10-K 1 tv512689_10k.htm FORM 10-K

 
 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549  

 

 

 

FORM 10-K

 

(Mark One)

  x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2018

 

OR

 

  ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______ to _______

 

Commission file number 001-36369

 

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

(Exact name of registrant as specified in its charter)

 

Maryland   26-3136483
 (State or other jurisdiction of incorporation or organization)    (I.R.S. Employer Identification No.)
     
712 Fifth Avenue, 9th Floor, New York, NY   10019
 (Address or principal executive offices)    (Zip Code)

 

(212) 843-1601

(Registrant’s telephone number, including area code)

 

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

 

Title of each class Name of each exchange on which registered
Class A Common Stock, $0.01 par value per share New York Stock Exchange American
Series A Preferred Stock, $0.01 par value per share New York Stock Exchange American
Series C Preferred Stock, $0.01 par value per share New York Stock Exchange American
Series D Preferred Stock, $0.01 par value per share New York Stock Exchange American

 

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

 

Title of each class

None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨   No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No ¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x     No ¨

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer ¨ Accelerated Filer x Non-Accelerated Filer ¨
Smaller reporting company x Emerging growth company ¨    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

 

The aggregate market value of the registrant's Class A common stock held by non-affiliates of the registrant as of June 30, 2018, the last business day of registrant's most recently completed second fiscal quarter, was $231,741,682 based on the closing price of the Class A common stock on the NYSE American on such date.

 

Number of shares outstanding of the registrant’s

classes of common stock, as of February 13, 2019:

Class A Common Stock: 23,063,119 shares

Class C Common Stock: 76,603 shares

 

 

 

 

 

  

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

FORM 10-K

December 31, 2018

 

PART I    
Item 1. Business 5
Item 1A. Risk Factors 10
Item 1B. Unresolved Staff Comments 42
Item 2. Properties 43
Item 3. Legal Proceedings 44
Item 4. Mining Safety Disclosures 44
PART II    
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 45
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 49
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 71
Item 8. Financial Statements and Supplementary Data 71
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 71
Item 9A. Controls and Procedures 72
Item 9B. Other Information 72
PART III    
Item 10. Directors, Executive Officers and Corporate Governance 73
Item 11. Executive Compensation 78
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 102
Item 13. Certain Relationships and Related Transactions, and Director Independence 106
Item 14. Principal Accounting Fees and Services 114
PART IV    
Item 15. Exhibits, Financial Statement Schedules 114
SIGNATURES 115

 

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Forward-Looking Statements

 

Statements included in this Annual Report on Form 10-K 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:

 

  • the competitive environment in which we operate;
     
  • the use of proceeds of the Company’s securities offerings;

 

  •

real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for tenants in such markets;

 

  • risks associated with geographic concentration of our investments;

 

  • 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 leading regional apartment owner/operators with which we invest, including through controlling positions in joint ventures;

 

  • 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;

 

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  • 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.

 

  • the possibility that the anticipated benefits from the internalization of our former external Manager, or the Internalization, may not be realized or may take longer to realize than expected, or that unexpected costs or unexpected liabilities may arise from the Internalization;
     
  • our ability to manage the Internalization effectively or efficiently; and
     
  •

the outcome of any legal proceedings that may be instituted against us or others following the Internalization.

 

 

Forward-looking statements are found throughout this Annual Report on Form 10-K, including under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Annual Report on Form 10-K. 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 Annual Report on Form 10-K.  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.

 

Cautionary Note

 

The representations, warranties, and covenants made by us in any agreement filed as an exhibit to this Annual Report on Form 10-K are made solely for the benefit of the parties to the agreement, including, in some cases, for the purpose of allocating risk among the parties to the agreement, and should not be deemed to be representations, warranties, or covenants to or with any other parties. Moreover, these representations, warranties, or covenants should not be relied upon as accurately describing or reflecting the current state of our affairs.

 

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PART I

 

Item 1.Business

 

Organization

 

Bluerock Residential Growth REIT, Inc. (“we,” “us,” or the “Company”) was incorporated on July 25, 2008 under the laws of the state of Maryland.

 

We have elected to be treated, and currently qualify, as a real estate investment trust (or “REIT”) for federal income tax purposes. As a REIT, we generally are not subject to corporate-level income taxes. To maintain our REIT status, we are required, among other requirements, to distribute annually at least 90% of our “REIT taxable income,” as defined by the Internal Revenue Code of 1986, as amended (the “Code”), to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate tax rates. We were incorporated to raise capital and acquire a diverse portfolio of residential real estate assets.

 

Unless otherwise indicated or the context requires otherwise, all references to “the Company,” “we,” “us” and “our” mean Bluerock Residential Growth REIT, Inc., a Maryland corporation, together with its consolidated subsidiaries, including, without limitation, Bluerock Residential Holdings, L.P., a Delaware limited partnership of which we are the sole general partner, which we refer to as our Operating Partnership. We refer to Bluerock Real Estate, L.L.C., a Delaware limited liability company, and its affiliate, Bluerock Real Estate Holdings, LLC, together as Bluerock, and we refer to our former external manager, BRG Manager, LLC, a Delaware limited liability company, as our former Manager. Both Bluerock and our former Manager are affiliated with the Company. References to our shares of Class A common stock on a “fully diluted basis” includes all outstanding shares of our Class A common stock, shares of our Class C common stock, units of limited partnership interest in our Operating Partnership, or OP Units, and long-term incentive plan units in our Operating Partnership, or LTIP Units, whether vested or unvested.

 

On October 31, 2017, we became an internally-managed REIT as a result of the completion of the management internalization transactions (the “Internalization”), and we are no longer externally managed by our former Manager. The owners of the former Manager are referred to as the Contributors.

 

Substantially all our business is conducted through our Operating Partnership.

 

The principal executive offices of our Company and the former Manager are located at 712 Fifth Avenue, New York, New York 10019. Our telephone number is (212) 843-1601.

 

Investments in Real Estate

 

As of December 31, 2018, we owned interests in forty-seven real estate properties, consisting of thirty-three consolidated operating properties and fourteen held through preferred equity and mezzanine loan investments. Of the property interests held through preferred equity and mezzanine loan investments, four are under development, seven are in lease-up and three properties are stabilized. The forty-seven properties contain an aggregate of 14,717 units, comprised of 11,286 consolidated operating units and 3,431 units through preferred equity and mezzanine loan investments. As of December 31, 2018, our consolidated operating properties were approximately 94% occupied. For more information regarding our investments, see “Item 2. Properties”.

  

Business and Growth Strategies

 

Our principal business objective is to generate attractive risk-adjusted investment returns by assembling a high-quality portfolio of apartment properties located in demographically attractive growth markets and by implementing our investment strategies and our “Live/Work/Play Initiatives” to achieve sustainable long-term growth in both our adjusted funds from operations and net asset value.

 

Invest in Institutional-Quality Apartment Properties.   We acquire institutional-quality apartment properties where we believe we can create long-term value for our stockholders utilizing our Value-Add, Opportunistic and Invest-to-Own investment strategies.

 

  • Value-Add.  We invest in well-located institutional-quality apartment properties with strong and stable cash flows in demographically attractive knowledge economy growth markets that offer significant potential for rental growth and value-creation generally through a light core+ upgrade of units and amenities.

 

  • Opportunistic.  We invest in properties available at opportunistic prices (i.e., at prices we believe are below those available in an otherwise efficient market) that exhibit some characteristics of distress, such as operational inefficiencies, significant deferred capital maintenance or broken capital structures providing an opportunity for a substantial portion of total return attributable to appreciation in value.

 

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  • Invest-to-Own. We selectively invest in development of Class A properties in target markets where we believe we can capture significant development premiums upon completion.  We generally use a mezzanine loan with an option to purchase common equity in the project or convertible preferred equity structure, both of which provide income during the development stage, while providing us the ability to capture development premiums at completion by exercising our rights to take ownership.

 

Invest in Class A Apartment Properties.  We intend to continue to acquire primarily Class A apartment properties targeting the high disposable income renter by choice, where we believe we can create long-term value growth for our stockholders.

 

Focus on Growth Markets.  We intend to continue to focus on demographically attractive growth markets, which we define as markets with strong employment drivers in industries creating high disposable income jobs over the long term. Employment growth is highly correlated with apartment demand; therefore, we believe that selecting markets with job growth significantly above the national average will provide high potential for increased rental demand leading to revenue growth and attractive risk-adjusted returns.

 

Implement our Value Creation Strategies.  We intend to continue to focus on creating value at our properties utilizing our Value-Add, Opportunistic and Invest-to-Own investment strategies in order to maximize our return on investment. We will work with each member of our network to evaluate property needs along with value-creation opportunities and create an asset-specific business plan to best position or reposition each property to drive rental growth and asset values. We then provide an aggressive asset management presence to manage our network partner and ensure execution of the plan, with the goal of driving rental growth and values.

 

Implement our Live/Work/Play Initiatives.  We intend to continue to implement our amenities and attributes to transform the apartment community from a purely functional product (i.e., as solely a place to live), to a lifestyle product (i.e., as a place to live, interact, and socialize). Our Live/Work/Play initiatives are property specific, and generally consist of attributes that go beyond traditional features, including highly amenitized common areas, cosmetic and architectural improvements, technology, music and other community-oriented activities to appeal to our residents’ desire for a “sense of community” by creating places to gather, socialize and interact in an amenity-rich environment. We believe this creates an enhanced perception of value among residents as compared to traditional properties, allowing for premium rental rates and improved resident retention.

 

Diversify Across Markets, Strategies and Investment Size.  We will seek to grow our high-quality portfolio of apartment properties diversified by geography and by investment strategy and by size (typically ranging from $50 to $100 million), in order to manage concentration risk, while driving both current income and capital appreciation throughout the portfolio. Our network enables us to diversify across multiple markets and multiple strategies efficiently, without the logistical burden and time delay of building operating infrastructure in multiple markets and across multiple investment strategies.

 

Selectively Harvest and Redeploy Capital.  On an opportunistic basis and subject to compliance with certain REIT restrictions, we intend to sell properties in cases where we have successfully executed our value creation plans and where we believe the investment has limited additional upside relative to other opportunities, in order to harvest profits and to reinvest proceeds to maximize stockholder value.  

 

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 Summary of Investments and Dispositions

 

The following table presents a summary of our investments during the years ended December 31, 2018, 2017 and 2016:

 

Properties Acquired  Location  Date Acquired  Ownership
Interest		  Number
of Units		 
ARIUM Gulfshore (1)  Naples, FL  1/5/2016  100.0%   368 
ARIUM at Palmer Ranch (1)  Sarasota, FL  1/5/2016  100.0%   320 
West Morehead  Charlotte, NC  1/6/2016  (2)   286 
The Preserve at Henderson Beach  Destin, FL  3/15/2016  100.0%   340 
ARIUM Westside  Atlanta, GA  7/14/2016  90.0%   336 
APOK Townhomes  Boca Raton, FL  9/1/2016  (2)   90 
ARIUM Glenridge  Atlanta, GA  10/13/2016  90.0%   480 
ARIUM Pine Lakes  Port St. Lucie, FL  10/31/2016  85.0%   320 
The Brodie  Austin, TX  11/10/2016  92.5%   324 
Roswell City Walk  Roswell, GA  12/1/2016  98.0%   320 
Crescent Perimeter  Atlanta, GA  12/12/2016  (3)   320 
James on South First  Austin, TX  12/15/2016  90.0%   250 
Vickers Village  Roswell, GA  12/20/2016  (3)   79 
Preston View (4)  Morrisville, NC  2/17/2017  100.0%   382 
Wesley Village (4)  Charlotte, NC  3/9/2017  100.0%   301 
Marquis at Crown Ridge  San Antonio, TX  6/9/2017  90.0%   352 
Marquis at Stone Oak  San Antonio, TX  6/9/2017  90.0%   335 
Marquis at the Cascades  Tyler, TX  6/9/2017  90.0%   582 
Marquis at TPC  San Antonio, TX  6/9/2017  90.0%   139 
Villages of Cypress Creek  Houston, TX  9/8/2017  80.0%   384 
Citrus Tower  Orlando, FL  9/28/2017  96.8%   336 
Outlook at Greystone  Birmingham, AL  10/19/2017  100.0%   300 
ARIUM Hunter’s Creek  Orlando, FL  10/30/2017  100.0%   532 
ARIUM Metrowest  Orlando, FL  10/30/2017  100.0%   510 
The Mills  Greenville, SC  11/29/2017  100.0%   304 
The Links at Plum Creek  Castle Rock, CO  3/26/2018  88%   264 
Sands Parc  Daytona Beach, FL  5/1/2018  100%   264 
Plantation Park  Lake Jackson, TX  6/14/2018  80%   238 
Veranda at Centerfield  Houston, TX  7/26/2018  93%   400 
North Creek Apartments  Leander, TX  10/29/2018  (5)   259 
Wayforth at Concord  Concord, NC  11/9/2018  (5)   150 
Ashford Belmar  Lakewood, CO  11/15/2018  85 %   512 
Riverside Apartments  Austin, TX  12/6/2018  (5)   222 

 

 (1) Increased ownership in April 2018 from 95.0% to 100.0%.

(2) The Company’s investment in the property through a note receivable from a related party that is an indirect owner of the property and in which related party the Company has an option to purchase a common equity investment.

(3) The Company’s investment in the property through a note receivable from a related party that is an indirect owner of the property.

(4) Increased ownership in December 2017 from 91.8% to 100.0%.

(5) The Company’s investment in the property is through a preferred equity investment with an unaffiliated third party.

 

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The following table presents a summary of our dispositions during the years ended December 31, 2018, 2017 and 2016:

 

Property Dispositions  Location  Date Sold  Ownership
Interest in
Property		  Number
of Units		 
Springhouse at Newport News  Newport News, VA  8/10/2016  75.0%   432 
EOS  Orlando, FL  12/19/2016  26.3%   296 
Village Green of Ann Arbor  Ann Arbor, MI  2/22/2017  48.6%   520 
Lansbrook Village  Palm Harbor, FL  4/26/2017  90.0%   621 
Fox Hill  Austin, TX  5/24/2017  94.6%   288 
MDA Apartments (1)  Chicago, IL  6/30/2017  35.3%   190 

 

(1)     Represents sale of the Company’s 35.3% joint venture interest in MDA Apartments.

 

Distribution Policy

 

We intend to continue to qualify as a REIT for federal income tax purposes. The Code generally requires that a REIT annually distribute at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gain, and imposes tax on any taxable income retained by a REIT, including capital gains.

 

To satisfy the requirements for qualification as a REIT and generally not be subject to federal income and excise tax, we intend to continue to make regular distributions of all or substantially all of our REIT taxable income, determined without regard to dividends paid, to our stockholders out of assets legally available for such purposes. All future distributions will be determined at the sole discretion of our Board of Directors (the “Board”) on a quarterly basis. When determining the amount of future distributions, we expect that our Board will consider, among other factors, (i) the amount of cash generated from our operating activities, (ii) our expectations of future operating cash flows, (iii) our determination of near-term cash needs for acquisitions of new properties, development investments, general property capital improvements and debt repayments, (iv) our ability to continue to access additional sources of capital, (v) the requirements of Maryland law, (vi) the amount required to be distributed to maintain our status as a REIT and to reduce any income and excise taxes that we otherwise would be required to pay and (vii) any limitations on our distributions contained in our credit or other agreements.

 

Holders of shares of 8.250% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share (the “Series A Preferred Stock”), will be entitled to receive cumulative cash dividends on the Series A Preferred Stock when, as and if authorized by our Board and declared by us from the end of the most recent dividend period for which dividends on the Series A Preferred Stock have been paid, payable quarterly in arrears on each January 5th, April 5th, July 5th and October 5th of each year, commencing on January 5, 2016, to holders of record on each December 25th, March 25th, June 25th and September 25th, respectively. From the date of original issue to, but not including, October 21, 2022, we will pay dividends on the Series A Preferred Stock at the rate of 8.250% per annum of the $25.00 liquidation preference per share (equivalent to the fixed annual amount of $2.0625 per share). Commencing October 21, 2022, we will pay cumulative cash dividends on the Series A Preferred Stock at an annual dividend rate of the initial rate increased by 2.0% of the liquidation preference per annum, which will increase by an additional 2.0% of the liquidation preference per annum on each subsequent anniversary thereafter, subject to a maximum annual dividend rate of 14.0%.

 

Holders of shares of Series B Redeemable Preferred Stock, $0.01 par value per share (the “Series B Preferred Stock”), are entitled to receive, when and as authorized by our Board and declared by us out of legally available funds, cumulative cash dividends on each share of Series B Preferred Stock at an annual rate of six percent (6%) of the initial stated value of $1,000 per share (the “Stated Value”). Dividends on each share of Series B Preferred Stock will begin accruing on, and will be cumulative from, the date of issuance or the end of the most recent dividend period for which dividends on the Series B Preferred Stock have been paid, payable monthly in arrears on the 5th day of each month to holders of record on the 25th day of the prior month.

 

Holders of shares of 7.625% Series C Cumulative Redeemable Preferred Stock, $0.01 par value per share (the “Series C Preferred Stock”), will be entitled to receive cumulative cash dividends on the Series C Preferred Stock when, as and if authorized by our Board and declared by us from and including the date of original issue or the end of the most recent dividend period for which dividends on the Series C Preferred Stock have been paid, payable quarterly in arrears on each January 5th, April 5th, July 5th and October 5th of each year, commencing on October 5, 2016, to holders of record on each December 25th, March 25th, June 25th and September 25th, respectively. From the date of original to, but not including, July 19, 2023, we will pay dividends on the Series C Preferred Stock at the rate of 7.625% per annum of the $25.00 liquidation preference per share (equivalent to the fixed annual amount of $1.90625 per share). Commencing July 19, 2023, we will pay cumulative cash dividends on the Series C Preferred Stock at an annual dividend rate of the initial rate increased by 2.0% of the liquidation preference per annum, which will increase by an additional 2.0% of the liquidation preference per annum on each subsequent anniversary thereafter, subject to a maximum annual dividend rate of 14.0%.

 

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Holders of shares of 7.125% Series D Cumulative Preferred Stock, $0.01 par value per share (the “Series D Preferred Stock”), will be entitled to receive cumulative cash dividends on the Series D Preferred Stock when, as and if authorized by our Board and declared by us from and including the date of original issue or the end of the most recent dividend period for which dividends on the Series D Preferred Stock have been paid, payable quarterly in arrears on each January 5th, April 5th, July 5th and October 5th of each year, commencing on January 5, 2017, to holders of record on each December 25th, March 25th, June 25th and September 25th, respectively. From the date of original issue, we will pay dividends on the Series D Preferred Stock at the rate of 7.1250% per annum of the $25.00 liquidation preference per share (equivalent to the fixed annual amount of $1.78125 per share).

 

Holders of shares of Class A common stock, $0.01 par value per share (the “Class A common stock”), and Class C common stock $0.01 par value per share (the “Class C common stock”), will be entitled to receive cash dividends when, as and if authorized by our Board and declared by us.

 

On December 20, 2017, the Company announced a revised dividend policy for the Company’s Class A common stock, which is also applicable to the Class C common stock, and set an annual dividend rate of $0.65 per common share. The common share dividend is paid on a quarterly basis, a change from previously being paid on a monthly basis. The Board considered a number of factors in setting the new common stock dividend rate, including but not limited to achieving a sustainable dividend covered by current recurring AFFO (vs. pro forma AFFO), multifamily and small cap peer dividend rates and payout ratios, providing financial flexibility for the Company, and achieving an appropriate balance between the retention of capital to invest and grow net asset value and the importance of current distributions.

 

We cannot assure you that we will generate sufficient cash flows to make distributions to our stockholders, or that we will be able to sustain those distributions. If our operations do not generate sufficient cash flow to allow us to satisfy the REIT distribution requirements, we may be required to fund distributions from working capital, offering proceeds, borrow funds, sell assets, make a taxable distribution of our equity or debt securities, or reduce such distributions. Our distribution policy enables us to review the alternative funding sources available to us from time to time. Our actual results of operations will be affected by a number of factors, including the revenues we receive from our properties, our operating expenses, interest expense, the ability of our tenants to meet their obligations and unanticipated expenditures. For more information regarding risk factors that could materially adversely affect our actual results of operations, please see “Item 1A - Risk Factors.”

  

Regulations

 

Our investments are subject to various federal, state and local laws, ordinances and regulations, including, among other things, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution and indirect environmental impacts such as increased motor vehicle activity. We believe that we have all permits and approvals necessary under current law to operate our investments.

 

 Environmental

 

As an owner of real estate, we are subject to various environmental laws of federal, state and local governments. Compliance with existing laws has not had a material adverse effect on our financial condition or results of operations, and management does not believe it will have such an impact in the future. However, we cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on properties in which we hold an interest, or on properties that may be acquired directly or indirectly in the future.

 

Industry Segment

 

Our current business consists of investing in and operating multifamily communities. A significant portion of our consolidated net income (loss) is from investments in real estate properties that we own through joint ventures. We internally evaluate operating performance on an individual property level and view our real estate assets as one industry segment, and, accordingly, our properties are aggregated into one reportable segment.

 

Available Information

 

We electronically file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports with the SEC. We also have filed with the SEC registration statements on Form S-3 (of which File Nos. 333-203415, 333-208988 and 333-224990 are currently effective) and Form S-8 (of which File Nos. 333-202569, 333-222255 and 333-228825 are currently effective). Copies of our filings with the SEC may be obtained from the SEC’s website at www.sec.gov, or downloaded from our website at www.bluerockresidential.com, as soon as reasonably practicable after such material has been filed with, or furnished to, the SEC. Access to these filings is free of charge.

 

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Item 1A.Risk Factors

 

Risks Related to our Business and Properties

 

We face numerous risks associated with the real estate industry that could adversely affect our results of operations through decreased revenues or increased costs.

 

As a real estate company, we are subject to various changes in real estate conditions, and any negative trends in such real estate conditions may adversely affect our results of operations through decreased revenues or increased costs. These conditions include:

 

  • changes in national, regional and local economic conditions, which may be negatively impacted by concerns about inflation, deflation, government deficits, high unemployment rates, decreased consumer confidence and liquidity concerns, particularly in markets in which we have a high concentration of properties;

 

  • fluctuations and relative increases in interest rates, which could adversely affect our ability to obtain financing on favorable terms or at all;

 

  • the inability of residents and tenants to pay rent;

 

  • the existence and quality of the competition, such as the attractiveness of our properties as compared to our competitors' properties based on considerations such as convenience of location, rental rates, amenities and safety record;

 

  • increased operating costs, including increased real property taxes, maintenance, insurance and utilities costs;

 

  • weather conditions that may increase or decrease energy costs and other weather-related expenses;

 

  • oversupply of apartments, commercial space or single-family housing or a reduction in demand for real estate in the markets in which our properties are located;

 

  • a favorable interest rate environment that may result in a significant number of potential residents of our apartment communities deciding to purchase homes instead of renting;

 

  • changes in, or increased costs of compliance with, laws and/or governmental regulations, including those governing usage, zoning, the environment and taxes; and

 

  • rent control or stabilization laws, or other laws regulating rental housing, which could prevent us from raising rents to offset increases in operating costs.

 

Moreover, other factors may adversely affect our results of operations, including potential liability under environmental and other laws and other unforeseen events, many of which are discussed elsewhere in the following risk factors. Any or all of these factors could materially adversely affect our results of operations through decreased revenues or increased costs. 

 

Our current portfolio consists of interests in thirty-three apartment communities and fourteen held through preferred equity and mezzanine loan investments in ventures that own apartment communities, located primarily in markets in the Southeastern United States. Any adverse developments in local economic conditions or the demand for apartment units in these markets may negatively impact our results of operations.

 

Our current portfolio of properties consists primarily of apartment communities and development communities geographically concentrated in the Southeastern United States, and our portfolio going forward may consist primarily of the same. For the year ended December 31, 2018, properties in Florida, Texas, Georgia, and North Carolina comprised 38%, 31%, 12%, and 12%, respectively, of our total rental revenue. As such, we are currently susceptible to local economic conditions and the supply of and demand for apartment units in these markets. If there is a downturn in the economy or an oversupply of or decrease in demand for apartment units in these markets, our business could be materially adversely affected to a greater extent than if we owned a real estate portfolio that was more diversified in terms of both geography and industry focus.

 

We may not be successful in identifying and consummating suitable investment opportunities.

 

Our investment strategy requires us to identify suitable investment opportunities compatible with our investment criteria. We may not be successful in identifying suitable opportunities that meet our criteria or in consummating investments, including those identified as part of our investment pipeline, on satisfactory terms or at all. Our ability to make investments on favorable terms may be constrained by several factors including, but not limited to, competition from other investors with significant capital, including other publicly-traded REITs and institutional investment funds, which may significantly increase investment costs; and/or the inability to finance an investment on favorable terms or at all. The failure to identify or consummate investments on satisfactory terms, or at all, may impede our growth and negatively affect our cash available for distribution to our stockholders.

 

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Adverse economic conditions may negatively affect our results of operations and, as a result, our ability to make distributions to our stockholders or to realize appreciation in the value of our properties.

 

Our operating results may be adversely affected by market and economic challenges, which may negatively affect our returns and profitability and, as a result, our ability to make distributions to our stockholders or to realize appreciation in the value of our properties. These market and economic challenges include, but are not limited to, the following:

 

  • any future downturn in the U.S. economy and the related reduction in spending, reduced home prices and high unemployment could result in tenant defaults under leases, vacancies at our apartment communities and concessions or reduced rental rates under new leases due to reduced demand;

 

  • the rate of household formation or population growth in our target markets or a continued or exacerbated economic slow-down experienced by the local economies where our properties are located or by the real estate industry generally may result in changes in supply of or demand for apartment units in our target markets; and

 

  • the failure of the real estate market to attract the same level of capital investment in the future that it attracts at the time of our purchases or a reduction in the number of companies seeking to acquire properties may result in the value of our investments not appreciating or decreasing significantly below the amount we pay for these investments.

 

The length and severity of any economic slow-down or downturn cannot be predicted. Our operations and, as a result, our ability to make distributions to our stockholders and/or our ability to realize appreciation in the value of our properties could be materially and adversely affected to the extent that an economic slow-down or downturn is prolonged or becomes severe.

 

Our revenues are significantly influenced by demand for apartment properties generally, and a decrease in such demand will likely have a greater adverse effect on our revenues than if we owned a more diversified real estate portfolio.

 

Our current portfolio is focused predominately on apartment properties, and we expect that our portfolio going forward will focus predominately on the same. As a result, we are subject to risks inherent in investments in a single industry, and a decrease in the demand for apartment properties would likely have a greater adverse effect on our rental revenues than if we owned a more diversified real estate portfolio. Resident demand at apartment properties was adversely affected by the most recent U.S. recession, including the reduction in spending, reduced home prices and high unemployment, together with the price volatility, dislocations and liquidity disruptions in the debt and equity markets, as well as the rate of household formation or population growth in our markets, changes in interest rates or changes in supply of, or demand for, similar or competing apartment properties in an area. If economic recovery slows or stalls, these conditions could persist and we could experience downward pressure on occupancy and market rents at our apartment properties, which could cause a decrease in our rental revenue. Any such decrease could impair our ability to satisfy our substantial debt service obligations or make distributions to our stockholders.

 

The properties in our investment pipeline are subject to contingencies that could delay or prevent acquisition or investment in those properties.

 

At any given time, we are generally in discussions regarding a number of apartment properties for acquisition or investment, which we refer to as our investment pipeline. However, we may not have completed our diligence process on these properties or development projects or have definitive investment or purchase and sale agreements, as applicable, and several other conditions may be required to be met in order for us to complete these acquisitions or developments, including approval by our investment committee or Board. If we are planning to use proceeds of an offering of our securities to fund these acquisitions or investments and are unable to complete the acquisition of the interests or investment in any of these properties or experience significant delays in executing any such acquisition or investment, we will have issued securities in an offering without realizing a corresponding current or future increase in earnings and cash flow from acquiring those interests or developing those properties, and may incur expenses in connection with our attempts in consummating such acquisition or investment, which could have a material adverse impact on our financial condition and results of operations. In addition, to the extent the uses of proceeds from an offering are designated for the acquisition of or investment in these properties, we will have no specific designated use for the net proceeds from the offering allocated to the purchase or development and investors will be unable to evaluate in advance the manner in which we will invest, or the economic merits of the properties we may ultimately acquire or develop with such proceeds.

 

Our expenses may remain constant or increase, even if our revenues decrease, causing our results of operations to be adversely affected.

 

Costs associated with our business, such as mortgage payments, real estate taxes, insurance premiums and maintenance costs, are relatively inflexible and generally do not decrease, and may increase, when a property is not fully occupied, rental rates decrease, a tenant fails to pay rent or other circumstances cause a reduction in property revenues. As a result, if revenues drop, we may not be able to reduce our expenses accordingly, which would adversely affect our financial condition and results of operations.

 

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We compete with numerous other parties or entities for real estate assets and tenants and may not compete successfully.

 

We compete with numerous other persons or entities engaged in real estate investment activities, many of which have greater resources than we do. Some of these investors may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. Our competitors may be willing to offer space at rates below our rates, causing us to lose existing or potential tenants.

 

Competition from other apartment properties for tenants could reduce our profitability and the return on your investment.

 

The apartment property industry is highly competitive. Our competitors may be willing to offer space at rates below our rates, causing us to lose existing or potential tenants. This competition could reduce occupancy levels and revenues at our apartment properties, which would adversely affect our results of operations. We expect to face competition for tenants from many sources. We will face competition from other apartment communities both in the immediate vicinity and in the larger geographic market where our apartment communities will be located. If overbuilding of apartment properties occurs at our properties it will increase the number of apartment units available and may decrease occupancy and apartment rental rates at our properties.

 

 

Increased competition and increased affordability of single-family homes could limit our ability to retain residents, lease apartment units or increase or maintain rents.

 

Any apartment properties we may acquire will most likely compete with numerous housing alternatives in attracting residents, including single-family homes, as well as owner-occupied single and multifamily homes available to rent. Competitive housing in a particular area and the increasing affordability of owner occupied single and multifamily homes available to rent or buy caused by declining mortgage interest rates and government programs to promote home ownership could adversely affect our ability to retain our residents, lease apartment units and increase or maintain rental rates.

 

Increased construction of similar properties that compete with our properties in any particular location could adversely affect the operating results of our properties and our cash available for distribution to our stockholders.

 

We may acquire properties in locations which experience increases in construction of properties that compete with our properties. This increased competition and construction could:

 

  • make it more difficult for us to find tenants to lease units in our apartment properties;

 

  • force us to lower our rental prices in order to lease units in our apartment properties; and/or

 

  • substantially reduce our revenues and cash available for distribution to our stockholders.

 

Our investments will be dependent on tenants for revenue, and lease terminations could reduce our revenues from rents, resulting in the decline in the value of your investment.

 

The underlying value of our properties and the ability to make distributions to you depend upon the ability of the tenants of our properties to generate enough income to pay their rents in a timely manner, and the success of our investments depends upon the occupancy levels, rental income and operating expenses of our properties and our Company. Tenants’ inability to timely pay their rents may be impacted by employment and other constraints on their personal finances, including debts, purchases and other factors. These and other changes beyond our control may adversely affect our tenants’ ability to make lease payments. In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as landlord and may incur costs in protecting our investment and re-leasing our property. We may be unable to re-lease the property for the rent previously received. We may be unable to sell a property with low occupancy without incurring a loss. These events and others could cause us to reduce the amount of distributions we make to stockholders and may also cause the value of your investment to decline.

 

Our operating results and distributable cash flow depend on our ability to generate revenue from leasing our properties to tenants on terms favorable to us.

 

Our operating results depend, in large part, on revenues derived from leasing space in our properties. We are subject to the credit risk of our tenants, and to the extent our tenants default on their leases or fail to make rental payments we may suffer a decrease in our revenue. In addition, if a tenant does not pay its rent, we may not be able to enforce our rights as landlord without delays and we may incur substantial legal costs. We are also subject to the risk that we will not be able to lease space in our value-added or opportunistic properties or that, upon the expiration of leases for space located in our properties, leases may not be renewed, the space may not be re-leased or the terms of renewal or re-leasing (including the cost of required renovations or concessions to customers) may be less favorable to us than current lease terms. If vacancies continue for a long period of time, we may suffer reduced revenues resulting in decreased distributions to our stockholders. In addition, the resale value of the property could be diminished because the market value of a particular property will depend principally upon the value of the leases of such property. Further, costs associated with real estate investment, such as real estate taxes and maintenance costs, generally are not reduced when circumstances cause a reduction in revenue. These events would cause a significant decrease in revenues and could cause us to reduce the amount of distributions to our stockholders.

 

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Short-term apartment leases expose us to the effects of declining market rent, which could adversely impact our ability to make cash distributions to our stockholders.

 

We expect that substantially all of our apartment leases will be for a term of one year or less. Because these leases generally permit the residents to leave at the end of the lease term without penalty, our rental revenues may be impacted by declines in market rents more quickly than if our leases were for longer terms.

 

Costs incurred in complying with governmental laws and regulations may reduce our net income and the cash available for distributions.

 

Our company and the properties we own and expect to own are subject to various federal, state and local laws and regulations relating to environmental protection and human health and safety. Federal laws such as the National Environmental Policy Act, the Comprehensive Environmental Response, Compensation, and Liability Act, the Solid Waste Disposal Act as amended by the Resource Conservation and Recovery Act, the Federal Water Pollution Control Act, the Federal Clean Air Act, the Toxic Substances Control Act, the Emergency Planning and Community Right to Know Act and the Hazard Communication Act and their resolutions and corresponding state and local counterparts govern such matters as wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials and the remediation of contamination associated with disposals. The properties we own and acquire must comply with the Americans with Disabilities Act of 1990 which generally requires that certain types of buildings and services be made accessible and available to people with disabilities. Additionally, we must comply with the Fair Housing Amendments Act of 1988, which requires that apartment properties first occupied after March 13, 1991 be accessible to handicapped residents and visitors. These laws may require us to make modifications to our properties. Some of these laws and regulations impose joint and several liability on tenants, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were illegal. Compliance with these laws and any new or more stringent laws or regulations may require us to incur material expenditures. Future laws, ordinances or regulations may impose material environmental liability. In addition, there are various federal, state and local fire, health, life-safety and similar regulations with which we may be required to comply, and which may subject us to liability in the form of fines or damages for noncompliance.

 

Our properties may be affected by our tenants’ activities or actions, the existing condition of land when we buy it, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties. The presence of hazardous substances, or the failure to properly remediate these substances, may make it difficult or impossible to sell or rent such property. Any material expenditures, fines, or damages we must pay will reduce our ability to make distributions and may reduce the value of your investment.

 

As the owner of real property, we could become subject to liability for asbestos-containing building materials in the buildings on our properties.  

 

Some of our properties may contain asbestos-containing materials. Environmental laws typically require that owners or operators of buildings with asbestos-containing building materials properly manage and maintain these materials, adequately inform or train those who may come in contact with asbestos and undertake special precautions, including removal or other abatement, in the event that asbestos is disturbed during building renovation or demolition. These laws may impose fines and penalties on building owners or operators for failure to comply with these requirements. In addition, third parties may be entitled to seek recovery from owners or operators for personal injury associated with exposure to asbestos-containing building materials. 

 

In addition, many insurance carriers are excluding asbestos-related claims from standard policies, pricing asbestos endorsements at prohibitively high rates or adding significant restrictions to this coverage. Because of our difficulty in obtaining specialized coverage at rates that correspond to the perceived level of risk, we may not obtain insurance for asbestos-related claims. We will continue to evaluate the availability and cost of additional insurance coverage from the insurance market. If we purchase insurance for asbestos, the cost could have a negative impact on our results of operations.

 

Costs associated with addressing indoor air quality issues, moisture infiltration and resulting mold remediation may be costly.

 

As a general matter, concern about indoor exposure to mold or other air contaminants has been increasing as such exposure has been alleged to have a variety of adverse effects on health. As a result, there have been a number of lawsuits in our industry against owners and managers of apartment communities relating to indoor air quality, moisture infiltration and resulting mold. Some of our properties may contain microbial matter such as mold and mildew. The terms of our property and general liability policies generally exclude certain mold-related claims. Should an uninsured loss arise against us, we would be required to use our funds to resolve the issue, including litigation costs. We can offer no assurance that liabilities resulting from indoor air quality, moisture infiltration and the presence of or exposure to mold will not have a future impact on our business, results of operations and financial condition.

 

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A change in the United States government policy with regard to Fannie Mae and Freddie Mac could impact our financial condition.

 

Fannie Mae and Freddie Mac are a major source of financing for the apartment real estate sector. We and other apartment companies in the apartment real estate sector depend frequently on Fannie Mae and Freddie Mac to finance growth by purchasing or guarantying apartment loans. In February 2011, the Obama Administration released a report to Congress which included options, among others, to gradually shrink and eventually shut down Fannie Mae and Freddie Mac.  In June 2013, a bipartisan group of senators proposed an overhaul of the housing finance system which would wind down Fannie Mae and Freddie Mac within five years; in August 2013, President Obama announced his support for this legislation. This legislation was ultimately abandoned. Any decision by the government to eliminate or downscale Fannie Mae or Freddie Mac, to reduce their acquisitions or guarantees of apartment real estate mortgage loans, or to reduce government support for multi-family housing more generally, may adversely affect interest rates, capital availability, development of multi-family communities and our ability to refinance our existing mortgage obligations as they come due and to obtain additional long-term financing for the acquisition of additional apartment communities on favorable terms or at all.

 

If we are not able to cost-effectively maximize the life of our properties, we may incur greater than anticipated capital expenditure costs, which may adversely affect our ability to make distributions to our stockholders.

 

While the majority of existing properties we acquire have undergone substantial renovations by prior owners since they were constructed, older properties may carry certain risks including unanticipated repair costs associated with older properties, increased maintenance costs as older properties continue to age, and cost overruns due to the need for special materials and/or fixtures specific to older properties. Although we take a proactive approach to property preservation, utilizing a preventative maintenance plan, and selective improvements that mitigate the cost impact of maintaining exterior building features and aging building components, if we are not able to cost-effectively maximize the life of our properties, we may incur greater than anticipated capital expenditure costs which may adversely affect our ability to make distributions to our stockholders.

 

Any uninsured losses or high insurance premiums will reduce our net income and the amount of our cash distributions to stockholders.

 

We will attempt to ensure adequate insurance is obtained to cover significant areas of risk to us as a company and to our properties. However, there are types of losses at the property level, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters, which are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. We may not have adequate coverage for such losses. If any of our properties incurs a casualty loss that is not fully insured, the value of our assets will be reduced by any such uninsured loss. In addition, other than any working capital reserve or other reserves we may establish, we have no source of funding to repair or reconstruct any uninsured damaged property. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in lower distributions to stockholders.

 

We may have difficulty selling real estate investments, and our ability to distribute all or a portion of the net proceeds from such sale to our stockholders may be limited.

 

Real estate investments are relatively illiquid. We will have a limited ability to vary our portfolio in response to changes in economic or other conditions. We will also have a limited ability to sell assets in order to fund working capital and similar capital needs. When we sell any of our properties, we may not realize a gain on such sale. We may not elect to distribute any proceeds from the sale of properties to our stockholders; for example, we may use such proceeds to:

 

  • purchase additional properties;

 

  • fund capital commitments to our joint ventures;

 

  • repay debt, if any;

 

  • buy out interests of any co-venturers or other partners in any joint venture in which we are a party;

 

  • create working capital reserves; and/or

 

  • make repairs, maintenance, tenant improvements or other capital improvements or expenditures to our remaining properties.

 

Our ability to sell our properties may also be limited by our need to avoid a 100% penalty tax that is imposed on gain recognized by a REIT from the sale of property characterized as dealer property. In order to ensure that we avoid such characterization, we may be required to hold our properties for the production of rental income for a minimum period of time, generally two years, and comply with certain other requirements in the Internal Revenue Code of 1986, as amended (the “Code”).

 

Representations and warranties made by us in connection with sales of our properties may subject us to liability that could result in losses and could harm our operating results and, therefore distributions we make to our stockholders.

 

When we sell a property, we may be required to make representations and warranties regarding the property and other customary items. In the event of a breach of such representations or warranties, the purchaser of the property may have claims for damages against us, rights to indemnification from us or otherwise have remedies against us. In any such case, we may incur liabilities that could result in losses and could harm our operating results and, therefore distributions we make to our stockholders.

 

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We may be unable to redevelop existing properties successfully and our investments in the development of new properties will be subjected to development risk, which could adversely affect our results of operations due to unexpected costs, delays and other contingencies.

 

As part of our operating strategy, we intend to selectively expand and/or redevelop existing properties as market conditions warrant, as well as invest in development of new properties through our Invest-to-Own strategy. In addition to the risks associated with real estate investments in general as described above, there are significant risks associated with development activities including the following:

 

  • we or the developers that we finance may be unable to obtain, or face delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations, which could result in increased development costs and/or lower than expected leases;

 

  • developers may incur development costs for a property that exceed original estimates due to increased materials, labor or other costs, changes in development plans or unforeseen environmental conditions, which could make completion of the property more costly or uneconomical;

 

  • land, insurance and construction costs may be higher than expected in our markets; therefore, we may be unable to attract rents that compensate for these increases in costs;

 

  • we may abandon redevelopment or Invest-to-Own development opportunities that we have already begun to explore, and we may fail to recover expenses already incurred in connection with exploring any such opportunities;

 

  • rental rates and occupancy levels may be lower and operating and/or capital cost may be higher than anticipated;

 

  • changes in applicable zoning and land use laws may require us to abandon projects prior to their completion, resulting in the loss of development costs incurred up to the time of abandonment; and

 

  • possible delays in completion because of construction delays, delays in the receipt of zoning, occupancy and other approvals, or other factors outside of our control.

 

In addition, if a project is delayed, certain residents and tenants may have the right to terminate their leases. Any one or more of these risks may cause us or the projects in which we invest to incur unexpected development costs, which would negatively affect our results of operations.

 

 As part of otherwise attractive portfolios of properties, we may acquire some properties with existing lock-out provisions, which may prohibit or inhibit us from selling a property for an indeterminate period of time, or may require us to maintain specified debt levels for a period of years on some properties.

 

Loan provisions could materially restrict us from selling or otherwise disposing of or refinancing properties. These provisions would affect our ability to turn our investments into cash and thus affect cash available for distributions to you. Loan provisions may prohibit us from reducing the outstanding indebtedness with respect to properties, refinancing such indebtedness on a non-recourse basis at maturity, or increasing the amount of indebtedness with respect to such properties.

 

Loan provisions could impair our ability to take actions that would otherwise be in the best interests of our stockholders and, therefore, may have an adverse impact on the value of our stock, relative to the value that would result if the loan provisions did not exist. In particular, loan provisions could preclude us from participating in major transactions that could result in a disposition of our assets or a change in control even though that disposition or change in control might be in the best interests of our stockholders.

 

Our investments could be adversely affected if a member of our Bluerock network performs poorly at one of our projects, which could adversely affect returns to our stockholders.

 

In general, we expect to rely on members of our network for the day-to-day management and development of our real estate investments. Members of our network are not fiduciaries to us, and generally will have limited capital invested in a project, if any. One or more members of our network may perform poorly in managing one of our project investments for a variety of reasons, including failure to properly adhere to budgets or properly consummate the property business plan. A member of our network may also underperform for strategic reasons related to projects or assets that the partner is involved in with a Bluerock affiliate but not our Company. If a member of our network does not perform well at one of our projects, we may not be able to ameliorate the adverse effects of poor performance by terminating the partner and finding a replacement partner to manage our projects in a timely manner. In such an instance, the returns to our stockholders could be adversely affected.

 

Actions of our joint venture partners could subject us to liabilities in excess of those contemplated or prevent us from taking actions which are in the best interests of our stockholders, which could result in lower investment returns to our stockholders.

 

We have entered into, and in the future intend to enter into, joint ventures with affiliates and other third parties, including our members of our network, to acquire or improve properties. We may also purchase properties in partnerships, co-tenancies or other co-ownership arrangements. Such investments may involve risks not otherwise present when acquiring real estate directly, including, for example:

 

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  • joint venturers may share certain approval rights over major decisions;

 

  • that such co-venturer, co-owner or partner may at any time have economic or business interests or goals which are or which become inconsistent with our business interests or goals, including inconsistent goals relating to the sale of properties held in the joint venture or the timing of termination or liquidation of the joint venture;

 

  • the possibility that our co-venturer, co-owner or partner in an investment might become insolvent or bankrupt;

 

  • the possibility that we may incur liabilities as a result of an action taken by our co-venturer, co-owner or partner;

 

  • that such co-venturer, co-owner or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives, including our policy with respect to maintaining our qualification as a REIT;

 

  • disputes between us and our joint venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business and result in subjecting the properties owned by the applicable joint venture to additional risk; or

 

  • under certain joint venture arrangements, neither venture partner may have the power to control the venture, and an impasse could be reached which might have a negative influence on the joint venture.

 

These events might subject us to liabilities in excess of those contemplated and thus reduce your investment returns. If we have a right of first refusal or buy/sell right to buy out a co-venturer, co-owner or partner, we may be unable to finance such a buy-out if it becomes exercisable or we may be required to purchase such interest at a time when it would not otherwise be in our best interest to do so. If our interest is subject to a buy/sell right, we may not have sufficient cash, available borrowing capacity or other capital resources to allow us to elect to purchase an interest of a co-venturer subject to the buy/sell right, in which case we may be forced to sell our interest as the result of the exercise of such right when we would otherwise prefer to keep our interest. Finally, we may not be able to sell our interest in a joint venture if we desire to exit the venture.

 

Your investment return may be reduced if we are required to register as an investment company under the Investment Company Act; if we are subject to registration under the Investment Company Act, we will not be able to continue our business.

 

Neither we, nor our Operating Partnership, nor any of our subsidiaries intend to register as an investment company under the Investment Company Act. We expect that our Operating Partnership’s and subsidiaries’ investments in real estate will represent the substantial majority of our total asset mix, which would not subject us to the Investment Company Act. In order to maintain an exemption from regulation under the Investment Company Act, we intend to engage, through our Operating Partnership and our wholly and majority owned subsidiaries, primarily in the business of buying real estate, and qualifying real estate investments must be made within a year after cash is received by us. If we are unable to invest a significant portion of cash proceeds in properties within one year of receipt, we may avoid being required to register as an investment company by temporarily investing any unused proceeds in government securities with low returns, which would reduce the cash available for distribution to stockholders and possibly lower your returns.

 

We expect that most of our assets will continue to be held through wholly owned or majority owned subsidiaries of our Operating Partnership. We expect that most of these subsidiaries will be outside the definition of investment company under Section 3(a)(1) of the Investment Company Act as they are generally expected to hold at least 60% of their assets in real property or in entities that they manage or co-manage that own real property. Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, which we refer to as the 40% test. Excluded from the term “investment securities,” among other things, are U.S. government securities and securities issued by majority owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act. We believe that we, our Operating Partnership and most of the subsidiaries of our Operating Partnership will not fall within either definition of investment company as we invest primarily in real property, through our wholly or majority owned subsidiaries, the majority of which we expect to have at least 60% of their assets in real property or in entities that they manage or co-manage that own real property. As these subsidiaries would be investing either solely or primarily in real property, they would be outside of the definition of “investment company” under Section 3(a)(1) of the Investment Company Act. We are organized as a holding company that conducts its businesses primarily through the Operating Partnership, which in turn is a holding company conducting its business through its subsidiaries. Both we and our Operating Partnership intend to conduct our operations so that they comply with the 40% test. We will monitor our holdings to ensure continuing and ongoing compliance with this test. In addition, we believe that neither we nor the Operating Partnership will be considered an investment company under Section 3(a)(1)(A) of the Investment Company Act because neither we nor the Operating Partnership will engage primarily or hold itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, through the Operating Partnership’s wholly-owned or majority owned subsidiaries, we and the Operating Partnership will be primarily engaged in the non-investment company businesses of these subsidiaries.

 

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In the event that the value of investment securities held by the subsidiaries of our Operating Partnership were to exceed 40%, we expect our subsidiaries to be able to rely on the exclusion from the definition of “investment company” provided by Section 3(c)(5)(C) of the Investment Company Act. Section 3(c)(5)(C), as interpreted by the staff of the SEC, requires each of our subsidiaries relying on this exception to invest at least 55% of its portfolio in “mortgage and other liens on and interests in real estate,” which we refer to as “qualifying real estate assets” and maintain at least 70% to 90% of its assets in qualifying real estate assets or other real estate-related assets. The remaining 20% of the portfolio can consist of miscellaneous assets. What we buy and sell is therefore limited to these criteria. How we determine to classify our assets for purposes of the Investment Company Act will be based in large measure upon no-action letters issued by the SEC staff in the past and other SEC interpretive guidance. These no-action positions were issued in accordance with factual situations that may be substantially different from the factual situations we may face, and a number of these no-action positions were issued more than ten years ago. Pursuant to this guidance, and depending on the characteristics of the specific investments, certain joint venture investments may not constitute qualifying real estate assets and therefore investments in these types of assets may be limited. No assurance can be given that the SEC will concur with our classification of our assets. Future revisions to the Investment Company Act or further guidance from the SEC may cause us to lose our exclusion from registration or force us to re-evaluate our portfolio and our investment strategy. Such changes may prevent us from operating our business successfully.

 

In the event that we, or our Operating Partnership, were to acquire assets that could make either entity fall within the definition of investment company under Section 3(a)(1) of the Investment Company Act, we believe that we would still qualify for an exclusion from registration pursuant to Section 3(c)(6). Section 3(c)(6) excludes from the definition of investment company any company primarily engaged, directly or through majority owned subsidiaries, in one or more of certain specified businesses. These specified businesses include the real estate business described in Section 3(c)(5)(C) of the Investment Company Act. It also excludes from the definition of investment company any company primarily engaged, directly or through majority owned subsidiaries, in one or more of such specified businesses from which at least 25% of such company’s gross income during its last fiscal year is derived, together with any additional business or businesses other than investing, reinvesting, owning, holding, or trading in securities. Although the SEC staff has issued little interpretive guidance with respect to Section 3(c)(6), we believe that we and our Operating Partnership may rely on Section 3(c)(6) if 55% of the assets of our Operating Partnership consist of, and at least 55% of the income of our Operating Partnership is derived from, qualifying real estate assets owned by wholly owned or majority owned subsidiaries of our Operating Partnership.

 

To ensure that neither we, nor our Operating Partnership nor subsidiaries are required to register as an investment company, each entity may be unable to sell assets they would otherwise want to sell and may need to sell assets they would otherwise wish to retain. In addition, we, our Operating Partnership or our subsidiaries may be required to acquire additional income or loss-generating assets that we might not otherwise acquire or forego opportunities to acquire interests in companies that we would otherwise want to acquire. Although we, our Operating Partnership and our subsidiaries intend to monitor our respective portfolios periodically and prior to each acquisition or disposition, any of these entities may not be able to maintain an exclusion from registration as an investment company. If we, our Operating Partnership or our subsidiaries are required to register as an investment company but fail to do so, the unregistered entity would be prohibited from engaging in our business, and criminal and civil actions could be brought against such entity. In addition, the contracts of such entity would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of the entity and liquidate its business.

 

We have experienced losses in the past, and we may experience similar losses in the future.

 

From inception of our Company through December 31, 2018, we had a cumulative net loss of $30.6 million. Our losses can be attributed, in part, to the initial start-up costs and initially high corporate general and administrative expenses relative to the size of our portfolio. In addition, acquisition costs and depreciation and amortization expenses substantially reduced our income. We cannot assure you that, in the future, we will be profitable or that we will realize growth in the value of our assets.

 

We previously generated negative operating cash flow, and our corporate general and administrative expenses were high relative to the size of our current portfolio.

 

In prior years, our corporate general and administrative expenses exceeded the cash flow received from our investments in real estate joint ventures. The primary reason for the previous negative operating cash flow was the amount of our corporate general and administrative expenses relative to the size of the portfolio. Our corporate general and administrative expenses were $19.6 million for the year ended December 31, 2018, which reflected a decrease of $0.7 million over the same period in 2017, inclusive of management fees in 2017. Due to the Internalization, expenses previously paid to the former Manager as base management fees are now considered general and administrative expenses. There can be no assurance that current period operating cash flow will continue to exceed our general and administrative expenses. If cash flow received from our investments decreases and our corporate general and administrative expenses become high in relation to the size of our portfolio, this would reduce the amount of funds available for us to invest in properties or other investments. These factors could have a material adverse effect on our results of operations, financial condition and ability to pay distributions to our stockholders.

 

Our corporate general and administrative costs may remain high relative to the size of our portfolio, which will adversely affect our results of operations and our ability to make distributions to our stockholders.

 

If we are not successful in investing the net proceeds of an offering in the manner set forth under “Use of Proceeds” in any applicable prospectus or prospectus supplement and continuing to raise capital and invest on an accretive basis, our corporate general and administrative costs will likely remain high relative to the size of our portfolio. If that occurs, it would adversely affect our results of operations and our ability to make distributions to our stockholders.

 

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Our internal control over financial reporting may not be effective, which could adversely affect our reputation, results of operations and stock price.

    

The accuracy of our financial reporting depends on the effectiveness of our internal control over financial reporting. Internal control over financial reporting can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements and may not prevent or detect misstatements because of its inherent limitations. These limitations include the possibility of human error, inadequacy or circumvention of internal controls and fraud. If we do not attain and maintain effective internal control over financial reporting or implement controls sufficient to provide reasonable assurance with respect to the preparation and fair presentation of our financial statements, we could be unable to file accurate financial reports on a timely basis, and our reputation, results of operations and stock price could be materially adversely affected.

 

We have very limited sources of capital other than the proceeds of offerings of our securities to meet our primary liquidity requirements.

 

We have very limited sources of capital other than cash from property operations and the net proceeds of offerings of our securities to meet our primary liquidity requirements. As a result, we may not be able to pay our liabilities and obligations when they come due other than with the net proceeds of an offering, which may limit our ability to fully consummate our business plan and diversify our portfolio. In the past, we have relied on borrowing from affiliates to help finance our business activities. We have no current intention to borrow from affiliates, but we may do so in the future. However, there are no assurances that we will be able to borrow from affiliates in the future, or extend the maturity date of any loans that may be outstanding and due to affiliates.

 

You will have limited control over changes in our policies and day-to-day operations, which limited control increases the uncertainty and risks you face as a stockholder. In addition, our Board may change our major operational policies without your approval.

 

Our Board determines our major policies, including our policies regarding financing, growth, debt capitalization, REIT qualification and distributions. Our Board may amend or revise these and other policies without a vote of the stockholders. Under the Maryland General Corporation Law and our charter, our stockholders have a right to vote only on limited matters. See “Important Provisions of Maryland Corporate Law and Our Charter and Bylaws” in any applicable prospectus or prospectus supplement.

 

We are responsible for the day-to-day operations of our Company and the selection and management of investments and have broad discretion over the use of proceeds from offerings of our securities. Accordingly, you should not purchase our securities unless you are willing to entrust all aspects of the day-to-day management and the selection and management of investments to us, who will manage our Company. In addition, we may retain independent contractors to provide various services for our Company, and you should note that such contractors will have no fiduciary duty to you or the other stockholders and may not perform as expected or desired.

 

In addition, while any applicable prospectus or prospectus supplement outlines our investment policies and generally describes our target portfolio, our Board may make adjustments to these policies based on, among other things, prevailing real estate market conditions and the availability of attractive investment opportunities. While we have no current intention of changing our investment policies, we will not forego an attractive investment because it does not fit within our targeted asset class or portfolio composition. We may use the proceeds of an offering to purchase or invest in any type of real estate which we determine is in the best interest of our stockholders. As such, our actual portfolio composition may vary substantially from the target portfolio described in the applicable prospectus or prospectus supplement.

 

Your rights as stockholders and our rights to recover claims against our officers, and directors are limited.

 

Under Maryland law, our charter, our bylaws and the terms of certain indemnification agreements with our directors, we may generally indemnify our officers, our directors, and their respective affiliates to the maximum extent permitted by Maryland law. Maryland law permits us to indemnify our present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or threatened to be made a party by reason of their service in those or other capacities unless it is established that: (1) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty; (2) the director or officer actually received an improper personal benefit in money, property or services; or (3) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. As a result, we and our stockholders may have more limited rights against our directors, officers, employees and agents, and their affiliates, than might otherwise exist under common law. In addition, we may be obligated to fund the defense costs incurred by our directors, officers, employees and agents in some cases.

 

A limit on the percentage of our capital stock and common stock a person may own may discourage a takeover or business combination, which could prevent our common stockholders from realizing a premium price for their common stock.

 

Our charter restricts direct or indirect ownership by one person or entity to no more than 9.8% in value of the outstanding shares of our capital stock or 9.8% in number of shares or value, whichever is more restrictive, of the outstanding shares of our common stock unless exempted (prospectively or retroactively) by our Board. This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price to our stockholders.

 

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Our charter permits our Board to issue stock with terms that may subordinate the rights of our common stockholders or discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.

 

Our Board may amend our charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority to issue and may classify or reclassify any unissued common stock or preferred stock into other classes or series of stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption of any such stock. Our Board has authorized a total of 250,000,000 shares of preferred stock for issuance, of which, as of December 31, 2018, there are issued and outstanding 5,721,460 shares of Series A Preferred Stock, 306,009 shares of Series B Preferred Stock, 2,323,750 shares of Series C Preferred Stock, and 2,850,602 shares of Series D Preferred Stock, all of which are senior to our common stock with respect to priority of dividend payments and rights upon liquidation, dissolution or winding up. Our Board could also authorize the issuance of up to approximately 229,900,000 additional shares of preferred stock with terms and conditions that could have priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Such preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price to holders of our common stock.  

 

We depend on our key employees. There is no guarantee that our key employees will remain employed with us for any specified period of time, and will not engage in competitive activities if they cease to be employed with us.

 

We depend on our key employees. In particular, our success depends to a significant degree upon the contributions of Messrs. Kamfar, Babb, MacDonald, Ruddy and Vohs, who each entered into employment agreements with us, and Mr. Konig, who entered into a services agreement with us through his wholly-owned law firm, Konig & Associates, LLC, on substantially the same terms as the employment agreements. Each such agreement became effective upon the closing of the Internalization and has an initial term through and including December 31, 2020. The departure or the loss of the services of Messrs. Kamfar, Ruddy, Babb, MacDonald, Vohs or Konig 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 we entered into 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 with us and engage in competitive activities, such activities could have a material adverse effect on our business, financial condition and results of operations.

 

Our management manages our portfolio pursuant to very broad investment guidelines approved by our Board, which does not approve each investment and financing decision made by our management unless required by our investment guidelines.

 

Our management is authorized to follow very broad investment guidelines established by our Board. Our Board will periodically review our investment guidelines and our portfolio of assets but will not, and will not be required to, review all of our proposed investments, except in limited circumstances as set forth in our investment guidelines. In addition, in conducting periodic reviews, our Board may rely primarily on information provided to them by our management. Furthermore, transactions entered into by our management may be costly, difficult or impossible to unwind by the time they are reviewed by our Board. Our management has great latitude within the broad parameters of our investment guidelines in determining the types and amounts of assets in which to invest on our behalf, including making investments that may result in returns that are substantially below expectations or result in losses, which would materially and adversely affect our business and results of operations, or may otherwise not be in the best interests of our stockholders.

 

We are highly dependent on information systems and systems failures, cybersecurity incidents or other technology disruptions could negatively impact our business.

 

Our operations are highly dependent upon our information systems that support our business processes, including marketing, leasing, resident and vendor communication, property management and work order processing, finance and intracompany communications throughout our operations. Certain critical components of our information systems are dependent upon third-party providers and a significant portion of our business operations are conducted over the internet. These systems and websites require access to telecommunications or the internet, each of which is subject to system security risks, cybersecurity breaches, outages, and other risks. As a result, we could be severely impacted by a catastrophic occurrence, such as a natural disaster or a terrorist attack, or a circumstance that disrupted access to telecommunications, the internet or operations at our third-party providers, including viruses or experienced computer programmers that could penetrate network security defenses and cause system failures and disruptions of operations. We have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, maintain the security and integrity of our information technology networks and related systems, and manage the risk of a security breach or disruption, but these measures, as well as our increased awareness of the nature and extent of a risk of a cyber incident, do not guarantee that our financial results, operations, business relationships or confidential information will not be negatively impacted by such an incident.  In addition, while we believe we utilize appropriate duplication and back-up procedures, a significant outage in telecommunications, the internet or at our third-party providers could nonetheless negatively impact our operations.

 

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Our third-party service providers are primarily responsible for the security of their own information technology environments and in certain instances, we rely significantly on third-party service providers to supply and store our sensitive data in a secure manner. All such third-party vendors face risks relating to cybersecurity similar to ours which could disrupt their businesses and therefore adversely impact us. While we provide guidance and specific requirements in some cases, we do not directly control any of such parties’ information technology security operations, or the amount of investment they place in guarding against cybersecurity threats. Accordingly, we are subject to any flaws in or breaches to their information technology systems or those which they operate for us. 

 

Although no material incidents have occurred to date, we cannot be certain that our security efforts and measures will be effective or that our financial results will not be negatively impacted by such an incident.

 

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

 

Information security risks have generally increased in recent years due to the rise in new technologies and the increased sophistication and activities of perpetrators of cyber-attacks.  In the ordinary course of our business we acquire and store sensitive data, including intellectual property, our proprietary business information and personally identifiable information of our prospective and current residents, our employees and third-party service providers in our offices and on our networks and website and on third-party vendor networks. We may share some of this information with vendors who assist us with certain aspects of our business.  The secure processing and maintenance of this information is critical to our operations and business and growth strategies.  Despite our security measures and those of our third-party vendors, our information technology and such infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disruption to our operations and the services we provide to customers or damage our reputation, and thus could have a material adverse impact on our business, financial condition or results of operations. In addition, a security breach could require that we expend significant additional resources to enhance our information security systems and could result in a disruption to our operations.

 

Risks Related to the Internalization Transaction

 

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

 

On October 31, 2017, we completed the Internalization of our management in a series of transactions that included the acquisition, directly and indirectly through a subsidiary, of Bluerock REIT Operator, LLC, a wholly owned subsidiary of our former Manager (“Manager Sub”), which owns the assets previously used by our former Manager in its performance of the management functions previously provided to us pursuant to the Management Agreement. We may not manage the Internalization effectively. As an internally-managed company, we may encounter potential difficulties in the integration process which may result in the inability to successfully internalize our corporate and/or property management functions in a manner that permits us to achieve the cost savings anticipated to result from the Internalization. Following the Internalization, we expect to remain reliant on certain affiliates of Bluerock for certain services such as human resources, investor relations, marketing, legal and other administrative services for a period of time after the closing. If we are unable to internalize these services or find other providers for these services within a reasonable time period, we may not achieve all of the expected benefits of the Internalization. We may not be able to retain all of the current employees who provided services to our former Manager who became our employees upon the Internalization, including our executive officers. Our general and administrative expenses after the Internalization could also be higher than anticipated. The failure to manage the Internalization effectively, including failure to smoothly transition services or retain employees, could result in the anticipated benefits of the Internalization not being realized in the timeframe currently anticipated or at all. Any of these foregoing risks could materially adversely affect our business, financial condition and results of operations.

 

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, had a dilutive effect and reduced the voting power and relative percentage interests of current holders of our Class A common stockholders in our earnings and market value.

 

The issuance of shares of our Class C common stock in connection with the Internalization had a dilutive effect and reduced 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 consisted 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 of the Internalization, each OP Unit 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 voting power.

 

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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, our Operating Partnership issued a number of OP Units to the Contributors as Internalization Consideration, which OP Units may be redeemed in shares of our Class A common stock rather than cash, at the Company’s option. In addition, 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. 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, 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.

 

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

 

We expensed all cash and non-cash costs involved in the Internalization. As a result, our statement of operations and FFO was 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 our former Manager while we were externally managed, our expenses will now include the compensation and benefits of our executive officers and the employees of Manager Sub, which is now our indirect subsidiary, as well as overhead previously paid by our former Manager or its affiliates in managing our business and operations. Furthermore, these employees and consultants of Manager Sub will be providing us with services historically provided by the former 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 former 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 have historically paid to the former 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.

 

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

 

The Internalization has exposed us to risks to which we have not historically been exposed. In connection with the Internalization, we incurred liabilities with respect to the assets acquired from the former Manager and certain of its affiliates. In addition, our overhead has increased as a result of our becoming internally managed, as the responsibility for overhead relating to management of our business formerly borne by the former Manager is now our own responsibility. In addition, in our former externally-advised structure, we did not directly employ any employees. As a result of the Internalization, we now indirectly, through Manager Sub, employ persons who were associated with the former Manager or its affiliates. As their employer, we are indirectly, through Manager Sub, 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 are now providing us services historically provided by the former Manager, which are provided with the support of the Administrative Services Agreement. There are no assurances that 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 former Manager, and there may be other unforeseen costs, expenses and difficulties associated with operating as an internally managed company.

 

Risks Related to Related Party Transactions

 

 We may pursue less vigorous enforcement of the terms of certain agreements in connection with related party transactions because of conflicts of interest with certain of our officers and directors, and the terms of those agreements may be less favorable to us than they might otherwise be in an arm’s-length transaction.

 

The agreements we enter into in connection with related party transactions are expected to contain limited representations and warranties and have limited express indemnification rights in the event of a breach of those agreements. Furthermore, Mr. Kamfar, our Chairman and Chief Executive Officer, currently serves as an officer of Bluerock, an affiliate of our former Manager, and will have a conflict with respect to any matters that require consideration by our Board that occur between us and Bluerock. Even if we have actionable rights, we may choose not to enforce, or to enforce less vigorously, our rights under these agreements or under other agreements we may have with these parties, because of our desire to maintain positive relationships with these individuals.

 

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Risks Related to Conflicts of Interest

 

 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.

 

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.

 

Conflicts of interest exist between our interests and the interests of Bluerock and its affiliates.

 

Examples of these potential conflicts of interest include:

  • The possibility that certain of our officers and their respective affiliates will face conflicts of interest relating to the purchase and leasing of properties, and that such conflicts may not be resolved in our favor;

 

  • The possibility that the competing demands for the time of certain of our officers may result in them spending insufficient time on our business, which may result in our missing investment opportunities or having less efficient operations, which could reduce our profitability and result in lower distributions to you;

 

  • Some of our current investments, generally in development projects, have been made through joint venture arrangements with Bluerock Funds (in addition to unaffiliated third parties), which arrangements were not the result of arm’s-length negotiations of the type normally conducted between unrelated co-venturers, and which could result in a disproportionate benefit to affiliates of our former Manager; and
   
  • Competition for the time and services of Bluerock personnel that work for us and our affiliates under the Administrative Services Agreement.

 

Any of these and other conflicts of interest could have a material adverse effect on the returns on our investments, our ability to make distributions to stockholders and the trading price of our stock.

 

The ownership by Mr. Kamfar and Bluerock, and our executive officers, of a significant portion of the outstanding shares of our common stock on a fully diluted basis could give Bluerock and/or our executive officers the ability to control the outcome of matters submitted for stockholder approval, including the election of directors, and otherwise allow Bluerock and/or our executive officers to exert significant influence over our Company in a manner that may not be in the best interests of our other stockholders.

 

As of February 6, 2019, Mr. Kamfar and Bluerock, in which Mr. Kamfar owns a majority equity interest, beneficially owned approximately 16.7% of our outstanding Class A common stock and Class C common stock on a fully diluted basis. While the shares of Class C common stock issued in connection with the Internalization were not designed to provide for disproportionate voting rights, the issuance of such Class C common stock resulted in Mr. Kamfar controlling significant voting power in matters submitted to a vote of our Class A common stockholders as a result of his beneficial ownership of Class C common stock (which gives him voting power equal to the economic interest in the Company issued to Bluerock in the form of OP Units as if all of those OP Units were redeemed for shares of Class A common stock), including the election of directors. 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. In addition, our other executive officers beneficially own approximately 6.8% of our outstanding Class A common stock and Class C common stock on a fully diluted basis. As a result of Bluerock and our executive officers’ significant ownership in our Company, Bluerock and/or our executive officers will have significant influence over our affairs and could exercise such influence in a manner that is not in the best interests of our other stockholders, including the ability to control the outcome of matters submitted to our stockholders for approval such as the election of directors and any merger, consolidation or sale of all or substantially all of our assets. In particular, this concentrated voting control could delay, defer or prevent a change of control, merger, consolidation or sale of all or substantially all of our assets that our other stockholders and our Board’s support. Conversely, the concentrated voting control held by Bluerock and/or our executive officers could result in the consummation of such a transaction that our other stockholders and our Board do not support.

 

Certain of our executive officers have interests that may conflict with the interests of stockholders.

 

Messrs. Kamfar, MacDonald, Ruddy and Konig are also affiliated with or are executive and/or senior officers of Bluerock and their affiliates. These individuals may have personal and professional interests that conflict with the interests of our stockholders with respect to business decisions affecting us and our Operating Partnership. As a result, the effect of these conflicts of interest on these individuals may influence their decisions affecting the negotiation and consummation of the transactions whereby we acquire apartment properties in the future from Bluerock or its affiliates, or in the allocation of investment opportunities to us by Bluerock or its affiliates.

 

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Messrs. Kamfar, MacDonald, Ruddy, Vohs and Konig will have competing demands on their time and attention.

 

Messrs. Kamfar, MacDonald, Ruddy, Vohs and Konig have competing demands on their respective time and attention, principally with respect to the provision of services to certain outside entities affiliated with Bluerock. Such competing demands are not expected to be different from those that existed prior to the Internalization, 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 certain of 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.

 

If we acquire direct or indirect interests in properties from a Bluerock Fund with which we have joint ventured in a development deal, the price may be higher than we would pay if the transaction were the result of arm’s-length negotiations.

 

We are a party to certain development joint ventures with the Bluerock Funds, among other third parties, and under the terms of such joint ventures, we may, from time to time, seek to acquire the minority interest held by such Bluerock Fund. The prices we pay for such interests will not be the subject of arm’s-length negotiations, which means that the acquisitions may be on terms less favorable to us than those negotiated in an arm’s-length transaction. We may pay more for such interests than we would have in an arm’s-length transaction, which would reduce our cash available for investment in other properties or distribution to our stockholders.

 

Legal counsel for us, Bluerock and some of our affiliates is the same law firm.

 

Kaplan Voekler Cunningham & Frank, PLC acts as legal counsel to us, Bluerock, Fund I and the Bluerock Funds, and some of our affiliates. Kaplan Voekler Cunningham & Frank, PLC is not acting as counsel for any specific group of stockholders or any potential investor. There is a possibility in the future that the interests of the various parties may become adverse and, under the Code of Professional Responsibility of the legal profession, Kaplan Voekler Cunningham & Frank, PLC may be precluded from representing any one or all of such parties. If any situation arises in which our interests appear to be in conflict with those of our affiliates, additional counsel may be retained by one or more of the parties to assure that their interests are adequately protected. Moreover, should such a conflict not be readily apparent, Kaplan Voekler Cunningham & Frank, PLC may inadvertently act in derogation of the interest of parties which could adversely affect us, and our ability to meet our investment objectives and, therefore, our stockholders.

 

We have entered into joint venture investments with affiliates of Bluerock and may continue to do so in the future.

 

As of December 31, 2018, twelve of our investments in equity interests in real property have been made through joint venture arrangements with affiliates of Bluerock, as well as unaffiliated third parties. While we have no current expectation of investing in additional development projects with affiliates of Bluerock in the future, in the event such opportunities arise that we determine to be in the best interest of our stockholders, it is likely that we will work together with such Bluerock affiliates to apportion the investments among us and such other programs in accordance with the investment objectives of the various programs, with our Company initially taking a senior or preferred capital position to such affiliates in the development project and having the right to elect into common ownership with such programs under certain conditions. The negotiation of such investments will not be at arm’s-length and conflicts of interest will arise in the process. We cannot assure you that we will be as successful as we otherwise would be if we enter into joint venture arrangements with programs sponsored by Bluerock or with affiliates of Bluerock. It is possible that we could pay more for an asset in this type of transaction than we would pay in an arm’s-length transaction with an unaffiliated third party.

 

In addition, the co-venturer may have economic or business interests or goals that are or may become inconsistent with our business interests or goals. Since Bluerock and its affiliates have an interest in us and control any affiliated co-venturer, agreements and transactions between the co-venturers with respect to any such joint venture do not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers.

 

Risks Related To Debt Financing

 

We have used and may continue to use mortgage and other debt financing to acquire properties or interests in properties and otherwise incur other indebtedness, which increases our expenses and could subject us to the risk of losing properties in foreclosure if our cash flow is insufficient to make loan payments.

 

We are permitted to acquire real properties and other real estate-related investments, including entity acquisitions, by assuming either existing financing secured by the asset or by borrowing new funds. In addition, we may incur or increase our mortgage debt by obtaining loans secured by some or all of our assets to obtain funds to acquire additional investments or to pay distributions to our stockholders. We also may borrow funds if necessary to satisfy the requirement that we distribute at least 90% of our annual “REIT taxable income,” or otherwise as is necessary or advisable to assure that we maintain our qualification as a REIT for federal income tax purposes.

 

There is no limit on the amount we may invest in any single property or other asset or on the amount we can borrow to purchase any individual property or other investment. If we mortgage a property and have insufficient cash flow to service the debt, we risk an event of default which may result in our lenders foreclosing on the properties securing the mortgage.

 

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If we cannot repay or refinance loans incurred to purchase our properties, or interests therein, then we may lose our interests in the properties secured by the loans we are unable to repay or refinance.

 

High levels of debt or increases in interest rates could increase the amount of our loan payments, which could reduce the cash available for distribution to stockholders.

 

Our policies do not limit us from incurring debt. For purposes of calculating our leverage, we assume full consolidation of all of our real estate investments, whether or not they would be consolidated under GAAP, include assets we have classified as held for sale, and include any joint venture level indebtedness in our total indebtedness.

 

These high debt levels cause us to incur higher interest charges, resulting in higher debt service payments, and may be accompanied by restrictive covenants. Interest we pay reduces cash available for distribution to stockholders. Additionally, with respect to our variable rate debt, increases in interest rates increase our interest costs, which reduces our cash flow and our ability to make distributions to you. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments in properties at times which may not permit realization of the maximum return on such investments and could result in a loss. In addition, if we are unable to service our debt payments, our lenders may foreclose on our interests in the real property that secures the loans we have entered into.

 

High mortgage rates may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our cash flow from operations and the amount of cash distributions we can make.

 

To qualify as a REIT, we will be required to distribute at least 90% of our annual taxable income (excluding net capital gains) to our stockholders in each taxable year, and thus our ability to retain internally generated cash is limited. Accordingly, our ability to acquire properties or to make capital improvements to or remodel properties will depend on our ability to obtain debt or equity financing from third parties or the sellers of properties. If mortgage debt is unavailable at reasonable rates, we may not be able to finance the purchase of properties. If we place mortgage debt on properties, we run the risk of being unable to refinance the properties when the debt becomes due or of being unable to refinance on favorable terms. If interest rates are higher when we refinance the properties, our income could be reduced. We may be unable to refinance properties. If any of these events occurs, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to you and may hinder our ability to raise capital by issuing more stock or borrowing more money.

 

Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to you.

 

When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage the property, discontinue insurance coverage, or impose other limitations. These or other limitations may limit our flexibility and prevent us from achieving our operating plans.

 

If mortgage debt is unavailable at reasonable rates, it may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our cash flows from operations and the amount of cash distributions we can make.

 

If we are unable to borrow monies on terms and conditions that we find acceptable, we likely will have to reduce the number of properties we can purchase, and the return on the properties we do purchase may be lower. If we place mortgage debt on properties, we run the risk of being unable to refinance the properties when the debt becomes due or of being unable to refinance on favorable terms. If interest rates are higher when we refinance the properties, our income could be reduced. As such, we may find it difficult, costly or impossible to refinance indebtedness which is maturing. If any of these events occur, our interest cost would increase as a result, which would reduce our cash flow. This, in turn, could reduce cash available for distribution to our stockholders and may hinder our ability to raise capital by issuing more stock or borrowing more money. If we are unable to refinance maturing indebtedness with respect to a particular property and are unable to pay the same, then the lender may foreclose on such property.

 

Financial and real estate market disruptions could adversely affect the multifamily property sector's ability to obtain financing from Freddie Mac and Fannie Mae, which could adversely impact us.

 

Fannie Mae and Freddie Mac are major sources of financing for the multifamily sector and both have historically experienced losses due to credit-related expenses, securities impairments and fair value losses. If new U.S. government regulations (i) heighten Fannie Mae's and Freddie Mac's underwriting standards, (ii) adversely affect interest rates, or (iii) reduce the amount of capital they can make available to the multifamily sector, it could reduce or remove entirely a vital resource for multifamily financing. Any potential reduction in loans, guarantees and credit-enhancement arrangements from Fannie Mae and Freddie Mac could jeopardize the effectiveness of the multifamily sector's available financing and decrease the amount of available liquidity and credit that could be used to acquire and diversify our portfolio of multifamily assets.

 

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Volatility in and regulation of the commercial mortgage-backed securities market has limited and may continue to impact the pricing of secured debt.

 

As a result of the past crisis in the residential mortgage-backed securities markets, the most recent global recession and some concerns over the ability to refinance or repay existing commercial mortgage-backed securities as they come due, liquidity previously provided by the commercial mortgage-backed securities and collateralized debt obligations markets has significantly decreased. In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act imposes significant new regulations related to the mortgage backed securities industry and market participants, which has contributed to uncertainty in the market. The volatility in the commercial mortgage-backed securities market could result in the following adverse effects on our incurrence of secured debt, which could have a materially negative impact on our financial condition, results of operations, cash flow and cash available for distribution:

 

  • higher loan spreads;
  • tighter loan covenants;
  • reduced loan to value ratios and resulting borrower proceeds; and
  • higher amortization and reserve requirements.

 

 Some of our mortgage loans may have “due on sale” provisions, which may impact the manner in which we acquire, sell and/or finance our properties.

 

In purchasing properties subject to financing, we may obtain financing with “due-on-sale” and/or “due-on-encumbrance” clauses. Due-on-sale clauses in mortgages allow a mortgage lender to demand full repayment of the mortgage loan if the borrower sells the mortgaged property. Similarly, due-on-encumbrance clauses allow a mortgage lender to demand full repayment if the borrower uses the real estate securing the mortgage loan as security for another loan. In such event, we may be required to sell our properties on an all-cash basis, which may make it more difficult to sell the property or reduce the selling price.

 

Lenders may be able to recover against our other properties under our mortgage loans.

 

In financing our property acquisitions, we will seek to obtain secured nonrecourse loans. However, only recourse financing may be available, in which event, in addition to the property securing the loan, the lender would have the ability to look to our other assets for satisfaction of the debt if the proceeds from the sale or other disposition of the property securing the loan are insufficient to fully repay it. Also, in order to facilitate the sale of a property, we may allow the buyer to purchase the property subject to an existing loan whereby we remain responsible for the debt.

 

If we are required to make payments under any “bad boy” carve-out guaranties that we may provide in connection with certain mortgages and related loans, our business and financial results could be materially adversely affected.

 

In obtaining certain nonrecourse loans, we may provide standard carve-out guaranties. These guaranties are only applicable if and when the borrower directly, or indirectly through agreement with an affiliate, joint venture partner or other third party, voluntarily files a bankruptcy or similar liquidation or reorganization action or takes other actions that are fraudulent or improper (commonly referred to as “bad boy” guaranties). Although we believe that “bad boy” carve-out guaranties are not guaranties of payment in the event of foreclosure or other actions of the foreclosing lender that are beyond the borrower’s control, some lenders in the real estate industry have recently sought to make claims for payment under such guaranties. In the event such a claim were made against us under a “bad boy” carve-out guaranty following foreclosure on mortgages or related loan, and such claim were successful, our business and financial results could be materially adversely affected.

 

Interest-only indebtedness may increase our risk of default and ultimately may reduce our funds available for distribution to our stockholders.

 

We may finance our property acquisitions using interest-only mortgage indebtedness. During the interest-only period, the amount of each scheduled payment will be less than that of a traditional amortizing mortgage loan. The principal balance of the mortgage loan will not be reduced (except in the case of prepayments) because there are no scheduled monthly payments of principal during this period. After the interest-only period, we will be required either to make scheduled payments of amortized principal and interest or to make a lump-sum or “balloon” payment at maturity. These required principal or balloon payments will increase the amount of our scheduled payments and may increase our risk of default under the related mortgage loan. If the mortgage loan has an adjustable interest rate, the amount of our scheduled payments also may increase at a time of rising interest rates. Increased payments and substantial principal or balloon maturity payments will reduce the funds available for distribution to our stockholders because cash otherwise available for distribution will be required to pay principal and interest associated with these mortgage loans.

 

To hedge against interest rate fluctuations, we may use derivative financial instruments that may be costly and ineffective, may reduce the overall returns on your investment, and may expose us to the credit risk of counterparties.

 

To the extent consistent with maintaining our qualification as a REIT, we may use derivative financial instruments to hedge exposures to interest rate fluctuations on loans secured by our assets and investments in collateralized mortgage-backed securities. Derivative instruments may include interest rate swap contracts, interest rate cap or floor contracts, futures or forward contracts, options or repurchase agreements. Our actual hedging decisions will be determined in light of the facts and circumstances existing at the time of the hedge and may differ from time to time.

 

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To the extent that we use derivative financial instruments to hedge against interest rate fluctuations, we will be exposed to financing, basis risk and legal enforceability risks. In this context, credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. Basis risk occurs when the index upon which the contract is based is more or less variable than the index upon which the hedged asset or liability is based, thereby making the hedge less effective. Finally, legal enforceability risks encompass general contractual risks, including the risk that the counterparty will breach the terms of, or fail to perform its obligations under, the derivative contract. If we are unable to manage these risks effectively, our results of operations, financial condition and ability to make distributions to you will be adversely affected.

 

Complying with REIT requirements may limit our ability to hedge risk effectively.

 

We must satisfy two gross income tests annually to maintain our qualification as a REIT. First, at least 75% of our gross income for each taxable year must consist of defined types of income that we derive, directly or indirectly, from investments relating to real property or mortgages on real property or qualified temporary investment income (the “75% Gross Income Test”). Second, in general, at least 95% of our gross income for each taxable year must consist of income that is qualifying income for purposes of the 75% Gross Income Test, other types of interest and dividends, gain from the sale or disposition of shares or securities, or any combination of these (the “95% Gross Income Test”).

 

These and other REIT provisions of the Code may limit our ability to hedge the risks inherent to our operations. From time to time, we may enter into hedging transactions with respect to one or more of our assets or liabilities. Our hedging transactions may include entering into interest rate swaps, caps and floors, options to purchase these items, and futures and forward contracts. Any income or gain derived by us from transactions that hedge certain risks, such as the risk of changes in interest rates, will not be treated as gross income for purposes of either the 75% Gross Income Test or the 95% Gross Income Test, unless specific requirements are met. Such requirements include that the hedging transaction be properly identified within prescribed time periods and that the transaction either (1) hedges risks associated with indebtedness issued by us that is incurred to acquire or carry real estate assets or (2) manages the risks of currency fluctuations with respect to income or gain that qualifies under the 75% Gross Income Test or 95% Gross Income Test (or assets that generate such income). To the extent that we do not properly identify such transactions as hedges, hedge with other types of financial instruments, or hedge other types of indebtedness, the income from those transactions is not likely to be treated as qualifying income for purposes of the 75% Gross Income Test and the 95% Gross Income Test. As a result of these rules, we may have to limit the use of hedging techniques that might otherwise be advantageous, which could result in greater risks associated with interest rate or other changes than we would otherwise incur.

 

You may not receive any profits resulting from the sale of one of our properties, or receive such profits in a timely manner, because we may provide financing for the purchaser of such property.

 

If we liquidate our Company, you may experience a delay before receiving your share of the proceeds of such liquidation. In a forced or voluntary liquidation, we may sell our properties either subject to or upon the assumption of any then outstanding mortgage debt or, alternatively, may provide financing to purchasers. We may take a purchase money obligation secured by a mortgage as partial payment. We do not have any limitations or restrictions on our taking such purchase money obligations. To the extent we receive promissory notes or other property instead of cash from sales, such proceeds, other than any interest payable on those proceeds, will not be included in net sale proceeds until and to the extent the promissory notes or other property are actually paid, sold, refinanced or otherwise disposed of. In certain cases, we may receive initial down payments in the year of sale in an amount less than the selling price and subsequent payments may be spread over a number of years. In such cases, you may experience a delay in the distribution of the proceeds of a sale until such time.

 

Risks Related to Offerings of our Class A Common Stock

 

The market price and trading volume of our Class A common stock has been volatile at times following the initial public offering (the “IPO”), and these trends may continue following an offering, which may adversely impact the market for shares of our Class A common stock and make it difficult for purchasers to sell their shares.

 

Prior to the IPO, there was no active market for our common stock. Although our Class A common stock is listed on the NYSE American, the stock markets, including the NYSE American on which our Class A common stock is listed, have from time to time experienced significant price and volume fluctuations. Our Class A common stock has frequently traded below the IPO price since the completion of the IPO. As a result, the market price of shares of our Class A common stock may be similarly volatile, and holders of shares of our Class A common stock may from time to time experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. The offering price for shares of our Class A common stock is expected to be determined by negotiation between us and the underwriters. Purchasers may not be able to sell their shares of Class A common stock at or above the offering price.

 

The price of shares of our Class A common stock could be subject to wide fluctuations in response to a number of factors, including those listed in this “Risk Factors” section and others such as:

 

  • our operating performance and the performance of other similar companies;

 

  •

actual or anticipated differences in our quarterly operating results;

 

  • changes in our revenues or earnings estimates or recommendations by securities analysts;

 

  • publication of research reports about us, the apartment real estate sector, apartment tenants or the real estate industry;

 

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  • increases in market interest rates, which may lead investors to demand a higher distribution yield for shares of our Class A common stock, and would result in increased interest expenses on our debt;

 

  • the current state of the credit and capital markets, and our ability and the ability of our tenants to obtain financing;

 

  • additions and departures of key personnel;

 

  • increased competition in the multifamily real estate business in our target markets;

 

  • the passage of legislation or other regulatory developments that adversely affect us or our industry;

 

  • speculation in the press or investment community;

 

  • equity issuances by us (including the issuances of OP and LTIP Units), or common stock resales by our stockholders, or the perception that such issuances or resales may occur;

 

  • actual, potential or perceived accounting problems;

 

  • changes in accounting principles;

 

  • failure to qualify as a REIT;

 

  • terrorist acts, natural or man-made disasters or threatened or actual armed conflicts; and

 

  •

general market and local, regional and national economic conditions, particularly in our target markets, including factors unrelated to our performance.

 

No assurance can be given that the market price of shares of our Class A common stock will not fluctuate or decline significantly in the future or that holders of shares of our Class A common stock will be able to sell their shares when desired on favorable terms, or at all. From time to time in the past, securities class action litigation has been instituted against companies following periods of extreme volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources.

 

In addition, our charter contains restrictions on the ownership and transfer of our stock, and these restrictions may inhibit your ability to sell your stock. Our charter contains a restriction on ownership of our shares that generally prevents any one person from owning more than 9.8% in value of our outstanding shares of stock or more than 9.8% in value or in number of shares, whichever is more restrictive, of our outstanding shares of common stock, unless otherwise excepted (prospectively or retroactively) by our Board.

 

Sales of shares of our Class A common stock, or the perception that such sales will occur, may have adverse effects on our share price.

 

We cannot predict the effect, if any, of future sales of Class A common stock, or the availability of shares for future sales, on the market price of our Class A common stock. Sales of substantial amounts of Class A common stock, including shares of Class A common stock issued in an offering, issuable upon the exchange of OP Units, the sale of shares of Class A common stock held by our current stockholders, and the sale of any shares we may issue under our incentive plans, or the perception that these sales could occur, may adversely affect prevailing market prices for our Class A common stock. We may be required to conduct additional offerings to raise more funds. These offerings or the perception of a need for offerings may affect the market prices for our Class A common stock.

 

An increase in market interest rates may have an adverse effect on the market price of our Class A common stock.

 

One of the factors that investors may consider in deciding whether to buy or sell our Class A common stock is our distribution yield, which is our distribution rate as a percentage of our share price, relative to market interest rates. If market interest rates increase, prospective investors may desire a higher distribution yield on our Class A common stock or may seek securities paying higher dividends or interest. The market price of our Class A common stock likely will be based primarily on the earnings that we derive from rental income with respect to our investments and our related distributions to stockholders, and not from the underlying appraised value of the properties themselves. As a result, interest rate fluctuations and capital market conditions are likely to affect the market price of our Class A common stock, and such effects could be significant. For example, if interest rates rise without an increase in our distribution rate, the market price of our Class A common stock could decrease because potential investors may require a higher distribution yield on our Class A common stock as market rates on interest-bearing securities, such as bonds, rise.

 

We have paid and may continue to pay distributions from offering proceeds, borrowings or the sale of assets to the extent our cash flow from operations or earnings are not sufficient to fund declared distributions. Rates of distribution to you will not necessarily be indicative of our operating results. If we make distributions from sources other than our cash flows from operations or earnings, we will have fewer funds available for the acquisition of properties and your overall return may be reduced.

 

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Our organizational documents permit us to make distributions from any source, including the net proceeds from an offering. There is no limit on the amount of offering proceeds we may use to pay distributions. We have funded and may continue to fund distributions from the net proceeds of our offerings, borrowings and the sale of assets to the extent distributions exceed our earnings or cash flows from operations. While our policy is generally to pay distributions from cash flow from operations, our distributions through December 31, 2018 have been paid from proceeds from our underwritten and continuous offerings and at the market (“ATM”) offerings, and sales of assets, and may in the future be paid from additional sources, such as from borrowings. To the extent we fund distributions from sources other than cash flow from operations, such distributions may constitute a return of capital and we will have fewer funds available for the acquisition of properties and your overall return may be reduced. Further, to the extent distributions exceed our earnings and profits, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder will be required to recognize capital gain.

 

We have issued Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, and intend to issue additional Series B Preferred Stock under our continuous offering, which, along with future issuances of debt securities and preferred equity, rank senior to our Class A common stock in priority of dividend payment and upon liquidation, dissolution and winding up, and may adversely affect the trading price of our Class A common stock.

 

As of December 31, 2018, we have issued and outstanding 5,721,460 shares of Series A Preferred Stock, 306,009 shares of Series B Preferred Stock, 2,323,750 shares of Series C Preferred Stock and 2,850,602 shares of Series D Preferred Stock, and are offering up to an additional 626,722 shares of Series B Preferred Stock in our continuous offering, all of which are senior to our common stock with respect to priority of dividend payments and rights upon liquidation, dissolution or winding up. The Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock may limit our ability to make distributions to holders of our Class A common stock. In the future, we may issue debt or additional preferred equity securities or incur other borrowings. Upon our liquidation, holders of our debt securities, other loans and Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock and additional preferred stock, if any, will receive a distribution of our available assets before common stockholders. Any additional preferred stock, if issued, likely will also have a preference on periodic distribution payments, which could eliminate or otherwise limit our ability to make distributions to holders of our Class A common stock and Class C common stock. Holders of shares of our Class A common stock bear the risk that our future issuances of debt or equity securities, including Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock or our incurrence of other borrowings may negatively affect the trading price of our Class A common stock.

 

We operate as a holding company dependent upon the assets and operations of our subsidiaries, and because of our structure, we may not be able to generate the funds necessary to make dividend payments on our common stock.

 

We generally operate as a holding company that conducts its businesses primarily through our Operating Partnership, which in turn is a holding company conducting its business through its subsidiaries. These subsidiaries conduct all of our operations and are our only source of income. Accordingly, we are dependent on cash flows and payments of funds to us by our subsidiaries as dividends, distributions, loans, advances, leases or other payments from our subsidiaries to generate the funds necessary to make dividend payments on our common stock. Our subsidiaries’ ability to pay such dividends and/or make such loans, advances, leases or other payments may be restricted by, among other things, applicable laws and regulations, current and future debt agreements and management agreements into which our subsidiaries may enter, which may impair our ability to make cash payments on our common stock. In addition, such agreements may prohibit or limit the ability of our subsidiaries to transfer any of their property or assets to us, any of our other subsidiaries or to third parties. Our future indebtedness or our subsidiaries’ future indebtedness may also include restrictions with similar effects.

 

In addition, because we are a holding company, stockholders’ claims will be structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed money) of our Operating Partnership and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation or reorganization, claims of our stockholders will be satisfied only after all of our and our Operating Partnership’s and its subsidiaries’ liabilities and obligations have been paid in full.

 

 Your percentage of ownership may be diluted if we issue new shares of stock.

 

Stockholders have no rights to buy additional shares of our stock in the event we issue new shares of stock. We may issue common stock, convertible debt or preferred stock pursuant to a subsequent public offering or a private placement, to sellers of properties we directly or indirectly acquire instead of, or in addition to, cash consideration, or to Bluerock in payment of some or all of the operating expense reimbursements that were earned by Bluerock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Investors purchasing shares of our Class A common stock in an offering who do not participate in any future stock issuances will experience dilution in the percentage of the issued and outstanding shares of Class A common stock they own.

 

Redemption of our Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock for shares of our Class A common stock will dilute the ownership interest of existing holders of our Class A common stock, including stockholders whose shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock were previously redeemed for shares of our Class A common stock, and stockholders whose shares of Series B Preferred Stock were previously converted into shares of our Class A common stock or whose Warrants were previously exercised for shares of our Class A common stock.

 

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Commencing on October 21, 2022, the holders of shares of our Series A Preferred Stock have the option to cause us to redeem their shares at a redemption price of $25.00 per share, plus an amount equal to all accrued but unpaid dividends. In addition, commencing on the date of original issuance of the shares of Series B Preferred Stock, the holders of shares of Series B Preferred Stock may require us to redeem such shares at a redemption price equal to their stated value (initially $1,000 per share), less a declining redemption fee (if applicable), plus an amount equal to any accrued but unpaid dividends. Further, commencing on July 19, 2023, the holders of shares of our Series C Preferred Stock have the option to cause us to redeem their shares at a redemption price of $25.00 per share, plus an amount equal to all accrued but unpaid dividends. The redemption price for any such redemptions of shares of Series A Preferred Stock, Series B Preferred Stock, or Series C Preferred Stock is payable, in our sole discretion, in cash or in equal value of shares of our Class A common stock, at our option. The redemption of our Series A Preferred Stock, our Series B Preferred Stock, or our Series C Preferred Stock for shares of our Class A common stock may result in the dilution of some or all of the ownership interests of existing stockholders, including stockholders whose shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock were previously redeemed for shares of our Class A common stock, and stockholders whose shares of Series B Preferred Stock were previously converted into shares of our Class A common stock or whose Warrants were previously exercised for shares of our Class A common stock. Any sales in the public market of our Class A common stock issuable upon any such redemption could adversely affect prevailing market prices of our Class A common stock. In addition, any redemption of our Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock for shares of our Class A common stock could depress the price of our Class A common stock.

 

Our authorized but unissued shares of common and preferred stock may prevent a change in our control.

 

Our charter authorizes us to issue additional authorized but unissued shares of common or preferred stock. In addition, our Board may, without stockholder approval, amend our charter from time to time to increase or decrease the aggregate number of shares of our stock or the number of shares of stock of any class or series that we have authority to issue and classify or reclassify any unissued shares of common or preferred stock into other classes or series of stock and set the preferences, rights and other terms of the classified or reclassified shares. As a result, our Board may establish a series of common or preferred stock that could delay or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.  

 

Risks Related to Offerings of our Series A Preferred Stock, our Series B Preferred Stock, our Series C Preferred Stock and/or our Series D Preferred Stock

 

Because we conduct substantially all of our operations through our Operating Partnership, our ability to pay dividends on any of our Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock depends almost entirely on the distributions we receive from our Operating Partnership. We may not be able to pay dividends regularly on our Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock.

 

We may not be able to pay dividends on a regular quarterly basis in the future on any of our Series A Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, or on a monthly basis in the future on our Series B Preferred Stock. We intend to contribute the entire net proceeds from the offerings of all such series of preferred stock to our Operating Partnership in exchange for Series A Preferred Units, Series B Preferred Units, Series C Preferred Units and Series D Preferred Units (as applicable) that have substantially the same economic terms as the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock (respectively). Because we conduct substantially all of our operations through our Operating Partnership, our ability to pay dividends on the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock will depend almost entirely on payments and distributions we receive on our interests in our Operating Partnership. If our Operating Partnership fails to operate profitably and to generate sufficient cash from operations (and the operations of its subsidiaries), we may not be able to pay dividends on the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock. Furthermore, any new shares of preferred stock on parity with any such series of preferred stock will substantially increase the cash required to continue to pay cash dividends at stated levels. Any common stock or preferred stock that may be issued in the future to finance acquisitions, upon exercise of stock options or otherwise, would have a similar effect.

 

Your interests in our Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock could be diluted by the incurrence of additional debt, the issuance of additional shares of preferred stock, including additional shares of any or all of the foregoing series of preferred stock, and by other transactions.

 

As of December 31, 2018, our total long-term mortgage indebtedness was approximately $1,215.4 million and our credit facilities were approximately $82.2 million, and we may incur significant additional debt in the future. Each of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock is subordinate to all of our existing and future debt and liabilities and those of our subsidiaries. Our future debt may include restrictions on our ability to pay dividends to preferred stockholders in the event of a default under the debt facilities or under other circumstances. Our charter currently authorizes the issuance of up to 250,000,000 shares of preferred stock in one or more classes or series, and as of December 31, 2018, we have issued and outstanding 5,721,460 shares of Series A Preferred Stock, 306,009 shares of Series B Preferred Stock, 2,323,750 shares of Series C Preferred Stock and 2,850,602 shares of Series D Preferred Stock. The issuance of additional preferred stock on parity with or senior to any or all of the foregoing series of preferred stock would dilute the interests of the holders of shares of preferred stock of the applicable series, and any issuance of preferred stock senior to the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock or any issuance of additional indebtedness, could affect our ability to pay dividends on, redeem or pay the liquidation preference on any or all of the foregoing series of preferred stock. We may issue preferred stock on parity with any or all of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock without the consent of the holders of shares of preferred stock of the applicable series. Other than the Asset Coverage Ratio (as defined below) with respect to the Series A Preferred Stock and Series C Preferred Stock and the right of holders to cause us to redeem the Series A Preferred Stock, Series B Preferred Stock, or Series C Preferred Stock or to convert the Series D Preferred Stock, upon a Change of Control/Delisting (as defined below), none of the provisions relating to any of the foregoing series of preferred stock relate to or limit our indebtedness or afford the holders of shares thereof protection in the event of a highly leveraged or other transaction, including a merger or the sale, lease or conveyance of all or substantially all our assets or business, that might adversely affect the holders of such shares.

 

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In the event a holder of our Series A Preferred Stock exercises a Redemption at Option of Holder on or after October 21, 2022, a holder of our Series B Preferred Stock exercises their redemption option, or a holder of our Series C Preferred Stock exercise a Redemption at Option of Holder on or after July 19, 2023, we may redeem such shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, either for cash, or for shares of our Class A common stock, or any combination thereof, in our sole discretion.

 

If we choose to so redeem for Class A common stock, the holder will receive shares of our Class A common stock and therefore be subject to the risks of ownership thereof. See “—Risks Related to an Offering of our Class A Common Stock.” Ownership of shares of our Series A Preferred Stock, shares of our Series B Preferred Stock, or shares of our Series C Preferred Stock will not give you the rights of holders of our common stock. Until and unless you receive shares of our Class A common stock upon redemption, you will have only those rights applicable to holders of our Series A Preferred Stock, our Series B Preferred Stock or Series C Preferred Stock (as applicable).

 

The Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock have not been rated.

 

We have not sought to obtain a rating for the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock or the Series D Preferred Stock. No assurance can be given, however, that one or more rating agencies might not independently determine to issue such ratings or that such a rating, if issued, would not adversely affect the market price of the applicable series of preferred stock. In addition, we may elect in the future to obtain a rating of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and/or the Series D Preferred Stock, which could adversely impact the market price of the applicable series. Ratings only reflect the views of the rating agency or agencies issuing the ratings and such ratings could be revised downward, placed on negative outlook or withdrawn entirely at the discretion of the issuing rating agency if in its judgment circumstances so warrant. While ratings do not reflect market prices or the suitability of a security for a particular investor, such downward revision or withdrawal of a rating could have an adverse effect on the market price of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock or the Series D Preferred Stock. It is also possible that the Series A Preferred Stock, Series B Preferred Stock, the Series C Preferred Stock and/or the Series D Preferred Stock will never be rated.

 

Dividend payments on the Series A Preferred Stock, on the Series B Preferred Stock, on the Series C Preferred Stock and on the Series D Preferred Stock are not guaranteed.

 

Although dividends on each of the Series A Preferred Stock, on the Series B Preferred Stock, on the Series C Preferred Stock and on the Series D Preferred Stock are cumulative, our Board must approve the actual payment of such distributions. Our Board can elect at any time or from time to time, and for an indefinite duration, not to pay any or all accrued distributions. Our Board could do so for any reason, and may be prohibited from doing so in the following instances:

 

  • poor historical or projected cash flows;

 

  • the need to make payments on our indebtedness;

 

  • concluding that payment of distributions on any or all such series of preferred stock would cause us to breach the terms of any indebtedness or other instrument or agreement; or

 

  • determining that the payment of distributions would violate applicable law regarding unlawful distributions to stockholders.

 

We intend to use the net proceeds from any offerings of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and/or the Series D Preferred Stock to fund future investments and for other general corporate and working capital purposes, but any such offerings will not be conditioned upon the closing of pending property investments and we will have broad discretion to determine alternative uses of proceeds.

 

We intend to use a portion of the net proceeds from any offerings of our Series A Preferred Stock, our Series B Preferred Stock, our Series C Preferred Stock and/or our Series D Preferred Stock to fund future investments and for other general corporate and working capital purposes. However, the offerings will not be conditioned upon the closing of definitive agreements to acquire or invest in any properties. We will have broad discretion in the application of the net proceeds from any such offerings, and holders of our Series A Preferred Stock, our Series B Preferred Stock, our Series C Preferred Stock and our Series D Preferred Stock will not have the opportunity as part of their investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from any such offerings, their ultimate use may vary substantially from their currently intended use, and result in investments that are not accretive to our results from operations.

 

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If we are required to make payments under any “bad boy” carve-out guaranties, recourse guaranties, and completion guaranties that we may provide in connection with certain mortgages and related loans in connection with an event that constitutes a Change of Control or Change of Control/Delisting, our business and financial results could be materially adversely affected.

 

In causing our subsidiaries to obtain certain nonrecourse loans, we may provide standard carve-out guaranties. These guaranties are generally only applicable if and when the borrower directly, or indirectly through agreement with an affiliate, joint venture partner or other third party, voluntarily files a bankruptcy or similar liquidation or reorganization action or takes other actions that are fraudulent or improper (commonly referred to as “bad boy” guaranties). We also may enter into recourse guaranties with respect to future mortgages, or provide credit support to development projects through completion guaranties, which also could increase risk of repayment. In some circumstances, pursuant to guarantees to which we are a party or that we may enter into in the future, our obligations pursuant to such “bad boy” carve-out guaranties and other guaranties may be triggered by a Change of Control or Change of Control/Delisting, because, among other things, such an event may result indirectly in a change of control of the applicable borrower. Because a Change of Control while any Series B Preferred Stock is outstanding, or a Change of Control/Delisting while any Series A Preferred Stock or Series C Preferred Stock is outstanding, also triggers a right of redemption for cash by the holders thereof, the effect of a Change of Control or Change of Control/Delisting could negatively impact our liquidity and overall financial condition, and could negatively impact the ability of holders of shares of our Series B Preferred Stock, Series A Preferred Stock or Series C Preferred Stock to receive dividends or other amounts on their shares of such Series B Preferred Stock, Series A Preferred Stock or Series C Preferred Stock.

 

There is a risk of delay in our redemption of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock and we may fail to redeem such securities as required by their terms.

 

Substantially all of the investments we presently hold and the investments we expect to acquire in the future are, and will be, illiquid. The illiquidity of our investments may make it difficult for us to obtain cash quickly if a need arises. If we are unable to obtain sufficient liquidity prior to a redemption date, we may be forced to engage in a partial redemption or to delay a required redemption. If such a partial redemption or delay were to occur, the market price of shares of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock might be adversely affected, and stockholders entitled to a redemption payment may not receive payment.

 

The Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock will bear a risk of early redemption by us.

 

We may voluntarily redeem some or all of the Series A Preferred Stock solely for cash, on or after October 21, 2020. We may also voluntarily redeem some or all of the Series B Preferred Stock, for cash or equal value of shares of our Class A common stock, two years after the issuance date. In addition, we may voluntarily redeem some or all of the Series C Preferred Stock, solely for cash, on or after July 19, 2021. Finally, we may voluntarily redeem some or all of the Series D Preferred Stock solely for cash, on or after October 13, 2021. Any such redemptions may occur at a time that is unfavorable to holders of such preferred stock. We may have an incentive to redeem the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock voluntarily if market conditions allow us to issue other preferred stock or debt securities at an interest or distribution rate that is lower than the distribution rate on the applicable series of preferred stock. Given the potential for early redemption of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, holders of such shares may face an increased reinvestment risk, which is the risk that the return on an investment purchased with proceeds from the sale or redemption of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock may be lower than the return previously obtained from the investment in such shares.

 

Holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock should not expect us to redeem all or any such shares on the date they first become redeemable or on any particular date after they become redeemable.

 

Except in limited circumstances related to our ability to qualify as a REIT, our compliance with our Asset Coverage Ratio, or a special optional redemption in connection with a Change of Control/Delisting, the Series A Preferred Stock may be redeemed by us at our option, either in whole or in part, only on or after October 21, 2020, and the Series C Preferred Stock may be redeemed by us at our option, either in whole or in part, only on or after July 19, 2021. Except in limited circumstances related to our ability to qualify as a REIT or a special optional redemption in connection with a Change of Control/Delisting, the Series B Preferred Stock may be redeemed by us at our option, either in whole or in part, only on or after two years from the issuance date, and the Series D Preferred Stock may be redeemed by us at our option, either in whole or in part, only on or after October 13, 2021. Any decision we make at any time to propose a redemption of any such series of preferred stock will depend upon, among other things, our evaluation of our capital position and general market conditions at the time. It is likely that we would choose to exercise our optional redemption right only when prevailing interest rates have declined, which would adversely affect the ability of holders of shares of the applicable series of preferred stock to reinvest proceeds from the redemption in a comparable investment with an equal or greater yield to the yield on such series of preferred stock had their shares not been redeemed. In addition, there is no penalty or premium payable on redemption, and the market price of the shares of such series of preferred stock may not exceed the liquidation preference at the time the shares become redeemable for any reason.

 

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Compliance with the Asset Coverage Ratio may result in our early redemption of your Series A Preferred Stock and/or Series C Preferred Stock.

 

The terms of our Series A Preferred Stock and Series C Preferred Stock require us to maintain asset coverage of at least 200% calculated by determining the percentage value of (1) our total assets plus accumulated depreciation minus our total liabilities and indebtedness as reported in our financial statements prepared in accordance with GAAP (exclusive of the book value of any Redeemable and Term Preferred Stock (as defined below)), over (2) the aggregate liquidation preference, plus an amount equal to all accrued and unpaid dividends, of our outstanding Series A Preferred Stock and Series C Preferred Stock and any outstanding shares of term preferred stock or preferred stock providing for a fixed mandatory redemption date or maturity date (collectively referred to as “Redeemable and Term Preferred Stock”) on the last business day of any calendar quarter (the “Asset Coverage Ratio”).

 

If we are not in compliance with the Asset Coverage Ratio, we may redeem shares of Redeemable and Term Preferred Stock, which may include Series A Preferred Stock and/or Series C Preferred Stock, including shares that will result in compliance with the Asset Coverage Ratio up to and including 285%. This could result in our ability to redeem a significant amount of the Series A Preferred Stock prior to October 21, 2020 and/or Series C Preferred Stock prior to July 19, 2021.

 

We may not have sufficient funds to redeem the Series A Preferred Stock, Series B Preferred Stock, and/or Series C Preferred Stock upon a Change of Control/Delisting.

 

A “Change of Control/Delisting” is when, after the original issuance of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, or Series D Preferred Stock any of the following has occurred and is continuing:

 

•      a “person” or “group” within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act”), other than our Company, its subsidiaries, and its and their employee benefit plans, has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of our common equity representing more than 50% of the total voting power of all outstanding shares of our common equity that are entitled to vote generally in the election of directors, with the exception of the formation of a holding company;

 

•      consummation of any share exchange, consolidation or merger of our Company or any other transaction or series of transactions pursuant to which our common stock will be converted into cash, securities or other property, other than any such transaction where the shares of our common stock outstanding immediately prior to such transaction constitute, or are converted into or exchanged for, a majority of the common stock of the surviving person or any direct or indirect parent company of the surviving person immediately after giving effect to such transaction;

 

•      any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of our Company and its subsidiaries, taken as a whole, to any person other than one of the Company’s subsidiaries;

 

•      our stockholders approve any plan or proposal for the liquidation or dissolution of our Company;

 

•      our Class A common stock ceases to be listed or quoted on a national securities exchange in the United States; or

 

•      at least a majority of our Board ceases to be constituted of directors who were either a member of our Board on October 21, 2015, (February 24, 2016 for Series B Preferred Stock), or who became a member of our Board subsequent to that date and whose appointment, election or nomination for election by our stockholders was duly approved by a majority of the continuing directors on our Board at the time of such approval, either by a specific vote or by approval of the proxy statement issued by our Company on behalf of our Board in which such individual is named as nominee for director (each, a “Continuing Director”).

 

Upon the occurrence of a Change of Control/Delisting, unless we have exercised our right to redeem the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, or Series D Preferred Stock, each holder of Series A Preferred Stock, Series B Preferred Stock, or Series C Preferred Stock will have the right to require us to redeem all or any part of such stockholder’s Series A Preferred Stock, Series B Preferred Stock, or Series C Preferred Stock at a price equal to the liquidation preference per share, plus an amount equal to any accumulated and unpaid dividends up to and including the date of payment (and each holder of Series D Preferred Stock will have the right to require us to convert all or some of their Series D Preferred Stock into shares of our Class A common stock (or equivalent value of alternative consideration)). If we experience a Change of Control/Delisting, there can be no assurance that we would have sufficient financial resources available to satisfy our obligations to redeem the Series A Preferred Stock, Series B Preferred Stock, or Series C Preferred Stock, and any guarantees or indebtedness that may be required to be repaid or repurchased as a result of such event. Our failure to redeem the Series A Preferred Stock, Series B Preferred Stock, or Series C Preferred Stock, could have material adverse consequences for us and the holders of the applicable series of preferred stock. In addition, the special optional redemption in connection with a Change of Control/Delisting feature of the Series A Preferred Stock, Series C Preferred Stock or Series D Preferred Stock may have the effect of inhibiting a third party from making an acquisition proposal for the Company, or of delaying, deferring or preventing a change of control of the Company under circumstances that otherwise could provide the holders of our Class A common stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock with the opportunity for liquidity or the opportunity to realize a premium over the then-current market price or that stockholders may otherwise believe is in their best interests.

 

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Holders of our Series D Preferred Stock may not be permitted to exercise conversion rights upon a Change of Control/Delisting. If exercisable, the Change of Control/Delisting conversion feature of our Series D Preferred Stock may not adequately compensate such holders and may make it more difficult for a third party to take over our Company or discourage a third party from taking over our Company.

 

Upon the occurrence of a Change of Control/Delisting, holders of our Series D Preferred Stock will have the right to convert some or all of their Series D Preferred Stock into shares of our Class A common stock (or equivalent value of alternative consideration). Notwithstanding that we generally may not redeem the Series D Preferred Stock prior to October 13, 2021, we have a special optional redemption right in the event of a Change of Control/Delisting, and if we provide notice of our election to redeem the Series D Preferred Stock (whether pursuant to our optional redemption right or our special optional redemption right), the holders of the Series D Preferred Stock will not be permitted to exercise the Change of Control/Delisting Conversion Right with respect to the shares of Series D Preferred Stock subject to such notice. Upon such a conversion, such holders will be limited to a maximum number of shares of our Class A common stock per share of Series D Preferred Stock equal to the lesser of (i) the conversion value (equal to the liquidation preference and unpaid and accrued dividends) divided by the closing price on the date of the event triggering the Change of Control/Delisting and (ii) the share cap of 4.15973, subject to adjustments.

 

The Change of Control/Delisting conversion feature of our Series D Preferred Stock may have the effect of discouraging a third party from making an acquisition proposal for our Company or of delaying, deferring or preventing certain change of control transactions of our Company under circumstances that stockholders may otherwise believe is in their best interests.

 

The market price of shares of our Class A common stock received in a conversion of our Series D Preferred Stock may decrease between the date received and the date the shares of Class A common stock are sold.

 

The market price of shares of our Class A common stock received in a conversion may decrease between the date received and the date the shares of Class A common stock are sold. The stock markets, including the NYSE American, have experienced significant price and volume fluctuations. As a result, the market price of our Class A common stock is likely to be similarly volatile, and recipients of our Class A common stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. The price of our Class A common stock could be subject to wide fluctuations in response to a number of factors, including sales of Class A common stock by other stockholders who received shares of our Class A common stock upon conversion of their Series D Preferred Stock, our financial performance, government regulatory action or inaction, tax laws, interest rates and general market conditions and other factors.

 

Market interest rates may have an effect on the value of the Series A Preferred Stock, the Series C Preferred Stock or the Series D Preferred Stock.

 

One of the factors that will influence the price of the Series A Preferred Stock, Series C Preferred Stock or the Series D Preferred Stock will be the dividend yield on the Series A Preferred Stock, the Series C Preferred Stock or the Series D Preferred Stock (as a percentage of the price of the Preferred Stock, as applicable) relative to market interest rates. An increase in market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of the Series A Preferred Stock, the Series C Preferred Stock or the Series D Preferred Stock to expect a higher dividend yield and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for distribution. Thus, higher market interest rates could cause the market price of the Series A Preferred Stock, the Series C Preferred Stock or the Series D Preferred Stock to decrease.

 

Holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock will be subject to inflation risk.

 

Inflation is the reduction in the purchasing power of money resulting from the increase in the price of goods and services. Inflation risk is the risk that the inflation-adjusted, or “real,” value of an investment in preferred stock or the income from that investment will be worth less in the future. As inflation occurs, the real value of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock and dividends payable on such shares declines.

 

Holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock have extremely limited voting rights.

 

The voting rights of holders of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock will be extremely limited. Our common stock is the only class or series of our stock carrying full voting rights. Voting rights for holders of shares of Series A Preferred Stock, Series C Preferred Stock and Series D Preferred Stock exist primarily with respect to the ability to elect two additional directors in the event that dividends for each of six quarterly dividend periods payable on the applicable series of such preferred stock are in arrears, and with respect to voting on amendments to our charter that materially and adversely affect the rights of the applicable series of such preferred stock or, with holders of Series B Preferred Stock, the creation of additional classes or series of preferred stock that are senior to the applicable series of such preferred stock with respect to a liquidation, dissolution or winding up of our affairs. Other than in these limited circumstances, holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock will not have voting rights.

 

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The amount of the liquidation preference is fixed and holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock will have no right to receive any greater payment.

 

The payment due upon liquidation is fixed at the liquidation preference of $25.00 per share of Series A Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, and $1,000.00 per share of Series B Preferred Stock, plus an amount equal to all accrued and unpaid dividends thereon, to, but not including, the date of liquidation, whether or not authorized or declared. If, in the case of our liquidation, there are remaining assets to be distributed after payment of this amount, you will have no right to receive or to participate in these amounts. Further, if the market price of a holder’s shares of Series A Preferred Stock, Series C Preferred Stock or Series D Preferred Stock is greater than the liquidation preference, the holder will have no right to receive the market price from us upon our liquidation.

 

Our charter and the articles supplementary establishing the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and the Warrant Agreement each contain restrictions upon ownership and transfer of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and the Warrants which may impair the ability of holders to acquire the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock, the Warrants and the shares of our common stock upon exercise of the Warrants into which shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock may be converted, at the Company’s option, pursuant to the redemption at the option of the holder under certain circumstances.

 

Our charter and the articles supplementary establishing the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock and the Warrants Agreement each contain restrictions on ownership and transfer of each such series of preferred stock and the Warrants intended to assist us in maintaining our qualification as a REIT for federal income tax purposes. For example, to assist us in qualifying as a REIT, the articles supplementary establishing the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock (respectively) prohibit anyone from owning, or being deemed to own by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% in value or number of shares, whichever is more restrictive, of the outstanding Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock (as applicable). Additionally, the Warrant Agreement prohibits any person from beneficially or constructively owning more than 9.8% of our Warrants, and provides that Warrants may not be exercised to the extent such exercise would result in the holder’s beneficial or constructive ownership of more than 9.8%, in number or value, whichever is more restrictive, of our outstanding shares of common stock, or more than 9.8% in value of our outstanding capital stock. You should consider these ownership limitations prior to a purchase of shares of any such series of preferred stock. The restrictions could also have anti-takeover effects and could reduce the possibility that a third party will attempt to acquire control of us, which could adversely affect the market price of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock.

 

Our ability to pay dividends or redeem shares is limited by the requirements of Maryland law.

 

Our ability to pay dividends on or redeem shares of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock is limited by the laws of Maryland. Under applicable Maryland law, a Maryland corporation generally may not make a distribution (including a dividend or redemption) if, after giving effect to the distribution, the corporation would not be able to pay its debts as the debts become due in the usual course of business, or the corporation’s total assets would be less than the sum of its total liabilities plus, unless the corporation’s charter provides otherwise, the amount that would be needed, if the corporation were dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the distribution. Accordingly, we generally may not make a distribution on the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock if, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of our total liabilities plus, unless the terms of such class or series provide otherwise, the amount that would be needed to satisfy the preferential rights upon dissolution of the holders of shares of any class or series of preferred stock then outstanding, if any, with preferences senior to those of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock. Any dividends or redemption payments may be delayed or prohibited.

 

If our common stock is no longer listed on the NYSE American or another national securities exchange, the ability to transfer or sell shares of the Series A Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock may be limited and the market value of the Series A Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock will be materially adversely affected.

 

If our Class A common stock is no longer listed on the NYSE American or another national securities exchange, it is likely that the Series A Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock will be delisted as well. Accordingly, if our Class A common stock is delisted, the ability of holders to transfer or sell their shares of the Series A Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock may be limited and the market value of the Series A Preferred Stock, Series C Preferred Stock and the Series D Preferred Stock may be materially adversely affected.

 

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If our Class A common stock is no longer listed on the NYSE American or another national securities exchange, we will be required to terminate the continuous offering of Series B Preferred Stock.

 

The Series B Preferred Stock is a “covered security” and therefore is not subject to registration under the state securities, or “Blue Sky,” regulations in the various states in which it may be sold due to its seniority to our Class A common stock, which is listed on the NYSE American. If our Class A common stock is no longer listed on the NYSE American or another appropriate exchange, we will be required to register the offering or Series B Preferred Stock in any state in which we subsequently offer the Series B Units. This would require the termination of the continuous offering and could result in our raising an amount of gross proceeds that is substantially less than the amount of the gross proceeds we expect to raise if the maximum offering is sold. This would reduce our ability to make additional investments and limit the diversification of our portfolio.

 

Although the Warrants are not “covered securities,” most states include an exemption from securities registration for warrants that are exercisable into a listed security. Therefore, the Warrants are subject to state securities registration in any state that does not provide such an exemption and the offering of Series B Preferred Stock must be registered in order to sell the Warrants in these states.

 

To the extent that our distributions represent a return of capital for tax purposes, stockholders may recognize an increased gain or a reduced loss upon subsequent sales (including cash redemptions) of their shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock.

 

The dividends payable by us on the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock may exceed our current and accumulated earnings and profits as determined for U.S. federal income tax purposes. If that were to occur, it would result in the amount of distributions that exceed our earnings and profits being treated first as a return of capital to the extent of the stockholder’s adjusted tax basis in the stockholder’s Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock and then, to the extent of any excess over the stockholder’s adjusted tax basis in the stockholder’s Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, as capital gain. Any distribution that is treated as a return of capital will reduce the stockholder’s adjusted tax basis in the stockholder’s Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, and subsequent sales (including cash redemptions) of such stockholder’s Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock will result in recognition of an increased taxable gain or reduced taxable loss due to the reduction in such adjusted tax basis.

 

There is no public market for our Series B Preferred Stock or Warrants and we do not expect one to develop.

 

There is no public market for our Series B Preferred Stock or Warrants offered in the Series B Preferred Offering, and we currently have no plan to list the Series B Preferred Stock or Warrants on a securities exchange or to include such shares for quotation on any national securities market. Additionally, our charter contains restrictions on the ownership and transfer of our securities, including our Series B Preferred Stock, and these restrictions may inhibit the ability to sell shares of our Series B Preferred Stock or Warrants promptly or at all. Furthermore, the Warrants will expire four years from the date of issuance. If holders are able to sell the Series B Preferred Stock or Warrants, they may only be able to be sold at a substantial discount from the price originally paid. Therefore, Series B Units should be purchased only as a long-term investment. After one year from the date of issuance, the Warrants will be exercisable at the option of the holder for shares of our Class A common stock, which currently are publicly traded on the NYSE American. Beginning two years from the date of original issuance, we may redeem, and upon original issuance the holder of shares of Series B Preferred Stock may require us to redeem, such shares, with the redemption price payable, in our sole discretion, in cash or in equal value of shares of our Class A common stock, based on the volume weighted average price per share of our Class A common stock for the 20 trading days prior to the redemption. If we opt to pay the redemption price in shares of our Class A common stock, holders of shares of Series B Preferred Stock may receive publicly traded shares as we currently expect to continue listing our Class A common stock on the NYSE American.

 

There may not be a broad market for our Class A common stock, which may cause our Class A common stock to trade at a discount and make it difficult for holders of Warrants to sell the Class A common stock for which the Warrants are exercisable and for which shares of our Series B Preferred Stock may be redeemable at our option.

 

Our Class A common stock for which the Warrants are exercisable trades on the NYSE American under the symbol “BRG.” Listing on the NYSE American or another national securities exchange does not ensure an actual or active market for our Class A common stock. Historically, our Class A common stock has had a low trading volume. Accordingly, an actual or active market for our Class A common stock may not be maintained, the market for our Class A common stock may not be liquid, the holders of our Class A common stock may be unable to sell their shares of our Class A common stock, and the prices that may be obtained following the sale of our Class A common stock upon the exercise of Warrants or the redemption of shares of Series B Preferred Stock may not reflect the underlying value of our assets and business.

 

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Shares of Series B Preferred Stock may be redeemed for shares of our Class A common stock, which rank junior to the Series B Preferred Stock with respect to dividends and upon liquidation.

 

The holders of shares of Series B Preferred Stock may require us to redeem such shares, with the redemption price payable, in our sole discretion, in cash or in equal value of shares of our Class A common stock, based on the volume weighted average price per share of our Class A common stock for the 20 trading days prior to the redemption. We may opt to pay the redemption price in shares of our Class A common stock. The rights of the holders of shares of Series B Preferred Stock, Series A Preferred Stock, Series C Preferred Stock and Series D Preferred Stock rank senior to the rights of the holders of shares of our common stock as to dividends and payments upon liquidation. Unless full cumulative dividends on our shares of Series B Preferred Stock, Series A Preferred Stock, Series C Preferred Stock and Series D Preferred Stock for all past dividend periods have been declared and paid (or set apart for payment), we will not declare or pay dividends with respect to any shares of our Class A common stock for any period. Upon liquidation, dissolution or winding up of our Company, the holders of shares of our Series B Preferred Stock are entitled to receive a liquidation preference of stated value, $1,000 per share, plus an amount equal to all accrued but unpaid dividends and holders of shares of our Series A Preferred Stock, our Series C Preferred Stock and Series D Preferred Stock are entitled to receive a liquidation preference of $25.00 per share, plus an amount equal to all accrued and unpaid dividends, prior and in preference to any distribution to the holders of shares of our Class A common stock or any other class of our equity securities.

 

We will be able to call shares of Series B Preferred Stock for redemption under certain circumstances without the consent of the holder.

 

We will have the ability to call the outstanding shares of Series B Preferred Stock after two years from the date of original issuance of such shares of Series B Preferred Stock. At that time, we will have the right to redeem, at our option, the outstanding shares of Series B Preferred Stock, in whole or in part, at 100% of the Stated Value per share, plus an amount equal to any accrued and unpaid dividends.

 

Our requirement to redeem the Series B Preferred Stock in the event of a Series B Change of Control may deter a change of control transaction otherwise in the best interests of our stockholders.

 

Upon the occurrence of a Series B Change of Control (as defined below), we will be required to redeem all outstanding shares of the Series B Preferred Stock in whole within 60 days after the first date on which such Series B Change of Control occurred, in cash at a redemption price of $1,000 per share, plus an amount equal to all accrued and unpaid dividends, if any, to and including the redemption date. The mandatory redemption in connection with a Series B Change of Control feature of the Series B Preferred Stock may have the effect of inhibiting a third party from making an acquisition proposal for the Company, or of delaying, deferring or preventing a change of control of the Company under circumstances that otherwise could provide the holders of our Class A common stock and Series B Preferred Stock with the opportunity for liquidity or the opportunity to realize a premium over the then-current market price or that stockholders may otherwise believe is in their best interests.

 

A “Series B Change of Control” is when, after the initial issuance of the Series B Preferred Stock, any of the following has occurred and is continuing:

 

•       a “person” or “group” within the meaning of Section 13(d) of the Exchange Act, other than our Company, its subsidiaries, and its and their employee benefit plans, has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of our common equity representing more than 50% of the total voting power of all outstanding shares of our common equity that are entitled to vote generally in the election of directors, with the exception of the formation of a holding company;

 

•       consummation of any share exchange, consolidation or merger of our Company or any other transaction or series of transactions pursuant to which our Class A common stock will be converted into cash, securities or other property, (1) other than any such transaction where the shares of our Class A common stock outstanding immediately prior to such transaction constitute, or are converted into or exchanged for, a majority of the common stock of the surviving person or any direct or indirect parent company of the surviving person immediately after giving effect to such transaction, and (2) expressly excluding any such transaction preceded by our Company’s acquisition of the capital stock of another company for cash, securities or other property, whether directly or indirectly through one of our subsidiaries, as a precursor to such transactions; or

 

•       at least a majority of our Board ceases to be constituted of directors who were either a member of our Board on February 24, 2016 or who becomes a member of our Board subsequent to that date and whose appointment, election or nomination for election by our stockholders was duly approved by a majority of the continuing directors on our Board at the time of such approval, either by a specific vote or by approval of the proxy statement issued by our Company on behalf of our Board in which such individual is named as nominee for director (each, a “Series B Continuing Director”).

 

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Subject to the Cetera Side Letter, upon the sale of any individual property, holders of Series B Preferred Stock do not have a priority over holders of our common stock regarding return of capital.

 

Subject to the Cetera Side Letter, holders of our Series B Preferred Stock do not have a right to receive a return of capital prior to holders of our common stock upon the individual sale of a property. To provide protection to the holders of the Series B Preferred Stock, our Cetera Side Letter restricts us from selling an asset if the sale would cause us to fail to meet a dividend coverage ratio of no less than 1.1:1 based on the ratio of our adjusted funds from operations to dividends required to be paid to holders of our Series A, Series B, Series C and Series D Preferred Stock for the two most recent quarters, subject to our ability to maintain status as a REIT for federal income tax purposes. Depending on the price at which such property is sold, it is possible that holders of our common stock will receive a return of capital prior to the holders of our Series B Preferred Stock, provided that any accrued but unpaid dividends have been paid in full to holders of Series B Preferred Stock. It is also possible that holders of common stock will receive additional distributions from the sale of a property (in excess of their capital attributable to the asset sold) before the holders of Series B Preferred Stock receive a return of their capital.

 

We established the offering price for the Series B Units pursuant to negotiations among us and our affiliated dealer manager; as a result, the actual value of an investment in Series B Units may be substantially less than the amount paid.

 

The selling price of the Series B Units was determined pursuant to negotiations among us and the dealer manager, which is an affiliate of Bluerock, based upon the following primary factors: the economic conditions in and future prospects for the industry in which we compete; our prospects for future earnings; an assessment of our management; the present state of our development; the prevailing conditions of the equity securities markets at the time of the Series B Preferred Offering; the present state of the market for non-traded REIT securities; and current market valuations of public companies considered comparable to our Company. Because the offering price is not based upon any independent valuation, the offering price is not indicative of the proceeds that an investor in the Series B Units would receive upon liquidation.

 

Your percentage of ownership may become diluted if we issue new shares of stock or other securities, and issuances of additional preferred stock or other securities by us may further subordinate the rights of the holders of our Class A common stock (which you may become upon receipt of redemption payments in shares of our Class A common stock, conversion of any of your shares of Series B Preferred Stock or exercise of any of your Warrants).

 

We may make redemption payments under the terms of the Series B Preferred Stock in shares of our Class A common stock. Although the dollar amounts of such payments are unknown, the number of shares to be issued in connection with such payments may fluctuate based on the price of our Class A common stock. Any sales or perceived sales in the public market of shares of our Class A common stock issuable upon such redemption payments could adversely affect prevailing market prices of shares of our Class A common stock. The issuance of shares of our Class A common stock upon such redemption payments also may have the effect of reducing our net income per share (or increasing our net loss per share). In addition, the existence of Series B Preferred Stock may encourage short selling by market participants because the existence of redemption payments could depress the market price of shares of our Class A common stock.

 

Our Board is authorized, without stockholder approval, to cause us to issue additional shares of our Class A common stock or to raise capital through the issuance of additional preferred stock (including equity or debt securities convertible into preferred stock), options, warrants and other rights, on such terms and for such consideration as our Board in its sole discretion may determine. Any such issuance could result in dilution of the equity of our stockholders. Our Board may, in its sole discretion, authorize us to issue common stock or other equity or debt securities to persons from whom we purchase apartment communities, as part or all of the purchase price of the community. Our Board, in its sole discretion, may determine the value of any common stock or other equity or debt securities issued in consideration of apartment communities or services provided, or to be provided, to us.

 

Our charter also authorizes our Board, without stockholder approval, to designate and issue one or more classes or series of preferred stock in addition to the Series B Preferred Stock (including equity or debt securities convertible into preferred stock) and to set or change the voting, conversion or other rights, preferences, restrictions, limitations as to dividends or other distributions and qualifications or terms or conditions of redemption of each class or series of shares so issued. If any additional preferred stock is publicly offered, the terms and conditions of such preferred stock (including any equity or debt securities convertible into preferred stock) will be set forth in a registration statement registering the issuance of such preferred stock or equity or debt securities convertible into preferred stock. Because our Board has the power to establish the preferences and rights of each class or series of preferred stock, it may afford the holders of any series or class of preferred stock preferences, powers, and rights senior to the rights of holders of common stock or the Series B Preferred Stock. If we ever create and issue additional preferred stock or equity or debt securities convertible into preferred stock with a distribution preference over common stock or the Series B Preferred Stock, payment of any distribution preferences of such new outstanding preferred stock would reduce the amount of funds available for the payment of distributions on our common stock and our Series B Preferred Stock. Further, holders of preferred stock are normally entitled to receive a preference payment if we liquidate, dissolve, or wind up before any payment is made to the common stockholders, likely reducing the amount common stockholders would otherwise receive upon such an occurrence. In addition, under certain circumstances, the issuance of additional preferred stock may delay, prevent, render more difficult or tend to discourage a merger, tender offer, or proxy contest, the assumption of control by a holder of a large block of our securities, or the removal of incumbent management.

 

Stockholders have no rights to buy additional shares of stock or other securities if we issue new shares of stock or other securities. We may issue common stock, convertible debt or preferred stock pursuant to a subsequent public offering or a private placement, or to sellers of properties we directly or indirectly acquire instead of, or in addition to, cash consideration. Investors purchasing Series B Units in the offering of our Series B Preferred Stock who do not participate in any future stock issuances will experience dilution in the percentage of the issued and outstanding stock they own. In addition, depending on the terms and pricing of any additional offerings and the value of our investments, you also may experience dilution in the book value and fair market value of, and the amount of distributions paid on, your shares of Series B Preferred Stock and common stock, if any.

 

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Holders of the Series B Preferred Stock have no control over changes in our policies and operations.

 

Our Board determines our major policies, including with regard to investment objectives, financing, growth, debt capitalization, REIT qualification and distributions. Our Board may amend or revise these and other policies without a vote of the stockholders.

 

In addition, holders of shares of our Series B Preferred Stock have no voting rights under our charter, and otherwise have no voting rights except as set forth in the Cetera Side Letter. Pursuant to the Cetera Side Letter, holders of shares of Series B Preferred Stock have voting rights only in certain limited circumstances, voting together as a single class with the holders of preferred stock (i) ranking on parity with the Series B Preferred Stock with respect to dividend rights and rights upon our liquidation, dissolution or winding up, and (ii) upon which voting rights have been conferred (such holders, together with holders of shares of Series B Preferred Stock, the Parity Holders). The Parity Holders currently include the holders of Series A Preferred Stock, Series C Preferred Stock and Series D Preferred Stock. The affirmative vote of a majority of the votes cast by the Parity Holders, voting together as a single class, is required to approve (a) the authorization, creation or issuance, or an increase in the number of authorized or issued shares of, any class or series of our capital stock ranking senior to the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, or Series D Preferred Stock with respect to dividend rights and rights upon our liquidation, dissolution or winding up (any such senior stock, the “Senior Stock”), (b) the reclassification of any of our authorized capital stock into Senior Stock, or (c) the creation, authorization or issuance of any obligation or security convertible into, or evidencing the right to purchase, Senior Stock. Other than in these limited circumstances, holders of Series B Preferred Stock have no voting rights.

 

General Risks Related Ownership of our Securities

 

The cash distributions you receive may be less frequent or lower in amount than you expect.

 

Our directors determine the amount and timing of distributions in their sole discretion. Our directors consider all relevant factors, including the amount of cash available for distribution, capital expenditure and reserve requirements, general operational requirements and the requirements necessary to maintain our REIT qualification. We cannot assure you that we will consistently be able to generate sufficient available cash flow to make distributions, nor can we assure you that sufficient cash will be available to make distributions to you. We may borrow funds, return capital, make taxable distributions of our stock or debt securities, or sell assets to make distributions. We cannot predict the amount of distributions you may receive and we may be unable to pay or maintain cash distributions or increase distributions over time. Our inability to acquire additional properties or make real estate-related investments or operate profitably may have a negative effect on our ability to generate sufficient cash flow from operations to pay distributions.

 

Also, because we may receive income from rents at various times during our fiscal year, distributions paid may not reflect our income earned in that particular distribution period. The amount of cash available for distributions will be affected by many factors, such as our ability to acquire properties as offering proceeds become available, the income from those investments and yields on securities of other real estate companies that we invest in, as well as our operating expense levels and many other variables. In addition, to the extent we make distributions to stockholders with sources other than cash flow from operations, the amount of cash that is available for investment in real estate assets will be reduced, which will in turn negatively impact our ability to achieve our investment objectives and limit our ability to make future distributions.

 

If the properties we acquire or invest in do not produce the cash flow that we expect in order to meet our REIT minimum distribution requirement, we may decide to borrow funds to meet the REIT minimum distribution requirements, which could adversely affect our overall financial performance.

 

We may decide to borrow funds in order to meet the REIT minimum distribution requirements even if our management believes that the then prevailing market conditions generally are not favorable for such borrowings or that such borrowings would not be advisable in the absence of such tax considerations. If we borrow money to meet the REIT minimum distribution requirement or for other working capital needs, our expenses will increase, our net income will be reduced by the amount of interest we pay on the money we borrow and we will be obligated to repay the money we borrow from future earnings or by selling assets, which may decrease future distributions to stockholders.

 

We intend to use the net proceeds from any offering of our securities to fund future acquisitions and for other general corporate and working capital purposes, but no offering will be conditioned upon the closing of properties in our then-current pipeline and we will have broad discretion to determine alternative uses of proceeds.

 

As described under “Use of Proceeds” in any applicable prospectus or prospectus supplement, we intend to use a portion of the net proceeds from any offering of our securities to fund future acquisitions and for other general corporate and working capital purposes. However, no offering will be conditioned upon the closing of any properties. We will have broad discretion in the application of the net proceeds from an offering, and holders of our securities will not have the opportunity as part of their investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from an offering, their ultimate use may vary substantially from their currently intended use.

 

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Material Federal Income Tax Risks

 

Failure to remain qualified as a REIT would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our stockholders.

 

We elected to be taxed as a REIT under the federal income tax laws commencing with our taxable year ended December 31, 2010. We believe that we have been organized and have operated in a manner qualifying us as a REIT commencing with our taxable year ended December 31, 2010 and intend to continue to so operate. However, we cannot assure you that we will remain qualified as a REIT.

 

If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distributions to our stockholders because:

 

  • we would not be able to deduct dividends paid to stockholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates;

 

  • we could be subject to possibly increased state and local taxes; and
     
  • unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT.

 

In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions. As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it would adversely affect the value of our securities.

 

Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.

 

To maintain our qualification as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our capital stock. In order to meet these tests, we may be required to forego investments we might otherwise make. Thus, compliance with the REIT requirements may hinder our performance.

 

In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate assets. The remainder of our investment in securities (other than government securities, securities of taxable REIT subsidiaries (“TRSs”) and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities, securities of TRSs and qualified real estate assets) can consist of the securities of any one issuer, and no more than 20% (25% for 2017 and prior years) of the value of our total assets can be represented by the securities of one or more TRSs. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

 

Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flows.

 

Even if we remain qualified as a REIT, we may be subject to certain federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes. In addition, any TRS in which we own an interest will be subject to regular corporate federal, state and local taxes. Any of these taxes would decrease cash available for distributions to stockholders.

 

Failure to make required distributions would subject us to U.S. federal corporate income tax.

 

We intend to continue to operate in a manner so as to qualify as a REIT for U.S. federal income tax purposes. In order to remain qualified as a REIT, we generally are required to distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain, each year to our stockholders. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under the Code.

 

We may satisfy the 90% distribution test with taxable distributions of our stock or debt securities. On August 11, 2017, the Internal Revenue Service (“IRS”) issued Revenue Procedure 2017-45 authorizing elective cash/stock dividends to be made by publicly offered REITs (e.g., REITs that are required to file annual and periodic reports with the SEC under the Exchange Act). Pursuant to Revenue Procedure 2017-45, effective for distributions declared on or after August 11, 2017, the IRS will treat the distribution of stock pursuant to an elective cash/stock dividend as a distribution of property under Section 301 of the Code (e.g., a dividend), as long as at least 20% of the total dividend is available in cash and certain other parameters detailed in the Revenue Procedure are satisfied. Although we have no current intention of paying dividends in our own stock, if in the future we choose to pay dividends in our own stock, our stockholders may be required to pay tax in excess of the cash that they receive.

 

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The prohibited transactions tax may subject us to tax on our gain from sales of property and limit our ability to dispose of our properties.

 

A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property other than foreclosure property, held primarily for sale to customers in the ordinary course of business. Although we intend to acquire and hold all of our assets as investments and not for sale to customers in the ordinary course of business, the IRS may assert that we are subject to the prohibited transaction tax equal to 100% of net gain upon a disposition of real property. Although a safe harbor to the characterization of the sale of real property by a REIT as a prohibited transaction is available, not all of our prior property dispositions qualified for the safe harbor and we cannot assure you that we can comply with the safe harbor in the future or that we have avoided, or will avoid, owning property that may be characterized as held primarily for sale to customers in the ordinary course of business. Consequently, we may choose not to engage in certain sales of our properties or may conduct such sales through a TRS, which would be subject to federal and state income taxation. Additionally, in the event that we engage in sales of our properties, any gains from the sales of properties classified as prohibited transactions would be taxed at the 100% prohibited transaction tax rate.

 

The ability of our Board to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.

 

Our charter provides that our Board may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on our total return to our stockholders.

 

Our ownership of any TRSs will be subject to limitations and our transactions with any TRSs will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms.

 

Overall, no more than 20% (25% for 2017 and prior years) of the value of a REIT’s assets may consist of stock or securities of one or more TRSs. In addition, the Code limits the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The Code also imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. Furthermore, we will monitor the value of our respective investments in any TRSs for the purpose of ensuring compliance with TRS ownership limitations and will structure our transactions with any TRSs on terms that we believe are arm’s-length to avoid incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to comply with the 20% REIT subsidiaries limitation or to avoid application of the 100% excise tax.

 

You may be restricted from acquiring or transferring certain amounts of our common stock.

 

The stock ownership restrictions of the Code for REITs and the 9.8% stock ownership limits in our charter may inhibit market activity in our capital stock and restrict our business combination opportunities.

 

In order to qualify as a REIT, five or fewer individuals, as defined in the Code to include specified private foundations, employee benefit plans and trusts, and charitable trusts, may not own, beneficially or constructively, more than 50% in value of our issued and outstanding stock at any time during the last half of a taxable year. Attribution rules in the Code determine if any individual or entity beneficially or constructively owns our capital stock under this requirement. Additionally, at least 100 persons must beneficially own our capital stock during at least 335 days of a taxable year. To help insure that we meet these tests, among other purposes, our charter restricts the acquisition and ownership of shares of our capital stock.

 

Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. Unless exempted, prospectively or retroactively, by our Board, our charter prohibits any person from beneficially or constructively owning more than 9.8% in value of the aggregate of our outstanding shares of capital stock or 9.8% in value or number of shares, whichever is more restrictive, of the outstanding shares of our common stock. Our Board may not grant an exemption from these restrictions to any proposed transferee whose ownership in excess of such thresholds does not satisfy certain conditions designed to ensure that we will not fail to qualify as a REIT. These restrictions on transferability and ownership will not apply, however, if our Board determines that it is no longer in our best interest to continue to qualify as a REIT or that compliance is no longer required for REIT qualification.

 

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our stock.

 

At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. We cannot predict when or if any new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively. We and our stockholders could be adversely affected by any such change in the U.S. federal income tax laws, regulations or administrative interpretations.

 

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The “Tax Cuts and Jobs Act” (the “TCJA”) makes significant changes to the U.S. federal income tax rules for taxation of individuals and corporations. In the case of individuals, the tax brackets have been adjusted, the top federal income rate has been reduced to 37%, special rules reduce taxation of certain income earned through pass-through entities and reduce the top effective rate applicable to ordinary dividends from REITs to 29.6% (through a 20% deduction for ordinary REIT dividends received) and various deductions have been eliminated or limited, including limiting the deduction for state and local taxes to $10,000 per year. Most of the changes applicable to individuals are temporary and apply only to taxable years beginning after December 31, 2017 and before January 1, 2026. The top corporate income tax rate has been reduced to 21%. There are only minor changes to the REIT rules (other than the 20% deduction applicable to individuals for ordinary REIT dividends received). The TCJA makes numerous other large and small changes to the tax rules that do not affect REITs directly but may affect our stockholders and may indirectly affect us.

 

Stockholders are urged to consult with their tax advisors with respect to the status of the TCJA and any other regulatory or administrative developments and proposals and their potential effect on investment in our stock.

 

Dividends payable by REITs generally do not qualify for the reduced tax rates available for certain dividends.

 

The maximum tax rate applicable to “qualified dividend income” payable to U.S. stockholders taxed at individual rates is 20% plus the 3.8%

surtax on net investment income, if applicable. Dividends payable by REITs, however, generally are not eligible for the reduced rates on qualified dividend income. Rather, under the TCJA, REIT dividends constitute “qualified business income” and thus a 20% deduction is available to individual taxpayers with respect to such dividends, resulting in a 29.6% maximum federal tax rate (plus the 3.8% surtax on net investment income, if applicable) for individual U.S. stockholders. Additionally, without further legislative action, the 20% deduction applicable to REIT dividends will expire on January 1, 2026. The more favorable rates applicable to regular corporate qualified dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non- REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our stock. 

 

Distributions to tax-exempt investors may be classified as unrelated business taxable income and tax-exempt investors would be required to pay tax on the unrelated business taxable income and to file income tax returns.

 

Neither ordinary nor capital gain distributions with respect to our stock nor gain from the sale of stock should generally constitute unrelated business taxable income to a tax-exempt investor. However, there are certain exceptions to this rule. In particular:

 

  • under certain circumstances, part of the income and gain recognized by certain qualified employee pension trusts with respect to our stock may be treated as unrelated business taxable income if our stock is predominately held by qualified employee pension trusts, such that we are a “pension-held” REIT (which we do not expect to be the case);

 

  • part of the income and gain recognized by a tax exempt investor with respect to our stock would constitute unrelated business taxable income if such investor incurs debt in order to acquire the stock; and

 

  • part or all of the income or gain recognized with respect to our stock held by social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans which are exempt from federal income taxation under Sections 501(c)(7), (9), (17) or (20) of the Code may be treated as unrelated business taxable income.

 

We encourage you to consult your tax advisor to determine the tax consequences applicable to you if you are a tax-exempt investor.

 

Benefit Plan Risks Under ERISA or the Code

 

If you fail to meet the fiduciary and other standards under the Employee Retirement Income Security Act of 1974, as amended or the Code as a result of an investment in our stock, you could be subject to criminal and civil liabilities and penalties.

 

Special considerations apply to the purchase of stock or holding of Warrants by employee benefit plans subject to the fiduciary rules of Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), including pension or profit sharing plans and entities that hold assets of such plans, which we refer to as ERISA Plans, and plans and accounts that are not subject to ERISA, but are subject to the prohibited transaction rules of Section 4975 of the Code, including IRAs, Keogh Plans, and medical savings accounts. (Collectively, we refer to ERISA Plans and plans subject to Section 4975 of the Code as “Benefit Plans” or “Benefit Plan Investors”). If you are investing the assets of any Benefit Plan, you should consider whether:

 

  • your investment will be consistent with your fiduciary obligations under ERISA and the Code;
     
  • your investment will be made in accordance with the documents and instruments governing the Benefit Plan, including the Benefit Plan’s investment policy;

 

  • your investment will satisfy the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA, if applicable, and other applicable provisions of ERISA and the Code;

 

 41 

 

 

  • your investment will impair the liquidity of the Benefit Plan;

 

  • your investment will produce “unrelated business taxable income” for the Benefit Plan;

 

  • you will be able to value the assets of the plan annually in accordance with ERISA requirements and applicable provisions of the Benefit Plan;

 

  • you will be able to satisfy plan liquidity requirements as there may be only a limited market to sell or otherwise dispose of our stock; and
     
  • your investment will constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.

 

Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA and the Code may result in the imposition of civil and criminal penalties, and can subject the fiduciary to personal liability for claims for damages or for equitable remedies. In addition, if an investment in our stock or holding of Warrants constitutes a prohibited transaction under ERISA or the Code, the fiduciary or IRA owner who authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested. In the case of a prohibited transaction involving an IRA owner, the IRA may be disqualified and all of the assets of the IRA may be deemed distributed and subjected to tax. Benefit Plan Investors should consult with counsel before making an investment in our securities.

 

Plans that are not subject to ERISA or the prohibited transactions of the Code, such as government plans or church plans, may be subject to similar requirements under state law. The fiduciaries of such plans should satisfy themselves that the investment satisfies applicable law.

 

For additional discussion of significant factors that make an investment in our shares risky, see the Liquidity and Capital Resources Section under Item 7. – Management’s Discussion and Analysis of Financial Conditions and Results of Operations of this report.

 

Item 1B.Unresolved Staff Comments

 

None.

 

 42 

 

 

Item 2.Properties

 

As of December 31, 2018 we owned interests in forty-seven real estate properties, consisting of thirty-three consolidated operating properties and fourteen held through preferred equity and mezzanine loan investments. Of the property interests held through preferred equity and mezzanine loan investments, four are under development, seven are in lease-up and three properties are stabilized. The following tables provide summary information regarding our consolidated operating properties and preferred equity and mezzanine loan investments.

 

Consolidated Operating Properties

 

Multifamily Community, Name, Location  Number of
Units		   Year
Built/Renovated (1)		  Ownership  Average
Rent  (2)		   Occupancy % (3)
ARIUM at Palmer Ranch, Sarasota, FL   320   2016  100.0%  $1,301   97%
ARIUM Glenridge, Atlanta, GA   480   1990  90.0%   1,195   93%
ARIUM Grandewood, Orlando, FL   306   2005  100.0%   1,384   95%
ARIUM Gulfshore, Naples, FL   368   2016  100.0%   1,261   98%
ARIUM Hunter’s Creek, Orlando, FL   532   1999  100.0%   1,387   95%
ARIUM Metrowest, Orlando, FL   510   2001  100.0%   1,368   94%
ARIUM Palms, Orlando, FL   252   2008  100.0%   1,335   92%
ARIUM Pine Lakes, Port St. Lucie, FL   320   2003  85.0%   1,267   95%
ARIUM Westside, Atlanta, GA   336   2008  90.0%   1,537   99%
Ashford Belmar, Lakewood, CO   512   1988/1993  85.0%   1,612   92%
Ashton Reserve, Charlotte, NC   473   2015  100.0%   1,116   93%
Citrus Tower, Orlando, FL   336   2006  96.8%   1,279   93%
Enders at Baldwin Park, Orlando, FL   220   2003  92.0%   1,762   97%
James on South First, Austin, TX   250   2016  90.0%   1,277   94%
Marquis at Crown Ridge, San Antonio, TX   352   2009  90.0%   1,006   93%
Marquis at Stone Oak, San Antonio, TX   335   2007  90.0%   1,425   94%
Marquis at the Cascades, Tyler, TX   582   2009  90.0%   1,201   96%
Marquis at TPC, San Antonio, TX   139   2008  90.0%   1,499   94%
Outlook at Greystone, Birmingham, AL   300   2007  100.0%   958   91%
Park & Kingston, Charlotte, NC   168   2015  100.0%   1,243   98%
Plantation Park, Lake Jackson, TX   238   2016  80.0%   1,408   93%
Preston View, Morrisville, NC   382   2000  100.0%   1,093   95%
Roswell City Walk, Roswell, GA   320   2015  98.0%   1,509   95%
Sands Parc, Daytona Beach, FL   264   2017  100.0%   1,323   97%
Sorrel, Frisco, TX   352   2015  95.0%   1,279   87%
Sovereign, Fort Worth, TX   322   2015  95.0%   1,347   95%
The Brodie, Austin, TX   324   2001  92.5%   1,271   95%
The Links at Plum Creek, Castle Rock, CO   264   2000  88.0%   1,428   94%
The Mills, Greenville, SC   304   2013  100.0%   1,019   96%
The Preserve at Henderson Beach, Destin, FL   340   2009  100.0%   1,350   94%
Veranda at Centerfield, Houston, TX   400   1999  93.0%   926   94%
Villages of Cypress Creek, Houston, TX   384   2001  80.0%   1,107   93%
Wesley Village, Charlotte, NC   301   2010  100.0%   1,326   93%
Total/Average   11,286         $1,280   94%

 

(1) Represents date of last significant renovation or year built if no renovations.

(2) Represents the average effective monthly rent per occupied unit for all occupied units for the three months ended December 31, 2018. Total concessions for the three months ended December 31, 2018 amounted to approximately $0.5 million.

(3) Percent occupied is calculated as (i) the number of units occupied as of December 31, 2018, divided by (ii) total number of units, expressed as a percentage.

 

 43 

 

 

Preferred Equity and Mezzanine Loan Investments

 

Multifamily Community Name

  Location 

Actual/

Planned

Number of
Units

 

Total Actual/

Estimated

Construction

Cost (in

millions)

 

Cost to Date
(in millions)

 

Actual/

Estimated

Construction
Cost Per Unit

 

Actual/

Estimated

Initial

Occupancy

 

Actual/
Estimated

Construction

Completion

 

Pro Forma

Average

Rent (1)

 
Whetstone (2)  Durham, NC   204  $37.0  $37.0  $181,373   3Q14  3Q15 $1,284 
Alexan CityCentre (2)  Houston, TX   340   83.5   80.7   245,588   2Q17  4Q17  1,566 
Helios  Atlanta, GA   282   51.8   50.4   183,688   2Q17  4Q17  1,486 
Alexan Southside Place  Houston, TX   270   49.4   47.0   182,963   4Q17  1Q18  2,012 
Leigh House  Raleigh, NC   245   40.2   39.4   164,082   3Q17  3Q18  1,271 
Vickers Historic Roswell  Roswell, GA   79   31.5   29.9   398,734   2Q18  3Q18  3,176 
Domain at The One Forty  Garland, TX   299   52.6   48.6   175,920   2Q18  4Q18  1,469 
Arlo  Charlotte, NC   286   60.0   54.9   209,790   2Q18  2Q19  1,507 
Cade Boca Raton  Boca Raton, FL   90   29.5   27.7   327,778   4Q18  2Q19  2,549 
Novel Perimeter  Atlanta, GA   320   71.0   68.4   221,875   3Q18  2Q19  1,749 
Flagler Village  Fort Lauderdale, FL   385   135.4   66.5   351,688   2Q20  3Q20  2,352 
North Creek Apartments  Leander, TX   259   44.0   7.0   169,884   4Q19  3Q20  1,358 
Riverside Apartments  Austin, TX   222   37.9   6.2   170,721   3Q20  4Q20  1,408 
Wayforth at Concord  Concord, NC   150   33.5   2.8   223,333   1Q20  2Q21  1,707 
       3,431                      $1,692 

 

(1) Represents the average pro forma effective monthly rent per occupied unit for all expected occupied units upon stabilization.

(2) Represents the average effective monthly rent per occupied unit for all occupied units for the three months ended December 31, 2018.

 

Item 3.Legal Proceedings

 

We are not party to, and none of our properties are subject to, any material pending legal proceeding.

 

Item 4.Mining Safety Disclosures

 

Not applicable.

 

 44 

 

 

PART II

 

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

  

Market Information

 

Our shares of Class A common stock are traded on the NYSE American under the symbol “BRG.”

 

On February 6, 2019, the closing price of our Class A common stock, as reported on the NYSE American, was $10.20.

 

The following table sets forth the high and low intraday sale prices of our Class A common stock, as reported on the NYSE American, for each calendar quarter in the last two fiscal years, as reported on the NYSE American, and the distributions paid by us with respect to those periods.

 

Quarter Ended  High   Low   Distributions (1) 
March 31, 2017  $14.14   $11.25   $0.290 
June 30, 2017  $13.26   $11.95   $0.290 
September 30, 2017  $13.77   $9.68   $0.290 
December 31, 2017  $11.81   $9.67   $0.290 
                
March 31, 2018  $10.19   $7.02   $0.1625 
June 30, 2018  $9.43   $8.33   $0.1625 
September 30, 2018  $10.08   $8.75   $0.1625 
December 31, 2018  $10.36   $8.19   $0.1625 
                

 

  (1) Distribution information is for distributions declared with respect to that quarter.

 

On January 11, 2019, our Board authorized, and we declared monthly dividends for the first quarter of 2019 equal to a monthly rate of $5.00 per share on our Series B Preferred Stock, payable monthly to the stockholders of record as of January 25, 2019, February 25, 2019 and March 25, 2019, which was paid in cash on February 5, 2019, and which will be paid in cash on March 5, 2019 and April 5, 2019, respectively.

 

Stockholder Information

 

As of February 6, 2019, we had approximately 23,060,501 shares of Class A common stock outstanding held by a total of 484 stockholders, one of which is the holder for all beneficial owners who hold in street name.

 

Distributions

  

Future distributions paid by the Company will be at the discretion of our Board and will depend upon the actual cash flow of the Company, its financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as our Board deems relevant.

 

 45 

 

 

Distributions paid on our Class A common shares, Class C common shares, OP Units and LTIP Units that are entitled to receive distribution equivalents when dividends are paid on the common stock, by quarter for the years ended December 31, 2018 and 2017, respectively, were as follows (amounts in thousands, except per share amounts):

   

 

   Distributions 
  Declared Per
Share		   Total Paid 
2017          
First Quarter  $0.290   $7,130 
Second Quarter   0.290    7,628 
Third Quarter   0.290    7,721 
Fourth Quarter   0.290    8,219 
Total  $1.160   $30,698 
           
2018          
First Quarter  $0.1625   $3,003 
Second Quarter   0.1625    5,149 
Third Quarter   0.1625    5,161 
Fourth Quarter   0.1625    5,149 
Total  $0.6500   $18,462 
           
2019  $0.1625   $5,132 
First Quarter          

 

On January 11, 2019, our Board authorized, and we declared monthly dividends for the first quarter of 2019 equal to monthly rate of $5.00 per share on our Series B Preferred Stock, payable monthly to the stockholders of record as of January 25, 2019, February 25, 2019 and March 25, 2019, which was paid in cash on February 5, 2019, and which will be paid in cash on March 5, 2019 and April 5, 2019, respectively.

 

Distributions paid for the years ended December 31, 2018, 2017 and 2016, respectively, were funded from cash provided by operating activities except with respect to zero, $4,824,000, and $3,283,000, respectively, which was funded from sales of real estate, borrowings, and/or proceeds from our equity offerings.

 

Although we may use alternative sources of cash to fund distributions in a given period, we expect that distribution requirements for an entire year will be met with cash flows from operating activities.

 

   Year Ended December 31, 
   2018   2017   2016 
   (In thousands) 
Cash provided by operating activities  $64,455   $54,247   $34,444 
                
Cash distributions to preferred stockholders   (35,014)   (26,042)   (9,664)
Cash distributions to common stockholders   (13,952)   (29,583)   (24,437)
Cash distributions to noncontrolling interests, excluding $27.9 million from sale of real estate investments in 2017   (6,298)   (3,446)   (3,626)
Total distributions  $(55,264)  $(59,071)  $(37,727)
Excess (shortfall)  $9,191   $(4,824)  $(3,283)
Proceeds from sale of joint venture interests  $-   $17,603   $20,521 
Proceeds from sale of real estate assets  $-   $-   $36,675 
Proceeds from sale of real estate assets, net of noncontrolling distributions of $27.9 million in 2017  $-   $44,028   $- 

 

 46 

 

 

Equity Compensation Plans

 

Incentive Plans

 

The Company’s incentive plans were originally adopted by our Board 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 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,” and together with the Amended 2014 Individuals Plan, the “Amended 2014 Incentive Plans”) as adopted by our Board on April 7, 2015 and approved by our stockholders on May 28, 2015. On August 3, 2017 and October 18, 2017, our Board adopted, and on October 26, 2017 our stockholders approved, the second amendment and restatement of the 2014 Individuals Plan (the “Second Amended 2014 Individuals Plan”) and the 2014 Entities Plan (the “Second Amended 2014 Entities Plan,” and together with the Second Amended 2014 Individuals Plan, the “Second Amended 2014 Incentive Plans”), which superseded and replaced in their entirety the Amended 2014 Incentive Plans.

 

On August 9, 2018, our Board adopted, and on September 28, 2018 our stockholders approved, the third amendment and restatement of the Second Amended 2014 Individuals Plan (the “Third Amended 2014 Individuals Plan”) and the Second Amended 2014 Entities Plan (the “Third Amended 2014 Entities Plan,” and together with the Third Amended 2014 Individuals Plan, the “Third Amended 2014 Incentive Plans,” and together with the Second Amended 2014 Incentive Plans,” the “Incentive Plans”) which superseded and replaced in their entirety the Second Amended 2014 Incentive Plans Under the Third Amended 2014 Incentive Plans, we have reserved and authorized an aggregate number of 2,250,000 shares of our common stock for issuance. As of February 6, 2019, 1,648,639 shares were available for future issuance.

 

The purpose of the Third Amended 2014 Incentive Plans is to attract and retain independent directors, executive officers and other key employees, including officers and employees of our Operating Partnership and their affiliates, and other service providers. The Third 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.

 

Administration of the Third Amended 2014 Incentive Plans

 

The Third Amended 2014 Incentive Plans are administered by the compensation committee of our Board, except that the Third Amended 2014 Incentive Plans will be administered by our Board 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, as applicable. The administrator will approve who will receive grants under the Third 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.

 

Eligibility

 

Employees and officers of our Company and our affiliates (including employees of our Operating Partnership) and members of our Board are eligible to receive grants under the Third 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 may receive grants under the Third Amended 2014 Individuals Plan.

 

Entities that provide significant services to us or our affiliates, including our Operating Partnership, may receive grants under the Third Amended 2014 Entities Plan in the discretion of the administrator.

 

The following table provides information about our common stock that may be issued upon the exercise of options, warrants and rights under our Third Amended 2014 Incentive Plans, as of December 31, 2018.

 

Plan Category  Number of
Securities to Be
Issued Upon
Exercise of
Outstanding
Options,
Warrants, and
Rights		   Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants, and
Rights		   Number of
Securities
Remaining
Available for
Future
Issuance		 
Equity compensation plans approved by security holders   -    -    2,166,037 
Equity compensation plans not approved by security holders   -    -    - 
Total   -    -    2,166,037 

 

 47 

 

 

We have adopted a Code of Ethics for our directors, officers and employees intended to satisfy NYSE American listing standards and the definition of a “code of ethics” set forth in Item 406 of Regulation S-K. Any information relating to amendments to our Code of Ethics or waivers of a provision of our Code of Ethics required to be disclosed pursuant to Item 5.05 of Form 8-K will be disclosed through our website.

 

Clawback Policy

 

Any award granted under the Incentive Plans, and any payment made with respect to any such award, is 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.

 

Unregistered Sales of Equity Securities

 

We previously disclosed our issuances during the years ended December 31, 2018, 2017 and 2016 of equity securities that were not registered under the Securities Act of 1933, as amended, in our Current Reports on Form 8-K and amendments thereto on Form 8-K/A, as applicable, filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2016, March 1, 2016, May 9, 2016, May 11, 2016, August 3, 2016, August 9, 2016, November 14, 2016, February 22, 2017, May 15, 2017, August 4, 2017, August 10, 2017, November 6, 2017, November 9, 2017, January 5, 2018, February 22, 2018, May 14, 2018, August 13, 2018, October 9, 2018, and November 9, 2018 and in our Form 10-Q filed on August 8, 2016.

 

Issuer Purchases of Equity Securities

 

 

Period

  Total Number
of Shares
Purchased		   Weighted
Average Price
Paid Per
Share		  

Total Number of
Shares Purchased as

Part of the Publicly
Announced Plan

   Maximum Dollar Value
of Shares that May Yet
Be Purchased Under
the Plan		 
February 1, 2018 through February 28, 2018   331,090   $7.86    331,090   $22,398,638 
March 1, 2018 through March 31, 2018   199,603    8.03    199,603    20,795,897 
April 1, 2018 through April 30, 2018   —    —    —    20,795,897 
May 1, 2018 through May 31, 2018   28,000    8.96    28,000    20,545,146 
June 1, 2018 through June 30, 2018   79,040    8.96    79,040    19,837,157 
July 1, 2018 through September 30, 2018   —    —    —    19,837,157 
October 1, 2018 through October 31, 2018   —    —    —    19,837,157 
November 1, 2018 through November 30, 2018   85,619    8.82    85,619    19,082,279 
December 1, 2018 through December 31, 2018   331,705    9.35    331,705    15,982,102 
Total   1,055,057   $8.55    1,055,057      

 

Item 6.Selected Financial Data

 

Not applicable.

 

 

 48 

 

 

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Bluerock Residential Growth REIT, Inc., and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Bluerock Residential Growth REIT, Inc., a Maryland corporation, and, as required by context, Bluerock Residential Holdings, L.P., a Delaware limited partnership, which we refer to as our “Operating Partnership,” and to their subsidiaries. We refer to Bluerock Real Estate, L.L.C., a Delaware limited liability company, and Bluerock Real Estate Holdings, LLC, together as “Bluerock”, and we refer to our former external manager, BRG Manager, LLC, as our “former Manager.” Both Bluerock and our former Manager are affiliated with the Company. See also “Forward-Looking Statements” preceding Part I.

 

Overview

 

We were incorporated as a Maryland corporation on July 25, 2008. Our principal business objective is to maximize returns through investments in Class A institutional-quality apartment properties in demographically attractive growth markets across the United States 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.

 

On October 31, 2017, we became an internally-managed REIT as a result of the completion of the management internalization transactions (the “Internalization”), and we are no longer externally managed by our former Manager.

 

We conduct our operations through our Operating Partnership, of which we are the sole general partner. The consolidated financial statements include our accounts and those of the Operating Partnership.

 

As of December 31, 2018, we owned interests in forty-seven real estate properties, consisting of thirty-three consolidated operating properties and fourteen held through preferred equity and mezzanine loan investments. Of the property interests held through preferred equity and mezzanine loan investments, four are under development, seven are in lease-up and three properties are stabilized. The forty-seven properties contain an aggregate of 14,717 units, comprised of 11,286 consolidated operating units and 3,431 units through preferred equity and mezzanine loan investments. As of December 31, 2018, our consolidated operating properties were approximately 94% occupied.

 

We have elected to be taxed as a Real Estate Investment Trust (“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.

 

Significant Developments

 

During 2018, we acquired five operating multifamily communities generally through various multi-tiered joint ventures in which we have indirect ownership ranging from 80% to 100%, representing an aggregate of 1,678 units, for an aggregate purchase price of approximately $330.8 million. These properties were located in: Castle Rock, Colorado; Daytona Beach, Florida; Lake Jackson, Texas; Houston, Texas; and Lakewood, Colorado.

 

We also invested in or continued to invest in multi-tiered development joint ventures through increased common or preferred equity investments of $17.9 million, representing an aggregate of 1,618 units. These properties are located in: Houston, Texas; Atlanta, Georgia; Raleigh, North Carolina; Leander, Texas, and Austin, Texas.

 

We provided mezzanine loan funds in three developments projects with 554 units in 2018. During the first quarter of 2018 we amended and restated the Flagler Village mezzanine loan and increased the loan by $21.0 million. We also provided increased mezzanine financing to Cade and Vickers Historic Roswell by approximately $1.0 million.

 

As part of our effort to simplify our structure, during 2018 we invested approximately $12.0 million to increase our ownership stake to 100% in each of our ARIUM at Palmer Ranch, ARIUM Gulfshore, and ARIUM Palms properties.

 

During the year ended December 31, 2018, we issued 123,592 shares of Series B Preferred Stock under a continuous registered offering with net proceeds of approximately $111.2 million after commissions and dealer manager fees.

 

In February 2018, the Company authorized the repurchase of up to $25 million of the Company’s outstanding shares of Class A common stock for a period of one year pursuant to a stock repurchase plan. In December 2018, we renewed our stock repurchase plan for a period of one year and announced a new plan for the repurchase of up to $5.0 million of our outstanding shares of Class A common stock in accordance with the guidelines specified under Rule 10b5-1 of the Exchange Act, which shares will be applied against the $25 million under our original repurchase plan. The repurchase plan may be discontinued at any time. The extent to which the Company repurchases shares of its Class A common stock, and the timing of any such purchases, depends on a variety of factors including general business and market conditions and other corporate considerations. The Company purchased 1,055,057 shares of Class A common stock during the year ended December 31, 2018 for a total purchase price of approximately $9.0 million.

 

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Industry Outlook

 

We believe that a significant amount of institutional capital and public REITs are primarily focused on investing in the big six Gateway Markets of Boston, New York, Washington, D.C., Seattle, San Francisco, and Los Angeles, and that many other primary markets are underinvested by institutional/public capital. We believe that the continued transition of the United States from an Industrial Economy to a Knowledge Economy is leading to the development of certain next generation markets which will disproportionally benefit from such transition by generating Knowledge Economy jobs of the future over the next several decades, and by attracting and retaining the highly-educated high income Knowledge Economy worker. We seek to target such next generation Knowledge Economy Markets which we believe provide the opportunity to source investments at cap rates that are more attractive than the gateway markets currently, and that have the potential to provide significant current income, along with the potential for significant capital appreciation over time.

 

 We additionally believe that a number of our target Knowledge Economy growth markets are underserved by highly amenitized institutional quality apartment properties, especially as the wave of Millennials continues to move into its prime rental years through the upcoming decade. As such, we believe there is opportunity in certain of our target markets for development and/or redevelopment to deliver highly amenitized institutional quality product and capture premium rental rates and value growth.

 

As the economy continues its recovery and enters an environment of more traditional (i.e., higher) interest rate levels, we believe private purchasers with greater capital constraints who have needed significant leverage to fund acquisitions will become less competitive, which should provide the opportunity to acquire apartment communities from owners who do not have sufficient capital resources to execute their business plans.

 

We further believe that demographic forces indicate strong growth for apartment demand in the foreseeable future due to a variety of factors, including demand from the growing Millennial population which has a high propensity to rent, the large pent-up demand from young adults that have been living at home or with roommates, increasing share of the rental sector vs. homeownership, the declining homeownership rate due to affordability issues, and negative sentiments toward home ownership following the housing crisis experienced during the Great Recession.

 

Results of Operations

 

Note 3, “Sale of Real Estate Assets and Joint Venture Equity Interests and Abandonment of Development Project”; Note 4, “Investments in Real Estate”; Note 5, “Acquisition of Real Estate’; Note 6, “Notes and Interest Receivable due from Related Party”; and Note 7, “Investments in Unconsolidated Real Estate Joint Ventures,” to our Consolidated Financial Statements provide discussion of the various purchases and sales of properties and joint venture equity interests. These transactions have resulted in material changes to the presentation of our financial statements.

 

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The following is a summary of our stabilized consolidated operating real estate investments as of December 31, 2018:

 

Multifamily
Community		  Year
Built/Renovated (1)		  Number 
of Units		  Ownership  Occupancy
%
ARIUM at Palmer Ranch  2016  320  100.0%  97%
ARIUM Glenridge  1990  480  90.0%  93%
ARIUM Grandewood  2005  306  100.0%  95%
ARIUM Gulfshore  2016  368  100.0%  98%
ARIUM Hunter’s Creek  1999  532  100.0%  95%
ARIUM Metrowest  2001  510  100.0%  94%
ARIUM Palms  2008  252  100.0%  92%
ARIUM Pine Lakes  2003  320  85.0%  95%
ARIUM Westside  2008  336  90.0%  99%
Ashford Belmar  1988/1993  512  85.0%  92%
Ashton Reserve  2015  473  100.0%  93%
Citrus Tower  2006  336  96.8%  93%
Enders Place at Baldwin Park  2003  220  92.0%  97%
James on South First  2016  250  90.0%  94%
Marquis at Crown Ridge  2009  352  90.0%  93%
Marquis at Stone Oak  2007  335  90.0%  94%
Marquis at the Cascades  2009  582  90.0%  96%
Marquis at TPC  2008  139  90.0%  94%
Outlook at Greystone  2007  300  100.0%  91%
Park & Kingston  2015  168  100.0%  98%
Plantation Park  2016  238  80.0%  93%
Preston View  2000  382  100.0%  95%
Roswell City Walk  2015  320  98.0%  95%
Sands Parc  2017  264  100.0%  97%
Sorrel  2015  352  95.0%  87%
Sovereign  2015  322  95.0%  95%
The Brodie  2001  324  92.5%  95%
The Links at Plum Creek  2000  264  88.0%  94%
The Mills  2013  304  100.0%  96%
The Preserve at Henderson Beach  2009  340  100.0%  94%
Veranda at Centerfield  1999  400  93.0%  94%
Villages of Cypress Creek  2001  384  80.0%  93%
Wesley Village  2010  301  100.0%  93%
Total/Average     11,286     94%

 

(1)         Represents date of most recent significant renovation or date built if no renovations.

 

Year ended December 31, 2018 as compared to the year ended December 31, 2017

 

Revenue

 

Net rental income increased $41.5 million, or 40%, to $144.3 million for the year ended December 31, 2018 as compared to $102.8 million for the same prior year period. Net rental income increased $46.1 million from the acquisition of five properties in 2018 and the full year impact of twelve properties acquired in 2017, and a $3.2 million increase from same store properties, offset by a $7.8 million decrease in net rental income driven by the sales of four properties in 2017. See Item 1. Business “Summary of Investments and Dispositions”.

 

Other property revenues increased $5.3 million, or 41%, to $18.1 million for the year ended December 31, 2018 as compared to $12.8 million for the same prior year period. Other property revenues increased $5.8 million from the acquisition of five properties in 2018 and the full year impact of twelve properties acquired in 2017, and a $0.4 million increase from same store properties, offset by a $0.9 million decrease in other property revenues driven by the sales of four properties in 2017.

 

Interest income from related parties increased $14.4 million, or 182%, to $22.3 million for the year ended December 31, 2018 as compared to $7.9 million for the same prior year period due to increases in the average balance of mezzanine loans outstanding.

 

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Expenses

 

Property operating expenses increased $19.7 million, or 41%, to $68.0 million for the year ended December 31, 218 as compared to $48.3 million for the same prior year period. Property operating expenses increased $21.8 million primarily from the acquisition of five properties in 2018 and the full year impact of twelve properties acquired in 2017, and a $1.4 million increase from same store properties, offset by a $3.4 million decrease in property operating expenses driven by the sales of four properties in 2017. Property NOI margins decreased to 58.1% of total revenues for the year ended December 31, 2018, from 58.2% in the prior year period. Property margins have been impacted by the sales of stabilized properties owned for longer time periods and the recent purchase of assets that have not yet achieved the same level of operational efficiency. Property NOI margins are computed as total property revenues less property operating expenses, divided by total property revenues.

 

Property management fees expense increased $1.2 million, or 38%, to $4.4 million for the year ended December 31, 2018 as compared to $3.2 million in the same prior year period.  Property management fees increased $1.4 million from the acquisition of five properties in 2018 and the full year impact of twelve properties acquired in 2017, offset by a $0.2 million decrease in property management fees driven by the sales of four properties in 2017.

 

General and administrative expenses amounted to $19.6 million for the year ended December 31, 2018 as compared to $7.5 million for the same prior year period. Excluding non-cash equity compensation expense of $6.9 million and $2.3 million for the years ended December 31, 2018 and 2017, respectively, general and administrative expenses were $12.6 million, or 6.8% of revenues for the year ended December 31, 2018 as compared to $5.2 million, or 4.2% of revenues, for the same prior year end period. This increase can be primarily attributed to the impact of the Internalization as we are now incurring expenses that were previously covered by the management fees payable to our former Manager, described below. Combined general and administrative expenses and management fees decreased $0.7 million to $19.6 million for the year ended December 31, 2018 as compared to $20.3 million for the year ended December 31, 2017.

 

Management fees were eliminated in conjunction with the Internalization. Base management fees of $8.7 million were expensed in the year ended December 31, 2017. Incentive management fees of $4.0 million were expensed in the year ended December 31, 2017. All base management and incentive management fees in 2017 were paid in LTIP Units in lieu of cash.

 

Acquisition and pursuit costs amounted to $0.1 million for the year ended December 31, 2018 as compared to $3.2 million for the same prior year period. Substantially all the expenses for the year ended December 31, 2017 were due to the Company’s decision to abandon the proposed East San Marco Property development and write off the pre-acquisition costs that had been incurred. Abandoned pursuit costs can vary greatly, and the costs incurred in any given period may be significantly different in future periods.

 

Management internalization expenses of $43.6 million for the year ended December 31, 2017 related to the transaction expenses for the Internalization, including the issuance of Class C common stock and OP units. There were no such costs in 2018.

 

Weather-related losses, net were $0.3 million for the year ended December 31, 2018 as compared to $1.0 million for the same prior year period. Weather-related losses incurred in the year ended December 31, 2018 primarily related to freeze damages at three properties in North Carolina and one property in Texas for $0.2 million, along with hail damages at one property in Texas for $0.1 million. Weather-related losses incurred in the year ended December 31, 2017 were related to damages sustained from Hurricane Irma at six properties in Florida and three properties in Georgia.

 

Depreciation and amortization expenses increased to $62.7 million for the year ended December 31, 2018 as compared to $48.6 million for the same prior year period. Depreciation and amortization expense increased $18.4 million from the acquisition of five properties in 2018 and the full year impact of twelve properties acquired in 2017, offset by a $2.0 million decrease in depreciation and amortization driven by the sales of four properties in 2017 and a $2.4 million decrease from same store properties.

 

Other Income and Expenses

 

Other income and expenses amounted to net expense of $45.0 million for the year ended December 31, 2018 as compared to net other income of $37.6 million for the same prior year period. Interest expense increased $21.5 million, or 68%, to $53.0 million for the year ended December 31, 2018 as compared to $31.5 million for the same prior year period due to the increased amount of properties and an increase in debt to fund the property acquisitions. The balance of the difference was primarily due to $60.4 million of gains on the sales of properties during the year ended December 31, 2017.

 

Year ended December 31, 2017 as compared to the year ended December 31, 2016

 

Revenue

 

Net rental income increased $29.5 million, or 40%, to $102.8 million for the year ended December 31, 2017 as compared to $73.3 million for the same prior year period. Net rental income increased $47.4 million from the acquisition of twelve properties in 2017 and the full year impact of nine properties acquired in 2016, offset by a $1.5 million decrease from same store properties and a $16.4 million decrease in net rental income driven by the sales of five properties in 2017 and 2016. See Item 1. Business “Summary of Investments and Dispositions”.

 

Other property revenues increased $4.8 million, or 59%, to $12.8 million for the year ended December 31, 2017 as compared to $8.1 million for the same prior year period. Other property revenues increased $6.3 million from the acquisition of twelve properties in 2017 and the full year impact of nine properties acquired in 2016, offset by a $1.5 million decrease in other property revenues driven by the sales of five properties in 2017 and 2016.

 

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Interest income from related parties increased to $7.9 million due to the entering into various mezzanine loans during 2017.

 

Expenses

 

Property operating expenses increased $16.5 million, or 52%, to $48.3 million for the year ended December 31, 2017 as compared to $31.8 million for the same prior year period. Property operating expenses increased $23.7 million primarily from the acquisition of twelve properties in 2017 and the full year impact of nine properties acquired in 2016, offset by a $0.5 million decrease from same store properties and a $6.8 million decrease in property operating expenses driven by the sales of five properties in 2017 and 2016. Property NOI margins decreased to 58.2% of total revenues for the year ended December 31, 2017, from 60.9% in the prior year period. Property margins have been impacted by the sales of properties owned for longer time periods which were efficiently operated with assets purchased more recently that had not yet achieved the same level of operational efficiency. Property NOI margins are computed as total property revenues less property operating expenses, divided by total property revenues.

 

Property management fees expense increased $0.9 million, or 39%, to $3.2 million for the year ended December 31, 2017 as compared to $2.3 million in the same prior year period.  Property management fees increased $1.5 million from the acquisition of twelve properties in 2017 and the full year impact of nine properties acquired in 2016, offset by a $0.6 million decrease in property management fees driven by the sales of five properties in 2017 and 2016.

 

General and administrative expenses amounted to $7.5 million for the year ended December 31, 2017 as compared to $5.9 million for the same prior year period. Excluding non-cash amortization of LTIPs and restricted stock expense of $2.3 million and $3.0 million, for the years ended December 31, 2017 and 2016, respectively, general and administrative expenses increased to $5.2 million, or 4.2% of revenues for the year ended December 31, 2017 as compared to $2.8 million, or 3.5% of revenues, for the same prior year end period. This increase can be partially attributed to the impact of the Internalization as we are now incurring expenses that were previously covered by the management fees.

 

Management fees amounted to $12.7 million for the year ended December 31, 2017 as compared to $6.5 million for the same prior year period. Base management fees were $8.7 million and $6.4 million for the years ended December 31, 2017 and 2016, respectively. Incentive fees were $4.0 million and $0.2 million for the years ended December 31, 2017 and 2016, respectively. These increases were primarily due to the significant increase in our equity base as a result of our Follow-On Offerings and the realized gains on asset sales, respectively, and partially offset by the Company not incurring management fees to the former Manager following the Internalization. All base management and incentive fees in 2017 and 2016 were paid in LTIP Units.

 

Acquisition and pursuit costs amounted to $3.2 million for the year ended December 31, 2017 as compared to $4.6 million for the same prior year period. The Company adopted ASU 2017-01 which resulted in the capitalization of costs incurred in asset acquisitions purchased after the effective date of January 1, 2017. Substantially all the expenses for the year ended December 31, 2017 were due to the Company’s decision to abandon the proposed East San Marco Property development and write off the pre-acquisition costs that had been incurred. Abandoned pursuit costs can vary greatly, and the costs incurred in any given period may be significantly different in future periods. The costs during the prior year were primarily due to the acquisition of 13 properties during 2016.

 

Management internalization expenses of $43.6 million related to the transaction expenses for the Internalization, including the issuance of Class C common stock and OP units.

 

Weather-related losses of $1.0 million were incurred in the year ended December 31, 2017 related to Hurricane Irma at six properties in Florida and three properties in Georgia.

 

Depreciation and amortization expenses increased to $48.6 million for the year ended December 31, 2017 as compared to $31.2 million for the same prior year period. Depreciation and amortization expense increased $23.5 million from the acquisition of twelve properties in 2017 and the full year impact of nine properties acquired in 2016, offset by a $6.0 million decrease in depreciation and amortization driven by the sales of five properties in 2017 and 2016.

 

Other Income and Expenses

 

Other income and expenses amounted to net income of $37.6 million for the year ended December 31, 2017 as compared to net other expense of $1.9 million for the same prior year period. This was primarily due to the gain on the sale of assets of $50.2 million in 2017 related to Village Green of Ann Arbor, Fox Hill and Lansbrook Village, and the gain on sale of the real estate joint venture interest of MDA Apartments of $10.2 million occurring in 2017, offset by the sale of the real estate joint venture interest of Springhouse of Newport News of $4.9 million in the prior year period, an increase in interest expense, net, of $11.6 million, as the result of the increase in mortgages payable resulting from the acquisition of interests in the properties mentioned above, and a decrease in income from unconsolidated joint venture interest of $1.3 million due to conversion of preferred investments into mezzanine loans, and a $3.8 million gain related to the revaluation of equity on business combination, and lower loss on early extinguishment of debt of $0.8 million.

 

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Property Operations

 

We define “same store” properties as those that we owned and operated for the entirety of both periods being compared, except for properties that are in the construction or lease-up phases, or properties that are undergoing development or significant redevelopment. We move properties previously excluded from our same store portfolio for these reasons into the same store designation once they have stabilized or the development or redevelopment is complete and such status has been reflected fully in all quarters during the applicable periods of comparison. For newly constructed or lease-up properties or properties undergoing significant redevelopment, we consider a property stabilized upon attainment of 90% physical occupancy, subject to loss-to-lease, bad debt and rent concessions. 

 

For comparison of our twelve months ended December 31, 2018 and 2017, the same store properties included properties owned at January 1, 2017. Our same store properties for the twelve months ended December 31, 2018 and 2017 consisted of sixteen properties, representing 5,151 units.

 

For comparison of our three months ended December 31, 2018 and 2017, the same store properties included properties owned at October 1, 2017. Our same store properties for the three months ended December 31, 2018 and 2017 consisted of twenty-four properties, representing 7,962 units.

 

Certain amounts in prior year same store presentation have been reclassified to conform to the current period presentation.

 

Because of the limited number of same store properties as compared to the number of properties in our portfolio in 2018 and 2017, respectively, our same store performance measures may be of limited usefulness.

 

The following table presents the same store and non-same store results from operations for the years ended December 31, 2018 and 2017 (dollars in thousands):

 

   Year Ended
December 31,		   Change 
   2018   2017   $   % 
Property Revenues                    
Same Store  $84,504   $80,828   $3,676    4.5%
Non-Same Store   77,957    34,818    43,139    123.9%
Total property revenues   162,461    115,646    46,815    40.5%
                    
Property Expenses                    
Same Store   34,967    33,585    1,382    4.1%
Non-Same Store   33,030    14,761    18,269    123.8%
Total property expenses   67,997    48,346    19,651    40.6%
                     
Same Store NOI   49,537    47,243    2,294    4.9%
Non-Same Store NOI   44,927    20,057    24,870    124.0%
Total NOI (1)  $94,464   $67,300   $27,164    40.40%

 

(1) See “Net Operating Income” below for a reconciliation of Same Store NOI, Non-Same Store NOI and Total NOI to net income (loss) and a discussion of how management uses this non-GAAP financial measure.

 

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 The following table presents the same store and non-same store results from operations for the three months ended December 31, 2018 and 2017 (dollars in thousands):

 

   Three Months Ended
December 31,		   Change 
   2018   2017   $   % 
Property Revenues                    
Same Store  $31,984   $30,313   $1,671    5.5%
Non-Same Store   12,304    4,072    8,232    202.2%
Total property revenues   44,288    34,385    9,903    28.8%
                     
Property Expenses                    
Same Store   12,871    12,558    313    2.5%
Non-Same Store   4,622    1,584    3,038    191.8%
Total property expenses   17,493    14,142    3,351    23.7%
                     
Same Store NOI   19,113    17,755    1,358    7.6%
Non-Same Store NOI   7,682    2,488    5,194    208.8%
Total NOI (1)  $26,795   $20,243   $6,552    32.4%

 

(1) See “Net Operating Income” below for a reconciliation of Same Store NOI, Non-Same Store NOI and Total NOI to net income (loss) and a discussion of how management uses this non-GAAP financial measure.

 

Twelve Months Ended December 31, 2018 Compared to Twelve Months Ended December 31, 2017

 

Same store NOI for the twelve months ended December 31, 2018 increased 4.9%, or $2.29 million, compared to the 2017 period. There was a 4.5% increase in same store property revenues as compared to the 2017 period. The increase was primarily attributable to a 4.5% increase in average rental rates; all sixteen same store properties recognized rental rate increases during the period.   Average occupancy decreased 30 basis points to 94.1%. The remaining increase was due to a $0.45 million increase in resident fees derived from implementing valet trash fees at twelve same store properties, telecommunication royalty programs and a general increase in resident fees, such as pet, pest and late fees. Same store expenses for the twelve months ended December 31, 2018 increased 4.1%, or $1.38 million, compared to the 2017 period, primarily due to a $0.62 million increase in real estate taxes due to higher valuations by municipalities and $0.38 million attributable to the recurring annual maintenance incurred in current year on certain properties which was not required in prior year as the properties were undergoing renovations.  The remaining increase is due to a $0.13 million increase in payroll and a $0.12 million increase in utilities.

 

Property revenues and property expenses for our non-same store properties increased significantly due to having a full year impact in 2018 from twelve properties acquired during 2017 along with the partial year impact of the five properties acquired in 2018. The results of operations for acquired properties have been included in our consolidated statements of operations from the date of acquisition and the results of operations for disposed properties have been excluded from the consolidated statements of operations since the date of disposition.

 

Three Months Ended December 31, 2018 Compared to Three Months Ended December 31, 2017

 

Same store NOI for the three months ended December 31, 2018 increased 7.6%, or $1.36 million, compared to the 2017 period. There was a 5.5% increase in same store property revenues as compared to the 2017 period. The increase was primarily attributable to a 4.8% increase in average rental rates; twenty-three of our twenty-four same store properties recognized rental rate increases during the period. In addition, average occupancy increased 80 basis points to 94.6%. Same store expenses for the three months ended December 31, 2018 increased 2.5%, or $0.32 million, compared to the 2017 period. The increase is primarily due to a $0.15 million increase in payroll, a $0.11 million increase in maintenance, and $0.09 million of additional real estate taxes due to higher valuations by municipalities.

 

Property revenues and property expenses for our non-same store properties increased significantly due to the properties acquired during 2017 and 2018; the 2018 non-same store property count was 9 compared to 4 properties for the 2017 period. The results of operations for acquired properties have been included in our consolidated statements of operations from the date of acquisition and the results of operations for disposed properties have been excluded from the consolidated statements of operations since the date of disposition.

 

Prior year’s comparisons

 

For comparison of our twelve months ended December 31, 2017 and 2016, the same store properties included properties owned at January 1, 2016. Our same store properties for the twelve months ended December 31, 2017 and 2016 consisted of eight properties, representing 2,429 units.

 

For comparison of our three months ended December 31, 2017 and 2016, the same store properties included properties owned at October 1, 2016. Our same store properties for the three months ended December 31, 2017 and 2016 consisted of eleven properties, representing 3,457 units.

 

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Because of the limited number of same store properties as compared to the number of properties in our portfolio in 2017 and 2016, respectively, our same store performance measures may be of limited usefulness.

 

Certain amounts in prior year same store presentation have been reclassified to conform to the current period presentation.

 

The following table presents the same store and non-same store results from operations for the years ended December 31, 2017 and 2016 (dollars in thousands):

 

   Year Ended
December 31,		   Change 
   2017   2016   $   % 
Property Revenues                    
Same Store  $37,501   $36,166   $1,335    3.7%
Non-Same Store   78,145    45,151    32,994    73.1%
Total property revenues   115,646    81,317    34,329    42.2%
                     
Property Expenses                    
Same Store   14,754    14,209    545    3.8%
Non-Same Store   33,592    17,605    15,987    90.8%
Total property expenses   48,346    31,814    16,532    52.0%
                     
Same Store NOI   22,747    21,957    790    3.6%
Non-Same Store NOI   44,553    27,546    17,007    61.7%
Total NOI (1)  $67,300   $49,503   $17,797    36.0%
                     

 

(1) See “Net Operating Income” below for a reconciliation of Same Store NOI, Non-Same Store NOI and Total NOI to net income (loss) and a discussion of how management uses this non-GAAP financial measure.

 

 The following table presents the same store and non-same store results from operations for the three months ended December 31, 2017 and 2016 (dollars in thousands):

 

   Three Months Ended
December 31,		   Change 
   2017   2016   $   % 
Property Revenues                    
Same Store  $13,870   $13,489   $381    2.8%
Non-Same Store   20,515    10,235    10,280    100.4%
Total property revenues   34,385    23,724    10,661    44.9%
                     
Property Expenses                    
Same Store   5,492    5,063    429    8.5%
Non-Same Store   8,650    3,954    4,696    118.8%
Total property expenses   14,142    9,017    5,125    56.8%
                     
Same Store NOI   8,378    8,426    (48)   -0.6%
Non-Same Store NOI   11,865    6,281    5,584    88.9%
Total NOI (1)  $20,243   $14,707   $5,536    37.6%

 

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Twelve Months Ended December 31, 2017 Compared to Twelve Months Ended December 31, 2016

 

Same store NOI for the twelve months ended December 31, 2017 increased by 3.6% or $0.79 million, compared to the 2016 period. There was a 3.7% or $1.3 million increase in same store property revenues as compared to the 2016 period, primarily attributable to a 3.8% increase in average rental rates, offset by a 44 basis point decrease in average occupancy. Same store expenses for the twelve months ended December 31, 2017 increased 3.8% or $0.54 million, compared to the 2016 period.  The increase is primarily due to $0.17 million increase in real estate taxes due to higher valuations by municipalities, $0.1 million increase in wages, $0.1 million increase in landscaping, $0.08 million in advertising, and $0.07 million in turnover costs.

 

Property revenues and property expenses for our non-same store properties increased significantly due to the properties acquired during 2016 and 2017; the 2017 non-same store property count was 25 compared to 13 properties for the 2016 period. The results of operations for acquired properties have been included in our consolidated statements of operations from the date of acquisition and the results of operations for disposed properties have been excluded from the consolidated statement of operations since the date of disposition.

 

Three Months Ended December 31, 2017 Compared to Three Months Ended December 31, 2016

 

Same store NOI for the three months ended December 31, 2017 decreased 0.6% or $0.05 million, compared to the 2016 period. There was a 2.8% increase in same store property revenues as compared to the 2016 period, primarily attributable to a 2.7% increase in average rental rates; nine of our eleven same store properties recognized rental rate increases during the period. Same store expenses for the three months ended December 31, 2017 increased 8.5% or $0.43 million, compared to the 2016 period, primarily due to $0.28 million increase in real estate taxes due to higher valuations by municipalities and $0.07 million increase in wages. The same store results were also disproportionately impacted by performance from two assets in the Dallas Fort Worth MSA, particularly our Frisco asset which continues to remain challenged from new supply.

 

Property revenues and property expenses for our non-same store properties increased significantly due to the properties acquired during 2016 and 2017; the 2017 non-same store property count was 18 compared to 9 properties for the 2016 period. The results of operations for acquired properties have been included in our consolidated statements of operations from the date of acquisition and the results of operations for disposed properties have been excluded from the consolidated statement of operations since the date of disposition.

 

Net Operating Income

 

We believe that net operating income, or NOI, is a useful measure of our operating performance. We define NOI as total property revenues less total property operating expenses, excluding depreciation and amortization and interest. Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs.

 

We believe that this measure provides an operating perspective not immediately apparent from GAAP operating income or net income. We use NOI to evaluate our performance on a same store and non-same store basis because NOI allows us to evaluate the operating performance of our properties because it measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance and captures trends in rental housing and property operating expenses.

 

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However, NOI should only be used as an alternative measure of our financial performance. The following table reflects net loss attributable to common stockholders together with a reconciliation to NOI and to same store and non-same store contributions to consolidated NOI, as computed in accordance with GAAP for the periods presented (amounts in thousands):

 

   Year Ended December 31, 
   2018   2017   2016 
Net loss attributable to common shares  $(42,759)  $(45,679)  $(18,985)
Add back: Net loss attributable to operating partnership units   (12,839)   (9,372)   (276)
Net loss attributable to common shares and units   (55,598)   (55,051)   (19,261)
Add common stockholders and operating partnership units pro-rata share of:               
Depreciation and amortization   59,103    44,741    27,356 
Non-real estate depreciation and amortization   301    6    — 
Non-cash interest expense   3,757    1,939    802 
Unrealized loss on derivatives   2,776    —    — 
Property management fees   4,151    2,915    1,988 
Management fees to related parties   —    12,726    6,510 
Acquisition and pursuit costs   116    3,091    4,182 
Loss on extinguishment of debt and debt modification costs   2,226    1,551    2,303 
Corporate operating expenses   19,416    7,541    5,863 
Management internalization   —    43,554    63 
Weather-related losses, net   280    956    — 
Preferred dividends   35,637    27,023    13,763 
Preferred stock accretion   5,970    3,011    893 
Less common stockholders and operating partnership units pro-rata share of:               
Other income   —    16    26 
Preferred returns and equity in income of unconsolidated real estate joint ventures   10,312    10,336    11,632 
Interest income from related parties   22,255    7,930    17 
Gain on sale of joint venture interests, net   —    6,414    — 
Gain on sale of real estate investments   —    34,436    6,801 
Pro-rata share of properties' income   45,568    34,871    26,262 
Add:               
Noncontrolling interest pro-rata share of partially owned property income   2,629    3,112    4,232 
Total property income   48,197    37,983    30,494 
Add:               
Interest expense   46,267    29,317    19,009 
Net operating income   94,464    67,300    49,503 
Less:               
Non-same store net operating income   44,927    20,057    27,546 
Same store net operating income  $49,537   $47,243   $21,957 

 

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Liquidity and Capital Resources

 

Liquidity is a measure of our ability to meet potential cash requirements. Our primary liquidity requirements relate to (a) our operating expenses and other general business needs, (b) distributions to our stockholders, (c) investments and capital requirements to fund development and renovations at existing properties and (d) ongoing commitments to repay borrowings, including our credit facilities and maturing short-term debt, and (e) Class A common stock repurchases under our stock repurchase program.

 

We believe the properties underlying our real estate investments are performing well. We had a portfolio-wide debt service coverage ratio of 1.86x and occupancy of 94%, exclusive of our development properties, at December 31, 2018.

 

On May 17, 2018, the Company filed, and on May 23, 2018, the SEC declared effective on Form S-3 (File No. 333-224990), a shelf registration statement that expires in May 2021 (the “May 2018 Shelf Registration Statement”). The securities covered by the May 2018 Shelf Registration Statement cannot exceed $2,500,000,000 in the aggregate and include common stock, preferred stock, depositary shares representing preferred stock, debt securities, warrants to purchase stock or debt securities and units. The Company may periodically offer one or more of these securities in amounts, prices and on terms to be announced when and if these securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering.

 

On February 24, 2016, we filed a prospectus supplement to our registration statement on Form S-3 (File No. 333-200359) filed with the SEC on November 19, 2014 and declared effective on December 19, 2014 (the “December 2014 Shelf Registration Statement”), offering a maximum of 150,000 Units (the “Series B Units”) consisting of 150,000 shares of Series B Redeemable Preferred Stock (the “Series B Preferred Stock”) and warrants (the “Warrants”) to purchase 3,000,000 shares of Class A common stock (liquidation preference $1,000 per share of Series B Preferred Stock) (the “Series B Preferred Offering”). On July 21, 2017, we filed an additional prospectus supplement to the December 2014 Shelf Registration Statement to increase the size of the Series B Preferred Offering to a maximum of 225,000 shares of our Series B Preferred Stock, and Warrants to purchase a maximum of 4,500,000 shares of our Class A common stock (which maximum amounts were inclusive of those reflected in the original Series B Prospectus Supplement). On November 15, 2017, we filed an additional prospectus supplement to our registration statement on Form S-3 (File No. 333-208956) filed with the SEC on January 13, 2016 and declared effective on January 29, 2016 (the “January 2016 Shelf Registration Statement”), to further increase the size of the Series B Preferred Offering to a maximum of 435,000 shares of our Series B Preferred Stock, and Warrants to purchase a maximum of 8,700,000 shares of our Class A common stock (which maximum amounts were inclusive of those reflected in the additional Series B Prospectus Supplement filed on July 21, 2017). On November 15, 2018, we filed a prospectus supplement to our May 2018 Shelf Registration Statement, to further increase the size of the Series B Preferred Offering by offering an additional 500,000 Units (the “Series B Units”) consisting of 500,000 shares of Series B Redeemable Preferred Stock (the “Series B Preferred Stock”) and warrants (the “Warrants”) to purchase 10,000,000 shares of Class A common stock (liquidation preference $1,000 per share of Series B Preferred Stock) (the “Series B Preferred Offering”). As of December 31, 2018, the Company has issued and outstanding 306,009 shares of Series B Preferred Stock and 308,273 Warrants to purchase 6,165,460 shares of Class A common stock.

 

Our total stockholders’ equity decreased $64.5 million from $222.8 million as of December 31, 2017 to $158.3 million as of December 31, 2018. The decrease in our total stockholders’ equity is primarily attributable to distributions declared of $47.1 million for the year ended December 31, 2018, net loss attributable to common stockholders of $1.2 million, and repurchase of Class A common stock of $9.0 million, offset by proceeds of $1.7 million from the sale of warrants in conjunction with the Series B preferred stock and the issuance of Class A common stock of $1.6 million for the redemption of Series B preferred stock.

 

In general, we believe our available cash balances, the proceeds from the continuous offering of Series B Preferred Stock, the Senior and Junior Credit Facilities, the Fannie Facility, other financing arrangements and cash flows from operations will be sufficient to fund our liquidity requirements with respect to our existing portfolio for the next 12 months. We expect that properties added to our portfolio with the proceeds from the continuous offering of Series B Preferred Stock and from the credit facilities will have a positive impact on our future results of operations. In general, we expect that our results related to our portfolio will improve in future periods as a result of anticipated future investments in and acquisitions of real estate.

 

  We believe we will be able to meet our primary liquidity requirements going forward through:

 

  • $24.8 million in cash available at December 31, 2018;
     
  • cash generated from operating activities; and
     
  • our continuous Series B Preferred Stock Offering, proceeds from future borrowings and potential offerings, including potential offerings of common and preferred stock through underwritten offerings, as well as issuances of units of limited partnership interest in our Operating Partnership, or OP Units.

 

Our primary long-term liquidity requirements relate to (a) costs for additional apartment community investments; (b) repayment of long-term debt and our credit facilities; (c) capital expenditures; and (d) cash redemption requirements related to our Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, and (e) Class A common stock repurchases under our stock repurchase program.

 

 59 

 

  

In February 2018, we authorized the repurchase of up to $25 million of our outstanding shares of Class A common stock over a period of one year pursuant to a stock repurchase plan. In December 2018, we renewed our stock repurchase plan for a period of one year and announced a new plan for the repurchase of up to $5.0 million of our outstanding shares of Class A common stock in accordance with the guidelines specified under Rule 10b5-1 of the Exchange Act, which shares will be applied against the $25 million under our original stock repurchase plan. The repurchase plan may be discontinued at any time. We purchased 1,055,057 shares of Class A common stock during the year ended December 31, 2018 for a total purchase price of approximately $9.0 million.

  

We intend to finance our long-term liquidity requirements with net proceeds of additional issuances of common and preferred stock, including our Series B Preferred Stock, our credit facilities, as well as future borrowings. Our success in meeting these requirements will therefore depend upon our ability to access capital. Further, our ability to access equity capital is dependent upon, among other things, general market conditions for REITs and the capital markets generally, market perceptions about us and our asset class, and current trading prices of our securities. 

 

We may also selectively sell assets at appropriate times, which would be expected to generate cash sources for both our short-term and long-term liquidity needs.

 

We may also meet our long-term liquidity needs through borrowings from a number of sources, either at the corporate or project level. We entered into the Senior Credit Facility in October 2017, and the Junior Credit Facility in March 2018, and we believe these facilities will enable us to deploy our capital more efficiently and provide capital structure flexibility as we grow our asset base. Additionally, we instituted the Fannie Facility, under which we closed our first property on April 30, 2018. We expect the combination of these facilities to provide us flexibility by allowing us, among other things, to use borrowings under our Senior Credit Facility and Junior Credit Facility to acquire properties pending placement of permanent mortgage indebtedness, including under the Fannie Facility. In addition to restrictive covenants, these credit facilities contain material financial covenants. At December 31, 2018, we were in compliance with all covenants under our credit facilities. We will continue to monitor the debt markets, including Fannie Mae and Freddie Mac, and as market conditions permit, access borrowings that are advantageous to us.

 

We intend to continue to use prudent amounts of leverage in making our investments, which we define as having total indebtedness of approximately 65% of the fair market value of the properties in which we have invested. For purposes of calculating our leverage, we assume full consolidation of all of our real estate investments, whether or not they would be consolidated under GAAP, include assets we have classified as held for sale, and include any joint venture level indebtedness in our total indebtedness. However, we are not subject to any limitations on the amount of leverage we may use, and accordingly, the amount of leverage we use may be significantly less or greater than we currently anticipate. We expect our leverage to decline commensurately as we execute our business plan to grow our net asset value.

 

If we are unable to obtain financing on favorable terms or at all, we would likely need to curtail our investment activities, including acquisitions and improvements to and developments of, real properties, which could limit our growth prospects. This, in turn, could reduce cash available for distribution to our stockholders and may hinder our ability to raise capital by issuing more securities or borrowing more money. We also may be forced to dispose of assets at inopportune times in order to maintain our REIT qualification and Investment Company Act exemption.

 

We expect to maintain a distribution paid to our Series A Preferred Stock, our Series B Preferred Stock, our Series C Preferred Stock and our Series D Preferred Stock in accordance with the terms of those securities which require monthly or quarterly dividends depending on the series. On December 20, 2017, we announced that our Board revised the dividend policy for the Class A Common Stock and set an annual dividend rate of $0.65 per share. The board's evaluation considered a number of factors including, but not limited to, achieving a sustainable dividend covered by current recurring AFFO (vs. pro forma AFFO), multifamily and small cap peer dividend rates and payout ratios, providing financial flexibility for the Company, and achieving an appropriate balance between the retention of capital to invest and grow net asset value and the importance of current distributions. While our policy is generally to pay distributions from cash flow from operations, our distributions through December 31, 2018 have been paid from cash flow from operations, proceeds from our continuous registered public offering, proceeds from the IPO and follow-on offerings, and sales of assets and may in the future be paid from additional sources, such as from borrowings.

 

In conjunction with the Internalization, we will no longer be responsible for paying the base management fee or incentive fee, and to the extent that we will be paying additional general and administrative expenses in replacement thereof, they will be paid in cash or LTIP Units.

 

We have preferred membership interests in development projects in various stages of completion and lease-up. Our preferred investments are generally structured to provide a current preferred return during the development and lease-up phase. We have the right, in certain development joint ventures, to convert our preferred membership interest, in our sole discretion, into a common membership interest for a period of six months from the date upon which 70% of the units in the related development project have been leased and occupied. If we elect to convert one or more of these investments into common ownership, our income, FFO, AFFO and cash flows would be reflective of our pro rata share of the property’s results, which may be a reduction from what our preferred membership interest currently generates. Alternatively, if we do not convert, and/or the joint ventures do not redeem our preferred membership interest when required, our income, FFO, AFFO and cash flows could be reduced if the development project does not produce sufficient cash flow to pays its operating expenses, debt service and preferred return obligations.

 

Each joint venture in which we own a preferred membership interest is required to redeem our preferred membership interests plus any accrued but unpaid preferred return on either a certain date or earlier upon the occurrence of certain events. Upon redemption of the preferred membership interests, our income, FFO, AFFO and cash flows could be reduced below the preferred returns currently being recognized.

 

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Cash Flows

 

Year ended December 31, 2018 as compared to the year ended December 31, 2017

 

As of December 31, 2018, we owned interests in forty-seven real estate properties, thirty-three consolidated operating properties and fourteen through preferred equity and mezzanine loan investments. During the year ended December 31, 2018, net cash provided by operating activities was $64.5 million. After the net loss of $15.3 million was adjusted for $66.5 million of non-cash items, net cash provided by operating activities consisted of the following:

 

  • Distributions from unconsolidated joint ventures of $9.5 million;
     
  • an increase in accounts payable, accrued liabilities and distributions of $7.8 million;
     

  •

offset by a decrease in accounts receivable, prepaid expenses and other assets of $2.0 million; and

 

  •

a decrease in due to affiliates of $2.0 million.

 

Cash Flows from Investing Activities

 

During the year ended December 31, 2018, net cash used in investing activities was $406.9 million, primarily due to the following:

 

  • $333.5 million used in acquiring consolidated real estate investments;
     
  • $12.2 million used in purchases of interests from noncontrolling members;
     
  • $39.9 million used in acquiring investments in unconsolidated joint ventures and notes receivable;
     
  • $21.2 million used on capital expenditures.
     

Cash Flows from Financing Activities

 

During the year ended December 31, 2018, net cash provided by financing activities was $330.1 million, primarily due to the following:

 

  •

net borrowings of $411.3 million on mortgages payable;

 

  •

net proceeds of $222.5 million from borrowings on revolving credit facilities;

 

  •

net proceeds of $109.4 million from issuance of Units of Series B Preferred Stock and Warrants;

 

  • $13.6 million in capital contributions from noncontrolling interests;
     
  • partially offset by $13.9 million in distributions paid to common stockholders;
     
  • $35.0 million paid in cash distribution paid to preferred stockholders;
     
  • $6.3 million paid in cash distribution paid to noncontrolling interests;
     
  •

$142.0 million of repayments of our mortgages payable;

 

  • $208.0 million of repayments of revolving credit facilities;
     
  •

$7.3 million increase in deferred financing costs;

 

  • $9.0 million paid for repurchase of Class A common stock;
     
  • $5.2 million paid to purchase interest rate caps.

 

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Operating Activities

 

Net cash flow provided by operating activities increased $10.2 million in 2018 compared to 2017 primarily due to:

 

·Operating income, adjusted for non-cash activity, increased $21.4 million as a result of our acquisitions (net of dispositions);
·Net distributions of income and preferred returns from preferred equity investments increased $0.2 million;
·Net due to affiliates decreased $0.4 million;
·Accounts payable and other accrued liabilities decreased $8.7 million;
·And accounts receivable, prepaid expenses and other assets increased $2.3 million.

 

Investing Activities

 

Net cash used in investing activities decreased $127.6 million in 2018 compared to 2017 primarily due to:

 

·Acquisition of real estate investments and capital expenditures decreased $185.5 million;
·Decrease in investment in notes receivable of $32.1 million;
·Lower proceeds from sales of joint venture interests and real estate investments of $89.5 million;
·And lower investments in unconsolidated real estate joint ventures interests of $3.1 million and higher purchases from noncontrolling interests of $4.3 million.

 

Financing Activities

 

Cash flows from financing activities were $330.1 million in 2018 as compared to $417.4 million in 2017. This decrease of $87.3 million is primarily explained by:

 

·An increase in net mortgage borrowings of $37.8 million;
·A decrease in distributions paid of $31.8 million;
·An increase in contributions from noncontrolling interests of $2.8 million; offset by
·A decrease in net revolving credit facility borrowings of $53.2 million;
·A decrease in the Series B preferred stock continuous offering of $34.7 million;
·A decrease in other stock offerings of $57.4 million;
·An increase in Class A common stock repurchases of $9.0 million;
·An increase in purchase of interest rate caps of $5.2 million;
·An increase in deferred financing costs of $0.7 million;

 

 Capital Expenditures

 

The following table summarizes our total capital expenditures incurred for the years ended December 31, 2018, 2017 and 2016 (amounts in thousands):

 

Year Ended December 31, 
   2018   2017   2016 
   (In thousands) 
Redevelopment/renovations  $16,095   $13,186   $4,255 
Routine capital expenditures   5,931    4,081    2,158 
New development   -    29,704    - 
Total capital expenditures  $22,026   $46,971   $6,413 

 

We define redevelopment and renovation costs as non-recurring capital expenditures for significant projects that upgrade units or common areas and projects that are revenue enhancing for the years ended December 31, 2018, 2017 and 2016. We define routine capital expenditures as capital expenditures that are incurred at every property and exclude development, investment, revenue enhancing and non-recurring capital expenditures.

 

Funds from Operations, Core Funds from Operations and Adjusted Funds from Operations, Attributable to Common Stockholders

 

We believe that funds from operations (“FFO”), as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), core funds from operations (“CFFO”), and adjusted funds from operations (“AFFO”) are important non-GAAP supplemental measures of operating performance for a REIT.

 

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Funds from operations attributable to common shares and units is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance. We consider FFO to be an appropriate supplemental measure of our operating performance as it is based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative. We define FFO, consistent with the NAREIT definition, as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization of real estate assets, plus impairments write-downs of depreciable real estate, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis.

 

CFFO makes certain adjustments to FFO, removing the effect of items that do not reflect ongoing property operations such as stock compensation expense, acquisition expenses, unrealized gains or losses on derivatives, losses on extinguishment of debt and debt modification costs (includes prepayment penalties incurred and the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt), non-cash interest, one-time weather-related costs, and preferred stock accretion. We believe that CFFO is helpful to investors as a supplemental performance measure because it excludes the effects of certain items which can create significant earnings volatility, but which do not directly relate to our core recurring property operations. As a result, we believe that CFFO can help facilitate comparisons of operating performance between periods and provides a more meaningful predictor of future earnings potential.

 

AFFO makes certain adjustments to CFFO in order to arrive at a more refined measure of the operating performance of our portfolio. There is no industry standard definition of AFFO and practice is divergent across the industry. AFFO adjusts CFFO for items that impact our ongoing operations, such as subtracting recurring capital expenditures (and while we were externally managed, when calculating the quarterly incentive fee paid to our former Manager only, we further adjusted FFO to include any realized gains or losses on our real estate investments). We believe that AFFO is helpful to investors as a meaningful supplemental indicator of our operational performance.

 

Our calculation of CFFO and AFFO differs from the methodology used for calculating Core FFO and AFFO by certain other REITs and, accordingly, our CFFO and AFFO may not be comparable to CFFO and AFFO reported by other REITs. Our management utilizes FFO, CFFO, and AFFO as measures of our operating performance after adjustment for certain non-cash items, such as depreciation and amortization expenses, and acquisition and pursuit costs that are required by GAAP to be expensed but may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Furthermore, although FFO, CFFO, AFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO, CFFO, and AFFO may provide us and our stockholders with an additional useful measure to compare our financial performance to certain other REITs. While we were externally managed, we also used AFFO for purposes of determining the quarterly incentive fee paid to our former Manager in prior periods.

 

Neither FFO, CFFO, nor AFFO is equivalent to net income, including net income attributable to common stockholders, or cash generated from operating activities determined in accordance with GAAP. Furthermore, FFO, CFFO, and AFFO do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO, CFFO, nor AFFO should be considered as an alternative to net income, including net income attributable to common stockholders, as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.

 

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The table below presents our calculation of FFO, CFFO and AFFO for the years ended December 31, 2018, 2017 and 2016.

 

We have acquired five operating properties and three investments accounted for under the equity method of accounting subsequent to December 31, 2017. As of December 31, 2017, we had acquired twelve operating properties subsequent to December 31, 2016 and sold four operating properties that were owned in 2016. The results presented in the table below are not directly comparable and should not be considered an indication of our future operating performance (amounts in thousands).

 

Years Ended December 31, 
   2018   2017    2016 
   (In thousands, except per share data) 
     
Net loss attributable to common shares  $(42,759)  $(45,679)  $(18,985)
Add back: Net loss attributable to operating partnership units   (12,839)   (9,372)   (276)
Net loss attributable to common shares and units   (55,598)   (55,051)   (19,261)
Common stockholders and operating partnership units pro-rata share of:               
Real estate depreciation and amortization (1)   59,103    44,741    27,356 
Gain on sale of real estate investments   —    (34,436)   (6,801)
Gain on sale of joint venture interests, net   —    (6,414)   — 
FFO Attributable to Common Shares and Units  $3,505   $(51,160)  $1,294 
Common stockholders and operating partnership units pro-rata share of:               
Acquisition and pursuit costs   116    3,091    4,182 
Non-cash interest expense   3,757    1,939    802 
Unrealized loss on derivatives   2,776    —    — 
Loss on extinguishment of debt and debt modification costs   2,226    1,551    2,303 
Weather-related losses, net   280    956    — 
Non-real estate depreciation and amortization   301    6    — 
Non-recurring income   —    (16)   (258)
Non-cash preferred returns and equity in income of unconsolidated real estate joint ventures   (980)   (1,243)   — 
Management internalization   —    43,554    63 
Non-cash equity compensation   6,807    15,022    9,542 
Preferred stock accretion   5,970    3,011    893 
Non-cash tax abatement   —    —    85 
CFFO Attributable to Common Shares and Units  $24,758   $16,711   $18,906 
Common stockholders and operating partnership units pro-rata share of:               
Normally recurring capital expenditures (2)   (2,569)   (1,541)   (921)
AFFO attributable to Common Shares and Units  $22,189   $15,170   $17,985 
                
FFO attributable to Common Stockholders  $0.11   $(1.89)  $0.06 
CFFO attributable to Common Stockholders  $0.80   $0.62   $0.90 
AFFO attributable to Common Stockholders  $0.72   $0.56   $0.85 
Weighted average shares outstanding   30,995,249    27,032,354    21,113,691 

 

(1)The real estate depreciation and amortization amount includes our share of consolidated real estate-related depreciation and amortization of intangibles, less amounts attributable to noncontrolling interests, and our similar estimated share of unconsolidated depreciation and amortization, which is included in earnings of our unconsolidated real estate joint venture investments.
(2)Normally recurring capital expenditures exclude development, investment, revenue enhancing and non-recurring capital expenditures.

 

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Operating cash flow, FFO and AFFO may also be used to fund all or a portion of certain capitalizable items that are excluded from FFO and AFFO, such as tenant improvements, building improvements and deferred leasing costs.

 

Presentation of this information is intended to assist the reader in comparing the sustainability of the operating performance of different REITs, although it should be noted that not all REITs calculate FFO or AFFO the same way, so comparisons with other REITs may not be meaningful.  FFO or AFFO should not be considered as an alternative to net income (loss), as an indication of our liquidity, nor is either indicative of funds available to fund our cash needs, including our ability to make distributions.  Both FFO and AFFO should be reviewed in connection with other GAAP measurements.

 

Contractual Obligations

 

The following table summarizes our contractual obligations as of December 31, 2018 (in thousands) which consisted of mortgage notes secured by our properties and revolving credit facilities. At December 31, 2018, our estimated future required payments on these obligations were:

 

   Total   Less than one year   2020-2021   2022-2023   Thereafter 
Mortgages Payable (Principal)  $1,215,376   $7,365   $46,658   $312,687   $848,666 
Revolving Credit Facilities (Principal)   82,209    14,500    67,709    -    - 
Estimated Interest Payments on Mortgages Payable and Revolving Credit Facilities   292,287    53,203    99,762    87,853    51,469 
Total  $1,589,872   $75,068   $214,129   $400,540   $900,135 

 

Estimated interest payments are based on the stated rates for mortgage notes payable and revolving credit facility assuming the interest rate in effect for the most recent quarter remains in effect through the respective maturity dates.

 

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Distributions

 

 

Declaration Date

 

Payable to stockholders

of record as of

 

 

Amount

  

 

Date Paid or Payable

Class A common stock          
October 13, 2017  December 22, 2017  $0.096667   January 5, 2018
December 20, 2017  March 23, 2018  $0.162500   April 5, 2018
June 8, 2018  June 25, 2018  $0.162500   July 5, 2018
September 7, 2018  September 25, 2018  $0.162500   October 5, 2018
December 7, 2018  December 24, 2018  $0.162500   January 4, 2019
Class C common stock           
October 13, 2017  December 22, 2017  $0.096667   January 5, 2018
December 20, 2017  March 23, 2018  $0.162500   April 5, 2018
June 8, 2018  June 25, 2018  $0.162500   July 5, 2018
September 7, 2018  September 25, 2018  $0.162500   October 5, 2018
December 7, 2018  December 24, 2018  $0.162500   January 4, 2019
Series A Preferred Stock           
December 8, 2017  December 22, 2017  $0.515625   January 5, 2018
March 9, 2018  March 23, 2018  $0.515625   April 5, 2018
June 8, 2018  June 25, 2018  $0.515625   July 5, 2018
September 7, 2018  September 25, 2018  $0.515625   October 5, 2018
December 7, 2018  December 24, 2018  $0.515625   January 4, 2019
Series B Preferred Stock           
October 13, 2017  December 22, 2017  $5.00   January 5, 2018
January 12, 2018  January 25, 2018  $5.00   February 5, 2018
January 12, 2018  February 23, 2018  $5.00   March 5, 2018
January 12, 2018  March 23 2018  $5.00   April 5, 2018
April 13, 2018  April 25, 2018  $5.00   May 4, 2018
April 13, 2018  May 25, 2018  $5.00   June 5, 2018
April 13, 2018  June 25, 2018  $5.00   July 5, 2018
July 10, 2018  July 25, 2018  $5.00   August 3, 2018
July 10, 2018  August 24, 2018  $5.00   September 5, 2018
July 10, 2018  September 25, 2018  $5.00   October 5, 2018
October 12, 2018  October 25, 2018  $5.00   November 5, 2018
October 12, 2018  November 23, 2018  $5.00   December 5, 2018
October 12, 2018  December 24, 2018  $5.00   January 4, 2019
Series C Preferred Stock           
December 8, 2017  December 22, 2017  $0.4765625   January 5, 2018
March 9, 2018  March 23, 2018  $0.4765625   April 5, 2018
June 8, 2018  June 25, 2018  $0.4765625   July 5, 2018
September 7, 2018  September 25, 2018  $0.4765625   October 5, 2018
December 7, 2018  December 24, 2018  $0.4765625   January 4, 2019
Series D Preferred Stock           
December 8, 2017  December 22, 2017  $0.4453125   January 5, 2018
March 9, 2018  March 23, 2018  $0.4453125   April 5, 2018
June 8, 2018  June 25, 2018  $0.4453125   July 5, 2018
September 7, 2018  September 25, 2018  $0.4453125   October 5, 2018
December 7, 2018  December 24, 2018  $0.4453125   January 4, 2019

 

A portion of each dividend may constitute a return of capital for tax purposes. There is no assurance that the Company will continue to declare dividends or at this rate.

 

Holders of OP and LTIP Units are entitled to receive "distribution equivalents" at the same time as dividends are paid to holders of the Company's Class A common stock.

 

The Company has a dividend reinvestment plan that allows for participating stockholders to have their Class A common stock dividends automatically invested in additional Class A common shares based on the average price of the shares on the investment date. The Company plans to issue Class A common shares to cover shares required for investment.

 

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Our Board will determine the amount of dividends to be paid to our stockholders. The determination of our Board will be based on a number of factors, including funds available from operations, our capital expenditure requirements and the annual distribution requirements necessary to maintain our REIT status under the Internal Revenue Code. As a result, our distribution rate and payment frequency may vary from time to time.  However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our “REIT taxable income” each year. While our policy is generally to pay distributions from cash flow from operations, we may declare distributions in excess of funds from operations.

 

Distributions paid for the year ended December 31, 2018 were as follows (amounts in thousands):

 

   Distributions 
2018  Declared   Paid 
First Quarter          
Class A Common Stock  $(79)  $2,341 
Class C Common Stock   —    7 
Series A Preferred Stock   2,950    2,950 
Series B Preferred Stock   2,921    2,816 
Series C Preferred Stock   1,107    1,107 
Series D Preferred Stock   1,270    1,270 
OP Units   —    602 
LTIP Units   175    53 
Total first quarter 2018  $8,344   $11,146 
Second Quarter          
Class A Common Stock  $3,863   $3,858 
Class C Common Stock   12    12 
Series A Preferred Stock   2,950    2,950 
Series B Preferred Stock   3,316    3,161 
Series C Preferred Stock   1,107    1,107 
Series D Preferred Stock   1,269    1,269 
OP Units   1,013    1,013 
LTIP Units   311    266 
Total second quarter 2018  $13,841   $13,636 
Third Quarter          
Class A Common Stock   3,847    3,864 
Class C Common Stock   12    12 
Series A Preferred Stock   2,950    2,950 
Series B Preferred Stock   3,779    3,631 
Series C Preferred Stock   1,107    1,107 
Series D Preferred Stock   1,269    1,269 
OP Units   1,013    1,013 
LTIP Units   297    272 
Total third quarter 2018   14,274    14,118 
Fourth Quarter          
Class A Common Stock  $3,819   $3,846 
Class C Common Stock   12    12 
Series A Preferred Stock   2,950    2,950 
Series B Preferred Stock   4,316    4,101 
Series C Preferred Stock   1,107    1,107 
Series D Preferred Stock   1,269    1,269 
OP Units   1,038    1,012 
LTIP Units   292    279 
Total fourth quarter 2018  $14,803   $14,576 
Total year  $51,262   $53,476 

 

On January 11, 2019, our Board authorized, and we declared monthly dividends for the first quarter of 2019 equal to monthly rate of $5.00 per share on our Series B Preferred Stock, payable monthly to the stockholders of record as of January 25, 2019, February 25, 2019 and March 25, 2019, which was paid in cash on February 5, 2019, and which will be paid in cash on March 5, 2019 and April 5, 2019, respectively.

 

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Critical Accounting Policies

 

Below is a discussion of the accounting policies that we consider critical to an understanding of our financial condition and operating results that may require complex or significant judgment in their application or require estimates about matters which are inherently uncertain.

 

Our consolidated financial statements include our accounts and the accounts of other subsidiaries over which we have control. All inter-company transactions, balances, and profits have been eliminated in consolidation. Interests in entities acquired will be evaluated based on applicable GAAP, which includes the requirement to consolidate entities deemed to be variable interest entities ("VIE”).

 

Principles of Consolidation and Basis of Presentation

 

Our consolidated financial statements include our accounts and the accounts of other subsidiaries over which we have control. All inter-company transactions, balances, and profits have been eliminated in consolidation. Interests in entities acquired will be evaluated based on applicable GAAP, which includes the requirement to consolidate entities deemed to be VIEs in which we are the primary beneficiary. If the entity in which we hold an interest is determined not to be a VIE, then the entity will be evaluated for consolidation based on legal form, economic substance, and the extent to which we have control and/or substantive participating rights under the respective ownership agreement.

 

There are judgments and estimates involved in determining if an entity in which we have made an investment is a VIE and, if so, whether we are the primary beneficiary. The entity is evaluated to determine if it is a VIE by, among other things, calculating the percentage of equity being risked compared to the total equity of the entity. A change in the judgments, assumptions, and estimates used could result in consolidating an entity that should not be consolidated or accounting for an investment using the equity method that should in fact be consolidated, the effects of which could be material to our financial statements.

 

Real Estate Asset Acquisition and Valuation

 

Upon the acquisition of real estate properties, we recognize the assets acquired, the liabilities assumed, and any noncontrolling interest as of the acquisition date, measured at their fair values. Acquisition-related costs are capitalized in the period incurred. Prior to the adoption of Financial Accounting Standards Board ASU 2017-01 in January 2017, “Business Combinations; Clarifying the Definition of a Business”, acquisition-related costs were expensed in the period incurred. We assess the acquisition-date fair values of all tangible assets, identifiable intangible assets and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis) and that utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it was vacant.

 

Intangible assets include the value of in-place leases, which represents the estimated value of the net cash flows of the in-place leases to be realized, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject to lease-up. We amortize the value of in-place leases to expense over the remaining non-cancelable term of the respective leases, which on average is six months. Should a tenant terminate its lease, the unamortized portion of the in-place lease value and customer relationship intangibles would be charged to expense in that period.

 

Estimates of the fair values of the tangible assets, identifiable intangible assets and assumed liabilities require us to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions could result in an incorrect valuation of acquired tangible assets, identifiable intangible assets and assumed liabilities, which could impact the amount of our net income (loss).

 

Our significant accounting policies are more fully described in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” to our Notes to the Consolidated Financial Statements. Certain of our accounting policies require management to make estimates and judgments regarding uncertainties that may affect the reported amounts presented and disclosed in our consolidated financial statements. These estimates and judgments are affected by management’s application of accounting policies. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods.

 

We base these estimates on historical experience and various other factors that are believed to be reasonable, the results of which form the basis for making judgments under the circumstances. Due to the inherent uncertainty involved in making these estimates, actual results reported may differ from these estimates under different situations or conditions. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. We consider an accounting estimate to be significant if it requires us to make assumptions about matters that were uncertain at the time the estimate was made and changes in the estimate would have had a significant impact on our consolidated financial position or results of operations.

 

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Revenue Recognition

 

Rental income related to tenant leases is recognized on an accrual basis over the terms of the related leases on a straight-line basis. Amounts received in advance are recorded as a liability within other related liabilities.

 

Other property revenues are recognized in the period earned.

 

The Company recognizes a gain or loss on the sale of real estate assets when the criteria for an asset to be derecognized are met, which include when (i) a contract exists and (ii) the buyer obtains control.

 

Investments in Joint Ventures

 

We accounted for the acquisitions of our interests in properties through managing member limited liability companies (“LLCs”) in accordance with the provisions of the Consolidation Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).

 

We analyze an investment to determine if it is a variable interest entity (a “VIE”) and, if so, whether we are the primary beneficiary requiring consolidation. A VIE is an entity that has (i) insufficient equity to permit it to finance its activities without additional subordinated financial support or (ii) equity holders that lack the characteristics of a controlling financial interest. VIEs are consolidated by the primary beneficiary, which is the entity that has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses of the entity or the right to receive benefits from the entity that potentially could be significant to the entity. Variable interests in a VIE are contractual, ownership, or other financial interests in a VIE that change in value with changes in the fair value of the VIE’s net assets. We continuously re-assess at each level of the investment whether the entity is (i) a VIE, and (ii) if we are the primary beneficiary of the VIE. If it was determined that the entity in which we hold an interest qualified as a VIE and we were the primary beneficiary, the entity would be consolidated.

 

If after consideration of the VIE accounting literature, we have determined that an entity is not a VIE, the Company assesses the need for consolidation under all other provisions of ASC 810.  These provisions provide for consolidation of majority-owned entities where majority voting interest held by the Company provides control, or through determination of control by virtue of the Company being the general partner in a limited partnership or the controlling member of a limited liability company.

 

In assessing whether we are in control of and requiring consolidation of the limited liability company and partnership venture structures we evaluate the respective rights and privileges afforded each member or partner (collectively referred to as “member”).  Our member would not be deemed to control the entity if any of the other members have either (i) substantive kickout rights providing the ability to dissolve (liquidate) the entity or otherwise remove the managing member or general partner without cause or (ii) has substantive participating rights in the entity.  Substantive participating rights (whether granted by contract or law) provide for the ability to effectively participate in significant decisions of the entity that would be expected to be made in the ordinary course business.   

  

If it has been determined that we do not have control, but do have the ability to exercise significant influence over the entity, we generally account for these unconsolidated investments under the equity method.  The equity method of accounting requires these investments to be initially recorded at cost and subsequently increased (decreased) for our share of net income (loss), including eliminations for our share of inter-company transactions, and increased (decreased) for contributions (distributions). The proportionate share of the results of operations of these investments is reflected in our earnings or losses.

 

Off-Balance Sheet Arrangements

 

As of December 31, 2018, we have off-balance sheet arrangements that may have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures. As of December 31, 2018, we own interests in fourteen joint ventures that are accounted for under the equity method as we exercise significant influence over, but do not control, the investee.

 

New Accounting Pronouncements

 

See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” to our Notes to the Consolidated Financial Statements for a description of accounting pronouncements. We do not believe these new pronouncements will have a significant impact on our Consolidated Financial Statements, cash flows or results of operations.

 

Subsequent Events

 

Issuance of LTIP Units under the Third Amended 2014 Incentive Plans

 

On January 1, 2019, the Company granted certain equity grants of LTIPs of the Company’s Operating Partnership to various executive officers under the Third Amended 2014 Incentive Plans. These awards, amounting to 490,054 LTIPs, were issued pursuant to the executive officers’ employment and service agreements as time-based LTIPs and performance-based LTIPs. All of these LTIP grants require continuous employment for vesting. Time-based LTIPs were issued amounting to 196,023 LTIPs that vest over approximately three years. Performance-based LTIPs were issued amounting to 294,031 LTIPs, are subject to a three-year performance period, and will vest immediately upon successful achievement of performance-based conditions.

 

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In addition, on January 1, 2019, the Company granted 6,836 LTIP Units pursuant to the Third Amended 2014 Incentive Plans to each independent member of the Board in payment of the equity portion of their respective annual retainers. The LTIP Units vested immediately upon issuance.

 

Distributions Declared

 

 On January 11, 2019, our Board authorized, and we declared monthly dividends for the first quarter of 2019 equal to monthly rate of $5.00 per share on our Series B Preferred Stock, payable monthly to the stockholders of record as of January 25, 2019, February 25, 2019 and March 25, 2019, which was paid in cash on February 5, 2019, and which will be paid in cash on March 5, 2019 and April 5, 2019, respectively.

 

Distributions Paid

 

The following distributions have been paid subsequent to December 31, 2018 (amounts in thousands):

 

   Distributions Paid 
January 4, 2019 (to stockholders of record as of December 24, 2018)       
Class A Common Stock    $3,819 
Class C Common Stock   12 
Series A Preferred Stock   2,950 
Series B Preferred Stock   1,530 
Series C Preferred Stock   1,107 
Series D Preferred Stock   1,269 
OP Units     1,038 
LTIP Units     262 
Total    $11,987 
February 5, 2019 (to stockholders of record as of January 25, 2019)       
Series B Preferred Stock  $1,625 
Total    $1,625 

 

Chapel Hill Interests

 

On January 23, 2019, the Company, through BRG Chapel Hill Lender, LLC (“BRG Chapel Hill Lender”), an indirect subsidiary, provided a $7.8 million senior loan (the “BRG Chapel Hill Loan”) to BR Chapel Hill, LLC (“BR Chapel Hill”). BR Chapel Hill JV, LLC (“BR Chapel Hill JV”) owns a 100.0% interest in BR Chapel Hill and is a joint venture with common interests held by Fund I, Fund II, and BR Chapel Hill Investment, LLC, all managed by affiliates of the former Manager. The BRG Chapel Hill Loan is secured by BR Chapel Hill’s fee simple interest in the Chapel Hill property. The BRG Chapel Hill Loan matures on January 23, 2021 and bears interest at a fixed rate of 10.0%. Regular monthly payments are interest-only during the initial term. The BRG Chapel Hill Loan can be prepaid without penalty.

 

In conjunction with the BRG Chapel Hill Loan, on January 23, 2019, the Company, through BRG Chapel Hill Lender, provided a $0.8 million mezzanine loan to BR Chapel Hill JV, which is secured by the Chapel Hill property. The loan bears interest at a fixed rate of 10.0% per annum and matures on the earliest to occur of: (i) the latest to occur of (a) January 23, 2021, or (b) the applicable maturity date under any extension granted under any construction financing, (ii) the date of sale or transfer of property, and (iii) such earlier date, by declaration of acceleration or otherwise, on which the final payment of principal becomes due. The loan can be prepaid without penalty.

 

Acquisition of Additional Interest in ARIUM Pine Lakes

 

On January 29, 2019, the Company, through subsidiaries of its Operating Partnership, purchased the non-controlling partner’s interest in ARIUM Pine Lakes for $7.8 million, increasing the Company’s interest in the property from 85.0% to 100.0%.

 

Vickers Historic Roswell Mezzanine Financing

 

On February 25, 2019, the Company’s audit committee authorized and approved a proposal for the Company, through BRG Vickers, and on behalf of Fund III, to fund a capital call of $1.2 million by increasing its mezzanine loan to BR Vickers JV Member. In exchange for contributing Fund III’s share of the total $1.2 million capital call, the Company will receive an additional 5.0 basis point discount purchase option and will have the right to exercise an option to purchase, at the greater of a 17.5 basis point discount to fair market value or 15% internal rate of return for Fund III, up to a 100% common membership interest in BR Vickers JV Member.

  

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Item 7A.Quantitative and Qualitative Disclosures About Market Risk

 

We are exposed to interest rate risk primarily through borrowing activities. There is inherent roll-over risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and our future financing requirements. We are not subject to foreign exchange rates or commodity price risk, and all of our financial instruments were entered into for other than trading purposes.

 

Our interest rate risk is monitored using a variety of techniques. The table below presents the principal payments and the weighted average interest rates on outstanding debt, by year of expected maturity, to evaluate the expected cash flows and sensitivity to interest rate changes. Fair value adjustments and unamortized deferred financing costs, net, of approximately $(9.2) million are excluded:

 

($ in thousands)

 

   2019   2020   2021   2022   2023   Thereafter   Total 
Mortgage Notes Payable  $7,365   $30,753   $15,905   $91,472   $221,215   $848,666   $1,215,376 
Weighted Average Interest Rate   4.10%   3.66%   4.03%   3.71%   4.04%   4.12%   4.06%
                                    
Revolving Credit Facilities  $14,500   $67,709   $-   $-   $-   $-   $82,209 
Weighted Average Interest Rate   5.94%   4.66%   -    -    -    -    4.89%

  

The fair value (in thousands) is estimated at $1,205.0 million for mortgages payable as of December 31, 2018.

 

The table above incorporates those exposures that exist as of December 31, 2018; it does not consider those exposures or positions which could arise after that date. As a result, our ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period and interest rates.

 

Based on our debt and interest rates in effect at December 31, 2018, a 100 basis point increase or decrease in interest rates on the portion of our debt bearing interest at variable rates would increase future interest expense by approximately $0.8 million or decrease by $4.5 million, respectively, on an annual basis.

 

Item 8.Financial Statements and Supplementary Data

 

The information required by this Item 8 is hereby included in our Consolidated Financial Statements beginning on page F-1 of the Annual Report on Form 10-K.

 

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

None.

 

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Item 9A.Controls and Procedures

 

Disclosure Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

As required by Rule 13a-15(b) and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, including our Chief Executive Officer and Chief Financial Officer, evaluated, as of December 31, 2018, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e).  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2018, to provide reasonable assurance that information required to be disclosed by us in this report filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

 

 We believe, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)).  Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated, as of December 31, 2018, the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013).  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting, as of December 31, 2018, were effective.

 

Report from Our Independent Registered Public Accounting Firm

 

BDO USA, LLP, our independent registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K, has audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018, and issued a report which appears on page F-2 of this Annual Report on Form 10-K.

 

Changes in Internal Control over Financial Reporting

 

There has been no change in internal control over financial reporting that occurred during the quarter ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B.Other Information

 

None.

 

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PART III

 

Item 10.Directors, Executive Officers and Corporate Governance.

 

Our Executive Officers and Directors

 

The individuals listed as our executive officers below serve to manage the day-to-day affairs and carry out the directives of our Board in the review, selection and recommendation of investment opportunities and operating acquired investments and monitoring the performance of those investments to ensure that they are consistent with our investment objectives. The duties that these executive officers perform also include the performance of corporate governance activities on our behalf that require the attention of our corporate officers, including signing certifications required under Sarbanes-Oxley Act of 2002, as amended, for filing with the periodic reports.

 

The following table and biographical descriptions set forth certain information with respect to the individuals who currently serve as our executive officers and directors:

 

Name *   Age **   Position   Year First Became Director
R. Ramin Kamfar   55   Chairman of the Board and Chief Executive Officer   2008
Jordan B. Ruddy   55   Chief Operating Officer and President   N/A
James G. Babb, III   54   Chief Investment Officer   N/A
Ryan S. MacDonald   35   Chief Acquisitions Officer   N/A
Christopher J. Vohs   42   Chief Financial Officer and Treasurer   N/A
Michael L. Konig   58   Chief Legal Officer and Secretary   N/A
Brian D. Bailey   52   Independent Director   2009
I. Bobby Majumder   50   Independent Director   2009
Romano Tio   59   Independent Director   2009
Elizabeth Harrison   54   Independent Director   2018

 

*The address of each executive officer and director listed is 712 Fifth Avenue, 9th Floor, New York, New York 10019.
**As of February 6, 2019.

 

R. Ramin Kamfar, Chairman of the Board and Chief Executive Officer.  Mr. Kamfar serves as our Chairman of the Board and as our Chief Executive Officer. Mr. Kamfar has served as our Chairman of the Board since August 2008, and also served as our President from April 2014 until October 2017. Mr. Kamfar also served as Chief Executive Officer of our former advisor, Bluerock Multifamily Advisor, LLC, from August 2008 to February 2013. He has also served as the Chairman of the Board and Chief Executive Officer of Bluerock since its inception in October 2002, where he has overseen the acquisition and development of approximately 23,800 apartment units, and over 2.5 million square feet of office space. In addition, Mr. Kamfar has served as Chairman of the Board of Trustees and as a Trustee of Bluerock Total Income + Real Estate Fund, a closed-end interval fund organized by Bluerock, since 2012. Mr. Kamfar has approximately 30 years of experience in various aspects of real estate, mergers and acquisitions, private equity investing, investment banking, and public and private financings. From 1988 to 1993, Mr. Kamfar worked as an investment banker at Lehman Brothers Inc., New York, New York, where he specialized in mergers and acquisitions and corporate finance. In 1993, Mr. Kamfar left Lehman to focus on private equity transactions. From 1993 to 2002, Mr. Kamfar executed a growth/consolidation strategy to build a startup into a leading public company in the ‘fast casual’ market now known as Einstein Noah Restaurant Group, Inc. with approximately 800 locations and $400 million in gross revenues. From 1999 to 2002, Mr. Kamfar also served as an active investor, advisor and member of the Board of Directors of Vsource, Inc., a technology company subsequently sold to Symphony House (KL: SYMPHNY), a leading business process outsourcing company focused on the Fortune 500 and Global 500. Mr. Kamfar received an M.B.A. degree with distinction in Finance in 1988 from The Wharton School of the University of Pennsylvania, located in Philadelphia, Pennsylvania, and a B.S. degree with distinction in Finance in 1985 from the University of Maryland located in College Park, Maryland.

 

Jordan B. Ruddy, Chief Operating Officer and President.   Mr. Ruddy serves as our Chief Operating Officer and President. Mr. Ruddy also served as the President of our former Manager from February 2013 to October 2017. Mr. Ruddy joined Bluerock in 2002 and has continuously served in various senior management capacities for it and its affiliates, including as Bluerock’s President until January 2013, and as co-portfolio manager for the advisor of Bluerock Total Income + Real Estate Fund since October of 2013. Mr. Ruddy has approximately 30 years of experience in real estate acquisitions, financings, management and dispositions. From 2000 to 2001, Mr. Ruddy served as a real estate investment banker at Banc of America Securities LLC. From 1997 to 2000, Mr. Ruddy served as Vice President of Amerimar Enterprises, a real estate company specializing in value-added investments nationwide, where he managed acquisitions, financings, leasing, asset management and dispositions involving over 1.5 million square feet of commercial and multifamily real estate. From 1995 to 1997, Mr. Ruddy served as a real estate investment banker at Smith Barney Inc. From 1988 to 1993, Mr. Ruddy served in the real estate department of The Chase Manhattan Bank, most recently as a Second Vice President. Mr. Ruddy received an M.B.A. degree in Finance and Real Estate in 1995 from The Wharton School of the University of Pennsylvania, located in Philadelphia, Pennsylvania, and a B.S. degree with high honors in Economics in 1986 from the London School of Economics, located in London, England.

 

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James G. Babb, III, Chief Investment Officer.  Mr. Babb serves as our Chief Investment Officer. Mr. Babb previously served as Chief Investment Officer of our former Manager from November 2013 until October 2017, as a director of the Company until April 2, 2014, as our Chief Investment Officer from July 2008 until November 2013, as our President from July 2008 until August 2012, and as the President of our former advisor from July 2008 until February 2013. Mr. Babb joined Bluerock in 2007 and served as its Chief Investment Officer through October 2017, and has been a Trustee of Bluerock Total Income + Real Estate Fund since 2012. He has been involved exclusively in real estate acquisition, management, financing and disposition for approximately 30 years. From 1992 to August 2003, Mr. Babb helped lead the residential and office acquisitions initiatives for Starwood Capital Group, or Starwood Capital. Starwood Capital was formed in 1992 and during his tenure raised and invested funds on behalf of institutional investors through seven private real estate funds, which in the aggregate ultimately invested approximately $8 billion in approximately 250 separate transactions and was also active in Starwood Capital’s efforts to expand its platform to invest in Europe. From August 2003 to July 2007, Mr. Babb founded Bluepoint Capital, LLC, a private real estate investment company focused on the acquisition, development and/or redevelopment of residential and commercial properties. Mr. Babb received a B.A. degree in Economics in 1987 from the University of North Carolina at Chapel Hill.

 

Ryan S. MacDonald, Chief Acquisitions Officer.  Mr. MacDonald serves as our Chief Acquisitions Officer. Mr. MacDonald joined Bluerock in 2008 and has continuously served in various senior acquisition and disposition capacities for it and its affiliates, including as Senior Vice President — Investments of our former Manager from November 2013 through February 2016, and as Managing Director — Investments for our former Manager from March 2016 through October 2017. To date, with Bluerock, Mr. MacDonald has been involved with real estate transactions with an aggregate value of approximately $1.25 billion. Prior to joining Bluerock, from 2006 to 2008, Mr. MacDonald was an Analyst for PNC Realty Investors (formerly Mercantile Real Estate Advisors), where he served as part of an investment team that made more than $1.2 billion in investments within all tranches of the capital structure. From 2005 to 2006, Mr. MacDonald served in a corporate development role at Mercantile Bankshares, where he worked with Executive Management focusing on high level strategic initiatives for the $6 billion bank. Mr. MacDonald received a B.A. in Economics in 2005 from the University of Maryland, College Park.

 

Christopher J. Vohs, Chief Financial Officer and Treasurer.  Mr. Vohs serves as our Chief Financial Officer and Treasurer. Mr. Vohs previously served as our Chief Accounting Officer and Treasurer from August 2013 through October 2017. Mr. Vohs joined Bluerock in July 2010 and has continuously served in various senior accounting and financial capacities for it and its affiliates, including as Bluerock’s Chief Accounting Officer from July 2010 until October 2017.  In his role as Chief Accounting Officer for Bluerock and our former advisor, Bluerock Multifamily Advisor, LLC, and our former Manager, all of which are affiliates of our Company, Mr. Vohs has been responsible for the oversight of all financial recordkeeping and reporting aspects of those companies. Previously, Mr. Vohs served as Corporate Controller for Roberts Realty Investors, Inc., a public multifamily REIT based in Atlanta, Georgia, from March 2009 to July 2010, where he was responsible for the accounting and financial reporting for the REIT. From October 2004 to March 2009, Mr. Vohs worked at Pulte Homes, a nationwide builder of single family homes, in various financial roles, including as Internal Audit Manager & Asset Manager and later as Vice President of Finance for Pulte’s Orlando and Southeast Florida operations. As Vice President of Finance, Mr. Vohs was responsible for all finance, accounting, and administrative operations of the division. From January 1999 to October 2004, Mr. Vohs worked as an Audit Manager for Deloitte & Touche, an international professional services firm, where he earned his CPA certification and focused on mid-size to large private and public companies in the manufacturing, finance, and communications industries. Mr. Vohs received his B.A. degree in Accounting from Michigan State University in 1998.

 

Michael L. Konig, Chief Legal Officer and Secretary.  Mr. Konig, through his wholly-owned limited liability company, Konig & Associates, LLC, serves as our Chief Legal Officer and Secretary. Previously, Mr. Konig served as Chief Operating Officer, General Counsel and Secretary of both our Company and our former Manager from November 2013 through October 2017, and as Senior Vice President and General Counsel of our Company and our former advisor from August 2008 through November 2013. Mr. Konig joined Bluerock in 2004 and has continuously served in various senior legal and management capacities for it and its affiliates, including as General Counsel of Bluerock, and served as Chief Legal Officer of the advisor of Bluerock Total Income + Real Estate Fund from October 2012 through May 2018. Mr. Konig has over 25 years of experience in law and business. Mr. Konig was an attorney at the firms of Ravin Sarasohn Cook Baumgarten Fisch & Baime from September 1987 to September 1989, and Greenbaum Rowe Smith & Davis from September 1989 to March 1997, representing borrowers and lenders in numerous financing transactions, primarily involving real estate, distressed real estate and Chapter 11 reorganizations, as well as a broad variety of litigation and corporate law matters. From 1998 to 2002, Mr. Konig served as legal counsel, including as General Counsel, at New World Restaurant Group, Inc. (now known as Einstein Noah Restaurant Group, Inc.). From 2002 to December 2004, Mr. Konig served as Senior Vice President of Roma Food Enterprises, Inc. where he led operations and the restructuring and sale of the privately held company with approximately $300 million in annual revenues. Mr. Konig received a J.D. degree cum laude in 1987 from California Western School of Law, located in San Diego, California, an M.B.A. degree in Finance in 1988 from San Diego State University and a Bachelor of Commerce degree in 1982 from the University of Calgary.

 

Brian D. Bailey, Independent Director.  Mr. Bailey has served as one of our independent directors since January 2009. Mr. Bailey has more than 20 years of experience in sourcing, evaluating, structuring and managing investments, including real estate and real estate-related debt financing. Mr. Bailey founded and currently serves as Managing Member of Carmichael Partners, LLC, a private equity investment firm based in Charlotte, North Carolina. He also currently serves as a director for Bandwidth Inc. (Nasdaq: BAND), a software company based in Raleigh, North Carolina. Prior to founding Carmichael Partners, Mr. Bailey served as Managing Partner (2000-2008) and Senior Advisor (2008-2009) of Carousel Capital, LLC, a private equity investment firm in Charlotte, North Carolina. Earlier in his career, Mr. Bailey was a team member of Forstmann Little & Co., a private equity investment firm in New York, New York and a Principal at the Carlyle Group, a private equity investment firm in Washington, DC. Mr. Bailey also previously worked in the leveraged buyout group at CS First Boston in New York, New York and in the mergers and acquisitions group at Bowles Hollowell Conner & Company in Charlotte, North Carolina. Mr. Bailey also served in the public sector, as Assistant to the Deputy Chief of Staff and Special Assistant to the President at the White House from 1994 to 1996 and as Director of Strategic Planning and Policy at the U.S. Small Business Administration in 1994. Mr. Bailey received a B.A. degree in Mathematics and Economics in 1988 from the University of North Carolina at Chapel Hill and an M.B.A. degree in 1992 from the Stanford Graduate School of Business, located in Stanford, California.

 

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Elizabeth Harrison, Independent Director.  Ms. Harrison has served as one of our independent directors since July 2018. Ms. Harrison has over 23 years of branding and marketing experience. Ms. Harrison serves as the CEO and Principal of Harrison & Shriftman (“H&S”), a full-service marketing, branding and public relations agency with offices in New York, Miami and Los Angeles, which she co-founded in 1995. In 2003, Ms. Harrison organized the sale of H&S to Omnicom Group (NYSE: OMC), a leading global marketing and corporate communications company, and continued to serve as CEO where she is responsible for the company’s operations and strategic development, while overseeing communications, partnerships and marketing for clients that include real estate developers, luxury hotel properties and travel technology companies on a global level. In 2011, H&S became the complementary sister-agency of Ketchum, a leading global communications consultancy. Ms. Harrison is the co-author of several books and is frequently invited to share her luxury branding expertise at high-profile conferences and summits, most recently including Harvard’s 5th Annual CEO Roundtable: Building Leading Brands and Driving Growth. Ms. Harrison has also served as a panelist for Step Up Women’s Network’s “View from the Top” seminar. Ms. Harrison has served on the boards of Love Heals and the Alison Gertz Foundation for AIDS Education, and also works closely with the Ars Nova Theater Group. Ms. Harrison received a B.A. degree in 1986 from Sarah Lawrence College, located in Bronxville, New York.

 

I. Bobby Majumder, Independent Director.  Mr. Majumder has served as one of our independent directors since January 2009. In addition, since May 2017, Mr. Majumder has served as our lead independent director and presides over executive sessions of our non-employee directors. Mr. Majumder is a partner at the law firm of Perkins Coie, where he serves as the Managing Partner of the firm’s Dallas office and firmwide Co-Chair of the firm’s India practice. Mr. Majumder specializes in corporate and securities transactions with an emphasis on the representation of underwriters, placement agents and issuers in both public and private offerings, private investment in public equity (PIPE) transactions and venture capital and private equity funds. Prior to Perkins Coie, Mr. Majumder was a partner in the law firm of K&L Gates LLP from May 2005 to March 2013. From January 2000 to April 2005, Mr. Majumder was a partner at the firm of Gardere Wynne Sewell LLP. Through his law practice, Mr. Majumder has gained significant experience relating to the acquisition of a number of types of real property assets including raw land, improved real estate and oil and gas interests. Mr. Majumder also has served as an independent Trustee on the Board of Trustees of Bluerock Total Income + Real Estate Fund, a closed-end interval fund organized by Bluerock, since July 2012. He is an active member of the Park Cities Rotary Club, a charter member of the Dallas Chapter of The Indus Entrepreneurs and an Associates Board member of the Cox School of Business at Southern Methodist University. Mr. Majumder received a J.D. degree in 1993 from Washington and Lee University School of Law, located in Lexington, Virginia, and a B.A. degree in 1990 from Trinity University, located in San Antonio, Texas.

 

Romano Tio, Independent Director.  Mr. Tio has served as one of our independent directors since January 2009. In addition, from February 2016 to May 2017, Mr. Tio served as our lead independent director and presided over executive sessions of our non-employee directors. Mr. Tio serves as Senior Managing Director at Ackman-Ziff, an institutional real estate capital advisory firm. From May 2009 to June 2017, Mr. Tio served as Managing Director of RM Capital Management LLC, a boutique real estate investment and advisory firm. From January 2008 to May 2009, Mr. Tio served as a Managing Director and co-head of the commercial real estate efforts of HCP Real Estate Investors, LLC, an affiliate of Harbinger Capital Partners Funds, a $10+ billion private investment firm specializing in event/distressed strategies. From August 2003 until December 2007, Mr. Tio was a Managing Director at Carlton Group Ltd., a boutique real estate investment banking firm where he was involved in over $2.5 billion worth of commercial real estate transactions. Earlier in his career, Mr. Tio was involved in real estate sales and brokerage for 25 years. Mr. Tio also has served as an independent Trustee of the Board of Trustees of Bluerock Total Income + Real Estate Fund, a closed-end interval fund organized by Bluerock, since July 2012. Mr. Tio served as an independent member of the Board of Directors of Yangtze River Development Ltd. from January 2016 until February 2017. Mr. Tio received a B.S. degree in Biochemistry in 1982 from Hofstra University located in Hempstead, New York.  

 

Selection of Our Board

 

In determining the composition of our Board, our goal was to assemble a group of individuals of sound character, judgment and business acumen, whose varied backgrounds, leadership experience and real estate experience would complement each other to bring a diverse set of skills and perspectives to the board. We have determined that each of our directors, including our independent directors, has at least three years of relevant experience demonstrating the knowledge and experience required to successfully acquire and manage the type of assets being acquired by our Company.

 

Mr. Kamfar was chosen to serve as the Chairman of the Board because, as our Chief Executive Officer, Mr. Kamfar is well positioned to provide essential insight and guidance to our Board from the inside perspective of the day-to-day operations of the Company. Furthermore, Mr. Kamfar brings to the board approximately 30 years of experience in building operating companies, and in various aspects of real estate, mergers and acquisitions, private equity investing and public and private financings. His experience with complex financial and operational issues in the real estate industry, as well as his strong leadership ability and business acumen, make him critical to proper functioning of our board.

 

Mr. Bailey was selected as one of our independent directors to leverage his extensive experience in sourcing, evaluating, structuring and managing private equity investments and his experience related to real estate and real estate-related debt financing. In addition, Mr. Bailey’s prior service on the audit committees of numerous privately-held companies provides him with the requisite skills and knowledge to serve effectively on our audit committee.

 

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Ms. Harrison was selected as one of our independent directors based on her extensive leadership and entrepreneurial experience, background in luxury branding and marketing, and oversight of global communications, partnerships and marketing for clients including real estate developers, luxury hotel properties and travel technology companies.

 

Mr. Majumder was selected as one of our independent directors due to his depth of legal experience in advising clients with respect to corporate and securities transactions, including representations of underwriters, placement agents and issuers in both public and private offerings. Mr. Majumder also brings with him significant legal experience relating to the acquisition of a number of types of real estate assets.

 

Mr. Tio was selected as one of our independent directors as a result of his demonstrated leadership skill and industry-specific experience developed through a number of high-level management positions with investment and advisory firms specializing in the commercial real estate sector.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934, or the Exchange Act, requires our directors and executive officers, and any persons beneficially owning more than 10% of our outstanding shares of common stock, to file with the SEC reports with respect to their initial ownership of our common stock and reports of changes in their ownership of our common stock. As a matter of practice, our administrative staff and outside counsel assists our directors and executive officers in preparing these reports, and typically file those reports on behalf of our directors and executive officers. Based solely on a review of the copies of such forms filed with the SEC during fiscal year 2018 and on written representations from our directors and executive officers, we believe that during fiscal year 2018, except for one Form 4 by Ramin Kamfar, all of our directors and executive officers filed the required reports on a timely basis under Section 16(a).

 

Code of Ethics and Whistleblower Policy

 

Our Board adopted a Code of Business Conduct and Ethics, Code of Ethics for Senior Executive and Financial Officers, Whistleblower Policy, and Corporate Governance Guidelines on March 26, 2014 that apply to our principal executive officer, principal financial officer, principal accounting officer, controller and persons performing similar functions and all members of our Board. We believe these policies are reasonably designed to deter wrongdoing and promote honest and ethical conduct; full, fair, accurate, timely, and understandable disclosure in our reporting to our stockholders and the SEC; compliance with applicable laws; reporting of violations of the code; and accountability for adherence to the code.  We will provide to any person without charge a copy of our Code of Ethics, Whistleblower Policy, and Corporate Governance Guidelines, including any amendments or waivers thereto, upon written request delivered to our principal executive office at the address listed on the cover page to our Annual Report on Form 10-K.

 

Committees of the Board

 

We currently have a standing audit committee, a standing investment committee, a standing compensation committee and a standing nominating and corporate governance committee. All of our standing committees consist solely of independent directors, except that R. Ramin Kamfar, who serves as our Chief Executive Officer and Chairman of the Board, serves as a member of the investment committee. The principal functions of these committees are briefly described below. Our Board may from time to time establish other committees to facilitate our management.

 

Audit Committee

 

Our Board has established an audit committee. The audit committee meets on a regular basis, at least quarterly and more frequently as necessary. The audit committee’s primary functions are:

 

  • to evaluate and approve the services and fees of our independent registered public accounting firm;
     
  • to periodically review the auditors’ independence; and

 

  • to assist our Board in fulfilling its oversight responsibilities by reviewing the financial information to be provided to the stockholders and others, management’s system of internal controls and the audit and financial reporting process.

 

The audit committee is comprised of three individuals, all of whom are independent directors. The audit committee also considers and approves the audit and non-audit services and fees provided by the independent public accountants.

 

The members of our audit committee are Brian D. Bailey, I. Bobby Majumder and Romano Tio. Mr. Bailey is the chairman of our audit committee, and is designated as the audit committee financial expert as defined by the rules promulgated by the SEC and the NYSE American corporate governance listing standards.

 

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Investment Committee

 

Our Board has delegated to the investment committee the authority (1) to approve all real property acquisitions, developments and dispositions, including real property portfolio acquisitions, developments and dispositions, as well as all other investments in real estate consistent with our investment guidelines (each, an “Investment Transaction”) and (2) to review our investment policies and procedures on an ongoing basis and recommend any changes to our Board.

 

Our Board has further delegated to our executive management team the authority to approve all investment transactions for investments less than ten percent (10%) of our Company equity, at the time of consideration. Management will recommend suitable investments for consideration by the investment committee for investments that are equal to or in excess of ten percent (10%) of our Company equity. If the members of the investment committee approve a given investment, then management will be directed to make such investment on our behalf, if such investment can be completed on terms approved by the committee.

 

The members of our investment committee are Brian D. Bailey, R. Ramin Kamfar and Romano Tio. Mr. Tio is the chairman of our investment committee.

 

Compensation Committee

 

Our compensation committee consists of our independent directors, and our compensation committee charter details the principal functions of the compensation committee. These functions include:

 

  • reviewing and approving on an annual basis the corporate goals and objectives relevant to our chief executive officer’s compensation, if any, evaluating our chief executive officer’s performance in light of such goals and objectives and determining and approving the remuneration, if any, of our chief executive officer based on such evaluation;

 

  • reviewing and approving the compensation, if any, of all of our other officers;

 

  • reviewing our executive compensation policies and plans;

 

  • implementing and administering our incentive compensation equity-based remuneration plans, if any;

 

  • assisting management in complying with our proxy statement and annual report disclosure requirements;

 

  • producing a report on executive compensation to be included in our annual proxy statement; and

 

  • reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.

 

The members of our compensation committee are Brian D. Bailey, Elizabeth Harrison and I. Bobby Majumder. Mr. Bailey is the chairman of our compensation committee.

 

Nominating and Corporate Governance Committee

 

Our nominating and corporate governance committee consists of our independent directors, and our nominating and corporate governance committee charter details the principal functions of the nominating and corporate governance committee. These functions include:

 

  • identifying and recommending to our full Board qualified candidates for election as directors and recommending nominees for election as directors at the annual meeting of stockholders;

 

  • developing and recommending to our Board corporate governance guidelines and implementing and monitoring such guidelines;

 

  • reviewing and making recommendations on matters involving the general operation of our Board, including board size and composition, and committee composition and structure;

 

  • recommending to our Board nominees for each committee of our Board;

 

  • annually facilitating the assessment of our Board’s performance as a whole and of the individual directors, as required by applicable law, regulations and the NYSE American corporate governance listing standards; and

 

  •

overseeing our Board’s evaluation of management.

 

The members of our nominating and corporate governance committee are I. Bobby Majumder, Elizabeth Harrison and Romano Tio. Mr. Majumder is the chairman of our nominating and corporate governance committee.

 

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Item 11.Executive Compensation

 

Compensation Discussion and Analysis

 

Our Compensation Discussion and Analysis describes our compensation program, objectives and policies for our Named Executive Officers, or NEOs, for fiscal year 2018. Our NEOs for fiscal year 2018 were R. Ramin Kamfar, Chief Executive Officer, Jordan B. Ruddy, President and Chief Operating Officer, James G. Babb, III, Chief Investment Officer, Michael L. Konig, Chief Legal Officer and Secretary, and Christopher J. Vohs, Chief Financial Officer and Treasurer. Where indicated, information is also provided for Ryan S. MacDonald, our Chief Acquisitions Officer.

 

Overview of Compensation Program and Philosophy

 

Pre-Internalization Compensation Summary

 

Prior to the completion of the Internalization on October 31, 2017, we had no employees, and were externally managed by our former Manager, BRG Manager, LLC, pursuant to the Management Agreement. The former Manager provided us with our executive officers and investment team, and administered our business activities and day-to-day operations. The former Manager paid our executive officers and others who provided services to us from the fees collected pursuant to the Management Agreement and other sources. For so long as we were externally managed, we did not pay any cash or other compensation to our NEOs, nor did we make any grants of awards under our Amended 2014 Incentive Plans of any kind to our NEOs. None of our executive officers received any options or stock directly from us, and we have not provided any of our executive officers with pension benefits or nonqualified deferred compensation plans. The former Manager made all decisions regarding the compensation of the executive officers, and any allocation by the former Manager of fees collected pursuant to the Management Agreement to compensation for our officers and other employee benefits was solely in the discretion of the former Manager.

 

During the period prior to the Internalization, all of our NEOs were employees of an affiliate of the former Manager. Each of our NEOs received compensation reflecting their aggregated services to us, the former Manager and/or its affiliates. We did not play a direct role in establishing or setting the level of compensation or the measures on which bonuses or long-term incentives, if any, would be based. During the period from January 1, 2017 through December 31, 2017, we paid the former Manager approximately $12.7 million in fees pursuant to the Management Agreement, and reimbursed the former Manager for approximately $1.5 million for out-of-pocket expenses. The former Manager used a portion of the fees collected pursuant to the Management Agreement, as well as other sources, to compensate its employees. None of our expense reimbursements to the former Manager were related to compensation expenses of the former Manager’s personnel.

 

Post-Internalization Compensation Summary

 

Upon the completion of the Internalization, Manager Sub, which became an indirect subsidiary of the Company in connection with the Internalization, entered into Employment Agreements with four of our current NEOs (Messrs. Kamfar, Babb, Ruddy, and Vohs), as well as our other executive officer (Mr. MacDonald), and has entered into a Services Agreement with our fifth current NEO (Mr. Konig) through his wholly-owned law firm, Konig & Associates, LLC (“K&A”) (such agreements, collectively, the “Executive Agreements”), which Executive Agreements became effective at closing on October 31, 2017. At that time, Messrs. Kamfar, Babb, Ruddy, Vohs, and MacDonald became employees of, and Mr. Konig, through K&A, became an independent contractor with, Manager Sub, and Manager Sub currently pays them cash and other compensation in such capacities pursuant to their respective Executive Agreements. In connection with negotiations between us and the former Manager regarding the Internalization, we engaged FPL Associates L.P. (“FPL”), an independent executive compensation consulting firm, to advise the compensation committee on alternatives for post-Internalization executive compensation design. FPL provided the compensation committee with a market-based compensation benchmarking analysis summarizing the compensation practices among the Company’s peer companies, including with respect to base salary, annual target bonus opportunities, long-term target equity compensation opportunities, as well as severance and change in control arrangements at the Company’s peers. FPL also provided recommendations relating to the proposed compensation arrangements and terms of employment or service for the Company’s NEOs and other executive officer, and supplemental market benchmarking data that summarized the typical compensation and perquisites provided to executives in the Company’s peer group. FPL also provided recommendations with respect to certain terms and conditions of the Second Amended 2014 Incentive Plans (which have subsequently been amended and restated in their entirety by the Third Amended 2014 Incentive Plans) and the amounts of the equity awards for which our NEOs and other executive officer will be eligible pursuant to the terms of their Executive Agreements. This information was discussed and considered by the compensation committee in negotiating the terms and conditions of the Executive Agreements with each of our NEOs and other executive officer.

 

The compensation committee oversees the Company’s Third Amended 2014 Incentive Plans. The compensation committee also oversees the compensation of our NEOs and other executive officer pursuant to the terms of their Executive Agreements, including awarding bonuses and making equity awards pursuant to the Third Amended 2014 Incentive Plans.

 

Executive Compensation Objectives

 

The primary objective of our executive compensation program is to align the interests of our executive officers with those of our stockholders in a way that allows us to attract and retain the best executive talent. The compensation committee has designed a compensation program intended to reward, among other things, favorable stockholder returns, share appreciation, same store net operating income growth, on-time and on-budget completion of development projects, return on investment on redevelopment projects, and our competitive position within our segment of the real estate industry, as well as each executive officer’s long-term career contributions to our Company. Compensation incentives designed to further these goals and to incentivize long-term careers with the Company will take 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. In addition, our compensation committee may decide to make awards to new executive officers in order to attract talented professionals.

 

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Elements of Executive Compensation

 

(A)       Base Salary/Base Payment.  Our compensation committee believes that payment of a competitive base salary or base payment (as applicable) is a necessary element of any compensation program that is designed to attract and retain talented and qualified executives. The Executive Agreements provide that Mr. Kamfar, Mr. Babb, Mr. MacDonald, Mr. Ruddy, Mr. Vohs and K&A will receive an annual base salary or, in the case of K&A, an annual base payment, of at least $400,000, $325,000, $250,000, $300,000, $250,000, and $300,000, respectively. Each Executive Agreement provides that the base salary or base payment (as applicable) of each of our NEOs and our other executive officer will be reviewed annually for appropriate increases by the compensation committee, but will not be decreased. Subject to our existing contractual obligations, we expect our compensation committee to consider base salary and base payment levels for our NEOs and other executive officers annually as part of our performance review process, as well as upon any promotion or other change in job responsibility. The goal of our base salary and base payment program is to provide such salaries and payments at a level that allows us to attract and retain qualified executives while preserving significant flexibility to recognize and reward individual performance with other elements of the overall compensation program. Base salary and base payment levels also affect the annual cash incentive compensation because the annual cash bonus target opportunity of each NEO and other executive officer is expressed as a percentage of base salary or base payment (as applicable). The following items are generally considered when determining base salary and base payment levels:

 

  • market data provided by our outside consultants;

 

  • our financial resources;

 

  • the executive officer’s experience, scope of responsibilities, performance and prospects; and

 

  •

internal equity in relation to other executive officers with similar levels of experience, scope of responsibilities, performance, and prospects.

 

See “2018 Compensation Decisions—2018 Base Salary/Base Payment” and “2019 Compensation Decisions—2019 Base Salary/Base Payment” below for information regarding the base salaries and base payments payable to our NEOs and other executive officer for fiscal years 2018 and 2019.

 

(B) Annual Cash Incentive Compensation.  It is the intention of our compensation committee to make a meaningful portion of each of our executives’ compensation in future years contingent on achieving certain performance targets and an executive’s individual objectives in that year. As part of such contingent compensation, during the term of their Executive Agreement, each of our current NEOs and our other executive officer will be eligible to receive an annual cash incentive bonus (each, an “Annual Cash Bonus”).

 

For the period between the date of closing of the Internalization and December 31, 2017, the amounts of prorated Annual Cash Bonuses were determined in the reasonable business judgment of the compensation committee (to which such responsibility was delegated by the Board), based on its review of the Company’s performance and the performance of each such executive officer, and on March 14, 2018, the compensation committee approved the payment of prorated Annual Cash Bonuses as follow: $66,667 to Mr. Kamfar; $54,167 to Mr. Babb; $41,667 to Mr. MacDonald; $50,000 to Mr. Ruddy; $20,833 to Mr. Vohs; and $50,000 to Mr. Konig (through K&A).

 

Beginning in fiscal year 2018 and for each year thereafter during the term of their Executive Agreement, each of our current NEOs and our other executive officer will be eligible to receive an Annual Cash Bonus in an amount ranging from 0% to a maximum of 150% (75% for Mr. Vohs) of their annual base salary or base payment (as applicable), with a target equal to 100% (50% for Mr. Vohs) of such annual base salary or base payment. The amount of each such Annual Cash Bonus will further be determined based on the Company’s performance relative to pre-determined performance criteria and targets established and administered by the compensation committee. See “2018 Compensation Decisions—2018 Annual Cash Bonuses” and “2019 Compensation Decisions—2019 Annual Cash Bonuses” below for information regarding the Annual Cash Bonuses for which our NEOs and other executive officer are eligible for fiscal years 2018 and 2019, and the applicable performance criteria and targets established by the compensation committee for use in determining the amounts of such Annual Cash Bonuses.

 

(C) Long-Term Equity Incentive Awards.  Our long-term equity incentive awards are comprised of two primary components, each of which are administered by the compensation committee through our Third Amended 2014 Incentive Plans: (1) a time-vested equity award component, and (2) a performance-vested equity award component.

 

  1. Time-Vested Equity Awards.  The objective of our time-vested equity award component is to attract and retain qualified personnel by offering an equity-based program that is competitive with our peer companies. Our compensation committee believes that these time-vested awards are necessary to successfully attract qualified executives, including our NEOs and other executive officers, and will continue to be an important incentive for promoting executive and employee retention going forward. Time-vested equity awards under this plan were determined by the compensation committee in consultation with FPL, and subsequently reviewed with the Chief Executive Officer (with respect to all awards except his own).

 

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  (a)

For the period between the date of closing of the Internalization and December 31, 2017, each of our NEOs and our other executive officer was entitled to a prorated grant of time-vested equity awards in the form of long-term incentive plan units of the Operating Partnership (“LTIP Units”) (each such award to any recipient, a “Prorated Annual LTIP Award”). Such Prorated Annual LTIP Awards were determined in part based upon each executive’s duration of tenure with the former Manager’s affiliate and pay grade.

 

Prorated Annual LTIP Awards. Pursuant to the Executive Agreements, on January 1, 2018, the Company granted the following Prorated Annual LTIP Awards: 9,636 LTIP Units to Mr. Kamfar; 3,212 LTIP Units to Mr. Babb; 2,810 LTIP Units to Mr. MacDonald; 3,212 LTIP Units to Mr. Ruddy; 803 LTIP Units to Mr. Vohs; and 3,212 LTIP Units to K&A. The amount of each Prorated Annual LTIP Award was determined by dividing (x) the respective pro-rated amount of $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 volume weighted average price of a share of the Company’s Class A Common Stock, as reported on the NYSE American for the twenty (20) trading days immediately preceding the date of grant. Each such Prorated Annual LTIP Award vested or will vest and become nonforfeitable in installments of one-third (1/3) of such Prorated Annual LTIP Award as follows: (i) the first installment on December 31, 2018, (ii) the second on October 31, 2019, and (iii) the third installments on October 31, 2020, in each case subject to continued employment and other conditions.

     
  (b) Beginning in fiscal year 2018 and for each year thereafter during the term of their Executive Agreement, each of our NEOs and our other executive officer will be entitled to an annual grant of time-vested equity awards in the form of LTIP Units (each, an “Annual LTIP Award”). The actual number of LTIP Units that will actually vest and become nonforfeitable in three equal installments on each anniversary of the date of grant in respect to each such Annual LTIP Award will be dependent upon continued employment and other conditions as set forth in the Executive Agreements. See “2018 Compensation Decisions—2018 Annual LTIP Awards” and “2019 Compensation Decisions—2019 Annual LTIP Awards” below for information regarding the Annual LTIP Awards to which our NEOs and other executive officer are entitled for fiscal years 2018 and 2019.

 

  2.

Performance-Vested Equity Awards.  The objective of our performance-vested equity award component is to implement our objective of promoting a performance-focused culture by rewarding our NEOs and other executive officers, and other employees of Manager Sub, based upon achievement of long term Company and individual performance targets. When determining the quantity and amounts of such long term performance-vested equity awards (each, a “Long Term Performance Award”) to be granted, the compensation committee assesses the same factors considered in setting base salaries and base payments, as applicable, described above, but with a greater emphasis on performance measures we believe drive our long-term success. The actual number of LTIP Units that will actually vest and become nonforfeitable as of the last day of the three-year performance period in respect of each such Long Term performance Award will be dependent upon the achievement of the long term Company and individual performance criteria and targets established and administered by the compensation committee as described below. 

 

  (a)

For the period between the date of closing of the Internalization and December 31, 2017, no Long Term Performance Awards were granted because of the short timeframe for measurement.

 

  (b) Beginning in fiscal year 2018 and for each year thereafter during the term of their Executive Agreement, each of our NEOs and our other executive officer will be entitled to an annual grant of a Long Term Performance Awards in the form of LTIP Units for a three-year performance period. The actual amount of the annual Long Term Performance Award for which each of our current NEOs and other executive officer will be eligible will range from 0% to a maximum of 150% of their Annual LTIP Award, with a threshold equal to 50% of that year’s Annual LTIP Award, a target equal to that year’s Annual LTIP Award, and a maximum equal to 150% of that year’s Annual LTIP Award.  The actual number of LTIP Units that will actually vest and become nonforfeitable in respect of each such Long Term Performance Award will be dependent upon the achievement, over the three-year performance period, of the objective Company performance criteria and targets established and administered by the compensation committee as described below, as well as a subjective evaluation of the performance of each such executive officer during such time period.  See “2018 Compensation Decisions—2018 Long Term Performance Awards” and “2019 Compensation Decisions—2019 Long Term Performance Awards” below for information regarding the Long Term Performance Awards to which our NEOs and other executive officer are entitled for fiscal years 2018 and 2019, and the applicable performance criteria and targets established by the compensation committee for use in determining the amounts of such Long Term Performance Awards.

 

(D) Executive Compensation Metrics: Objective Performance Criteria. Listed below are the objective performance criteria established by the compensation committee for use in determining Annual Cash Bonuses and/or Long Term Performance Awards for our NEOs and other executive officer for fiscal year 2018. Except as indicated below, the same objective performance criteria were also approved by the compensation committee for use in determining Annual Cash Bonuses and/or Long Term Performance Awards for our NEOs and other executive officer for fiscal year 2019. For information regarding the relative weightings and threshold, target, and maximum achievement levels assigned to each such criterion for each type of equity incentive award for fiscal years 2018 and 2019, see “2018 Compensation Decisions—2018 Annual Cash Bonuses” and “—2018 Long Term Performance Awards,” and “2019 Compensation Decisions—2019 Annual Cash Bonuses” and “—2019 Long Term Performance Awards,” below.

 

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(a)

 Total Shareholder Return (TSR) Rank vs. SNL U.S. Multifamily REIT Index Peer Group
   
 

Why is this metric important? The Company’s total stockholder return (“TSR”) metric was designed to increase accountability for creating value for our stockholders as recognized by the market. This metric compares our TSR (calculated based on appreciation/depreciation in the price per share of our common stock and distributions paid thereon, including reinvestment of dividends), relative to that of the peer companies in the SNL U.S. Multifamily REIT Index. We believe that the Company’s relative TSR rank is an important component of our executive compensation program because it helps to align the interests of our NEOs and other executives with, and ensure our NEOs and other executives remain focused on the value they are delivering to, our stockholders.

 

For Use in Determining: Annual Cash Bonuses and Long Term Performance Awards (fiscal years 2018 and 2019).

 

Target: For fiscal years 2018 and 2019, the Company’s target is to rank within the 50th percentile in TSR relative to the SNL U.S. Multifamily REIT Index. 

 

(b) Same Store NOI Growth Rank vs. SNL U.S. Multifamily REIT Index Peer Group
   
 

Why is this metric important? The Company’s primary financial measure for evaluating the operating performance of its portfolio is net operating income (“NOI”), which represents rental income less direct property operating expenses (including real estate taxes and insurance). The Company believes that NOI is helpful to stockholders as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company’s portfolio. Comparing the growth of the Company’s “same store” NOI (i.e., looking at NOI growth of the exact same set of stabilized apartment properties over the periods being compared) relative to that of the peer companies in the SNL U.S. Multifamily REIT Index helps stockholders compare the Company’s operating results to the market. The Company’s same store NOI growth rank further provides an indication of the Company’s focus on quality acquisitions, and its execution of its business plan.

 

For Use in Determining: Annual Cash Bonuses and Long Term Performance Awards (fiscal years 2018 and 2019).

 

Target: For fiscal years 2018 and 2019, the Company’s target is to rank within the 50th percentile in same store NOI growth relative to the SNL U.S. Multifamily REIT Index. 

 

(c)

 Development Projects: Schedule Performance vs. Targets
   
 

Why is this metric important? The on-time development metric focuses on the timing of start, completion, initial occupancy and stabilization dates for the Company’s development projects, and compares the Company’s actual performance relative to its targets with respect to such dates. The accuracy of both the Company’s forecasts as to when a development project will begin to generate income, and the Company’s projections with respect to the operating performance of each such project, are dependent upon the timely execution of the Company’s targeted development milestones. The on-time development metric was designed to ensure our NEOs and other executives remain focused on the timely execution of such milestones.

 

For Use in Determining: Annual Cash Bonuses (fiscal years 2018 and 2019).

 

Target: For fiscal years 2018 and 2019, the Company’s target is to be on schedule relative to its target start, completion, initial occupancy and stabilization dates for its development projects. 

 

(d)

 Development Projects: Budget Performance vs. Target
   
 

Why is this metric important? The on-budget development metric compares the Company’s actual performance relative to its target budget with respect to each of its development projects. On-budget completion of the Company’s development projects ensures that the Company’s strategic business objectives with respect to each such project is achieved in a cost-effective manner. The on-budget development metric was designed to ensure our NEOs and other executives remain focused on maintaining the Company’s target budget with respect to its development projects.

 

For Use in Determining: Annual Cash Bonuses (fiscal years 2018 and 2019).

 

Target: For fiscal years 2018 and 2019, the Company’s target is to be on budget for its development projects. 

 

(e)

 Redevelopment Projects: Return on Investment (IRR)
 

 

Why is this metric important? This metric focuses on the Company’s return on investment with respect to its redevelopment projects, and was designed to ensure our NEOs and other executives remain focused on maximizing return on the Company’s value-added investments.

  

For Use in Determining: Annual Cash Bonuses (fiscal years 2018 and 2019); Long Term Performance Awards (fiscal year 2019).

  

Target: For fiscal years 2018 and 2019, the Company’s target is to achieve an internal rate of return of 20% on its redevelopment projects.

  

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(f) Inclusion in Morgan Stanley REIT (MCSI) and S&P 600 Indices
   
 

Why is this metric important? This metric focuses on growth in ownership of the Company’s common stock by institutional stockholders.

 

For Use in Determining: Long Term Performance Awards (fiscal year 2018 only).

 

Target: For fiscal year 2018, the Company’s target was to achieve inclusion in one of the two applicable indices. 

 

(E)  Initial Commitment Awards.  In order to further incentivize and retain our NEOs and other executive officer following the Internalization, each of the Executive Agreements provided for a one-time grant of an initial commitment award of LTIP Units (each, an “Initial Commitment Award”) under the Second Amended 2014 Incentive Plans (which have subsequently been amended and restated in their entirety by the Third Amended 2014 Incentive Plans), which will vest and become nonforfeitable in five equal annual installments. Pursuant to the Executive Agreements, on January 1, 2018, the Company granted the following Initial Commitment Awards: 240,892 LTIP Units to Mr. Kamfar; 120,446 LTIP Units to Mr. Babb; 120,446 LTIP Units to Mr. MacDonald; 120,446 LTIP Units to Mr. Ruddy; 48,178 LTIP Units to Mr. Vohs; and 120,446 LTIP Units to K&A. The amount of each Initial Commitment Award was determined by dividing (x) $500,000 per year for Mr. Kamfar, $250,000 per year for each of Messrs. Babb, MacDonald, Ruddy, and Konig (through K&A), and $100,000 per year for Mr. Vohs, by (y) the volume weighted average price of a share of the Company’s Class A Common Stock, as reported on the NYSE American for the twenty (20) trading days immediately preceding the date of grant. Each Initial Commitment Award vested or will vest and become nonforfeitable as follows: (i) the first installment on December 31, 2018 in the amount of one-fifth (1/5) of the Initial Commitment Award and (ii) the second through fifth installments on the second through fifth anniversary of October 31, 2017, respectively, each in an amount equal to one-fifth (1/5) of the Initial Commitment Award, in each case subject to continued employment and other conditions.

 

(F)  Distributions on LTIP Units.  Distributions on LTIP Units granted to our NEOs and other executive officer pursuant to the equity incentive awards described above will be paid from the date of grant; provided, that (i) solely with respect to LTIP Units granted as part of Long Term Performance Awards, distributions will be paid at the rate of ten percent (10%) of the distributions otherwise payable with respect to such LTIP Units until the last day of the three-year performance period (or the date of forfeiture, if earlier); and (ii) with respect to each LTIP Unit granted as part of a Long Term Performance Award that becomes fully vested in accordance with the terms of an executive officer’s Executive Agreement, such executive officer shall be entitled to receive, as of the date of such vesting, a single cash payment equal to the distributions payable with respect to each such LTIP Unit back to the date of grant, minus the distributions already paid on each such LTIP Unit in accordance with clause (i), in each case subject to certain potential limitations on distributions set forth in the limited partnership agreement of our Operating Partnership and intended to preserve the U.S. federal income tax treatment of such LTIP Units as “profits interests.”

 

(G)  Post-Termination Compensation. The Executive Agreements with our five NEOs (Messrs. Kamfar, Babb, Ruddy, Vohs and Konig) and our other executive officer (Mr. MacDonald) provide for payments and other benefits if the executive’s employment terminates under specified circumstances. See “Executive Officer Compensation Tables—Narrative Discussion of Summary Compensation Table—Employment Agreements” and “Executive Officer Compensation Tables—Potential Payments upon Termination or Change in Control” for a description of these termination and severance benefits with our executive officers.

 

2018 Compensation Decisions

 

2018 Base Salary/Base Payment. In connection with the hiring and engagement of our current NEOs and other executive officer and the negotiation and execution of their Executive Agreements, our compensation committee set the base salaries or base payment, as applicable, for the period between the date of closing of the Internalization and December 31, 2017, and for fiscal year 2018, as set forth in the table below.

 

Name and Principal Position  2018 Base Salary/Base Payment 
R. Ramin Kamfar, Chief Executive Officer  $400,000 
Michael L. Konig (through K&A), Chief Legal Officer and Secretary  $300,000 
Christopher J. Vohs, Chief Financial Officer and Treasurer  $250,000 
James G. Babb, III, Chief Investment Officer  $325,000 
Ryan S. MacDonald, Chief Acquisitions Officer  $250,000 
Jordan B. Ruddy, Chief Operating Officer and President  $300,000 

  

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2018 Annual Cash Bonuses. For fiscal year 2018, the compensation committee determined that 75% of the Annual Cash Bonus for which each of our NEOs and our other executive officer would be eligible would be determinable based upon the objective Company performance criteria set forth below, and the remaining 25% would be determinable based upon subjective performance criteria. Listed below are the objective Company performance criteria that were established for fiscal year 2018 and utilized by the compensation committee to determine Annual Cash Bonuses for our NEOs and other executive officer, along with the relative weightings and threshold, target, and maximum achievement levels assigned to each such goal: 

 

2018 Objective Performance Criteria  Weighting  Threshold  Target  Maximum
Total Shareholder Return (TSR) Rank vs. SNL U.S. Multifamily REIT Index Peer Group*  33.33%  25th Percentile  50th Percentile  75th Percentile
Same Store NOI Growth Rank vs. SNL U.S. Multifamily REIT Index Peer Group*  33.33%  25th Percentile  50th Percentile  75th Percentile
Development Projects: Schedule Performance vs. Targets  8.33%  1 Qtr Behind  On Schedule  1 Qtr Ahead
Development Projects: Budget Performance vs. Target  8.34%  3% Over  On Budget  3% Under
Redevelopment Projects: Return on Investment (IRR)*  16.67%  15% ROI  20% ROI  25% ROI

 

*For performance between achievement levels, the award was determined by linear interpolation.

Each component of the 2018 objective performance criteria is weighted as indicated above. For fiscal year 2018, the target amount of each executive officer’s Annual Cash Bonus was equal to the 2018 Base Salary or 2018 Base Payment (as applicable) of each such executive officer (50% of the 2018 Base Salary for Mr. Vohs). For achievement of the threshold level, 50% of the target amount of each such executive’s Annual Cash Bonus can be earned (35% for Mr. Vohs); for achievement of the target level, 100% can be earned (50% for Mr. Vohs); and for achievement of the maximum level, 150% can be earned (75% for Mr. Vohs). If performance for a component of the objective performance criteria is below the threshold level, no bonus will be earned for that component. The actual amounts of such Annual Cash Bonuses for the year ended December 31, 2018 are not calculable through the latest practicable date, but will be determined by the compensation committee in March 2019, in its reasonable business judgment and based on its review of the Company’s performance with respect to the objective performance criteria set forth above and the performance of each such executive officer during the applicable time period. The Annual Cash Bonuses for fiscal year 2018 will be payable on March 15, 2019.

 

2018 Annual LTIP Awards. Pursuant to the Executive Agreements, on January 1, 2018, the Company granted the following Annual LTIP Awards for fiscal year 2018: 57,814 LTIP Units to Mr. Kamfar; 19,271 LTIP Units to Mr. Babb; 16,862 LTIP Units to Mr. MacDonald; 19,271 LTIP Units to Mr. Ruddy; 4,818 LTIP Units to Mr. Vohs; and 19,271 LTIP Units to K&A. The amount of each such Annual LTIP Award was determined by dividing (x) $600,000 for Mr. Kamfar, $200,000 for Mr. Babb, $175,000 for Mr. MacDonald, $200,000 for Mr. Ruddy, $50,000 for Mr. Vohs, and $200,000 for Mr. Konig (through K&A), by (y) the volume weighted average price of a share of the Company’s Class A Common Stock as reported on the NYSE American for the twenty (20) trading days immediately preceding the date of grant. The actual number of LTIP Units that will actually vest and become nonforfeitable in three equal installments on each anniversary of the date of grant in respect of each such Annual LTIP Award will be dependent upon continued employment and other conditions as set forth in the Executive Agreements.

 

2018 Long Term Performance Awards. For fiscal year 2018, the compensation committee determined that 75% of the Long Term Performance Award for which each of our NEOs and our other executive officer would be eligible would be determinable based upon the objective performance criteria set forth below, and the remaining 25% would be determinable based upon subjective performance criteria. The objective performance criteria, their relative weightings, and threshold, target, and maximum achievement levels were as follow:

 

2018 Objective Performance Criteria  Weighting  Threshold  Target  Maximum
Total Shareholder Return (TSR) Rank vs. SNL U.S. Multifamily REIT Index*  33.33%  25th Percentile  50th Percentile  75th Percentile
Same Store NOI Growth Rank vs. SNL U.S. Multifamily REIT Index*  33.33%  25th Percentile  50th Percentile  75th Percentile
Inclusion in Morgan Stanley REIT (MSCI) and S&P 600 Indices  33.33%  None  1  2

 

*For performance between achievement levels, the award will be determined by linear interpolation.

Each component of the 2018 objective performance criteria is weighted as indicated above. For achievement of the threshold level, 50% of the weighted portion of each executive’s target Long Term Performance Award (i.e., 50% of the weighted portion of their Annual LTIP Award) can be earned; for achievement of the target level, 100% can be earned; and for achievement of the maximum level, 150% can be earned. If performance for a component of the objective performance criteria was below the threshold level, no bonus will be earned for that component.

 

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Pursuant to the Executive Agreements, on January 1, 2018, the Company granted the following Long Term Performance Awards for fiscal year 2018 (each, an “Initial Long Term Performance Award”): 52,701 LTIP Units to Mr. Kamfar; 17,567 LTIP Units to Mr. Babb; 15,371 LTIP Units to Mr. MacDonald; 17,567 LTIP Units to Mr. Ruddy; 4,392 LTIP Units to Mr. Vohs; and 17,567 LTIP Units to Mr. Konig (through K&A). Due to limitations on the number of LTIP Units then available for issuance under the Second Amended Equity Incentive Plans, the Initial Long Term Performance Awards were, in aggregate, approximately 39% lower than the total Long Term Performance Awards to which the recipients were entitled pursuant to the terms of their Executive Agreements, with the Company to issue the remaining LTIP Units (the “Shortfall LTIP Units”) at such time as such Shortfall LTIP Units became available for issuance under the Second Amended 2014 Incentive Plans (or their respective successor plans by amendment and restatement). At the annual meeting of the Company’s stockholders on September 28, 2018, the stockholders approved the Third Amended 2014 Incentive Plans, which reflected an increase in the aggregate number of shares of Class A common stock reserved for issuance thereunder. The increased capacity under the Third Amended 2014 Incentive Plans enabled the Company to issue the Shortfall LTIP Units, and on October 4, 2018, the Company granted to each of Mr. Kamfar, Mr. Babb, Mr. MacDonald, Mr. Ruddy, Mr. Vohs and K&A a Long Term Performance Award of the following number of Shortfall LTIP Units under the Third Amended 2014 Incentive Plans: 34,020 LTIP Units to Mr. Kamfar; 11,340 LTIP Units to Mr. Babb; 9,923 LTIP Units to Mr. MacDonald; 11,340 LTIP Units to Mr. Ruddy; 2,835 LTIP Units to Mr. Vohs; and 11,340 LTIP Units to Mr. Konig (through K&A). The actual number of LTIP Units that will actually vest and become nonforfeitable as of the last day of the three-year performance period in respect of each such Long Term Performance Award will be dependent upon the achievement, over the three-year performance period, of the objective Company performance criteria and targets set forth above, and the performance of each such executive officer during such time period.

 

2019 Compensation Decisions

 

2019 Base Salary/Base Payment. For fiscal year 2019, the compensation committee has set the base salaries or base payment, as applicable, of our current NEOs and other executive officer as set forth in the table below:

 

Name and Principal Position  2019 Base Salary/Base Payment 
R. Ramin Kamfar, Chief Executive Officer  $400,000 
James G. Babb, III, Chief Investment Officer  $325,000 
Jordan B. Ruddy, Chief Operating Officer and President  $300,000 
Michael L. Konig (through K&A), Chief Legal Officer and Secretary  $300,000 
Ryan S. MacDonald, Chief Acquisitions Officer  $300,000 
Christopher J. Vohs, Chief Financial Officer and Treasurer  $250,000 

 

2019 Annual Cash Bonuses. For fiscal year 2019, the compensation committee has determined that 75% of the Annual Cash Bonus for which each of our NEOs and our other executive officer will be eligible will be determinable based upon the objective performance criteria set forth below, and the remaining 25% will be determinable based upon subjective performance criteria.

 

For fiscal year 2019, in recognition of the Company’s greater emphasis on value-add investments in redevelopment projects, the compensation committee elected to revise the objective performance criteria applicable to the Annual Cash Bonuses, to increase the weighting for the “Redevelopment Projects – Return on Investment (IRR)” criterion (which, for fiscal year 2018, was weighted at 16.67%) to 30.00%. To accommodate this change, the compensation committee further elected to decrease the weighting (i) for each of the “Total Shareholder Return (TSR) Rank vs. SNL U.S. Multifamily REIT Index Peer Group” and the “Same Store NOI Growth Rank vs. SNL U.S. Multifamily REIT Index Peer Group” criteria (which, for fiscal year 2018, were both weighted at 33.33%) to 30.00%; and (ii) for each of the “Development Projects: Schedule Performance vs. Targets” and the “Development Projects: Budget Performance vs. Targets” criteria (which, for fiscal year 2018, were weighted at 8.33% and 8.34%, respectively) to 5.00%. For fiscal year 2019, the objective performance criteria, their relative weightings, and threshold, target, and maximum achievement levels will thus be as follow:

 

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2019 Objective Performance Criteria  Weighting  Threshold  Target  Maximum
Total Shareholder Return (TSR) Rank vs. SNL U.S. Multifamily REIT Index Peer Group*  30.00%  25th Percentile  50th Percentile  75th Percentile
Same Store NOI Growth Rank vs. SNL U.S. Multifamily REIT Index Peer Group*  30.00%  25th Percentile  50th Percentile  75th Percentile
Development Projects: Schedule Performance vs. Targets  5.00%  1 Qtr Behind  On Schedule  1 Qtr Ahead
Development Projects: Budget Performance vs. Target  5.00%  3% Over  On Budget  3% Under
Redevelopment Projects: Return on Investment (IRR)*  30.00%  15% ROI  20% ROI  25% ROI

 

*For performance between achievement levels, the award will be determined by linear interpolation.

Each component of the 2019 objective performance criteria will be weighted as indicated above. For fiscal year 2019, the target amount of each executive officer’s Annual Cash Bonus is equal to the 2019 Base Salary or 2019 Base Payment (as applicable) of each such executive officer (50% of the 2019 Base Salary for Mr. Vohs). For achievement of the threshold level, 50% of the target amount of each such executive’s Annual Cash Bonus can be earned (35% for Mr. Vohs); for achievement of the target level, 100% can be earned (50% for Mr. Vohs); and for achievement of the maximum level, 150% can be earned (75% for Mr. Vohs). If performance for a component of the objective performance criteria is below the threshold level, no bonus will be earned for that component. The actual amounts of such Annual Cash Bonuses for fiscal year 2019 will be determined by the compensation committee in March 2020, in its reasonable business judgment and based on its review of the Company’s performance with respect to the objective performance criteria set forth above and the performance of each such executive officer during the applicable time period. The Annual Cash Bonuses for fiscal year 2019 will be payable by March 15, 2020.

 

2019 Annual LTIP Awards. Also pursuant to the Executive Agreements, on January 1, 2019, the Company granted the following Annual LTIP Awards for fiscal year 2019: 76,252 LTIP Units to Mr. Kamfar; 27,872 LTIP Units to Mr. Babb; 27,872 LTIP Units to Mr. MacDonald; 27,872 LTIP Units to Mr. Ruddy; 8,283 LTIP Units to Mr. Vohs; and 27,872 LTIP Units to K&A. The amount of each such Annual LTIP Award was determined by dividing (x) $725,000 for Mr. Kamfar, $265,000 for Mr. Babb, $265,000 for Mr. MacDonald, $265,000 for Mr. Ruddy, $78,750 for Mr. Vohs, and $265,000 for Mr. Konig (through K&A), by (y) the volume weighted average price of a share of the Company’s Class A Common Stock as reported on the NYSE American for the twenty (20) trading days immediately preceding the date of grant. The actual number of LTIP Units that will actually vest and become nonforfeitable in three equal installments on each anniversary of the date of grant in respect of each such Annual LTIP Award will be dependent upon continued employment and other conditions as set forth in the Executive Agreements.

 

2019 Long Term Performance Awards. For fiscal year 2019, the compensation committee has determined that 75% of the Long Term Performance Award for which each of our NEOs and our other executive officer will be eligible will be determinable based upon the objective performance criteria set forth below, and the remaining 25% will be determinable based upon subjective performance criteria.

 

For fiscal year 2019, in recognition of the Company’s greater emphasis on value-add investments in redevelopment projects, the compensation committee elected to revise the objective performance criteria applicable to the Long Term Performance Awards, to eliminate the criterion related to inclusion in the Morgan Stanley REIT (MCSI) and S&P 600 Indices (as used for fiscal year 2018), and replace it with the “Redevelopment Projects – Return on Investment (IRR)” criterion (which, for fiscal year 2018, was applicable only to the Annual Cash Bonuses). For fiscal year 2019, the objective performance criteria, their relative weightings, and threshold, target, and maximum achievement levels will thus be as follow:

 

2019 Objective Performance Criteria  Weighting  Threshold  Target  Maximum
Total Shareholder Return (TSR) Rank vs. SNL U.S. Multifamily REIT Index*  33.33%  25th Percentile  50th Percentile  75th Percentile
Same Store NOI Growth Rank vs. SNL U.S. Multifamily REIT Index*  33.33%  25th Percentile  50th Percentile  75th Percentile
Redevelopment Projects – Return on Investment (IRR)*  33.34%  15% ROI  20% ROI  25% ROI

  

*For performance between achievement levels, the award will be determined by linear interpolation.

Each component of the 2019 objective performance criteria will be weighted as indicated above. For achievement of the threshold level, 50% of the weighted portion of each executive’s target Long Term Performance Award (i.e., 50% of the weighted portion of their Annual LTIP Award) can be earned; for achievement of the target level, 100% can be earned; and for achievement of the maximum level, 150% can be earned. If performance for a component of the objective performance criteria is below the threshold level, no bonus will be earned for that component.

 

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Pursuant to the Executive Agreements, on January 1, 2019, the Company granted the following Long Term Performance Awards for fiscal year 2019: 114,379 LTIP Units to Mr. Kamfar; 41,807 LTIP Units to Mr. Babb; 41,807 LTIP Units to Mr. MacDonald; 41,807 LTIP Units to Mr. Ruddy; 12,424 LTIP Units to Mr. Vohs; and 41,807 LTIP Units to Mr. Konig (through K&A). The actual number of LTIP Units that will actually vest and become nonforfeitable as of the last day of the three-year performance period in respect of each such Long Term Performance Award will be dependent upon the achievement, over the three-year performance period, of the objective Company performance criteria and targets set forth above, and the performance of each such executive officer during such time period.

 

Peer Groups

 

To assist the compensation committee in developing the post-Internalization compensation program for the Company’s NEOs and other executive officer, FPL was engaged to examine current market compensation practices. In connection with that process, FPL provided the compensation committee with a market-based compensation benchmarking analysis summarizing the executive compensation practices among a peer group of companies consisting of 15 REITs reasonably comparable in size to the Company based on total market capitalization and total return. The size-based peer group was utilized to assist the compensation committee in understanding current compensation structures and practices. However, the compensation committee did not rely solely upon benchmarking to determine the post-Internalization compensation of the Company’s NEOs and other executive officer, but used the compensation levels, structures and practices of the peer group as one of many factors to formulate the Company’s post-Internalization executive compensation structure. The post-Internalization compensation of the Company’s NEOs and other executive officer is not tied to a specified percentile of a peer group.

 

2018 Peer Group. The size-based peer group utilized by the compensation committee in establishing the post-Internalization compensation program for the Company’s NEOs and other executive officer, including compensation metrics for fiscal year 2018, was comprised of the following:

 

• Cedar Realty Trust, Inc. • Rexford Industrial Realty, Inc.
• Chatham Lodging Trust • Retail Opportunity Investments Corp.
• Cousins Properties Incorporated • Silver Bay Realty Trust Corp.
• Easterly Government Properties, Inc. • STAG Industrial, Inc.
• EastGroup Properties, Inc. • Terreno Realty Corporation
• Education Realty Trust, Inc. • TIER REIT, Inc.
• First Potomac Realty Trust • Whitestone REIT
    • Xenia Hotels & Resorts, Inc.

 

2019 Peer Group. The size-based peer group utilized by the compensation committee in establishing compensation metrics for the Company’s NEOs and other executive officer for fiscal year 2019 was comprised of the following:

 

• Armada Hoffler Properties, Inc. • Hersha Hospitality Trust
• CatchMark Timber Trust, Inc. • Independence Realty Trust, Inc.
• Cedar Realty Trust, Inc. • Rexford Industrial Realty, Inc.
• Chatham Lodging Trust • Terreno Realty Corporation
• Chesapeake Lodging Trust • TIER REIT, Inc.
• Easterly Government Properties, Inc. • Whitestone REIT

 

Say-on-Pay Vote

 

At our 2017 annual meeting of stockholders, we provided our stockholders with the opportunity to vote to approve, on an advisory basis, the compensation of our NEOs. A substantial majority of our stockholders (91.94%) that voted at the 2017 annual meeting of stockholders approved the compensation of our NEOs as described in our proxy statement for the 2017 annual meeting of stockholders, which descriptions included both the proposed annual salaries for each NEO for 2018, as well as the proposed formulas for the calculation of each element of incentive compensation for which our NEOs were proposed to be eligible in 2018. The compensation committee reviewed and considered the results of this advisory “say-on-pay” vote in determining specific award amounts granted to our NEOs for 2018. The compensation committee will also carefully consider the results of other future stockholder votes on executive compensation, along with other expressions of stockholder views it receives on specific policies and desirable actions.

 

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Say-on-Frequency Vote

 

At our 2014 annual meeting of stockholders, our stockholders who voted recommended by a strong majority (77.15%) that we hold an advisory stockholder vote on the compensation of our NEOs every three years. As a result of this vote, as noted above, the stockholders held an advisory vote on the NEOs compensation at the 2017 annual meeting of stockholders. Our next say-on-pay vote and our next say-on-frequency vote are both scheduled for our 2020 annual meeting of stockholders.

 

Incentive Plans

 

The Company’s incentive plans were originally adopted by our Board 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 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,” and together with the Amended 2014 Individuals Plan, the “Amended 2014 Incentive Plans”) as adopted by our Board on April 7, 2015 and approved by our stockholders on May 28, 2015. On August 3, 2017 and October 18, 2017, our Board adopted, and on October 26, 2017 our stockholders approved, the second amendment and restatement of the 2014 Individuals Plan (the “Second Amended 2014 Individuals Plan”) and the 2014 Entities Plan (the “Second Amended 2014 Entities Plan,” and together with the Second Amended 2014 Individuals Plan, the “Second Amended 2014 Incentive Plans”), which superseded and replaced in their entirety the Amended 2014 Incentive Plans.

 

On August 9, 2018, our Board adopted, and on September 28, 2018 our stockholders approved, the third amendment and restatement of the Second Amended 2014 Individuals Plan (the “Third Amended 2014 Individuals Plan”) and the Second Amended 2014 Entities Plan (the “Third Amended 2014 Entities Plan,” and together with the Third Amended 2014 Individuals Plan, the “Third Amended 2014 Incentive Plans,” and together with the Second Amended 2014 Incentive Plans, the “Incentive Plans”), which superseded and replaced in their entirety the Second Amended 2014 Incentive Plans Under the Third Amended 2014 Incentive Plans, we have reserved and authorized an aggregate number of 2,250,000 shares of our common stock for issuance. As of February 6, 2019, 1,648,639 shares were available for future issuance.

 

The purpose of the Third Amended 2014 Incentive Plans is to attract and retain independent directors, executive officers and other key employees, including officers and employees of our Operating Partnership and their affiliates, and other service providers. The Third 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.

 

Stock Ownership Guidelines

 

On December 20, 2017, to further align the interests of our executive officers and directors with the interest of our stockholders, and to promote our commitment to sound corporate governance, our Board implemented stock ownership guidelines (“Stock Ownership Guidelines”) for our executive officers, including our NEOs, and non-employee directors.

 

The stock ownership guidelines provide that, within five years of the later date of adoption of the guidelines or the date an individual first becomes subject to the guidelines upon becoming a director or executive officer:

 

  • our Chief Executive Officer is encouraged to own shares of our common stock, including restricted stock, valued at a minimum of six times annual base compensation;

 

  • all other executive officers are encouraged to own shares of our common stock, including restricted stock, valued at a minimum of three times annual base compensation; and

 

  • non-employee directors are encouraged to own shares of our common stock valued at a minimum of three times their annual director compensation.

 

As of December 31, 2018, all of our directors and executive officers were in compliance with our stock ownership guidelines or on track to be compliant within the five-year period specified by the guidelines.

 

Pledging Policy

 

In February 2019, our Board adopted a Pledging Policy Regarding Company Securities (the “Pledging Policy”).  The Pledging Policy prohibits the Company’s executive officers and directors from pledging, or otherwise using as collateral to secure any loan or other obligation, any Company securities that such executive officer or director is required to hold pursuant to the Company’s Stock Ownership Guidelines.  To encourage our executive officers and directors to continue to hold Company securities currently owned by them that are in excess of the amounts required under the Stock Ownership Guidelines, and to encourage them to increase such ownership over time, our executive officers and directors will be permitted to pledge only such Company securities held in excess of the Stock Ownership Guidelines applicable to such executive officer or director (such excess, to the extent pledged, the “Pledged Shares”) and subject to certain restrictions and limitations.   The Pledging Policy requires that the average outstanding loan balance on any separate loan arrangement secured in whole or in part by such Pledged Shares must be limited, on an annual basis, to thirty percent (30%) of the time-weighted value of the creditor’s collateral package, inclusive of any Pledged Shares.  Within thirty (30) days of entering into any new pledge or loan arrangement, the executive officer or director will be required to certify to the audit committee that such pledge is limited to only such Company securities held in excess of the applicable Stock Ownership Guidelines.  In addition, within thirty (30) days of the effective date of the Pledging Policy, any executive officer or director who, prior to such effective date, had entered into a pledge or loan arrangement with respect to Pledged Shares must certify to the audit committee that such arrangement does not include any pledge of Company securities required to be held under the Stock Ownership Guidelines applicable to such executive officer or director.  Finally, within ten (10) days following each annual meeting of the Company’s stockholders, each executive officer or director will be required to certify to the audit committee that each such pledge or loan arrangement is limited, on an annual basis, to thirty percent (30%) of the time-weighted value of the creditor’s collateral package, inclusive of any Pledged Shares.

 

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Clawback Policy

 

Our compensation committee has adopted a policy on the clawback of incentive compensation. The policy is applicable to incentive-based compensation (including equity and equity-based compensation) that is paid, issued or vests based on the achievement of performance objectives (“Incentive Awards”) granted on or after its effective date to current or former executive officers while an executive officer (“Covered Executives”). The policy will be invoked in the event that (a) the Company is required to restate its financial statements due to material noncompliance with any financial reporting requirement under U.S. federal securities laws (whether or not based on fraud or misconduct) and the Board or the compensation committee has not determined that such restatement (i) is required or permitted under GAAP in connection with the adoption or implementation of a new accounting standard or (ii) was caused by the Company’s decision to change its accounting practice as permitted by applicable law, and (b) the performance measurement period with respect to the grant or vesting of such Incentive Awards includes one or more fiscal periods affected by such restatement.

 

In such event, under the terms of the policy, our Board or the compensation committee will determine whether, within three (3) completed fiscal years preceding the restatement date and any interim period, any Covered Executives received Incentive Awards in excess of the amount to which he or she would otherwise have been entitled based on the restated financial statements (such excess amount, “Excess Compensation”). If the Board or the compensation committee determines that any Covered Executive received Excess Compensation, the Company will be entitled to recover such Excess Compensation from such Covered Executive, and our Board or the compensation committee, in its sole discretion and subject to applicable law, will take such action as it deems necessary to recover such Excess Compensation. Such actions may include (i) requiring repayment or return of prior Incentive Awards made to such Covered Executive, including Incentive Awards not affected by the accounting restatement, (ii) cancelling unvested Incentive Awards, or (iii) adjusting the future compensation of such Covered Executive.

 

In the event that the Board or the compensation committee determines that a Covered Executive’s acts or omissions constituted fraud or misconduct, then in addition to the recovery of Incentive Awards, the Board or the compensation committee may (i) take (in the case of the Board), or recommend to the Board (in the case of the compensation committee), disciplinary action, including termination, and (ii) pursue other available remedies, including legal action.

 

In addition, each award that may be granted under the Third Amended 2014 Incentive Plans will be subject to the condition that we may require that such award be returned, and that any payment made with respect to such award must be repaid, if such action is required under the terms of any recoupment or “clawback” policy of ours as in effect on the date that the payment was made, or on the date the award was granted or exercised or vested or earned, as applicable.

 

Our Board and compensation committee recognize that the Dodd-Frank legislation enacted in 2010 may, following rulemaking, require some modification of these policies. Our Board and compensation committee intend to review any rules adopted as a result of that legislation and to adopt any modifications to these policies that become required by applicable law.

 

Compensation Policies and Practices Relating to Risk Management

 

The compensation committee, with the assistance of FPL, conducts regular analytical reviews focusing on several key areas of the Company’s compensation program for its NEOs and other executive officer, including external market compensation data, pay mix, selection of performance metrics, the goal-setting process, and internal equity (i.e., compensation differences between individuals) on the payment of compensation. These reviews provide a framework for consideration by the compensation committee with respect to whether any of the Company’s current programs, practices or procedures regarding compensation of its NEOs and other executive officer should be altered to help ensure the Company maintains an appropriate balance between prudent business risk and resulting compensation.

 

As a result of this process, the compensation committee has concluded that while a significant portion of the Company’s compensation program for its NEOs and other executive officer is performance-based, the program does not encourage excessive or unnecessary risk-taking. The compensation committee further concluded that the Company’s policies and procedures largely achieve the appropriate balance between the Company’s annual goals and its long-term financial success and growth. While risk-taking is a necessary part of the growth of any business, the compensation committee focuses on aligning the Company’s compensation policies with its long-term interests, and on avoiding short-term rewards for management decisions that could pose long-term risks to the Company, including as follows:

 

·Use of Long-Term Compensation. In order to more closely align the interests of the Company’s NEOs and other executive officer with those of its stockholders, more than half of the total compensation payable or potentially payable to our NEOs and other executive officer is non-cash compensation in the form of long-term equity-based awards. This structure is also intended to maximize retention, as such equity-based awards are subject to either time- or performance-based vesting, generally over a period of at least three years (subject to accelerated vesting upon certain terminations of the holder’s employment as described under “Potential Payments Upon Termination or Change-in-Control” below). Such vesting periods encourages our NEOs and other executive officer to focus on sustaining the Company’s long-term performance. Grants of such long-term equity-based awards are typically made annually, so our NEOs and other executive officer generally have unvested awards that could decrease significantly in value if the Company’s business is not managed for the long-term.

 

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·Stock Ownership Guidelines. The Board has implemented stock ownership guidelines for our NEOs and other executive officers, which are described above under “Stock Ownership Guidelines.” The compensation committee believes that significant ownership of the Company’s common stock by its NEOs and other executive officers helps to align the interests of the Company’s management with those of its stockholders, and is consistent with the Company’s commitment to sound corporate governance. As of December 31, 2018, all of our NEOs and our other executive officer were in compliance with our stock ownership guidelines or on track to be compliant within the five-year period specified by the guidelines.

 

·Clawback Policy. The compensation committee has also adopted a policy on the clawback of incentive compensation, which is described above under “Clawback Policy.” Under the clawback policy, if the Company is required to restate its financial results due to material noncompliance with any financial reporting requirement under the U.S. federal securities laws (whether or not based on fraud or misconduct) and the Board or the compensation committee has not determined that such restatement is subject to certain exceptions, the Company may recover certain excess incentive-based compensation (including equity and equity-based compensation) that is paid, issued or vests based on the achievement of performance objectives and that is granted on or after the policy’s effective date to current or former NEOs or other executive officers while an NEO or other executive officer.

 

·Performance Metrics. The compensation committee further believes in linking pay with performance. In 2018, the Company used a variety of quantifiable performance metrics for its annual incentive programs, which are described in more detail under “Compensation Discussion and Analysis—Elements of Compensation and 2018 Compensation Decisions.”

 

In summary, the compensation committee believes that structuring the Company’s executive compensation program such that a considerable amount of the compensation of its NEOs and other executive officers is tied to the Company’s long-term success and share value provides incentives for our NEOs and other executive officers to manage the Company for long-term growth in a prudent manner, and avoids creating disproportionately large short-term incentives that could otherwise serve to promote the taking of risks that would not be in the long-term interests of the Company.

 

Lending Policies

 

We may not make loans to our directors, officers or other employees except in accordance with our code of business conduct and ethics and applicable law.

 

Compensation Committee Report (1)

 

The compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Annual Report on Form 10-K. Based on such review and discussion, the compensation committee has recommended to our Board that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

 

Submitted by the Compensation Committee:
Brian D. Bailey, Chairman

Elizabeth Harrison
I. Bobby Majumder

 

(1)   The Compensation Committee Report does not constitute “soliciting material” and will not be deemed “filed” or incorporated by reference into any of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate our SEC filings by reference, in whole or in part, notwithstanding anything to the contrary set forth in those filings.

 

Compensation Committee Interlocks and Insider Participation

 

The members of the compensation committee are Brian D. Bailey, Elizabeth Harrison and I. Bobby Majumder, each of whom is an independent director. None of these directors has at any time served as an officer or employee of the Company. None of our executive officers has served as a director or member of the compensation committee of any entity that has one or more of its executive officers serving as a member of our Board or compensation committee. Accordingly, during 2018, there were no interlocks with other companies within the meaning of the SEC’s rules.

 

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EXECUTIVE OFFICER COMPENSATION TABLES

 

Summary Compensation Table

The table below summarizes the total compensation paid or earned by our NEOs and other executive officers in 2018, 2017 and 2016.

 

Name and Principal
Position		  Year  

Salary

($)

  

Bonus

($)(1)

  

Stock

Awards

($)(2)

  

Non-Equity

Incentive Plan

Compensation

($)(3)

  

All Other

Compensation

($)

  

Total

($)

 
R. Ramin Kamfar   2018    400,000    —    3,968,912    —    —    4,368,912 
Chairman and CEO   2017    66,667    66,667    —    —    —    133,334 
    2016    —    —    —    —    —    — 
Jordan B. Ruddy   2018    300,000    —    1,728,870    —    —    2,028,870 
President and   2017    50,000    50,000    —    —    —    100,000 
COO   2016    —    —    —    —    —    — 
James G. Babb, III   2018    325,000    —    1,728,870    —    —    2,053,870 
Chief Investment Officer   2017    54,167    54,167    —    —    —    108,334 
    2016    —    —    —    —    —    — 
Ryan S. MacDonald   2018    250,000    —    1,664,972    —    —    1,914,972 
Chief Acquisitions Officer   2017    41,667    41,667    —    —    —    83,334 
    2016    —    —    —    —    —    — 
Christopher J. Vohs   2018    250,000    —    614,875    —    —    864,875 
Chief Financial Officer and Treasurer   2017    41,667    20,833    —    —    —    62,500 
    2016    —    —    —    —    —    — 
Michael L. Konig*   2018    300,000    —    1,728,870    —    —    2,028,870 
Chief Legal Officer and Secretary   2017    50,000    50,000    —    —    —    100,000 
    2016    —    —    —    —    —    — 

 

* Pursuant to a Services Agreement with his wholly-owned law firm, K&A.
   
(1) Each executive officer is eligible for an annual cash incentive bonus for the year ended December 31, 2018. The amounts of such bonuses are not calculable through the latest practicable date, but will be determined by the compensation committee, in its reasonable business judgment and based on its review of the Company’s performance and the performance of each such executive officer during that time period, in March 2019. The annual cash incentive bonuses will be payable on March 15, 2019.
   
(2)

Amounts shown do not reflect compensation actually received by the named executive officer. Instead, the amounts shown are the full grant date fair value of LTIP Unit awards issued to the executives in 2018. In accordance with SEC disclosure requirements, the amounts for 2018 include the full grant date fair value of awards issued under the Incentive Plans. The grant date fair value is computed in accordance with FASB ASC 718, “Compensation-Stock Compensation,” or “ASC 718.”

 

The actual value of awards with respect to these awards are contingent on continued employment and assumes maximum performance had been achieved under any long term performance awards.

 

(3) The executive officers did not receive any non-equity incentive plan compensation in 2018.

 

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Grants of Plan-Based Awards for 2018

 

Estimated Future Payouts Under Equity Incentive Plan Awards

 

Name  Grant Date     Threshold (#)   Target (#)   Maximum (#)   All Other Stock
Awards: Number of
Shares of Stock or
Units (#)		   Grant Date Fair
Value of Stock
and Option
Awards ($)(1)
                          
R. Ramin Kamfar  1/1/2018 (2)                  240,892 $ 2,435,418
   1/1/2018 (3)                  57,814 $ 584,500
   1/1/2018 (4)                  9,636 $ 97,420
   1/1/2018 (5)   17,567    35,134    52,701      $ 532,807
   10/4/2018 (6)   11,340    22,680    34,020      $ 318,767
                              
Jordan B. Ruddy  1/1/2018 (2)                  120,446 $ 1,217,709
   1/1/2018 (3)                  19,271 $ 194,830
   1/1/2018 (4)                  3,212 $ 32,473
   1/1/2018 (5)   5,856    11,711    17,567      $ 177,602
   10/4/2018 (6)   3,780    7,560    11,340      $ 106,256
                              
James G. Babb III  1/1/2018 (2)                  120,446 $ 1,217,709
   1/1/2018 (3)                  19,271 $ 194,830
   1/1/2018 (4)                  3,212 $ 32,473
   1/1/2018 (5)   5,856    11,711    17,567      $ 177,602
   10/4/2018 (6)   3,780    7,560    11,340      $ 106,256
                              
Ryan S. MacDonald  1/1/2018 (2)                  120,446 $ 1,217,709
   1/1/2018 (3)                  16,862 $ 170,475
   1/1/2018 (4)                  2,810 $ 28,409
   1/1/2018 (5)   5,124    10,247    15,371      $ 155,401
   10/4/2018 (6)   3,308    6,615    9,923      $ 92,979
                              
Christopher J. Vohs  1/1/2018 (2)                  48,178 $ 487,080
   1/1/2018 (3)                  4,818 $ 48,710
   1/1/2018 (4)                  803 $ 8,118
   1/1/2018 (5)   1,464    2,928    4,392      $ 44,403
   10/4/2018 (6)   945    1,890    2,835      $ 26,564
                              
Michael L. Konig  1/1/2018 (2)                  120,446 $ 1,217,709
   1/1/2018 (3)                  19,271 $ 194,830
   1/1/2018 (4)                  3,212 $ 32,473
   1/1/2018 (5)   5,856    11,711    17,567      $ 177,602
   10/4/2018 (6)   3,780    7,560    11,340      $ 106,256

 

(1)The amounts presented in this column represent the full grant date fair value of equity awards (calculated pursuant to FASB ASC Topic 718) granted to the Named Executive Officers in 2018. Pursuant to the rules and regulations of the SEC, the amounts exclude the impact of estimated forfeitures related to service-based vesting conditions. The grant date fair value, including the impact of estimated forfeitures related to service-based vesting conditions, is the amount we would expense in our consolidated financial statements over the award's vesting schedule. For additional information on our value assumptions, refer to Note 13 of our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC.
(2)Represents long-term incentive plan units ("LTIP Units") in Bluerock Residential Holdings, LP (the "Operating Partnership"), of which the Issuer is the general partner. These LTIP Units will vest ratably over a five year period and may convert to units of limited partnership in the Operating Partnership ("OP Units") upon reaching capital account equivalency with the OP Units held by the Issuer, and may then be redeemed for cash or, at the option of the Issuer and after a one year holding period (including any period during which the LTIP Units were held), settled in shares of the Issuer's Class A common stock on a one-for-one basis.

 

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(3)Represents long-term incentive plan units in the Operating Partnership, of which the Issuer is the general partner. These LTIP Units will vest ratably over a three year period and may convert to OP Units upon reaching capital account equivalency with the OP Units held by the Issuer, and may then be redeemed for cash or, at the option of the Issuer and after a one year holding period (including any period during which the LTIP Units were held), settled in shares of the Issuer's Class A common stock on a one-for-one basis.
(4)Represents LTIP Units in the Operating Partnership, of which the Issuer is the general partner. These LTIP Units will vest in three equal annual installments (the first, on December 31, 2018, and thereafter, on each anniversary of October 31, 2017), and may convert to OP Units upon reaching capital account equivalency with the OP Units held by the Issuer, and may then be redeemed for cash or, at the option of the Issuer and after a one year holding period (including any period during which the LTIP Units were held), settled in shares of the Issuer's Class A common stock on a one-for-one basis.
(5)Represents LTIP Units in the Operating Partnership, of which the Issuer is the general partner. These Long Term Performance Awards LTIP Units are subject to a three-year performance period and may vest at the end of that period subject to performance criteria and established targets. The LTIPs may convert to OP Units upon reaching capital account equivalency with the OP Units held by the Issuer, and may then be redeemed for cash or, at the option of the Issuer and after a one year holding period (including any period during which the LTIP Units were held), settled in shares of the Issuer's Class A common stock on a one-for-one basis.
(6)Represents long-term incentive plan units in the Operating Partnership of which the Issuer is the general partner. These Long Term Performance Awards LTIP Units are subject to a three-year performance period beginning January 1, 2018 and may vest at the end of that period subject to performance criteria and established targets. The LTIP Units may convert to OP Units upon reaching capital account equivalency with the OP Units held by the Issuer, and may then be redeemed for cash, or at the option of the Issuer and after a one-year holding period (including any period during which the LTIP Units were held), settled in shares of the Issuer's Class A common stock on a one-for-one basis.

 

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Outstanding Equity Awards at December 31, 2018

 

The following table sets forth certain information with respect to outstanding equity awards held by the named executive officers as of December 31, 2018:

 

Name  Grant Date 

Number of Shares or

Units of Stock That

Have Not Vested (#)

   Market Value of
Shares or Units of
Stock That Have Not
Vested ($)(1)		   Equity Incentive Plan
Awards:Number of
Unearned Shares,
Units or Other Rights
That Have Not Vested
(#)		  

Equity Incentive Plan

Awards: Market or Payout
Value of Unearned Shares,
Units or Other Rights That
Have Not Vested ($)(1)

 
                    
R. Ramin Kamfar   1 /1/2018(2)  192,714    1,738,280           
    1 /1/2018(3)  57,814    521,482           
    1 /1/2018(4)  6,424    57,944           
    1 /1/2018(5)            52,701    475,363 
    10 /4/2018(6)            34,020    306,860 
                        
Jordan B. Ruddy   1 /1/2018(2)  96,357    869,140           
    1 /1/2018(3)  19,271    173,824           
    1 /1/2018(4)  2,141    19,312           
    1 /1/2018(5)            17,567    158,454 
    10 /4/2018(6)            11,340    102,287 
                        
James G. Babb III   1 /1/2018(2)  96,357    869,140           
    1 /1/2018(3)  19,271    173,824           
    1 /1/2018(4)  2,141    19,312           
    1 /1/2018(5)            17,567    158,454 
    10 /4/2018(6)            11,340    102,287 
                        
Ryan S. MacDonald   1 /1/2018(2)  96,357    869,140           
    1 /1/2018(3)  16,862    152,095           
    1 /1/2018(4)  1,873    16,894           
    1 /1/2018(5)            15,371    138,646 
    10 /4/2018(6)            9,923    89,505 
                        
Christopher J. Vohs   1 /1/2018(2)  38,542    347,649           
    1 /1/2018(3)  4,818    43,458           
    1 /1/2018(4)  535    4,826           
    1 /1/2018(5)            4,392    39,616 
    10 /4/2018(6)            2,835    25,572 
                        
Michael L. Konig   1 /1/2018(2)  96,357    869,140           
    1 /1/2018(3)  19,271    173,824           
    1 /1/2018(4)  2,141    19,312           
    1 /1/2018(5)            17,567    158,454 
    10 /4/2018(6)            11,340    102,287 

 

(1)Based upon the closing price of our Class A common stock on December 31, 2018 of $9.02.
(2)Each LTIP award vests and becomes nonforfeitable as follows: (i) the first installment vested on December 31, 2018 in the amount of one-fifth (1/5) of the LTIP award and (ii) the second through fifth installments on the second through fifth anniversary of October 31, 2017, respectively, in an amount equal to one-fifth (1/5) of the LTIP award, in each case subject to continued employment and other conditions.

 

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(3)The amount of each such LTIP award was determined as set forth above. Each LTIP award vests and becomes nonforfeitable in three equal installments on each anniversary of the date of grant, subject to continued employment and other conditions.
(4)Each LTIP award vests and becomes nonforfeitable as follows: (i) the first installment vested on December 31, 2018 in the amount of one-third (1/3) of the LTIP award, and (ii) the second and third installments on the second and third anniversary of October 31, 2017, respectively, in the amount of one-third (1/3) of the LTIP award, in each case subject to continued employment and other conditions.
(5)Each Initial Long Term Performance Award was granted in the form of LTIP Units for a three-year performance period, with a threshold equal to 50% of that year’s Annual LTIP Award, a target equal to that year’s Annual LTIP Award and a maximum equal to 150% of that year’s Annual LTIP Award, subject to the performance criteria and targets established and administered by the compensation committee. The amounts in the table assume maximum performance. The actual number of LTIP Units that become fully vested in respect of each such Long Term Performance Award will be based on the attainment, over the three-year performance period, of targets related to relative total stockholder return, relative same store net operating income growth, and inclusion in certain peer indices, as well as a subjective evaluation of the achievement of strategic objectives. Each such Long Term Performance Award will vest and become nonforfeitable effective as of the last day of the performance period. Due to limitations on the number of LTIP Units available for issuance under the Second Amended 2014 Incentive Plans, these Long Term Performance Awards were, in aggregate, lower than those to which the recipients were entitled pursuant to the terms of their respective Executive Agreements. Upon stockholder approval of the Third Amended 2014 Incentive Plans, such remaining LTIP Units were issued by the Company to each such recipient at such time. See footnote (6).
(6)The increased capacity under the Third Amended 2014 Incentive Plans enabled the Company to issue the Shortfall LTIP Units, for a three-year performance period from the date of grant of the Initial Long Term Performance Award, subject to performance criteria and targets established and administered by the compensation committee. Each such Shortfall Long Term Performance Award will vest and become nonforfeitable effective as of the last day of the performance period, subject to certain clawback and termination provisions.

 

Stock Vested in 2018

 

The following table sets forth certain information with respect to the vesting of LTIP Units for each named executive officer during the fiscal year ended December 31, 2018.

 

   Stock Awards 
Name  Number of Shares
Acquired on Vesting
(#)		  

Value Received on

Vesting ($)(1)

 
         
R. Ramin Kamfar   51,390   $463,538 
           
Jordan B. Ruddy   25,160   $226,943 
           
James G. Babb III   25,160   $226,943 
           
Ryan S. MacDonald   25,026   $225,735 
           
Christopher J. Vohs   9,904   $89,334 
           
Michael L. Konig   25,160   $226,943 

 

(1)Based on a price of $9.02 per LTIP Unit, which was the closing price on the NYSE American of one share of Class A common stock on December 31, 2018. Assumes that the value of LTIP Units on a per unit basis is equal to the per share value of our Class A common stock.

 

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Narrative Discussion of Summary Compensation Table

 

We provide additional disclosure below of factors relating to the Summary Compensation Table, including descriptions of the Executive Agreements of our NEOs and other executive officer. For further narrative disclosures concerning the information set forth in the Summary Compensation Table, please see “Compensation Discussion and Analysis” in this Form 10-K.

 

Executive Agreements

 

We have entered into Employment Agreements with Messrs. Kamfar, Ruddy, Babb, MacDonald and Vohs, as well as a Services Agreement with Mr. Konig through K&A, on substantially the same terms as the Employment Agreements (collectively, the “Executive Agreements”). The post-termination and severance provisions of these agreements are discussed in “Potential Payments Upon Termination or Change-in-Control” below.

 

Term. The Executive Agreements became effective as of the closing of the Internalization on October 31, 2017, and will continue in effect for an initial term through and including December 31, 2020, subject to automatic renewals of additional successive one-year periods unless either party thereto provides at least sixty (60) days’ advance notice of non-renewal. The Executive Agreements provide that each of Mr. Kamfar, Mr. Babb, Mr. MacDonald, Mr. Ruddy, Mr. Vohs, and Mr. Konig, each in their respective capacity as executive officers (collectively, the “Executive Officers,” and each, an “Executive Officer”) can voluntarily terminate his employment or service for any reason upon 60 days’ notice or by sending a notice of non-renewal to the Company, or may resign for good reason.   The Company may also terminate the Executive Agreements upon the disability of the Executive Officer, and the Executive Officer’s employment or service shall terminate upon such Executive Officer’s death.  The terms “cause,” “disability,” and “good reason,” are discussed in “Potential Payments on Termination or Change-In-Control” below.  

 

Duties. The Executive Agreements provide that each Executive Officer will perform duties and provide services to us that are commensurate with the duties, authorities and responsibilities of persons in similar capacities in similarly sized companies, and such other duties, authorities and responsibilities as may reasonably be assigned to him from time to time by the Board or, in the case of Executive Officers other than Mr. Kamfar, the Chief Executive Officer. The Executive Agreements further provide that the Executive Officers will, without additional compensation, also serve on the Board of, serve as an officer of, and/or perform such executive and consulting services for, or on behalf of, such subsidiaries of the Company as the Board may, from time to time, request. The Executive Agreements also provide that the Executive Officers will devote substantially all of their business time and attention to the performance of their duties to the Company, but will be permitted to devote time as they determine in good faith to be necessary or appropriate to fulfill their duties to Bluerock and its affiliates, and engage in certain other outside activities, so long as those duties and activities do not unreasonably interfere with the performance of their duties to us.

 

Compensation. The Executive Agreements provide that Mr. Kamfar, Mr. Babb, Mr. MacDonald, Mr. Ruddy, Mr. Vohs and K&A will receive an annual base salary or, in the case of K&A, an annual base payment, of at least $400,000, $325,000, $250,000, $300,000, $250,000, and $300,000, respectively. Each Executive Agreement provides that each Executive Officer’s base salary or base payment, as applicable, will be reviewed annually for appropriate increases by the compensation committee, but will not be decreased.  Each Executive Agreement further states that each Executive Officer is eligible to receive an annual incentive bonus payable in cash, and annual grants of time- and performance-based equity awards, in each case as described above in “Elements of Executive Compensation” and “2018 Compensation Decisions.” Each Executive Agreement provides that each Executive Officer is entitled to participate in all executive incentive and, and except for K&A, all employee benefit programs of the Company made available to the Company’s senior executives generally, and to be reimbursed for reasonable and customary expenses related to his employment and to paid vacation in accordance with the Company’s policies.

 

Clawback.  Each Executive Agreement provides that any compensation paid to the Executive Officer pursuant to the Executive Agreement or any other agreement or arrangement with the Company is subject to mandatory repayment by the Executive Officer to the Company if and to the extent any such compensation or gain is or becomes subject to (i) the Company’s clawback policy, or (ii) any law, rule, requirement or regulation which imposes mandatory recoupment, under circumstances set forth in such law, rule, requirement or regulation.

 

Non-Competition, Non-Solicitation, Intellectual Property, Confidentiality and Non-Disparagement. The Executive Agreements provide that for the one-year period following the termination of his employment or its service relationship with the Company for any reason, the respective Executive Officer and K&A will not solicit our employees or exclusive consultants or independent contractors, and for the eighteen-month period following the termination of his employment or its service relationship with us for any reason, each Executive Officer and K&A will not solicit our investors or customers or compete with us. Each Executive Agreement also contains covenants relating to the treatment of confidential information and intellectual property matters and restrictions on the ability of each of the Executive Officers and K&A on the one hand and us on the other hand to disparage the other.

 

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Parachute Payments.  Each Executive Agreement provides that the Executive Officer shall bear all expense of, and be solely responsible for, all federal, state, local or foreign taxes due with respect to any amount payable to or other benefit receivable by the Executive Officer under their Executive Agreement, including, without limitation, any excise tax imposed by Section 4999 of the Code; provided, however, that any such amount or benefit deemed to be a “parachute payment” (as defined in Section 280G of the Code) alone or when added to any other amount payable or paid to or other benefit receivable or received by the Executive Officer which is deemed to constitute a parachute payment (whether or not under an existing plan, arrangement or other agreement), and would result in the imposition on the Executive Officer of an excise tax under Section 4999 of the Code (all such amounts and benefits being referred to as total payments), shall be reduced to the extent necessary so that no portion thereof shall be subject to the excise tax imposed by Section 4999 of the Code but only if, by reason of such reduction, the net after-tax benefit received by the Executive Officer shall exceed the net after-tax benefit received by the Executive Officer if no such reduction was made.  Net after-tax benefit is defined as (i) the total of all payments and the value of all benefits which the Executive Officer receives or is then entitled to receive from the Company that would constitute parachute payments, less (ii) the amount of all federal, state and local income taxes payable with respect to the foregoing calculated at the maximum marginal income tax rate for each year in which the foregoing shall be paid to the Executive Officer (based on the rate in effect for such year as set forth in the Code as in effect at the time of the first payment of the foregoing) and the amount of applicable employment taxes, less (iii) the amount of excise taxes imposed with respect to the payments and benefits described in (i) above by Section 4999 of the Code.

 

Section 409A.  Each Executive Agreement provides that it is intended to comply with the requirements of Section 409A of the Code, to the extent applicable, and the Executive Agreement will be interpreted to avoid any penalty sanctions under Section 409A of the Code. Accordingly, each Executive Agreement provides that all of its provisions will be construed and interpreted to comply with Section 409A and, if necessary, any such provision shall be deemed amended to comply with Section 409A of the Code and regulations thereunder. If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions under Section 409A of the Code, then such benefit or payment shall be provided in full at the earliest time thereafter when such sanctions will not be imposed. For purposes of Section 409A of the Code, each payment made under the Executive Agreement shall be treated as a separate payment. In no event may the Executive Officer, directly or indirectly, designate the calendar year of payment. The Executive Officer will be deemed to have a termination of employment for purposes of determining the timing of any payments or benefits hereunder that are classified as deferred compensation only upon a “separation from service” within the meaning of Section 409A of the Code.

 

Each Executive Agreement provides that if on the date of the Executive Officer’s termination of employment, the Executive Officer is a “specified employee” (as such term is defined in Section 409A(a)(2)(B)(i) of the Code and its corresponding regulations) as determined by the board (or its delegate) in its sole discretion in accordance with its “specified employee” determination policy, then all cash severance payments payable to the Executive Officer under the Executive Agreement that are deemed as deferred compensation subject to the requirements of Section 409A of the Code shall be postponed for a period of six months following the Executive Officer’s “separation from service” with the Company (or any successor thereto). The postponed amounts shall be paid to the Executive Officer in a lump sum on the date that is six (6) months and one (1) day following the Executive Officer’s “separation from service” with the Company (or any successor thereto). If the Executive Officer dies during such six-month period and prior to payment of the postponed cash amounts hereunder, the amounts delayed on account of Section 409A of the Code shall be paid to the personal representative of the Executive Officer’s estate on the sixtieth (60th) day after the Executive Officer’s death. If any of the cash payments payable pursuant to the Executive Agreement are delayed due to the requirements of Section 409A of the Code, there shall be added to such payments interest during the deferral period at an annualized rate of interest equal to the prime rate as reported in the Wall Street Journal (or, if unavailable, a comparable source) at the relevant time.

 

 All reimbursements provided under the Executive Agreements that constitute deferred compensation under Section 409A of the Code shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the Executive Officer’s lifetime (or during a shorter period of time specified in the Executive Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the taxable year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.

 

Potential Payments Upon Termination or Change-in-Control

 

The following section describes potential payments and benefits to the NEOs under the Company’s compensation and benefit plans and arrangements upon termination of employment or a change of control of the Company.

 

We have entered into Employment Agreements with Messrs. Kamfar, Ruddy, Babb, MacDonald and Vohs, as well as a Services Agreement with Mr. Konig through K&A, on substantially the same terms as the Employment Agreements (collectively, the “Executive Agreements”). The Executive Agreements provide for payments and other benefits if the executive’s employment with us is terminated under circumstances specified in his respective Executive Agreement. An executive’s rights upon the termination of his employment will depend upon the circumstances of the termination. The table below summarizes these rights and the amount of any payments and benefits due under the circumstances specified for the executive indicated.

 

Further, certain of the Company’s benefit plans and arrangements contain provisions regarding acceleration of vesting and payment upon specified termination events; see “—Company Share-Based Plans” below. In addition, the Company may authorize discretionary severance payments to its NEOs upon termination.

 

Company Share-Based Plans

 

Third Amended 2014 Incentive Plan (the “Incentive Plans”). A “Change in Control” under the Third 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;

 

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  • 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 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.

 

If we experience a Change in Control, the administrator may, at its discretion, provide that 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 will be assumed by the surviving entity, will be replaced by a comparable substitute award of substantially equal value granted by the surviving entity, or will otherwise automatically 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, on such date. 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 assumed or substitute awards for Time-Based Awards originally granted under the Incentive Plans will automatically become vested in full on the last day of the holder’s employment 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.

 

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 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 Plans), 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 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.

 

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 Incentive Plans could be treated as parachute payments. In that event, the Incentive Plans provide that the benefits under the 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 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 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.

 

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Change in Control/Severance Payment Table as of December 31, 2018

 

The following table estimates the potential payments and benefits to our Executive Officers upon termination of employment or a change in control of the Company, assuming such event occurs on December 31, 2018. These estimates do not reflect the actual amounts that would be paid to such persons, which would only be known at the time that they become eligible for payment and would only be payable if the specified event occurs.

 

Items Not Reflected in Table. The following items are not reflected in the table set forth below:

 

• Accrued salary, bonus and vacation.

 

• Welfare benefits provided to all salaried employees having substantially the same value.

 

• Amounts outstanding under the Company’s 401(k) plan.

 

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Change in Control and Severance Payments as of December 31, 2018

 

      Reason for Termination / Acceleration 

 

 

Name

 

 

 

Benefit

 

 

 

Disability (1)

  

 

 

Company
non-renewal (2)

   Termination by
Company without
cause or by Executive
for good reason (3)		  

 

 

Change in Control (4)

 
                    
R. Ramin Kamfar  Cash Severance  $-   $2,400,000   $2,400,000   $- 
   Acceleration of Share-Based Awards   2,444,193    2,444,193    2,444,193    - 
   Annual Disability Benefits (5)   120,000    -    -    - 
   Other (6)    -    41,626    41,626    - 
   Total  $2,564,193   $4,885,819   $4,885,819   $- 
Jordan B. Ruddy  Cash Severance  $-   $1,200,000   $1,200,000   $1,800,000 
   Acceleration of Share-Based Awards   1,104,438    1,104,438    1,104,438    1,104,438 
   Annual Disability Benefits (5)   120,000    -    -    - 
   Other (6)    -    12,459    12,459    12,459 
   Total  $1,224,438   $2,316,897   $2,316,897   $2,916,897 
James G. Babb, III  Cash Severance  $-   $1,300,000   $1,300,000   $1,950,000 
   Acceleration of Share-Based Awards   1,104,438    1,104,438    1,104,438    1,104,438 
   Annual Disability Benefits (5)   120,000    -    -    - 
   Other (6)   -    35,829    35,829    35,829 
   Total  $1,224,438   $2,440,267   $2,440,267   $3,090,267 
Ryan S. MacDonald  Cash Severance  $-   $1,000,000   $1,000,000   $1,500,000 
   Acceleration of Share-Based Awards   1,075,022    1,075,022    1,075,022    1,075,022 
   Annual Disability Benefits (5)   120,000    -    -    - 
   Other (6)    -    41,626    41,626    41,626 
   Total  $1,195,022   $2,116,648   $2,116,648   $2,616,648 
Christopher J. Vohs  Cash Severance  $-   $750,000   $750,000   $1,125,000 
   Acceleration of Share-Based Awards   406,474    406,474    406,474    406,474 
   Annual Disability Benefits (5)   120,000    -    -    - 
   Other (6)    -    41,626    41,626    41,626 
   Total  $526,474   $1,198,100   $1,198,100   $1,573,100 
Michael L. Konig  Cash Severance  $-   $1,200,000   $1,200,000   $1,800,000 
   Acceleration of Share-Based Awards   1,104,438    1,104,438    1,104,438    1,104,438 
   Annual Disability Benefits (5)   120,000    -    -    - 
   Other (6)    -    27,370    27,370    27,370 
   Total  $1,224,438   $2,331,808   $2,331,808   $2,931,808 

 

(1)Each Executive Agreement provides that the Company may terminate the Executive Officer’s employment, to the extent permitted by applicable law, if the Executive Officer (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company, or a disability.  If the Company terminates the Executive Officer’s employment for disability, the Executive Officer will be entitled to receive the following:

 

(A) Any unpaid base salary and accrued but unused vacation and/or paid time off (determined in accordance with Company policy) through the date of termination (paid in cash within 30 days, or such shorter period required by applicable law, following the effective date of termination);

 

(B) Reimbursement for all necessary, customary and usual business expenses and fees incurred and paid by the Executive Officer prior to the effective date of termination in connection with his employment or service upon presentation to the Company of reasonable substantiation and documentation (payable in accordance with the Company’s expense reimbursement policy);

 

(C) Vested benefits, if any, to which the Executive Officer may be entitled under the Company’s employee benefit plans as provided under his Executive Agreement (payable in accordance with the applicable employee benefit plan), and directors and officers liability coverage pursuant to the applicable provisions of the Executive Agreement for actions and inactions occurring during the term of such agreement, and continued coverage for any actions or inactions by the Executive Officer while providing cooperation under the Executive Agreement (all such benefits set forth under subsection (A) through (C) to this footnote (1), collectively, the “Accrued Benefits”); and

 

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(D) Executive Officer's outstanding equity awards (x) that are subject solely to time-based vesting conditions shall become fully vested as of Executive Officer's date of termination for disability and (y) that are subject to performance-based vesting conditions, will vest if and to the extent the applicable performance-based conditions are satisfied as of the date of termination (without regard to the original length of the performance period); provided, however, that any performance-based award that vests pursuant to clause (y) will be pro-rated for the actual number of days in the applicable vesting period preceding the date of termination of Executive Officer's employment.

 

(2)Each Executive Agreement provides that the Company may elect not to extend the term of such Executive Agreement by giving written notice to the Executive Officer at least sixty (60) days prior to any anniversary of December 31, 2020 (a “Non-Renewal”). In the event that the Executive Officer’s employment is terminated by reason of a Non-Renewal by the Company and the Executive Officer is willing and able, at the time of such Non-Renewal, to continue performing services on the terms and conditions set forth herein for the renewal term that would have occurred but for the Non-Renewal, then the Executive Officer shall be entitled to receive:

 

(A)The Accrued Benefits; and,

 

(B)If the Executive Officer signs a general release of claims in favor of the Company (subject to the expiration of any applicable or legally required revocation period) within sixty (60) days after the effective date of termination (the “Release Requirement”):

 

(1) A lump sum cash payment equal to a multiple (the “Severance Multiple”) of (a) three times of the sum (in the case of Mr. Kamfar), or (b) two times of the sum (in the case of the other Executive Officers), of (i) his base salary, and (ii) his average annual bonus with respect to the two prior calendar years (or, if any such termination of employment occurs during calendar year 2018, then the annual bonus paid or payable to him for the year ending December 31, 2017, provided, further, that if the termination occurs during the years ending December 31, 2018 or 2019, the 2017 annual bonus will be annualized for purposes of calculating his average annual bonus with respect to the two prior calendar years);

 

(2) A lump sum cash payment in an amount equal to his target bonus for the then-current calendar year (annualized, to the extent the 2017 target bonus is used), pro-rated for the number of days in such calendar year ending on the effective date of termination;

 

(3) All outstanding equity-based awards (x) that are subject solely to time-based vesting conditions will become fully vested as of the effective date of termination, and (y) that are subject to performance-based vesting conditions will vest if and to the extent the applicable performance-based vesting conditions are satisfied as of the date of termination (without regard to the original length of the performance period); provided, that any performance-based award that vests pursuant to clause (y) will be pro-rated for the actual number of days in the applicable vesting period preceding the effective date of termination;

 

(4) If entitled to elect continuation of coverage under any Company group health plan under applicable law, reimbursement for 100% of COBRA premiums incurred for he and his dependents under such plan during the duration of his COBRA continuation;

 

(5) A lump-sum cash payment of any unpaid base salary or unpaid base payment and accrued but unused vacation and/or paid time off through the date of termination; and

 

(6) Reimbursement for all necessary, customary and usual business expenses and fees incurred and paid prior to the effective date of termination (all such benefits set forth under this subsection (B) to footnote (5), collectively, the “Release Benefits”).

 

(3)Under each Executive Agreement, the Company may terminate an Executive Officer’s employment or service at any time without “cause” (defined below) upon not less than sixty (60) days’ prior written notice to the Executive Officer. In addition, the Executive Officer may initiate a termination of employment or service by resigning for “good reason” (defined below).  The Executive Officer must give the Company not less than sixty (60) days’ prior written notice of such resignation.  In addition, the Company may initiate a termination of employment or service by sending a notice of non-renewal of the Executive Agreement to the Executive Officer, as described above. If the Executive Officer satisfies the Release Requirement in these circumstances, the Executive Officer will be entitled to receive the Accrued Benefits and the Release Benefits. If the Executive Officer does not satisfy the Release Requirement in these circumstances, we refer to the termination as a no-release termination.  Upon any no-release termination, the Executive Officer is entitled to receive only the amount due to the Executive Officer under the Company’s then current severance pay plan for employees, if any.  No other payments or benefits will be due under the Executive Agreement to the Executive Officer, but the Executive Officer will be entitled to receive the Accrued Benefits.

 

Each Executive Agreement defines “cause” as any of the following grounds for termination of the Executive Officer’s employment or service:

 

i.the Executive Officer’s conviction of, or plea of guilty or nolo contendere to, a felony (excluding traffic-related felonies), or any financial crime involving the Company (including, but not limited to, fraud, misappropriation or embezzlement of Company assets);

 

ii.the Executive Officer’s willful and gross misconduct in the performance of his duties (other than by reason of his incapacity or disability); provided, that the Company’s dissatisfaction with the Executive Officer’s performance shall not constitute “cause”;

 

iii.the Executive Officer’s continuous, willful and material breach of the Executive Agreement after written notice of such breach has been given by the Board in its reasonable discretion exercised in good faith; provided that, in no event shall any action or omission in subsection (ii) or (iii) constitute “cause” unless (1) the Company gives notice to the Executive Officer stating that the Executive Officer will be terminated for cause, specifying the particulars thereof in reasonable detail and the effective date of termination (which shall be no less than ten (10) business days following the date on which such written notice is received by the Executive Officer) (the “Cause Termination Notice”), (2) the Company provides the Executive Officer and his counsel with an opportunity to appear before the Board to rebut or dispute the alleged reason for termination on a specified date that is at least three (3) business days following the date on which the Cause Termination Notice is given, but prior to the stated termination date described in clause (1), and (3) a majority of the Board (calculated without regard to the Executive Officer, if applicable) determines that the Executive Officer has failed to materially cure or cease such misconduct or breach within ten (10) business days after the Cause Termination Notice is given to him. For purposes of the foregoing sentence, no act, or failure to act, on the Executive Officer’s part shall be considered willful unless done or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company, and any act or omission by the Executive Officer pursuant to the authority given pursuant to a resolution duly adopted by the Board or on the advice of counsel to the Company will be deemed made in good faith and in the best interest of the Company.

 

Each Executive Agreement defines “good reason” to mean the occurrence of any of the following events without the Executive Officer’s consent:

 

iv.the assignment to the Executive Officer of duties or responsibilities substantially inconsistent with his title at the Company or a material diminution in the Executive Officer’s title, authority or responsibilities; provided (in the case of Mr. Kamfar only) that failing to maintain Mr. Kamfar as a member of the Board will constitute “good reason”; and provide (in the case of the other the Executive Officers) that a change in title or modification of authority or responsibilities in connection with hiring new or elevating other executives as reasonably required or commensurate with the growth of the Company shall not constitute “good reason”;

 

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v.a material reduction in base salary, or the annual or long-term target incentive opportunities, of the Executive Officer;

vi.the Company’s continuous, material and willful breach of the Executive Agreement; or

vii.the relocation (without the written consent of the Executive Officer) of the Executive Officer’s principal place of employment or service by more than thirty-five (35) miles from its location on the effective date of the Executive Agreement.

 

Each Executive Agreement provides that (i) “good reason” will not be deemed to exist unless notice of termination on account thereof (specifying a termination date of at least sixty (60) days but no more than ninety (90) days from the date of such notice) is given no later than ninety (90) days after the time at which the event or condition purportedly giving rise to “good reason” first occurs or arises, and (ii) if there exists an event or condition that constitutes “good reason,” the Company will have thirty (30) days from the date notice of such a termination is given to cure such event or condition and, if the Company does so, such event or condition will not constitute “good reason;” provided, however, that the Company’s right to cure such event or condition will not apply if there have been repeated breaches by the Company.

 

(4)The Executive Agreement of each Executive Officer other than Mr. Kamfar provides that if a “Change in Control” of the Company occurs and, upon or within 18 months thereafter, the Company terminates the Executive Officer’s employment or service without “cause” or the Executive Officer terminates his employment or service for “good reason,” then the Executive Officer shall be entitled to receive (A) the Accrued Benefits; and (B) if the Executive Officer satisfies the Release Requirement, the Release Benefits, except that the Severance Multiple shall be three rather than two.

 

The Executive Agreement of each Executive Officer other than Mr. Kamfar defines “Change in Control” to have the same meaning as the same term under the Third Amended 2014 Incentive Plans, which definition is set forth above under “Potential Payments Upon Termination or Change-in-Control—Company Share-Based Plans.”

  

(5)$120,000 represents the maximum amount paid under the Company’s Long-Term Disability Plan to an employee if disabled for 90 consecutive days and the employee was eligible to receive the long-term disability payments. $120,000 represents the aggregate of maximum monthly payments of $2,000 payable as a long-term disability benefit for a maximum of 5 years or to age 70 (such payments would continue for the length of the disability).

 

(6)Represents COBRA payments for a maximum of 18 months.

 

In the event of the death of an Executive Officer during the term of their Executive Agreement, the Executive Officer will be entitled to receive (i) the Accrued Benefits, and (ii) all outstanding equity awards (a) that are subject solely to time-based vesting conditions, which will become fully vested as of the date of such Executive Officer’s death, and (b) that are subject to performance-based vesting conditions, which will vest if and to the extent the applicable performance-based vesting conditions are satisfied as of the date of such Executive Officer’s death (without regard to the original length of the performance period); provided, however, that any performance-based award that vests and becomes payable pursuant to clause (b) will be pro-rated for the actual number of days in the applicable performance period preceding the Executive Officer’s death.

 

In the event of (i) the Company’s termination of an Executive Officer’s employment or service at any time for “cause” or (ii) voluntary termination by the Executive Officer without “good reason” upon sixty (60) days’ prior written notice to the Company, the Executive Officer will be entitled to receive the Accrued Benefits. In such event, all payments and benefits under the Executive Agreement will otherwise cease, and all then-unvested awards or benefits will be forfeited.

 

CEO Pay Ratio

 

The amount earned in 2018 by our Chief Executive Officer with respect to the annual cash incentive bonus (the “Annual Cash Bonus”) for the year ended December 31, 2018 is not calculable as of the date of this Annual Report on Form 10-K, because the final performance data for the 2018 performance period used in determining the amount of such Annual Cash Bonus was not yet available as of the date of this Annual Report on Form 10-K.  For this reason, pursuant to Instruction 6 to Item 402(u) of Regulation S-K, we have omitted the CEO pay ratio disclosure required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K from this Annual Report on Form 10-K. We expect to determine the amount payable to our Chief Executive Officer with respect to such Annual Cash Bonus in March 2019, and will include such amount, and the required CEO pay ratio disclosure, in a Current Report on Form 8-K to be filed no later than four business days after our compensation committee approves the Chief Executive Officer’s Annual Cash Bonus, if any, for the year ended December 31, 2018.

 

Compensation of Directors

 

During 2018, the independent directors’ compensation consisted of cash and equity retainers amounting to $40,000 and $65,000, respectively. In addition, the lead independent director, the audit committee chairman, the compensation committee chairman, and the nominating & corporate governance chairman received annual retainers of $25,000, $20,000, $15,000, and $10,000, respectively. Effective July 2018 the investment committee chairman received an annual retainer of $15,000. Each member of the audit committee, the compensation committee, the nominating & corporate governance committee and the investment committee received annual retainers of $10,000, $7,500, $5,000 and $5,000, respectively. Meeting fees were eliminated in 2018 as part of the compensation program. All directors receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at meetings of the Board.

 

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We have provided below certain information regarding compensation earned by and paid to our directors and during fiscal year 2018 (amounts in thousands).

 

   Fees Paid         
   in Cash in   LTIP Unit     
Name  2018 (1)   Awards (2)   Total 
Brian D. Bailey (3)  $74   $63   $137 
Elizabeth Harrison (4)   25    30    55 
I. Bobby Majumder (5)   89    63    152 
Romano Tio (6)   71    63    134 
R. Ramin Kamfar   -    -    - 

 

(1)Excludes $8,333 of the $25,000 annual retainer paid in 2017, which retainer also compensated for services to be rendered in 2018 in the amount of $8,333.
(2)Reflects 6,263 LTIP Units granted under the Second Amended 2014 Individuals Plan (which has subsequently been amended and restated in their entirety by the Third Amended 2014 Individuals Plan) to Mr. Bailey, Mr. Majumder and Mr. Tio, and 3,165 LTIP Units granted under the Third Amended 2014 Individuals Plan for Ms. Harrison, each a 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 January 1, 2018 and October 4, 2018, respectively (i.e. $10.11 and $9.37).
(3)Includes standard Board retainer of $40,000, audit committee chairperson retainer of $20,000, compensation committee member retainer of $7,500, investment committee member retainer of $5,000 and nominating committee member retainer of $5,000, less $8,333 paid in 2017. Includes one $2,000 payment and one $2,500 payment paid in 2018 for 2017 meetings. Does not include $1,199 paid in 2019 for services rendered in 2018.
(4)Includes standard Board retainer of $40,000, compensation committee member retainer of $7,500, and nominating committee member retainer of $5,000, pro-rated for Ms. Harrison’s service during 2018.
(5)Includes standard Board retainer of $40,000, lead independent director retainer of $25,000, audit committee member retainer of $10,000, compensation committee member retainer of $7,500 and nominating committee chairperson retainer of $10,000, less $8,333 paid in 2017. Includes one $2,000 payment and one $2,500 payment paid in 2018 for 2017 meetings.
(6)

Includes standard Board retainer of $40,000, compensation committee chairperson retainer of $15,000, audit committee member retainer of $10,000, nominating and corporate governance member retainer of $5,000, and investment committee member retainer of $5,000, less $8,333 paid in 2017. Includes one $2,000 payment and one $2,500 payment paid in 2018 for 2017 meetings. Includes $2,398 paid in 2018 for services to be rendered in 2019.

 

Item 12.Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters

 

Stock Ownership

 

The table below sets forth, as of February 13, 2019, certain information regarding the total beneficial ownership of our shares of Class A common stock, Class C common stock, and shares of Class A common stock issuable upon redemption of OP Units for (1) each person who is expected to be 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 executive officers 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 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 within 60 days thereafter, are deemed outstanding, while such shares are not deemed outstanding for purposes of computing percentage ownership of any other person.  

 

Name of Beneficial Owner  Amount of
Beneficial
Ownership		   Percent of
Common Stock (2)		 
Named Executive Officers and Directors: (1)          
R. Ramin Kamfar (3)(4)(5)   5,091,078    16.7%
Jordan B. Ruddy (3)(6)   540,812    1.78%
James G. Babb (3)(6)   674,632    2.22%
Ryan S. MacDonald (3)(6)   205,082    * 
Christopher J. Vohs (3)(6)   14,085    * 
Michael L. Konig (3)(6)(7)   534,812    1.76%
Brian D. Bailey, Independent Director   30,873    * 
Elizabeth Harrison, Independent Director   10,001    * 
I. Bobby Majumder, Independent Director   29,824    * 
Romano Tio, Independent Director   33,843    * 
All Named Executive Officers and Directors as a Group   7,165,042    23.5%
           
5% Stockholders:          

BlackRock, Inc. (8)

55 East 52nd Street

New York, NY 10022

   1,734,100    7.5%

Harbert Special Opportunity Fund, LP (9)

2100 Third Avenue North Suite 600

Birmingham, AL 35203

   1,348,384    5.8%

The Vanguard Group (10)

100 Vanguard Blvd.

Malvern, PA 19355

   1,298,675    5.6%

 

* Less than 1%.

 

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(1)The address of each beneficial owner listed is 712 Fifth Avenue, 9th Floor, New York, New York 10019.

 

  (2)

Numbers and percentages in the table are based on 23,063,119 shares of Class A common stock outstanding, 76,603 shares of Class C common stock outstanding, 6,386,841 units of limited partnership interest in our Operating Partnership (“OP Units”) outstanding and 920,228 vested long-term incentive plan units of the Operating Partnership (“LTIP Units”) outstanding, in each case as of February 13, 2019, for a total of 30,446,791 shares of Class A common stock, Class C common stock, OP Units and vested LTIP Units outstanding. Numbers and percentages in the table exclude an additional 1,419,493 unvested LTIP Units outstanding as of February 13, 2019 as set forth in footnotes 3 and 4 below.

 

 

  (3)

Percent of common stock for each executive officer and director is calculated using the combined total of all shares of Class A common stock, Class C common stock, OP Units and vested LTIP Units owned by each such individual, as each is an equivalent unit of ownership, relative to the total of 30,446,791 shares of Class A common stock and Class C common stock, OP Units, and vested LTIP Units outstanding as of February 13, 2019 (comprised of 23,063,119 shares of Class A common stock outstanding, 76,603 shares of Class C common stock outstanding, 6,386,841 OP Units outstanding, and 920,228 vested LTIP Units outstanding).  Further, the number of vested LTIP Units owned by each of the following executive officers and directors include the indicated number of LTIP Units that, though vested, may not yet have achieved capital account equivalency with the OP Units held by the Company (at which time such LTIP Units may convert to OP Units and may then be settled in shares of Class A Common Stock): (a) 188,792 vested LTIP Units owned by Mr. Kamfar; (b) 31,584 vested LTIP Units owned by Mr. Ruddy; (c) 31,584 vested LTIP Units owned by Mr. Babb; (d) 30,647 vested LTIP Units owned by Mr. MacDonald; (e) 11,510 vested LTIP Units owned by Mr. Vohs; (f) 31,584 vested LTIP Units owned by Mr. Konig; (g) 13,099 vested LTIP Units owned by Mr. Bailey; (h) 10,001 vested LTIP Units owned by Ms. Harrison; (i) 13,099 vested LTIP Units owned by Mr. Majumder; and (j) 13,099 vested LTIP Units owned by Mr. Tio. 

 

(4)

10,148 shares of Class A Common Stock, 4,000,437 OP Units and 870,286 LTIP Units reflected in the totals are pledged as security in connection with third party loans.

 

(5)Totals do not include 515,033 remaining unvested LTIP Units issued to Mr. Kamfar pursuant to his Executive Agreement, which will vest and become nonforfeitable in accordance with the vesting periods (and any applicable performance criteria and targets) of each award, subject to continued employment and other conditions.

 

(6)Totals do not include the following remaining unvested LTIP Units issued to each such Executive Officer pursuant to the Executive Agreement: (a) 209,931 unvested LTIP Units issued to Mr. Ruddy; (b) 209,931 unvested LTIP Units issued to Mr. Babb; (c) 204,444 unvested LTIP Units issued to Mr. MacDonald; (d) 70,223 unvested LTIP Units issued to Mr. Vohs; and (e) 209,931 unvested LTIP Units issued to Mr. Konig. The remaining unvested LTIP Units attributable to each such Executive Officer will vest and become nonforfeitable in accordance with the vesting periods (and any applicable performance criteria and targets) of each award, subject to continued employment and other conditions.

 

(7)472,296 OP Units reflected in total are pledged as security in connection with a third party loan.

 

(8)Based on the Schedule 13G/A filed with the SEC on February 4, 2019. This report includes holdings of various subsidiaries of BlackRock, Inc.

 

(9)

Based on the Schedule 13D filed with the SEC on October 29, 2018. This report is a joint filing of (i) Harbert Special Opportunity Fund, LP, (ii) Harbert Special Opportunity Fund GP, LLC, (iii) Harbert Fund Advisors, Inc., (iv) Harbert Management Corporation, (v) Jack Bryant, (vi) Todd N. Jordan, and (vii) Raymond Harbert.

 

(10)

Based on Schedule 13G filed with the SEC on February 11, 2019. This report includes holdings of various subsidiaries of the Vanguard Group, Inc.

 

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Equity Compensation Plans

 

Incentive Plans

 

The Company’s incentive plans were originally adopted by our Board 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 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,” and together with the Amended 2014 Individuals Plan, the “Amended 2014 Incentive Plans”) as adopted by our Board on April 7, 2015 and approved by our stockholders on May 28, 2015. On August 3, 2017 and October 18, 2017, our Board adopted, and on October 26, 2017 our stockholders approved, the second amendment and restatement of the 2014 Individuals Plan (the “Second Amended 2014 Individuals Plan”) and the 2014 Entities Plan (the “Second Amended 2014 Entities Plan,” and together with the Second Amended 2014 Individuals Plan, the “Second Amended 2014 Incentive Plans”), which superseded and replaced in their entirety the Amended 2014 Incentive Plans.

 

On August 9, 2018, our Board adopted, and on September 28, 2018 our stockholders approved, the third amendment and restatement of the Second Amended 2014 Individuals Plan (the “Third Amended 2014 Individuals Plan”) and the Second Amended 2014 Entities Plan (the “Third Amended 2014 Entities Plan,” and together with the Third Amended 2014 Individuals Plan, the “Third Amended 2014 Incentive Plans,” and together with the Second Amended 2014 Incentive Plans, the “Incentive Plans), which superseded and replaced in their entirety the Second Amended 2014 Incentive Plans Under the Third Amended 2014 Incentive Plans, we have reserved and authorized an aggregate number of 2,250,000 shares of our common stock for issuance. As of February 6, 2019, 1,648,639 shares were available for future issuance.

 

The purpose of the Third Amended 2014 Incentive Plans is to attract and retain independent directors, executive officers and other key employees, including officers and employees of our Operating Partnership and their affiliates, and other service providers. The Third 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.

 

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Administration of the Third Amended 2014 Incentive Plans

 

The Third Amended 2014 Incentive Plans are administered by the compensation committee of our Board, except that the Third Amended 2014 Incentive Plans will be administered by our Board 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, as applicable. The administrator will approve who will receive grants under the Third 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.

 

Eligibility

 

Employees and officers of our Company and our affiliates (including employees of our Operating Partnership) and members of our Board are eligible to receive grants under the Third 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 may receive grants under the Third Amended 2014 Individuals Plan.

 

Entities that provide significant services to us or our affiliates, including our Operating Partnership, may receive grants under the Third Amended 2014 Entities Plan in the discretion of the administrator.

 

The following table provides information about our common stock that may be issued upon the exercise of options, warrants and rights under our Third Amended 2014 Incentive Plans, as of December 31, 2018.

 

Plan Category  Number of
Securities to Be
Issued Upon
Exercise of
Outstanding
Options,
Warrants, and
Rights		   Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants, and
Rights		   Number of
Securities
Remaining
Available for
Future
Issuance		 
Equity compensation plans approved by security holders   -    -    2,166,037 
Equity compensation plans not approved by security holders   -    -    - 
Total   -    -    2,166,037 

 

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Item 13.Certain Relationships and Related Transactions and Director Independence

 

Director Independence

 

A majority of the members of our Board, and all of the members of the audit committee, are “independent.” One of our current directors, Ramin Kamfar, is affiliated with us and we do not consider Mr. Kamfar to be an independent director. Our other current directors, Brian D. Bailey, Elizabeth Harrison, I. Bobby Majumder and Romano Tio, qualify as “independent directors” as defined under the rules of the New York Stock Exchange American. Messrs. Majumder and Tio each serve as an independent director of the Board of Directors of Bluerock Total Income + Real Estate Fund, an affiliate of our former Manager (“TIPRX”). Serving as a director of, or having an ownership interest in, another program sponsored by Bluerock will not, by itself, preclude independent director status. The Board has determined that Messrs. Bailey, Majumder and Tio and Mrs. Harrison each satisfy the independence criteria. None of these directors has ever served as (or is related to) an employee of ours or any of our predecessors or acquired companies or received or earned any compensation from us or any such other entities except for compensation directly related to service as a director of us or TIPRX. Therefore, we believe that all of these directors are independent directors.

 

Certain Transactions with Related Persons

 

Related Person Transaction Policy

 

Our Board has adopted a written related person transaction policy. The purpose of this policy is to describe the procedures used to identify, review and approve any existing or proposed transaction, arrangement, relationship (or series of similar transactions, arrangements or relationships) in which (a) we, our Operating Partnership or any of our subsidiaries were, are or will be a participant, (b) the aggregate amount involved exceeds $120,000, and (c) a related person has or will have a direct or indirect interest. For purposes of this policy, a related person is (i) any person who is, or at any time since the beginning of the current fiscal year was, a director, director nominee, or executive officer of the Company, (ii) any beneficial owner of more than 5% of our stock, or (iii) any immediate family member of any of the foregoing persons.

 

Under this policy, our audit committee is responsible for reviewing and approving or ratifying each related person transaction or proposed related person transaction. In determining whether to approve or ratify a related person transaction, the audit committee is required to consider all relevant facts and circumstances of the related person transaction available to the audit committee and to approve only those related person transactions that are in, or not inconsistent with, the best interests of the Company and its stockholders, as the audit committee determines in good faith. No member of the audit committee is permitted to participate in any consideration of a related person transaction with respect to which that member or any of his or her immediate family is a related person.

 

Affiliate Transactions

 

As described further below, we have entered into agreements with certain affiliates pursuant to which they will provide services to us.  Our independent directors have reviewed the material transactions between our affiliates and us since the beginning of 2018.  Set forth below is a description of such transactions and the independent directors’ determination of their fairness.

 

Administrative Services Agreement

 

In connection with the closing of the Internalization, the Company, the Operating Partnership, and Bluerock TRS Holdings, LLC, a Delaware limited liability company and wholly-owned subsidiary of the Operating Partnership (the “the OP Sub”), and Manager Sub (collectively, the “Company Parties,” and each, a “Company Party”) entered into an Administrative Services Agreement (the “Administrative Services Agreement”) with Bluerock and its affiliate, Bluerock Real Estate Holdings, LLC (together “Bluerock”). Pursuant to the Administrative Services Agreement, Bluerock provides the Company with certain human resources, investor relations, marketing, legal and other administrative services (the “Services”) to facilitate a smooth transition in the Company’s management of its operations and enable the Company to benefit from operational efficiencies created by access to such services following closing, to give the Company time to develop such services in-house or to hire other third-party service providers for such services. The Services are provided on an at-cost basis, generally allocated based on the use of such Services for the benefit of the Company’s business, and are invoiced on a quarterly basis. In addition, the Administrative Services Agreement permits, from time to time, certain employees of the Company to provide or cause to be provided services to Bluerock, on an at-cost basis, generally allocated based on the use of such services for the benefit of the business of Bluerock and invoiced on a quarterly basis, and otherwise subject to the terms of the Services provided by Bluerock to the Company under the Administrative Services Agreement. Payment by the Company of invoices and other amounts payable under the Administrative Services Agreement will be made in cash or, in the sole discretion of the Board, in the form of fully-vested LTIP Units.

 

The initial term of the Administrative Services Agreement was one year from October 31, 2017, subject to the Company’s right to renew it for successive one-year terms upon sixty (60) days written notice prior to expiration. The initial term of the Administrative Services Agreement expired on October 31, 2018. On August 6, 2018, the Company delivered written notice to Bluerock of the Company’s intention to renew the Administrative Services Agreement for an additional one-year term, to expire on October 31, 2019. The Administrative Services Agreement automatically terminates (i) upon termination by the Company of all Services, or (ii) in the event of non-renewal by the Company. Any Company Party can also be able to terminate the Administrative Services Agreement with respect to any individual Service upon written notice to the applicable Bluerock entity, in which case the specified Service will discontinue as of the date stated in such notice, which date must be at least ninety (90) days from the date of such notice. Further, either Bluerock entity can terminate the Administrative Services Agreement at any time upon the occurrence of a “Change of Control Event” (as defined therein) upon at least one hundred eighty (180) days prior written notice to the Company.

 

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In the event of (i) the failure by any Company Party to pay for Services as required under the Administrative Services Agreement, (ii) any material default by either Bluerock entity in the due performance or observance of any term or agreement in the Administrative Services Agreement, or (iii) the adjudication of any party as insolvent and/or bankrupt, or the appointment of a receiver or trustee for any party or its property, or the approval of a petition for reorganization or arrangement under any bankruptcy or insolvency Law, or the filing by any party of a voluntary petition in bankruptcy, or the consent by any party to the appointment of a receiver or trustee (in each such case, the “Defaulting Party”), then the non-Defaulting Party shall have the right, at its sole discretion, (A) in the case of a default under clause (iii), to immediately terminate the applicable Service(s) and/or the Administrative Services Agreement and its participation with the Defaulting Party thereunder; and (B) in the case of a default under clause (i) or (ii), to terminate the applicable Service(s) and/or the Administrative Services Agreement and its participation with the Defaulting Party thereunder if the Defaulting Party has failed to (x) cure the default within thirty (30) days after receiving written notice of such default, or (y) take substantial steps towards and diligently pursue the curing of the default. The Company Parties have each agreed that in the event of the termination of the Administrative Services Agreement or of a Service thereunder, the obligation of Bluerock to provide the terminated Services, or to cause the terminated Services to be provided, shall immediately cease.

 

Pursuant to the Administrative Services Agreement, Bluerock is responsible for the payment of all employee benefits and any other direct and indirect compensation for the employees of Bluerock (or their affiliates or permitted subcontractors) assigned to perform the Services, as well as such employees’ worker’s compensation insurance, employment taxes, and other applicable employer liabilities relating to such employees.

 

The amounts paid or payable to Bluerock for the year ended December 31, 2018 are as reflected in the following table (amounts in thousands):

 

   Approximate
Dollar Value of
Mr. Kamfar’s
Interest In Company
Incurred Amounts		   Year Ended
December 31, 2018		 
Expense Reimbursements  $2,162   $2,162 
Offering expense reimbursements   1,314    1,314 

 

Stockholders Agreement

 

In connection with the closing of the Internalization, the Company and the Contributors entered into a Stockholders Agreement (the “Stockholders Agreement”), pursuant to which the Company may grant certain registration rights for the benefit of the Contributors and impose certain limitations on the voting rights of the Class C Common Stock, in each case as a condition to the consummation of the transactions contemplated by the Contribution Agreement.

 

Pursuant to the Stockholders Agreement, each Contributor, in respect of any Class A common stock that they may receive in connection with any redemption or conversion, as applicable, of any OP Units or Class C Common Stock received as a result of the Internalization (“Registrable Shares”), may require the Company from time to time to register the resale of their Registrable Shares under the Securities Act on a registration statement filed with the SEC. The Stockholders Agreement grants each Contributor certain rights to demand a registration of some or all of their Registrable Shares (a “Demand Registration”) or to request the inclusion of some or all of their Registrable Shares in a registration being effected by the Company for itself or on behalf of another person (a “Piggyback Registration”), in each case subject to certain customary restrictions, limitations, registration procedures and indemnity provisions. The Company is obligated to use commercially reasonable efforts to prepare and file a registration statement within specified time periods and to cause that registration statement to be declared effective by the SEC as soon as reasonably practicable thereafter.

 

The ability to cause the Company to effect a Demand Registration is subject to certain conditions. The Company is not required to effect such registration within 180 days of the effective date of any prior registration statement with respect to the Company’s Class A Common Stock and may delay the filing for up to 60 days under certain circumstances.

 

If, pursuant to an underwritten Demand Registration or Piggyback Registration, the managing underwriter advises that the number of Registrable Shares requested to be included in such registration exceeds a maximum number (the “Maximum Number”) that the underwriter believes can be sold without delaying or jeopardizing the success of the proposed offering, the Stockholders Agreement specifies the priority in which Registrable Shares are to be included.

 

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Pursuant to the Stockholders Agreement, the Contributors have agreed to limit certain of their voting rights with respect to the Class C Common Stock. 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 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 capital stock of the Company that have 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 capital stock of the Company 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 will 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 our Board. All Subject Shares other than the Excess Shares may be voted for or against any matter in the Class C Common Stock Holder’s sole and absolute discretion.

 

Premises Agreements

 

In connection with the closing of the Internalization, Bluerock and the former Manager entered into a use and occupancy agreement (the “NY Agreement”) for certain corporate space located in New York, NY (the “NY Premises”) and for certain space located in Southfield, MI (the “MI Premises,” and together with the NY Premises, the “Premises”). On December 1, 2017, Bluerock and Manager Sub entered into sublease for the MI Premises (“MI Sublease,” and together with the NY Agreement, the “Premises Agreements”). Pursuant to the Premises Agreements, collectively, Bluerock permits the Manager Sub and certain of its subsidiaries and/or affiliates to share occupancy of the Premises.

 

Dealer Manager Agreement for Series B Preferred Stock Offering

 

In conjunction with the offering of the Series B Preferred Stock, we entered into a dealer manager agreement (the “Series B Dealer Manager Agreement”) with Bluerock Capital Markets, LLC (“Bluerock Capital Markets”), our affiliate, pursuant to which it assumed dealer manager responsibilities for our Series B Preferred Stock Offering. Pursuant to the Series B Dealer Manager Agreement, Bluerock Capital Markets will receive up to 7.0% and 3.0% of the gross offering proceeds from the offering as selling commissions and dealer manager fees, respectively. The dealer manager re-allows the substantial majority of the selling commissions and dealer manager fees to participating broker-dealers and incurs costs in excess of the 10%, which costs are borne by the dealer manager without reimbursement by the Company.

 

Summary of Fees and Reimbursements to Dealer Manager

 

Summarized below are the fees earned and expenses reimbursable to Bluerock Capital Markets, our affiliated dealer manager, and any related amounts payable for the year ended December 31, 2018 (amounts in thousands):

 

   Approximate
Dollar Value
of 
Mr.
Kamfar’s
Interest
In
REIT
Incurred
Amounts		   Incurred
for the
Year
Ended
December 31,
2018		 
Type of Compensation          
Selling Commissions  $8,651   $8,651 
Dealer Manager Fees   3,708    3,708 
Total:  $12,359   $12,359 

 

The dealer manager re-allows the substantial majority of the selling commissions and dealer manager fees to participating broker-dealers, and incurs costs in excess of the 10%, which costs are borne by the dealer manager bearing the loss from the excess above the 10% without reimbursement by the Company.

 

Transactions with Affiliates of Our Former Manager

 

We have entered into several transactions with four private real estate funds that are affiliates of Bluerock, an affiliate of our former Manager, in connection with our investments. Bluerock Special Opportunity + Income Fund, LLC (“Fund I”) and Bluerock Growth Fund (“BGF”) are managed and controlled by Bluerock. Bluerock Special Opportunity + Income Fund II, LLC (“Fund II”) and Bluerock Special Opportunity + Income Fund III, LLC (“Fund III”) are managed and controlled by a wholly owned subsidiary of Bluerock. Mr. Kamfar and a family owned limited liability company are the indirect owners of 100% of the membership interests of Bluerock, and certain of our and our former Manager’s officers is also an officer of Bluerock.

 

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Arlo Interests, formerly known as West Morehead

 

On January 6, 2016, through BRG Morehead NC, LLC (“BRG Arlo”), a wholly-owned subsidiary of the Operating Partnership, the Company made a convertible preferred equity investment in a multi-tiered joint venture along with Fund II, an affiliate of the former Manager, and an unaffiliated third party (the “Arlo JV”), to develop a 286-unit, Class A apartment community located in Charlotte, North Carolina known as Arlo.  The Company has a 0.5% common equity interest in BR Morehead JV Member, LLC, at December 31, 2018.

 

On December 29, 2016, the Company, through BRG Arlo, provided a $21.3 million mezzanine loan (the “BRG Arlo Mezz Loan”) to BR Morehead JV Member, LLC (“Arlo JV Member”), an affiliate of the former Manager. The BRG Arlo Mezz Loan is secured by Arlo JV Member’s approximate 95.0% interest in the Arlo JV, which is developing Arlo. On January 5, 2017, the Company increased the amount of the BRG Arlo Mezz Loan to approximately $24.6 million. The BRG Arlo Mezz Loan matures on the earlier of January 5, 2020, or the maturity date of the Arlo Construction Loan, as defined below, as extended, and bears interest at a fixed rate of 15.0%. Regular monthly payments are interest-only during the initial term. The BRG Arlo Mezz Loan can be prepaid without penalty. The Company has the right to exercise an option to purchase, at the greater of a 25 basis point discount to fair market value or 15% internal rate of return for Fund II, up to a 100% common membership interest in Arlo JV Member (the mezzanine borrower), which is 99.5% owned by Fund II and which currently holds an approximate 95.0% interest in the Arlo JV and in the Arlo property, subject to certain promote rights of our unaffiliated development partner.

 

In conjunction with the Arlo development, on December 29, 2016, the Arlo property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a $34.5 million construction loan (“the Arlo Construction Loan”) with an unaffiliated party, of which approximately $29.1 million is outstanding at December 31, 2018, and which is secured by the Arlo property. The Arlo Construction Loan matures on December 29, 2019, and contains two one-year extension options, subject to certain conditions including a debt service coverage, loan to value ratio and payment of an extension fee. The Arlo Construction Loan bears interest on a floating basis on the amount drawn based on LIBOR plus 3.75%, subject to a minimum of 4.25%. Regular monthly payments are interest-only until September 2019, with further payments based on twenty-five-year amortization. The Arlo Construction Loan can be prepaid without penalty.

 

In addition, on December 29, 2016, the Arlo property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a $7.3 million mezzanine loan with an unaffiliated party, of which $7.3 million is outstanding at December 31, 2018, and which is secured by membership interest in the joint venture developing the Arlo property. The loan matures on December 29, 2019, and contains two one-year extension options, subject to certain conditions including a debt service coverage, loan to value ratio, extension of the Arlo Construction Loan and payment of an extension fee. The loan bears interest on a fixed rate of 11.5%. Regular monthly payments are interest-only. The loan can be prepaid prior to maturity provided the lender receives a cumulative return of 30% of its loan amount including all principal and interest paid.

 

Cade Boca Raton Interests, formerly known as APOK Townhomes

 

On September 1, 2016, through BRG Boca, LLC (“BRG Boca”), a wholly-owned subsidiary of its Operating Partnership, the Company made an investment in a multi-tiered joint venture along with Fund II, an affiliate of the former Manager, and an unaffiliated third party (the “Boca JV”), to develop a 90-unit, Class A apartment community located in Boca Raton, Florida known as Cade Boca Raton. On January 6, 2017, (i) Fund II substantially redeemed the common equity investment held by BRG Boca in BR Boca JV Member, LLC (“BRG Boca JV Member”), an affiliate of the former Manager, for $7.3 million and (ii) BRG Boca maintained a 0.5% common interest in BR Boca JV Member.

 

On January 6, 2017, the Company, through BRG Boca, provided a $11.2 million mezzanine loan (the “BRG Boca Mezz Loan”) to BRG Boca JV Member. The BRG Boca Mezz Loan is secured by BR Boca JV Member’s approximate 90.0% interest in the Boca JV which is developing Cade Boca Raton. The BRG Boca Mezz Loan matures on the earlier of January 6, 2020, or the maturity of the Boca Construction Loan, defined below, as extended, and bears interest at a fixed rate of 15.0%. Regular monthly payments are interest-only during the initial term. The BRG Boca Mezz Loan can be prepaid without penalty. The Company has the right to exercise an option to purchase, at the greater of a 25 basis point discount to fair market value or 15% internal rate of return for Fund II, up to a 100% common membership interest in BR Boca JV Member (the mezzanine borrower), which is 99.5% owned by Fund II and which currently holds an approximate 90.0% interest in the Boca JV and in the Cade Boca Raton property, subject to certain promote rights of our unaffiliated development partner.

 

In conjunction with the Cade Boca Raton development, on December 29, 2016, the Cade Boca Raton property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a $18.7 million construction loan (the “Boca Construction Loan”) with an unaffiliated party, of which $16.9 million is outstanding at December 31, 2018, which is secured by the Cade Boca Raton property. The Boca Construction Loan matures on June 29, 2019, and contains two one-year extension options, subject to certain conditions including a debt service coverage, stabilized occupancy and payment of an extension fee. The Boca Construction Loan requires interest-only payments at prime plus 0.625%, subject to a floor of 4.125%, and can be prepaid without penalty. As the current loan matures on June 29, 2019, the Cade Boca Raton property owner is engaged in discussions to refinance the loan.

 

On November 9, 2018, the Company, through BRG Boca, and on behalf of Fund II, funded a capital call of $0.5 million by increasing its mezzanine loan to BR Boca JV Member. In exchange for contributing Fund II’s share of the total $0.5 million capital call, the Company received an additional 2.5 basis point discount purchase option and has the right to exercise an option to purchase, at the greater of a 27.5 basis point discount to fair market value or 15% internal rate of return for Fund II, up to a 100% common membership interest in BR Boca JV Member. 

 

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Domain at the One Forty Interests, formerly known as Domain Phase I

 

On November 20, 2015, through a wholly-owned subsidiary of the Operating Partnership, BRG Domain Phase 1, LLC (“BRG Domain 1”), the Company made a convertible preferred equity investment in a multi-tiered joint venture along with Fund II, an affiliate of the former Manager, and an unaffiliated third party (the “Domain 1 JV”), to develop a 299-unit, Class A apartment community located in Garland, Texas known as Domain at the One Forty. On March 3, 2017, (i) Fund II substantially redeemed the preferred equity investment held by BRG Domain 1 in BR Member Domain Phase I, LLC (“BR Domain 1 JV Member), an affiliate of the former Manager, for $7.1 million and (ii) BRG Domain 1 maintained a 0.5% common interest in BR Domain 1 JV Member.

 

On March 3, 2017, the Company, through BRG Domain 1, also provided a $20.3 million mezzanine loan (the “BRG Domain 1 Mezz Loan”) to BR Domain I JV Member. The BRG Domain 1 Mezz Loan is secured by BR Domain 1 JV Member’s approximate 95.0% interest in the Domain I JV which is developing Domain at the One Forty. The BRG Domain Phase 1 Mezz Loan matures on the earlier of March 3, 2020, or the maturity of the Domain 1 Construction Loan, defined below, as extended, and bears interest at a fixed rate of 15.0%. Regular monthly payments are interest-only during the initial term. The BRG Domain 1 Mezz Loan can be prepaid without penalty. The Company has the right to exercise an option to purchase, at the greater of a 25 basis point discount to fair market value or 15% internal rate of return for Fund II, up to a 100% common membership interest in BR Domain 1 JV Member (the mezzanine borrower), which is 99.5% owned by Fund II and which currently holds an approximate 95.0% interest in the Domain 1 JV and in the Domain 1 property, subject to certain promote rights of our unaffiliated development partner.

 

In conjunction with the Domain 1 development, on March 3, 2017, the Domain 1 property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a $30.3 million construction loan (the “Domain 1 Construction Loan”) with an unaffiliated party, of which $26.3 million is outstanding at December 31, 2018, and which is secured by the Domain 1 property. The Domain 1 Construction Loan matures on March 3, 2020, and contains two one-year extension options, subject to certain conditions including construction completion, a debt service coverage, loan to value ratio and payment of an extension fee. The Domain 1 Construction Loan bears interest on a floating basis on the amount drawn based on LIBOR plus 3.25%. Regular monthly payments are interest-only until March 2020, with further payments based on thirty-year amortization. The Domain 1 Construction Loan can be prepaid without penalty.

 

In addition, on March 3, 2017, the Domain 1 property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a $6.4 million mezzanine loan with an unaffiliated party, of which $6.4 million is outstanding at December 31, 2018, and which is secured by membership interest in the joint venture developing the Domain 1 property. The loan matures on March 3, 2020, and contains two one-year extension options, subject to certain conditions including a debt service coverage, loan to value ratio, extension of the Domain 1 Construction Loan and payment of an extension fee. The loan bears interest on a fixed rate of 12.5%, with 9.5% paid currently. Regular monthly payments are interest-only. The loan can be prepaid prior to maturity provided the lender receives a minimum profit and 1% exit fee.

 

Novel Perimeter Mezzanine Financing, formerly known as Crescent Perimeter

 

On December 12, 2016, through BRG Perimeter, LLC (“BRG Perimeter”), a wholly-owned subsidiary of the Operating Partnership, the Company made a common equity investment of approximately $15.2 million to obtain an approximately 60% interest in a multi-tiered joint venture structure along with Fund III, an affiliate of the former Manager, and an unaffiliated third party (the “Novel Perimeter JV”), to acquire a tract of real property located in Atlanta, Georgia for the development of a 320-unit, Class A apartment community known as Novel Perimeter. The acquisition was accounted for as an asset acquisition.

 

On December 12, 2016, the Novel Perimeter property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a $44.7 million construction loan (the “Novel Perimeter Construction Loan”) with an unaffiliated party, of which $39.2 million is outstanding at December 31, 2018, and which is secured by the Novel Perimeter development. The Novel Perimeter Construction Loan matures December 12, 2020, with a one-year extension option subject to certain conditions including a debt service coverage, loan to value ratio and payment of an extension fee. The Novel Perimeter Construction Loan bears interest at a rate of LIBOR plus 3.00%, with interest only payments until December 12, 2020 and future payments based on 30-year amortization. The Novel Perimeter Construction Loan can be prepaid without penalty.

 

On December 29, 2017, (i) Fund III substantially redeemed the common equity investment held by BRG Perimeter in BR Perimeter JV Member, LLC (“BR Perimeter JV Member), an affiliate of the former Manager, for $15.3 million, and (ii) BRG Perimeter maintained a 0.5% common interest in BR Perimeter JV Member.

 

On December 29, 2017, the Company, through BRG Perimeter, provided a $20.6 million mezzanine loan (the “BRG Perimeter Mezz Loan”) to BR Perimeter JV Member. The BRG Perimeter Mezz Loan is secured by BR Perimeter JV Member’s approximate 60.0% interest in Novel Perimeter JV, which is developing Novel Perimeter. The BRG Perimeter Mezz Loan matures on the later of December 29, 2021, or the maturity date of the Novel Perimeter Construction Loan, as extended, and bears interest at a fixed rate of 15.0%. Regular monthly payments are interest-only during the initial term. The BRG Perimeter Mezz Loan can be prepaid without penalty

 

Vickers Historic Roswell, formerly known as Vickers Village

 

On December 22, 2016, through BRG Vickers Roswell, LLC (“BRG Vickers”), a wholly-owned subsidiary of the Operating Partnership, the Company made a common equity investment of approximately $8.5 million to obtain an approximately 80% interest in a multi-tiered joint venture structure along with Fund III, an affiliate of the former Manager, and an unaffiliated third party (the “Vickers JV”), for the development of a 79-unit, Class A apartment community known as Vickers Historic Roswell in the Roswell submarket of Atlanta, Georgia. The acquisition was accounted for as an asset acquisition.

 

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On December 22, 2016, the Vickers Historic Roswell property owner, which is owned by an entity in which the Company owns an indirect interest, entered into an $18.0 million construction loan (the “Vickers Construction Loan”) with an unaffiliated party, of which $17.4 million is outstanding at December 31, 2018, and which is secured by the Vickers Historic Roswell development. The Vickers Construction Loan matures December 1, 2020 and bears interest at a rate of LIBOR plus 3.00%, with interest only payments until December 1, 2018 and future payments based on 25-year amortization. The Vickers Construction Loan can be prepaid without penalty.

 

On December 29, 2017, (i) Fund III substantially redeemed the common equity investment held by BRG Vickers in BR Vickers Roswell JV Member, LLC (“BR Vickers JV Member”), an affiliate of the former Manager, for $8.7 million, and (ii) BRG Vickers maintained a 0.5% common interest in BR Vickers JV Member.

 

On December 29, 2017, the Company, through BRG Vickers, an indirect subsidiary, provided a $9.8 million mezzanine loan (the “BRG Vickers Mezz Loan”) to BR Vickers JV Member. The BRG Vickers Mezz Loan is secured by BR Vickers JV Member’s approximate 80.0% interest in the Vickers JV, which is developing Vickers Historic Roswell. The BRG Vickers Mezz Loan matures on the latest of December 29, 2020, or the maturity date of the Vickers Construction Loan, as extended, and bears interest at a fixed rate of 15.0%. Regular monthly payments are interest-only during the initial term. The BRG Vickers Mezz Loan can be prepaid without penalty.

 

On August 13, 2018, the Company, through BRG Vickers, and on behalf of Fund III, funded a capital call of $0.3 million by increasing its mezzanine loan to BR Vickers JV Member, which is 99.5% owned by Fund III and which currently holds an approximate 80.0% interest in the Vickers JV. In exchange for contributing Fund III’s share of the total $0.3 million capital call, the Company received the right to exercise an option to purchase, at the greater of a 10 basis point discount to fair market value or 15% internal rate of return for Fund III, up to a 100% common membership interest in BR Vickers JV Member.

 

On November 9, 2018, the Company, through BRG Vickers, and on behalf of Fund III, funded a capital call of $0.3 million by increasing its mezzanine loan to BR Vickers JV Member. In exchange for contributing Fund III’s share of the total $0.3 million capital call, the Company received an additional 2.5 basis point discount purchase option and has the right to exercise an option to purchase, at the greater of a 12.5 basis point discount to fair market value or 15% internal rate of return for Fund III, up to a 100% common membership interest in BR Vickers JV Member.

 

On February 25, 2019, the Company’s audit committee authorized and approved a proposal for the Company, through BRG Vickers, and on behalf of Fund III, to fund a capital call of $1.2 million by increasing its mezzanine loan to BR Vickers JV Member. In exchange for contributing Fund III’s share of the total $1.2 million capital call, the Company will receive an additional 5.0 basis point discount purchase option and will have the right to exercise an option to purchase, at the greater of a 17.5 basis point discount to fair market value or 15% internal rate of return for Fund III, up to a 100% common membership interest in BR Vickers JV Member.

 

Flagler Village Interests

 

On December 18, 2015, the Company, through BRG Flagler Village, LLC (“BRG Flagler”), a wholly-owned subsidiary of the Operating Partnership, made an investment in a multi-tiered joint venture along with Fund II, an affiliate of the former Manager, and an unaffiliated third party (the “Flagler JV”), to develop an approximately 385-unit, Class A apartment community located in Ft. Lauderdale, Florida known as Flagler Village. On December 29, 2017, (i) Fund II substantially redeemed the equity investment held by BRG Flagler in BR Flagler JV Member, LLC (“BR Flagler JV Member”), an affiliate of the former Manager, for $26.3 million, and (ii) BRG Flagler maintained a 0.5% common interest in BR Flagler JV Member.

 

On December 29, 2017, the Company, through BRG Flagler, an indirect subsidiary, provided a $53.6 million mezzanine loan (the “BRG Flagler Mezz Loan”) to BR Flagler JV Member. The BRG Flagler Mezz Loan is secured by BR Flagler JV Member’s approximate 100.0% interest in the Flagler JV, which is developing Flagler Village. The BRG Flagler Mezz Loan had a maturity date of December 29, 2022 and bore interest at a fixed rate of 15.0%. Regular monthly payments are interest-only during the initial term. The BRG Flagler Mezz Loan can be prepaid without penalty.

 

On March 28, 2018, in conjunction with the closing of the Flagler Construction Loan, as defined below, the Company, through BRG Flagler, restated the BRG Flagler Mezz Loan and increased the amount to approximately $74.6 million. The restated BRG Flagler Mezz Loan matures on March 28, 2023 and bears interest at a fixed rate of 12.9%. The BRG Flagler Mezz Loan is secured by BR Flagler JV Member’s approximate 97.4% interest in the Flagler JV, subject to certain promote rights of the Company’s unaffiliated development partner, and which is subject to preferred equity of partners holding preferred membership interests in the Flagler Village property. The Company has the right of first offer to purchase the member’s ownership interests in BR Flagler JV Member, or, if applicable, to purchase Flagler Village if BR Flagler JV Member exercises its rights under the Flagler JV to cause the sale of Flagler Village.

 

On March 28, 2018, the Flagler Village property owner, which is owned by an entity in which the Company owns an indirect interest, entered into an approximately $70.4 million construction loan (the “Flagler Construction Loan”) with an unaffiliated party, of which $1,042 is outstanding at December 31, 2018, and which is secured by the Flagler Village development. The Flagler Construction Loan matures March 28, 2022 and contains a one-year extension option subject to certain conditions including a debt service coverage, loan to value ratio, certificate of occupancy and payment of an extension fee. The Flagler Construction Loan bears interest at the greater of 5.0% or a rate of LIBOR plus 3.85%, with interest only payments until March 28, 2022 and future payments after extension based on thirty-year amortization. The Flagler Construction Loan can be prepaid subject to payment of a make-whole premium and exit fee.

 

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Alexan CityCentre Interests

 

On July 1, 2014, through BRG T&C BLVD Houston, LLC, a wholly-owned subsidiary of the Operating Partnership, the Company made a convertible preferred equity investment in a multi-tiered joint venture along with BGF, Fund II and Fund III, affiliates of the former Manager, and an unaffiliated third party, to develop a 340-unit, Class A apartment community located in Houston, Texas known as Alexan CityCentre. The Company has made a commitment to invest in $11.2 million of preferred equity interests in BR T&C BLVD JV Member, LLC, all of which has been funded as of December 31, 2018 (of which, $6.5 million and $4.7 million earns a 15% and 20% preferred return, respectively).

 

On June 7, 2016, the Alexan CityCentre property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a loan modification agreement to amend the terms of its construction loan financing the construction and development of the Alexan CityCentre property (the “Alexan Development”). The maximum principal amount available to the borrower under the terms of the modified loan is $55.1 million of which approximately $55.1 million is outstanding at December 31, 2018. The maturity date is January 1, 2020, subject to a single one-year extension exercisable at the option of the borrower. The interest rate on the loan is a variable per annum rate equal to the prime rate plus 0.5%, or LIBOR plus 3.00%, at the borrower’s option. The loan requires monthly interest payments until the maturity date, after which $60,000 monthly payments of principal will be required in addition to payment of accrued interest during the maturity extension period. Certain unaffiliated third parties agreed to guaranty the completion of the development of the Alexan Development and provided partial guaranties of the borrower’s principal and interest obligations under the loan.

 

The Company had the right, in its sole discretion, to convert its preferred membership interest into a common membership interest for a period of six months from the date upon which 70% of the units in Alexan CityCentre had been leased and occupied. The six-month period during which the Company had the right to convert commenced on January 21, 2018, the date on which the Alexan Development achieved 70% leased and occupied units. The Company did not elect to convert into a common membership and its option to convert expired on July 21, 2018.

 

Alexan Southside Place Interests

 

On January 12, 2015, through BRG Southside, LLC, a wholly-owned subsidiary of its Operating Partnership, the Company made a convertible preferred equity investment in a multi-tiered joint venture, along with Fund II and Fund III, affiliates of the former Manager, and an unaffiliated third party, to develop a 270-unit, Class A apartment community located in Houston, Texas known as Alexan Southside Place. Alexan Southside Place will be developed upon a tract of land ground leased from Prokop Industries BH, L.P., a Texas limited partnership, by BR Bellaire BLVD, LLC (“BR Bellaire BLVD”), as tenant under an 85-year ground lease. The Company has made a commitment to invest in $22.8 million of preferred equity interests in BRG Southside, LLC, all of which has been funded as of December 31, 2018.

 

In conjunction with the Alexan Southside development, on April 7, 2015, BR Bellaire BLVD, which is owned by an entity in which the Company owns an indirect interest, entered into a $31.8 million construction loan, of which $31.7 million is outstanding at December 31, 2018, which is secured by its interest in the Alexan Southside Place property. The loan matures on April 7, 2019, and contains a one-year extension option, subject to certain conditions including a debt service coverage, loan to value ratio and payment of an extension fee. The loan bears interest on a floating basis on the amount drawn based on the base rate plus 1.25% or LIBOR plus 2.25%. Regular monthly payments are interest-only during the initial term, with payments during the extension period based on a thirty-year amortization. The loan can be prepaid without penalty. As the current loan matures on April 7, 2019, BR Bellaire BLVD is engaged in discussions to refinance the construction loan.

 

On November 9, 2018, the Company, through BRG Southside, LLC, entered into an amended agreement with Fund II and Fund III (together “the Funds”) that reduced the Company’s preferred return in exchange for certain grants made by the Funds. The Company’s previous preferred return of 15% per annum was reduced as follows: (i) 6.5% per annum effective November 9, 2018 through the end of calendar year 2019, (ii) 5.0% per annum for the calendar year 2020, and (iii) 3.5% per annum for the calendar year 2021 and thereafter. The Funds agreed to (i) grant the Company a right to compel a sale of the project beginning November 1, 2021 and (ii) grant the Company a 50.0% participation in any profits achieved in a sale after the Company receives its full preferred return and repayment of principal, and the Funds receive full return of their capital contributions. The Funds are obligated to fund their prorata share of future capital calls, absent a default event. If a default event shall occur and is continuing at the time of a sale, BRG Southside, LLC would be entitled to 100% of the profits after the Funds receive full return of their capital contributions. Additionally, the Company agreed to extend the mandatory redemption date of its preferred equity to be reflective of any changes in the loan maturity date as a result of refinancing.

 

Helios Interests

 

On May 29, 2015, through BRG Cheshire, LLC, a wholly-owned subsidiary of its Operating Partnership, the Company made a convertible preferred equity investment in a multi-tiered joint venture along with Fund III, an affiliate of the former Manager, and an unaffiliated third party, to develop a 282-unit, Class A apartment community located in Atlanta, Georgia known as Helios. The Company has made a commitment to invest in $19.2 million of preferred equity interests in BRG Cheshire, LLC, all of which has been funded as of December 31, 2018.

 

In conjunction with the Helios development, on December 16, 2015, the Helios property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a $38.1 million construction loan. The construction loan was secured by the fee simple interest in the Helios property with an original maturity date of December 16, 2018. In November, the loan was modified to extend the maturity date to February 16, 2019. On December 28, 2018, the Helios property owner refinanced the construction loan and entered into a $39.5 million senior mortgage loan (“senior loan”), which is secured by the Helios property, and paid off the previous construction loan of $38.1 million. The Helios property owner accounted for the refinancing as an extinguishment of debt. The senior loan matures on January 1, 2029 and bears interest at a floating basis of LIBOR plus 1.75%, with interest only payments through January 2023, and then monthly payments based on thirty-year amortization. On or after September 29, 2028, the loan may be prepaid without prepayment fee or yield maintenance.

 

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On November 9, 2018, the Company, through BRG Cheshire, LLC, entered into an amended agreement with Fund III that reduced the Company’s preferred return in exchange for certain grants made by Fund III. The Company’s previous preferred return of 15% per annum was reduced as follows: (i) 7.0% per annum effective November 9, 2018 through the end of calendar year 2019, (ii) 6.0% per annum for the calendar year 2020, and (iii) 4.5% per annum for the calendar year 2021 and thereafter. Fund III agreed to (i) grant the Company a right to compel a sale of the project beginning November 1, 2021 and (ii) grant the Company a 50.0% participation in any profits achieved in a sale after the Company receives its full preferred return and repayment of principal, and Fund III receives full return of its capital contribution. Fund III is obligated to fund its prorata share of future capital calls, absent a default event. If a default event shall occur and is continuing at the time of a sale, BRG Cheshire, LLC would be entitled 100% of the profits after Fund III receives full return of its capital contribution. Additionally, the Company agreed to extend the mandatory redemption date of its preferred equity to be reflective of any changes in the loan maturity date as a result of refinancing.

 

Leigh House Interests, formerly known as Lake Boone Trail

 

On December 18, 2015, through BRG Lake Boone, LLC, a wholly-owned subsidiary of the Operating Partnership, the Company made a convertible preferred equity investment in a multi-tiered joint venture along with Fund II, an affiliate of the former Manager, and an unaffiliated third party, to develop a 245-unit, Class A apartment community located in Raleigh, North Carolina known as Leigh House. The Company has the right, in its sole discretion, to convert its preferred membership interest into a common membership interest for a period of six months from the date upon which 70% of the units in Leigh House have been leased and occupied. The Company has made a commitment to invest in $13.3 million of preferred equity interests in BR Lake Boone, LLC, all of which has been funded at December 31, 2018 (of which, $11.9 million and $1.4 million earns a 15% and 20% preferred return, respectively).

 

In conjunction with the Leigh House development, on June 23, 2016, the Leigh House property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a $25.2 million construction loan which is secured by the fee simple interest in the Leigh House property, of which $24.8 million is outstanding as of December 31, 2018. The loan matures on December 23, 2019, and contains one extension option for one year to five years, subject to certain conditions including construction completion, a debt service coverage, loan to value ratio and payment of an extension fee. The loan bears interest on a floating basis on the amount drawn based on one-month LIBOR plus 2.65%. Regular monthly payments are interest-only during the initial term, with payments during the extension period based on a thirty-year amortization. The loan can be prepaid without penalty.

 

The six-month period during which the Company has the right to convert its preferred membership interest into a common membership interest commenced on August 9, 2018, the date on which Leigh House achieved 70% leased and occupied units. As of December 31, 2018, the Company has not elected to convert into a common membership interest.

 

Whetstone Apartments Interests

 

On May 20, 2015, through BRG Whetstone Durham, LLC, a wholly-owned subsidiary of its Operating Partnership, the Company made a convertible preferred equity investment in a multi-tiered joint venture along with Fund III, an affiliate of the former Manager, and an unaffiliated third party, to acquire a 204-unit, Class A apartment community located in Durham, North Carolina known as Whetstone Apartments. The Company has made a commitment to invest in $12.9 million of preferred equity interests in BRG Whetstone Durham, LLC, all of which has been funded as of December 31, 2018. On October 6, 2016, the Company entered into an agreement that provided for an extended twelve-month period in which it had a right to convert into common ownership. The Company did not elect to convert into common ownership on October 6, 2017, and therefore its preferred return decreased to 6.5%. Effective April 1, 2017, Whetstone Apartments ceased paying its preferred return on a current basis. The accrued preferred return of $2.2 million and $1.2 million as of December 31, 2018 and December 31, 2017, respectively, is included in due from affiliates in the consolidated balance sheets. The Company has evaluated the preferred equity investment and accrued preferred return and determined that the investment is fully recoverable. The development was 97% occupied at December 31, 2018.

 

On October 6, 2016, the Whetstone Apartments property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a mortgage loan of approximately $26.5 million secured by the Whetstone Apartments property, of which $26.0 million is outstanding as of December 31, 2018. The loan matures on November 1, 2023. The loan bears interest at a fixed rate of 3.81%. Regular monthly payments were interest-only until November 1, 2017, with monthly payments beginning December 1, 2017 based on thirty-year amortization. The loan may be prepaid with the greater of 1% prepayment fee or yield maintenance until October 31, 2021, and thereafter at par. The loan is nonrecourse to the Company and its joint venture partners with certain standard scope non-recourse carve-outs for certain deeds, acts or failures to act on the part of the Company and the joint venture partners.

 

See Note 12 – Related Party Transactions of the Company’s financial statements for additional related party disclosures.

 

 113 

 

 

Item 14.Principal Accounting Fees and Services.

 

Independent Auditors

 

BDO USA, LLP has served as our independent auditors since October 3, 2012.  The appointment of BDO USA, LLP as our independent public accountants was unanimously approved by our Board.

 

In order to ensure that the provision of such services does not impair the auditors’ independence, the audit committee approved, on March 26, 2014, the Amended and Restated Audit Committee Charter, which includes an Audit Committee Pre-Approval Policy for Audit and Non-audit Services.  In establishing this policy, the audit committee considered whether the service is a permissible service under the rules and regulations promulgated by the SEC.  In addition, the audit committee, may, in its discretion, delegate to one or more of its members the authority to pre-approve any audit or non-audit services to be performed by the independent auditors, provided any such approval is presented to and approved by the full audit committee at its next scheduled meeting.

 

Since October 15, 2009, when we became a reporting company under Section 15(d) of the Exchange Act, all services rendered by our independent auditors have been pre-approved in accordance with the policies and procedures described above.

 

The aggregate fees billed to us for professional accounting services, including the audit of our annual financial statements by BDO USA, LLP for the years ended December 31, 2018 and 2017, are set forth in the table below (amounts in thousands):

 

    2018     2017  
Audit fees   $

824

     $ 886  
Audit-related fees     -       -  
Tax fees    

271

       209  
All other fees     -       -  
Total   $

1,095

     $ 1,095  

 

For purposes of the preceding table professional fees are classified as follows:

 

·Audit fees – These are fees for professional services performed for the audit of our annual financial statements and the required review of quarterly financial statements and other procedures performed by the independent auditors in order for them to be able to form an opinion on our consolidated financial statements.  These fees also cover services that are normally provided by independent auditors in connection with statutory and regulatory filings or engagements.
·Audit-related fees – These are fees for assurance and related services that traditionally are performed by independent auditors that are reasonably related to the performance of the audit or review of the financial statements, such as due diligence related to acquisitions and dispositions, attestation services that are not required by statute or regulation, internal control reviews and consultation concerning financial accounting and reporting standards.  
·Tax fees – These are fees for all professional services performed by professional staff in our independent auditor’s tax division, except those services related to the audit of our financial statements.  These include fees for tax compliance, tax planning and tax advice, including federal, state and local issues.  Services may also include assistance with tax audits and appeals before the IRS and similar state and local agencies, as well as federal, state and local tax issues related to due diligence.
·All other fees – These are fees for any services not included in the above-described categories.    

 

PART IV

 

Item 15.Exhibits, Financial Statement Schedules.

 

(a)List of Documents Filed.

 

1.Financial Statements

 

The list of the financial statements filed as part of this Annual Report on Form 10-K is set forth on page F-1 herein.

 

(b)Exhibits.

 

The exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto.

 

(c)Financial Statement Schedules.

 

Our consolidated financial statements and supplementary data are included as a separate section in this Annual Report on Form 10-K commencing on page F-1 and are incorporated herein by reference.

 

 114 

 

 

SIGNATURES

 

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

 

  BLUEROCK RESIDENTIAL GROWTH REIT, INC.
   
Date: February 27, 2019 /s/ R. Ramin Kamfar
  R. Ramin Kamfar
  Chief Executive Officer
  (Principal Executive Officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

  BLUEROCK RESIDENTIAL GROWTH REIT, INC.
   
Date: February 27, 2019 /s/ R. Ramin Kamfar
  R. Ramin Kamfar
  Chief Executive Officer
  (Principal Executive Officer)
   
Date: February 27, 2019 /s/ Christopher J. Vohs
  Christopher J. Vohs
  Chief Financial Officer and Treasurer
  (Principal Financial Officer and Principal Accounting Officer)
   
Date: February 27, 2019 /s/ Brian D. Bailey
  Brian D. Bailey
  Director
   
Date: February 27, 2019 /s/ Elizabeth Harrison
  Elizabeth Harrison
  Director
   
Date: February 27, 2019 /s/ I. Bobby Majumder
  I. Bobby Majumder
  Director
   
Date: February 27, 2019 /s/ Romano Tio
  Romano Tio
  Director

 

 115 

 

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

  Page
Financial Statements  
Reports of Independent Registered Public Accounting Firms F-2
Consolidated Balance Sheets as of December 31, 2018 and 2017 F-4
Consolidated Statements of Operations for the Years Ended December 31, 2018, 2017, and 2016 F-5
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2018, 2017, and 2016 F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017, and 2016 F-9
Notes to Consolidated Financial Statements F-10

 

 F-1 

 

 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors and Stockholders

Bluerock Residential Growth REIT, Inc.

New York, New York

 

Opinion on the Consolidated Financial Statements

 

We have audited the accompanying consolidated balance sheets of Bluerock Residential Growth REIT, Inc. (the “Company”) and subsidiaries as of December 31, 2018 and 2017, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries at December 31, 2018 and 2017, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

  

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 26, 2019 expressed an unqualified opinion thereon.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

 

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ BDO USA, LLP

 

We have served as the Company's auditor since 2012.

 

Troy, Michigan

 

February 26, 2019

 

 F-2 

 

 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors and Stockholders

Bluerock Residential Growth REIT, Inc.

New York, New York

 

Opinion on Internal Control over Financial Reporting

 

We have audited Bluerock Residential Growth REIT, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company and subsidiaries as of December 31, 2018 and 2017, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and schedule and our report dated February 26, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

 

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

 

Definition and Limitations of Internal Control over Financial Reporting

 

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

/s/ BDO USA, LLP

 

Troy, Michigan

 

February 26, 2019

 

 F-3 

 

  

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

 

   December 31,
2018		   December 31,
2017		 
ASSETS          
Net Real Estate Investments          
Land  $200,385   $169,135 
Buildings and improvements   1,546,244    1,244,193 
Furniture, fixtures and equipment   55,050    38,446 
Construction in progress   989    985 
Total Gross Real Estate Investments   1,802,668    1,452,759 
Accumulated depreciation   (108,911)   (55,177)
Total Net Real Estate Investments   1,693,757    1,397,582 
Cash and cash equivalents   24,775    35,015 
Restricted cash   27,469    29,575 
Notes and accrued interest receivable from related parties   164,084    140,903 
Due from affiliates   2,854    2,003 
Accounts receivable, prepaids and other assets   14,395    9,689 
Preferred equity investments and investments in unconsolidated real estate joint ventures   89,033    71,145 
In-place lease intangible assets, net   1,768    4,635 
TOTAL ASSETS  $2,018,135   $1,690,547 
           
LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY          
Mortgages payable  $1,206,136   $939,494 
Revolving credit facilities   82,209    67,670 
Accounts payable   1,486    1,652 
Other accrued liabilities   31,690    22,952 
Due to affiliates   726    1,575 
Distributions payable   12,073    14,287 
Total Liabilities   1,334,320    1,047,630 
8.250% Series A Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 10,875,000 shares authorized; and 5,721,460 issued and outstanding as of December 31, 2018 and 2017   139,545    138,801 
6.000% Series B Redeemable Preferred Stock, liquidation preference $1,000 per share, 1,225,000 and 725,000 shares authorized; 306,009 and 184,130 issued and outstanding as of December 31, 2018 and 2017, respectively   272,842    161,742 
7.625% Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized; and 2,323,750 issued and outstanding as of December 31, 2018 and 2017   56,485    56,196 
Equity          
Stockholders’ Equity          
Preferred stock, $0.01 par value, 229,900,000 and 230,400,000 shares authorized; none issued and outstanding as of December 31, 2018 and 2017, respectively   —    — 
7.125% Series D Cumulative Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized; 2,850,602 issued and outstanding at December 31, 2018 and 2017   68,705    68,705 
Common stock - Class A, $0.01 par value, 747,509,582 shares authorized; 23,322,211 and 24,218,359 shares issued and outstanding as of December 31, 2018 and 2017, respectively   233    242 
Common stock - Class C, $0.01 par value, 76,603 shares authorized; 76,603 shares issued and outstanding as of December 31, 2018 and 2017   1    1 
Additional paid-in-capital   307,938    318,170 
Distributions in excess of cumulative earnings   (218,531)   (164,286)
Total Stockholders’ Equity   158,346    222,832 
Noncontrolling Interests          
Operating partnership units   27,613    42,999 
Partially owned properties   28,984    20,347 
Total Noncontrolling Interests   56,597    63,346 
Total Equity   214,943    286,178 
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY  $2,018,135   $1,690,547 

 

See Notes to Consolidated Financial Statements

 

 F-4 

 

 

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

 

   Year Ended December 31, 
   2018   2017   2016 
Revenues            
Net rental income  $144,325   $102,806   $73,257 
Other property revenues   18,136    12,840    8,060 
Interest income from related parties   22,255    7,930    17 
Total revenues   184,716    123,576    81,334 
                
Expenses               
Property operating   67,997    48,346    31,814 
Property management fees   4,391    3,185    2,339 
General and administrative   19,553    7,541    5,863 
Management fees to related parties   —    12,726    6,510 
Acquisition and pursuit costs   116    3,233    4,590 
Management internalization   —    43,554    63 
Weather-related losses, net   288    1,014    — 
Depreciation and amortization   62,683    48,624    31,187 
Total expenses   155,028    168,223    82,366 
                
Operating income (loss)   29,688    (44,647)   (1,032)
                
Other income (expense)               
Other income   —    17    26 
Preferred returns and equity in income of unconsolidated real estate joint ventures   10,312    10,336    11,632 
Gain on sale of real estate investments   —    50,163    4,947 
Gain on sale of real estate joint venture interests   —    10,262    — 
Gain on revaluation of equity of business combination   —    —    3,761 
Loss on extinguishment of debt and debt modification costs   (2,277)   (1,639)   (2,393)
Interest expense, net   (52,998)   (31,520)   (19,915)
 Total other (expense) income    (44,963)   37,619    (1,942)
Net loss   (15,275)   (7,028)   (2,974)
Preferred stock dividends   (35,637)   (27,023)   (13,763)
Preferred stock accretion   (5,970)   (3,011)   (893)
                
Net (loss) income attributable to noncontrolling interests               
Operating partnership units   (12,839)   (9,372)   (276)
Partially-owned properties   (1,284)   17,989    1,631 
Net (loss) income attributable to noncontrolling interests   (14,123)   8,617    1,355 
Net loss attributable to common stockholders  $(42,759)  $(45,679)  $(18,985)
                
Net loss per common share – Basic   (1.82)   (1.79)  $(0.91)
Net loss per common share - Diluted  $(1.82)  $(1.79)  $(0.91)
                
Weighted average basic common shares outstanding   23,845,800    25,561,673    20,805,852 
                
Weighted average diluted common shares outstanding   23,845,800    25,561,673    20,805,852 

 

See Notes to Consolidated Financial Statements

 

 F-5 

 

 

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share and per share amounts)

 

   Class A
Common Stock		   Class C
Common Stock		   Class B-3
Common Stock		   Series D
Preferred Stock		                     
   Number of
Shares		  

Par

Value

   Number of
Shares		  

Par

Value

   Number of
Shares		  

Par

Value

   Number of
Shares		  

Par

Value

  

Additional

Paid-
in Capital

   Cumulative
Distributions		   Net Loss to
Common
Stockholders		   Noncontrolling
Interests		  

Total 

Equity

 
Balance, January 1, 2016   19,202,112   $192    -   $-    353,629   $4    -   $-   $248,484   $(32,001)  $(9,495)  $30,528   $237,712 
                                                                  
Issuance of Class A common stock, net   4,265    -    -    -    -    -    -    -    51    -    -    -    51 
Conversion of Class B-3 shares into Class A   353,629    4    -    -    (353,629)   (4)   -    -    -    -    -    -    - 
Vesting of restricted stock compensation   -    -    -    -    -    -    -    -    133    -    -    -    133 
Issuance of stock for director compensation   7,500         -    -    -    -    -    -    77    -    -    -    77 
Issuance of LTIP units   -    -    -    -    -    -    -    -    5,770    -    -    -    5,770 
Issuance of LTIP units for compensation   -    -    -    -    -    -    -    -    2,821    -    -    -    2,821 
Issuance of Series B warrants   -    -    -    -    -    -    -    -    275    -    -    -    275 
Contributions from noncontrolling interests, net   -    -    -    -    -    -    -    -    -    -    -    25,009    25,009 
Distributions declared   -    -    -    -    -    -    -    -    -    (24,150)   -    (352)   (24,502)
Series A Preferred Stock distributions declared   -    -    -    -    -    -    -    -    -    (10,333)   -    -    (10,333)
Series A Preferred Stock accretion   -    -    -    -    -    -    -    -    -    (627)   -    -    (627)
Series B Preferred Stock distributions declared   -    -    -    -    -    -    -    -    -    (321)   -    -    (321)
Series B Preferred Stock accretion   -    -    -    -    -    -    -    -    -    (149)   -    -    (149)
Series C Preferred Stock distributions declared   -    -    -    -    -    -    -    -    -    (2,009)   -    -    (2,009)
Series C Preferred Stock accretion   -    -    -    -    -    -    -    -    -    (117)   -    -    (117)
Issuance of Series D Preferred Stock   -    -    -    -    -    -    2,850,602    68,760    -    -    -    -    68,760 
Series D Preferred Stock distributions declared   -    -    -    -    -    -    -    -    -    (1,100)   -    -    (1,100)
Distributions to noncontrolling interests   -    -    -    -    -    -    -    -    -    -    -    (3,626)   (3,626)
Redemption of Operating Partnership units   -    -    -    -    -    -    -    -    (37)   -    -    (64)   (101)
Noncontrolling interest related to sale of Springhouse at Newport News   -    -    -    -    -    -    -    -    20    -    -    (2,017)   (1,997)
Noncontrolling interest related to sale of EOS   -    -    -    -    -    -    -    -    (191)   -    -    -    (191)
Net (loss) income   -    -    -    -    -    -    -    -    -    -    (4,329)   1,355    (2,974)
                                                                  
Balance, December 31, 2016   19,567,506   $196    -   $-    -   $-    2,850,602   $68,760   $257,403   $(70,807)  $(13,824)  $50,833   $292,561 

 

See Notes to Consolidated Financial Statements

 

 F-6 

 

 

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - (Continued)

(In thousands, except share and per share amounts)

 

  

Class A

Common Stock

  

Class C

Common Stock

  

Class B-3

Common Stock

  

Series D

Preferred Stock

                     
   Number of
Shares		  

Par

Value

   Number of
Shares		  

Par

Value

   Number of
Shares		  

Par

Value

   Number of
Shares		  

Par

Value

  

Additional

Paid-
in Capital

   Cumulative
Distributions		   Net Loss to
Common
Stockholders		   Noncontrolling
Interests		  

Total 

Equity

 
Issuance of Class A common stock, net   4,604,701    46    -    -    -    -    -    -    57,330    -    -    -    57,376 
Issuance of Class C common stock   -    -    76,603    1    -    -    -    -    814    -    -    -    815 
Vesting of restricted stock compensation   -    -    -    -    -    -    -    -    9    -    -    -    9 
Issuance of LTIP Units for director compensation   -    -    -    -    -    -    -    -    100    -    -    -    100 
Issuance of LTIP units   -    -    -    -    -    -    -    -    13,748    -    -    -    13,748 
Issuance of LTIP units for compensation   -    -    -    -    -    -    -    -    2,187    -    -    -    2,187 
Issuance of OP Units for Internalization   -    -    -    -    -    -    -    -    -    -    -    39,938    39,938 
Issuance of Series B warrants   -    -    -    -    -    -    -    -    3,072    -    -    -    3,072 
Contributions from noncontrolling interests, net   -    -    -    -    -    -    -    -    -    -    -    10,738    10,738 
Distributions declared   -    -    -    -    -    -    -    -    -    (33,976)   -    (2,699)   (36,675)
Series A Preferred Stock distributions declared   -    -    -    -    -    -    -    -    -    (11,801)   -    -    (11,801)
Series A Preferred Stock accretion   -    -    -    -    -    -    -    -    -    (658)   -    -    (658)
Series B Preferred Stock distributions declared   -    -    -    -    -    -    -    -    -    (5,715)   -    -    (5,715)
Series B Preferred Stock accretion   -    -    -    -    -    -    -    -    -    (2,104)   -    -    (2,104)
Series C Preferred Stock distributions declared   -    -    -    -    -    -    -    -    -    (4,430)   -    -    (4,430)
Series C Preferred Stock accretion   -    -    -    -    -    -    -    -    -    (249)   -    -    (249)
Issuance costs of Series D Preferred Stock   -    -    -    -    -    -    -    (55)   -    -    -    -    (55)
Series D Preferred Stock distributions declared   -    -    -    -    -    -    -    -    -    (5,077)   -    -    (5,077)
Distributions to noncontrolling interests   -    -    -    -    -    -    -    -    -    -    -    (30,252)   (30,252)
Cash redemption of Operating Partnership units   -    -    -    -    -    -    -    -    (16)   -    -    (29)   (45)
Cash redemption of Series B Preferred Stock   -    -    -    -    -    -    -    -    33    -    -    -    33 
Redemption of Series B Preferred Stock and conversion into Class A common stock   23,785    -    -    -    -    -    -    -    267    -    -    -    267 
Conversion of OP Units into Class A common stock   22,367    -    -    -    -    -    -    -    167    -    -    (167)   - 
Transfer of noncontrolling interest to controlling interest   -    -    -    -    -    -    -    -    -    -    -    (3,825)   (3,825)
Conversion of LTIP units into OP Units   -    -    -    -    -    -    -    -    (18,414)   -    -    18,414    - 
Changes in additional paid-in capital   -    -    -    -    -    -    -    -    (3,832)   -    -    -    (3,832)
Deconsolidation of MDA Apartments, Crescent Perimeter and Vickers Village   -    -    -    -    -    -    -    -    -    -    -    (22,920)   (22,920)
Adjustment for noncontrolling interests ownership in Operating Partnership   -    -    -    -    -    -    -    -    5,302    -    -    (5,302)   - 
Net (loss) income   -    -    -    -    -    -    -    -    -    -    (15,645)   8,617    (7,028)
                                                                  
Balance, December 31, 2017   24,218,359   $242    76,603   $1    -   $-    2,850,602   $68,705   $318,170   $(134,817)  $(29,469)  $63,346   $286,178 

 

See Notes to Consolidated Financial Statements

 

 F-7 

 

 

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - (Continued)

(In thousands, except share and per share amounts)

 

  

Class A

Common Stock

  

Class C

Common Stock

  

Class B-3

Common Stock

  

Series D

Preferred Stock

                     
   Number of
Shares		  

Par

Value

   Number of
Shares		  

Par

Value

   Number of
Shares		  

Par

Value

   Number of
Shares		  

Par

Value

  

Additional

Paid-
in Capital

   Cumulative
Distributions		   Net Loss to
Common
Stockholders		   Noncontrolling
Interests		  

Total 

Equity

 
Issuance of Class A common stock, net   2,831    -    -    -    -    -    -    -    25    -    -    -    25 
Issuance of Class A common stock due to Series B warrants exercise   100    -    -    -    -    -    -    -    -    -    -    -    - 
Repurchase of Class A common stock   (1,055,057)   (11)   -    -    -    -    -    -    (9,007)   -    -    -    (9,018)
Issuance of Long-Term Incentive Plan (“LTIP”) units for director compensation   -    -    -    -    -    -    -    -    -    -    -    220    220 
Issuance of LTIP units for compensation   -    -    -    -    -    -    -    -    -    -    -    5,128    5,128 

Issuance of LTIP units for compensation to former Manager

   -    -    -    -    -    -    -    -    -    -    -    

993

    993 

Issuance of LTIP units for expense reimbursements

                                                          

1,066

    

1,066

 
Issuance of Series B warrants   -    -    -    -    -    -    -    -    1,699    -    -    -    1,699 
Contributions from noncontrolling interests, net   -    -    -    -    -    -    -    -    -    -    -    13,551    13,551 
Common stock distributions declared   -    -    -    -    -    -    -    -    -    (11,486)   -    -    (11,486)
Series A Preferred Stock distributions declared   -    -    -    -    -    -    -    -    -    (11,800)   -    -    (11,800)
Series A Preferred Stock accretion   -    -    -    -    -    -    -    -    -    (744)   -    -    (744)
Series B Preferred Stock distributions declared   -    -    -    -    -    -    -    -    -    (14,332)   -    -    (14,332)
Series B Preferred Stock accretion   -    -    -    -    -    -    -    -    -    (4,937)   -    -    (4,937)
Series C Preferred Stock distributions declared   -    -    -    -    -    -    -    -    -    (4,428)   -    -    (4,428)
Series C Preferred Stock accretion   -    -    -    -    -    -    -    -    -    (289)   -    -    (289)
Series D Preferred Stock distributions declared   -    -    -    -    -    -    -    -    -    (5,077)   -    -    (5,077)
Distributions to operating partnership noncontrolling interests   -    -    -    -    -    -    -    -    -    -    -    (4,139)   (4,139)
Distributions to partially owned noncontrolling interests   -    -    -    -    -    -    -    -    -    -    -    (1,786)   (1,786)
Redemption of Operating Partnership units                                           (3)             (3)   (6)
Redemption of Series B Preferred Stock and conversion into Class A common stock   155,978    2    -    -    -    -    -    -    1,563    -    -    -    1,565 
Cash redemption of Series B Preferred Stock   -    -    -    -    -    -    -    -    13    -    -    -    13 
Acquisition of noncontrolling interest   -    -    -    -    -    -    -    -    (10,334)   -    -    (1,844)   (12,178)
Adjustment for noncontrolling interest ownership in Operating Partnership   -    -    -    -    -    -    -    -    5,812    -    -    (5,812)   - 
Net loss   -    -    -    -    -    -    -    -    -    -    (1,152)   (14,123)   (15,275)
                                                                  
Balance, December 31, 2018   23,322,211   $233    76,603   $1    -   $-    2,850,602   $68,705   $307,938   $(187,910)  $(30,621)  $56,597   $214,943 

 

See Notes to Consolidated Financial Statements

 

 F-8 

 

 

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,

 

   2018   2017   2016 
Cash flows from operating activities               
Net loss  $(15,275)  $(7,028)  $(2,974)
Adjustments to reconcile net loss to net cash provided by operating activities:               
Depreciation and amortization   67,004    51,146    32,435 
Amortization of fair value adjustments   (434)   (319)   (362)
Preferred returns and equity in income of unconsolidated real estate joint ventures   (10,312)   (10,336)   (11,632)
Gain on sale of real estate investments   -    (50,163)   (4,947)
Gain on sale of real estate joint venture interests   -    (10,262)   - 
Gain on revaluation of equity of business combination   -    -    (3,761)
Fair value adjustment of interest rate caps   2,846    -    - 
Loss on extinguishment of debt and modification costs   -    -    (1,104)
Distributions of income and preferred returns from preferred equity investments and unconsolidated real estate joint ventures   9,464    9,252    11,405 
Share-based compensation attributable to equity incentive plan   5,348    109    210 
Share-based compensation to former Manager – LTIP Units   993    15,935    8,591 
Share-based expense reimbursements – LTIP Units   1,066    -    - 
Internalization OP Units issued   -    39,938    - 
Internalization Class C Shares issued   -    814    - 
Changes in operating assets and liabilities:               
Due (from) to affiliates, net   (2,000)   (1,565)   950 
Accounts receivable, prepaids and other assets   (2,029)   294    (1,867)
Accounts payable and other accrued liabilities   7,784    16,432    7,500 
Net cash provided by operating activities   64,455    54,247    34,444 
                
Cash flows from investing activities               
Acquisitions of real estate investments   (333,540)   (493,311)   (472,791)
Capital expenditures   (21,240)   (46,971)   (6,413)
Investment in notes receivable from related parties   (22,032)   (54,096)   (14,717)
Proceeds from sale of real estate investments   -    71,945    36,675 
Proceeds from sale of joint venture interests   -    17,603    20,521 
Deconsolidation of interests in MDA Apartments, Novel Perimeter and Vickers Historic Roswell   -    (794)   - 
Purchase of interests from noncontrolling interests   (12,178)   (7,864)   (15,581)
Investments in unconsolidated real estate joint venture interests   (17,888)   (20,989)   (26,864)
Net cash used in investing activities   (406,878)   (534,477)   (479,170)
                
Cash flows from financing activities               
Distributions to common stockholders   (13,952)   (29,583)   (24,437)
Distributions to noncontrolling interests   (6,298)   (31,363)   (3,626)
Distributions to preferred stockholders   (35,014)   (26,042)   (9,664)
Contributions from noncontrolling interests   13,551    10,738    25,009 
Borrowings on mortgages payable   411,269    234,133    365,406 
Repayments on mortgages payable   (141,994)   (2,581)   (68,746)
Proceeds from revolving credit facilities   222,495    107,670    - 
Repayments on revolving credit facilities   (207,956)   (40,000)   - 
Payments of deferred financing fees   (7,291)   (6,627)   (4,672)
Payments to purchase interest rate caps   (5,174)   -    - 
Net proceeds from issuance of Class A common stock   25    57,376    51 
Repurchase of Class A common stock   (9,018)   -    - 
Net issuance costs from issuance of 8.250% Series A Cumulative Redeemable Preferred Stock   -    (173)   68,524 
Net proceeds from issuance of 6.0% Series B Redeemable Preferred Stock   107,877    141,244    18,789 
Net proceeds from issuance of Warrants associated with the Series B Redeemable Preferred Stock   1,699    3,072    275 
Net issuance costs from issuance of 7.625% Series C Cumulative Redeemable Preferred Stock   -    (148)   55,978 
Net issuance costs from issuance of 7.125% Series D Cumulative Redeemable Preferred Stock   -    (55)   68,760 
Payments to redeem 6.0% Series B Redeemable Preferred Stock   (136)   (244)   - 
Payments to redeem Operating Partnership Units   (6)   (46)   (101)
Net cash provided by financing activities   330,077    417,371    491,546 
                
Net (decrease) increase in cash, cash equivalents and restricted cash   (12,346)   (62,859)   46,820 
Cash, cash equivalents and restricted cash, beginning of year   64,590    127,449    80,629 
Cash, cash equivalents and restricted cash, end of year  $52,244   $64,590   $127,449 
                
Supplemental disclosure of cash flow information               
Cash paid for interest (net of interest capitalized)  $44,837   $28,004   $18,095 
                
Supplemental disclosure of non-cash investing and financing activities               
Conversion of preferred equity investments to notes receivable  $-   $(40,760)  $- 
Distributions payable - declared and unpaid  $12,073   $14,287   $7,328 
Mortgages assumed upon property acquisitions  $-   $173,831   $39,054 
Mortgages assumed by buyer upon sale of real estate assets  $-   $(41,419)  $- 
Capital expenditures held in accounts payable and other accrued liabilities  $786   $-   $- 
Reduction of assets from deconsolidation  $-   $110,402   $- 
Reduction of mortgages payable from deconsolidation  $-   $(49,445)  $- 
Reduction of other liabilities from deconsolidation  $-   $(6,905)  $- 
Reduction of noncontrolling interests from deconsolidation  $-   $22,920   $- 

 

See Notes to Consolidated Financial Statements

 

 F-9 

 

 

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1 – Organization and Nature of Business

 

Bluerock Residential Growth REIT, Inc. (the “Company”) was incorporated as a Maryland corporation on July 25, 2008. The Company’s objective is to maximize long-term stockholder value by acquiring and developing well-located institutional-quality apartment properties in knowledge economy growth markets across the United States. The Company seeks to maximize returns through investments where it believes it can drive substantial growth in its adjusted funds from operations and net asset value primarily through its Value-Add and Invest-to-Own investment strategies.

 

The Company has elected to be treated, and currently qualifies, as a real estate investment trust (“REIT”) for federal income tax purposes. As a REIT, the Company generally is not subject to corporate-level income taxes. To maintain its REIT status, the Company is required, among other requirements, to distribute annually at least 90% of its “REIT taxable income,” as defined by the Internal Revenue Code of 1986, as amended (the “Code”), to the Company’s stockholders. If the Company fails to qualify as a REIT in any taxable year, it would be subject to federal income tax on its taxable income at regular corporate tax rates.

 

On October 31, 2017, the Company became an internally-managed REIT as a result of the completion of the management internalization (the “Internalization”), and it is no longer externally managed by BRG Manager, LLC (the “former Manager”). The owners of the former Manager are referred to as the Contributors.

 

As of December 31, 2018, the Company owned interests in forty-seven real estate properties, consisting of thirty-three consolidated operating properties and fourteen properties through preferred equity and mezzanine loan investments. Of the property interests held through preferred equity and mezzanine loan investments, four are under development, seven are in lease-up and three properties are stabilized. The forty-seven properties contain an aggregate of 14,717 units, comprised of 11,286 consolidated operating units and 3,431 units through preferred equity and mezzanine loan investments. As of December 31, 2018, the Company’s consolidated operating properties were approximately 94% occupied.

 

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies

 

Principles of Consolidation and Basis of Presentation

 

The Company operates as an umbrella partnership REIT in which Bluerock Residential Holdings, L.P. (the “Operating Partnership”), or the Operating Partnership’s wholly-owned subsidiaries, owns substantially all of the property interests acquired and investments made on the Company’s behalf. As of December 31, 2018, limited partners other than the Company owned approximately 25.91% of the common units of the Operating Partnership (20.22% is held by holders of limited partnership interest in the Operating Partnership (“OP Units”) and 5.69% is held by holders of the Operating Partnership’s long-term incentive plan units (“LTIP Units”), including 3.09% which are not vested at December 31, 2018).

 

Because the Company is the sole general partner of the Operating Partnership and has unilateral control over its management and major operating decisions (even if additional limited partners are admitted to the Operating Partnership), the accounts of the Operating Partnership are consolidated in its consolidated financial statements.

 

The Company also consolidates entities in which it controls more than 50% of the voting equity and control does not rest with other investors. Investments in real estate joint ventures in which the Company has the ability to exercise significant influence, but does not have financial or operating control, are accounted for using the equity method of accounting. These entities are reflected on the Company’s consolidated financial statements as “Preferred equity investments and investments in unconsolidated real estate joint ventures.” All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.  The Company will consider future investments for consolidation in accordance with the provisions required by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810: Consolidation.

 

Certain amounts in prior periods have been reclassified to conform to the current presentation. For the years ended December 31, 2017 and 2016, tenant reimbursements for utility expenses amounting to $0.2 million and $0.2 million, respectively, and tenant reimbursements for contractor services amounting to $0.1 million and $0.1 million, respectively, have been reclassified to other property revenues from property operating expenses.  In addition, model unit vacancy costs amounting to $0.2 million and $0.1 million for the years ended December 31, 2017 and 2016, respectively, have been reclassified to net rental income from other property revenues.

 

 F-10 

 

 

Summary of Significant Accounting Policies

 

Preferred Equity Investments and Investments in Unconsolidated Real Estate Joint Ventures

 

The Company first analyzes an investment to determine if it is a variable interest entity (“VIE”) in accordance with Topic ASC 810 and, if so, whether the Company is the primary beneficiary requiring consolidation.  A VIE is an entity that has (i) insufficient equity to permit it to finance its activities without additional subordinated financial support or (ii) equity holders that lack the characteristics of a controlling financial interest.  VIEs are consolidated by the primary beneficiary, which is the entity that has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that potentially could be significant to the entity.  Variable interests in a VIE are contractual, ownership, or other financial interests in a VIE that change in value with changes in the fair value of the VIE’s net assets. The Company continuously re-assesses at each level of the investment whether the entity is (i) a VIE, and (ii) if the Company is the primary beneficiary of the VIE.  If it was determined that an entity in which the Company holds an interest qualified as a VIE and the Company was the primary beneficiary, the entity would be consolidated. 

 

If, after consideration of the VIE accounting literature, the Company has determined that an entity is not a VIE, the Company assesses the need for consolidation under all other provisions of ASC 810.  These provisions provide for consolidation of majority-owned entities through a majority voting interest held by the Company providing control.

 

In assessing whether the Company is in control of and requiring consolidation of the limited liability company and partnership venture structures, the Company evaluates the respective rights and privileges afforded each member or partner (collectively referred to as “member”).  The Company’s member would not be deemed to control the entity if any of the other members have either (i) substantive kickout rights providing the ability to dissolve (liquidate) the entity or otherwise remove the managing member or general partner without cause or (ii) has substantive participating rights in the entity.  Substantive participating rights (whether granted by contract or law) provide for the ability to effectively participate in significant decisions of the entity that would be expected to be made in the ordinary course of business.    

  

If it has been determined that the Company does not have control, but does have the ability to exercise significant influence over the entity, the Company accounts for these unconsolidated investments under the equity method of accounting. The equity method of accounting requires these investments to be initially recorded at cost and subsequently increased (decreased) for the Company’s share of net income (loss), including eliminations for the Company’s share of intercompany transactions, and increased (decreased) for contributions (distributions). The Company’s proportionate share of the results of operations of these investments is reflected in the Company’s earnings or losses.

 

Fair Value Measurements

 

For financial assets and liabilities recorded at fair value on a recurring or non-recurring basis, fair value is the price the Company would expect to receive to sell an asset, or pay to transfer a liability, in an orderly transaction with a market participant at the measurement date under current market conditions. In the absence of such data, fair value is estimated using internal information consistent with what market participants would use in a hypothetical transaction.

 

In determining fair value, observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions; preference is given to observable inputs. In accordance with accounting principles generally accepted in the Unites States of America (“GAAP”) and as defined in ASC Topic 820, “Fair Value Measurement”, these two types of inputs create the following fair value hierarchy:

 

· Level 1: Quoted prices for identical instruments in active markets
· Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable
· Level 3: Significant inputs to the valuation model are unobservable

 

If the inputs used to measure the fair value fall within different levels of the hierarchy, the fair value is determined based upon the lowest level input that is significant to the fair value measurement. Whenever possible, the Company uses quoted market prices to determine fair value. In the absence of quoted market prices, the Company uses independent sources and data to determine fair value.

 

Financial Instrument Fair Value Disclosures

 

As of December 31, 2018 and 2017, the carrying values of cash and cash equivalents, accounts receivable, due to and due from affiliates, accounts payable, accrued liabilities, and distributions payable approximate their fair value based on their highly-liquid nature and/or short-term maturities. The carrying values of notes receivable from related parties approximate fair value because stated interest rate terms are consistent with interest rate terms on new deals with similar leverage and risk profiles. The fair values of notes receivable are classified in Level 3 of the fair value hierarchy due to the significant unobservable inputs that are utilized in their respective valuations.

 

 F-11 

 

 

Derivative Financial Instruments

 

The estimated fair values of derivative financial instruments are valued using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and volatility. The fair value of interest rate caps is determined using the market-standard methodology of discounting the future expected cash receipts which would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. The inputs used in the valuation of interest rate caps fall within Level 2 of the fair value hierarchy.

 

Notes and Accrued Interest Receivable from Related Parties

 

The Company recognizes interest income on notes receivable on the accrual method unless a significant uncertainty of collection exists.  If a significant uncertainty exists, interest income is recognized as collected.  Costs incurred to originate notes receivable are deferred and amortized using the effective interest method over the term of the related notes receivable. The Company evaluates the collectability of both interest and principal on each of its loans to determine whether the loans are impaired.  A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms.  When a loan is considered to be impaired, the amount of loss is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the loan’s effective interest rate or to the fair value of the underlying collateral (if the loan is collateralized) less costs to sell.  During 2018, there was no significant uncertainty of collection; therefore, interest income was recognized.  As of December 31, 2018, the Company determined that no allowance for collectability of the mortgage loans receivable was necessary.

 

Real Estate Assets

 

Capital Additions, Depreciation and Amortization

 

The Company capitalizes costs, including certain indirect costs, incurred in connection with its capital additions activities, including redevelopment, development and construction projects, other tangible apartment community improvements, and replacements of existing apartment community components. Included in these capitalized costs are payroll costs associated with time spent by employees in connection with capital additions activities at the apartment community level. The Company characterizes as “indirect costs” an allocation of certain department costs, including payroll, at the corporate levels that clearly relate to capital additions activities. The Company also capitalizes interest, property taxes and insurance during periods in which redevelopment, development and construction projects are in progress. Cost capitalization begins once the development or construction activity commences and ceases when the asset is ready for its intended use. Repair and maintenance and tenant turnover costs are expensed as incurred.  Repair and maintenance and tenant turnover costs include all costs that do not extend the useful life of the real estate asset.  Depreciation and amortization expense are computed on the straight-line method over the asset’s estimated useful life. The Company considers the period of future benefit of an asset to determine its appropriate useful life and anticipates the estimated useful lives of assets by class to be generally as follows:

 

Buildings 30 – 40 years
Building improvements 5 – 15 years
Land improvements 5 – 15 years
Furniture, fixtures and equipment 3 – 7 years
In-place leases 6 months

 

Real Estate Purchase Price Allocations

 

Upon the acquisition of real estate properties which do not constitute the definition of a business, the Company recognizes the assets acquired, the liabilities assumed, and any noncontrolling interest as of the acquisition date, measured at their relative fair values. Acquisition-related costs are capitalized in the period incurred and are recorded to the components of the real estate assets acquired. Prior to the adoption of Financial Accounting Standards Board ASU 2017-01, “Business Combinations; Clarifying the Definition of a Business” in January 2017, acquisition-related costs were expensed in the period incurred. The Company assesses the acquisition-date fair values of all tangible assets, identifiable intangible assets and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis) and that utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it was vacant.

 

Intangible assets include the value of in-place leases, which represents the estimated fair value of the net cash flows of leases in place at the time of acquisition, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject to lease-up.  The Company amortizes the value of in-place leases to expense over the remaining non-cancelable term of the respective leases, which is on average six months. 

 

Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require the Company to make significant assumptions to estimate market lease rates, property operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, prevailing interest rates and the number of years the property will be held for investment.  The use of inappropriate assumptions could result in an incorrect valuation of acquired tangible assets, identifiable intangible assets and assumed liabilities, which could impact the amount of the Company’s net income (loss). Differences in the amount attributed to the fair value estimate of the various assets acquired can be significant based upon the assumptions made in calculating these estimates.

 

 F-12 

 

 

Impairment of Real Estate Assets

 

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of the Company’s real estate and related intangible assets may not be recoverable.  When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets may not be recoverable, the Company assesses the recoverability of the assets by estimating whether the Company will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition.  Based on this analysis, if the Company does not believe that it will be able to recover the carrying value of the real estate and related intangible assets and liabilities, the Company will record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets.  No impairment charges were recorded in 2018, 2017 or 2016.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents may include cash and short-term investments. Short-term investments are stated at cost, which approximates fair value.  

 

Restricted Cash

 

Restricted cash is comprised of the following: (i) lender-imposed escrow accounts for replacement reserves, real estate taxes and insurance, and (ii) amounts set aside for reinvestment in accordance with Internal Revenue Service Code Section 1031 related to like-kind exchanges.

 

Concentration of Credit Risk

 

The Company maintains cash balances with high quality financial institutions and periodically evaluates the creditworthiness of such institutions and believes that the Company is not exposed to significant credit risk.  Cash balances may be in excess of the amounts insured by the Federal Deposit Insurance Corporation.

 

Rents and Other Receivables

 

The Company will periodically evaluate the collectability of amounts due from tenants and maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements.  The Company exercises judgment in establishing these allowances and considers payment history and current credit status of tenants in developing these estimates. 

 

Deferred Financing Fees

 

Deferred financing fees represent commitment fees, legal fees and other third-party costs associated with obtaining financing. Deferred financing fees paid by the Company on behalf of its consolidated joint ventures are capitalized and reflected as a reduction of mortgages payable, and fees associated with the Company’s lines of credit are recorded within accounts receivable, prepaids and other assets on the consolidated balances sheets. Deferred financing fees paid by the Company on behalf of its consolidated joint ventures and fees associated with its lines of credit are amortized to interest expense over the terms of the financing agreements using the straight-line method, which approximates the effective interest method.

 

Deferred financing fees paid by the Company on behalf of its unconsolidated joint ventures are recorded within investments in unconsolidated real estate joint ventures on the consolidated balance sheets and are amortized to equity in income (loss) of unconsolidated real estate joint ventures.

 

Noncontrolling Interests

 

Noncontrolling interests are comprised of the Company’s joint venture partners’ interests in consolidated joint ventures, as well as interests held by LTIP Unit holders and OP Unit holders.  The Company reports its joint venture partners’ interest in its consolidated real estate joint ventures and other subsidiary interests held by third parties as noncontrolling interests.  The Company records these noncontrolling interests at their initial fair value, adjusting the basis prospectively for their share of the respective consolidated investments’ net income or loss and equity contributions and distributions.  These noncontrolling interests are not redeemable by the equity holders and are presented as part of permanent equity.  Income and losses are allocated to the noncontrolling interest holder pursuant to each joint venture’s operating agreement.

 

Revenue Recognition

 

Rental income related to tenant leases is recognized on an accrual basis over the terms of the related leases on a straight-line basis. Amounts received in advance are recorded as a liability within other accrued liabilities.

 

Other property revenues are recognized in the period earned.

 

The Company recognizes a gain or loss on the sale of real estate assets when the criteria for an asset to be derecognized are met, which include when (i) a contract exists and (ii) the buyer obtains control.

  

 F-13 

 

 

Stock-Based Compensation

 

The Company expenses the fair value of share awards in accordance with the fair value recognition requirements of ASC Topic 718 “Compensation-Stock Compensation.” ASC Topic 718 requires companies to measure the cost of the recipient services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. The cost of the share award is expensed over the requisite service period (usually the vesting period).

  

Distribution Policy

 

The Company expects to authorize and declare regular cash distributions to its stockholders in order to maintain its REIT status. Distributions to stockholders will be determined by the Company’s board of directors (the “Board”) and will be dependent upon a number of factors, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements, and annual distribution requirements in order to maintain the Company’s status as a REIT, and other considerations as the Board may deem relevant. Distributions are recorded as a reduction of stockholders’ equity in the period in which they are declared.

 

Related Party Transactions

 

On April 2, 2014, upon the completion of the initial public offering (the “IPO”), the Company entered into a management agreement with the former Manager, an affiliate of Bluerock, to be the Company’s external manager (the “Management Agreement”). Under the Management Agreement the Company paid the former Manager a base management fee and incentive fee. The Company records all related party fees as incurred.

 

Following the Internalization on October 31, 2017, the Company, as an internally managed company, no longer pays the former Manager any fees or expense reimbursements arising from the Management Agreement.

 

Selling Commissions and Dealer Manager Fees

 

In conjunction with the offering of the Series B Preferred Stock, the Company engaged a related party as dealer manager and pays selling commissions and dealer manager fees of 7% and 3%, respectively, of the gross offering proceeds from the offering. The dealer manager re-allows the substantial majority of the selling commissions and dealer manager fees to participating broker-dealers, and incurs costs in excess of the 10%, which costs are borne by the dealer manager without reimbursement by the Company. Offering costs related to each closing are recorded as a reduction of proceeds raised on the date of issue.

 

Income Taxes

 

The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, and has qualified since the taxable year ended December 31, 2010.  To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its stockholders.  Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income.  If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants it relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income (loss) and net cash available for distribution to stockholders. However, the Company intends to continue to organize and operate in such a manner as to remain qualified for treatment as a REIT.

 

For the year ended December 31, 2018, 100% of the distributions received by the common stockholders were classified as return of capital for income tax purposes and none were ordinary income. In addition, for the year ended December 31, 2018, approximately 34.00% of the distributions received by the preferred stockholders were classified as ordinary income for income tax purposes and 66.00% were return of capital. For the year ended December 31, 2017, 64.21% of the distributions received by the common stockholders were classified as return of capital for income tax purposes, 4.00% were ordinary income, 31.79% were capital gains, with 21.29% of the capital gains qualifying as Section 1250 gains. In addition, for the year ended December 31, 2017, 11.19% of the distributions received by the preferred stockholders were classified as ordinary income for income tax purposes and 88.81% were capital gains, with 21.29% of the capital gains qualifying as Section 1250 gains. For the year ended December 31, 2016, 100% of the distributions received by the common stockholders were classified as return of capital for income tax purposes and none were ordinary income. In addition, for the year ended December 31, 2016, 91.05% of the distributions received by the preferred stockholders were classified as return of capital for income tax purposes and 8.95% were ordinary income.

 

ASC Topic 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. It requires a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be taken, in an income tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Management has considered all positions taken on the 2013 through 2017 tax returns (where applicable), and those positions expected to be taken on the 2018 tax returns, and concluded that tax positions taken will more likely than not be sustained at the full amount upon examination. Accordingly, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its consolidated financial statements.  The Company expects no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2018. If any income tax exposure was identified, the Company would recognize an estimated liability for income tax items that meet the criteria for accrual. Neither the Company nor its subsidiaries have been assessed interest or penalties by any major tax jurisdictions. If any interest and penalties related to income tax assessments arose, the Company would record them as income tax expense. As of December 31, 2018, tax returns for the calendar years 2013 and subsequent remain subject to examination by the Internal Revenue Service and various state tax jurisdictions.

 

 F-14 

 

 

 Reportable Segment

 

The Company’s current business consists of investing in and operating multifamily communities. Substantially all of its consolidated net income (loss) is from investments in real estate properties that the Company owns through co-investment ventures which it either consolidates or accounts for under the equity method of accounting.  The Company evaluates operating performance on an individual property level and based on the properties’ similar economic characteristics, the Company’s properties are aggregated into one reportable segment.

 

Use of Estimates

 

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

 

Other than the adoption of new accounting pronouncements as described below, there have been no significant changes to the Company’s accounting policies since it filed its audited consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2017.

 

New Accounting Pronouncements

  

In November 2016, the FASB issued ASU No. 2016-18 "Statement of Cash Flows; Restricted Cash" (“ASU 2016-18”). This update requires that a statement of cash flows reflect the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents are to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adjusted the consolidated statement of cash flows as required in conjunction with the adoption of ASU 2016-18 as of January 1, 2018.

 

In August 2016, the FASB issued ASU No. 2016-15 “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). The ASU provides guidance on the treatment of cash receipts and cash payments for certain types of cash transactions to eliminate diversity in practice in the presentation of the cash flow statement. With respect to distributions from equity-method investees, the Company uses the nature of distributions approach. In 2018, the Company adjusted the consolidated statement of cash flows as required in conjunction with the adoption of ASU 2016-15 as of January 1, 2018.

 

In June 2016, the FASB issued ASU No. 2016-13 “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 will require more timely recognition of credit losses associated with financial assets. While current GAAP includes multiple credit impairment objectives for instruments, the previous objectives generally delayed recognition of the full amount of credit losses until the loss was probable of occurring. The amendments in ASU 2016-13, whose scope is asset-based and not restricted to financial institutions, eliminate the probable initial recognition threshold in current GAAP and, instead, reflect an entity’s current estimate of all expected credit losses. The amendments in ASU 2016-13 broaden the information that the Company must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss that will be more useful to users of the financial statements. In November 2018, the FASB issued ASU No. 2018-19 “Codification Improvements to Topic 326, Financial Instruments-Credit Losses” (“ASU 2018-19”). ASU 2018-19 clarifies that operating lease receivables are excluded from the scope of ASU 2016-13 and instead, impairment of operating lease receivables is to be accounted for under ASC 842. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the guidance and the impact this standard may have on the Company’s consolidated financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02 “Leases (Topic 842)” (“ASU 2016-02”). Under ASU 2016-02, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company will adopt ASU 2016-02 as of January 1, 2019 and intends to elect the package of practical expedients provided by the standard which includes: (i) an entity need not reassess whether any expired or existing contract is a lease or contains a lease, (ii) an entity need not reassess the lease classification of any expired or existing leases, and (iii) and entity need not reassess initial direct costs for any existing leases. The Company expects that ASU 2016-02 will not have a material impact on the Company’s consolidated financial statements. Consistent with present standards, the Company will continue to account for lease revenue on a straight-line basis. Also, consistent with the Company’s current practice, under ASU 2016-02 only initial direct costs that are incremental to the lessor will be capitalized. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements” (“ASU 2018-11”). ASU 2018-11 provides lessors with a practical expedient to not separate lease and non-lease components if both (i) the timing and pattern of revenue recognition for the non-lease component and the related lease component are the same and (ii) the combined single lease component would be classified as an operating lease. The Company intends to adopt the practical expedient as of January 1, 2019 to account for lease and non-lease components as a single component in lease contracts where the Company is the lessor. Based on the Company’s initial assessments, the Company does not have material lessee operating lease commitments.

 

 F-15 

 

 

In August 2017, the FASB issued ASU No. 2017-12 “Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”), which, among other things, requires entities to present the earnings effect of hedging instruments in the same income statement line item in which the earnings effect of the hedged item is reported. The new standard also adds new disclosure requirements. ASU 2017-12 is effective for annual periods beginning after December 15, 2018, though early adoption, including interim periods, is permissible. The Company has elected early adoption and there has been no material impact to the Company’s consolidated financial statements upon its adoption of ASU 2017-12.

 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). Under the new standard, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. Revenue is generally recognized net of allowances.  In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers-Deferral of the Effective Date” which deferred the effective date of the new revenue recognition standard until the first quarter of 2018.  Therefore, ASU 2014-09 became effective for the Company in the first quarter of the fiscal year ending December 31, 2018.  The ASU allows for either full retrospective or modified retrospective adoption. The majority of the Company's revenue is derived from rental income, which is scoped out from this standard and will be accounted for under ASU 2016-02, discussed above. The Company's other revenue streams, including interest income from related parties, were determined not to be within the scope of ASU 2014-09, gains and losses from real estate dispositions as defined in Subtopic 610-20 discussed below, and notes and accrued interest receivable from related parties, which the ASU provides to follow established guidance in Topic 310. The adoption by the Company of ASU 2014-09 as of January 1, 2018 did not result in a cumulative adjustment and did not have a material impact on the Company’s consolidated financial statements.

 

In addition to the comprehensive new revenue guidance, ASU 2014-09 also introduced new standards for accounting for gains and losses from derecognition of nonfinancial assets, which was codified into ASC Topic 610-20, “Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets”. The scope of ASC Topic 610-20 was further clarified in ASU 2017-05, “Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets” (“ASU 2017-05”), noting that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset. ASU 2017-05 also defines the term “in substance nonfinancial asset” and provides guidance on the recognition of gains and losses on sale of real estate investments. The Company recognizes the sale, and associated gain or loss from the disposition, provided that the earnings process is complete. Subsequent to the adoption of the new standard, a gain or loss is recognized when the criteria for an asset to be derecognized are met, which include when (i) a contract exists and (ii) the buyer obtained control of the nonfinancial asset when sold. As a result, the Company may recognize a gain on a real estate disposition transaction that previously did not qualify as a sale or for full profit recognition due to the timing of the transfer of control or certain forms of continuing involvement. ASC Topic 610-20 is effective for annual periods beginning after December 15, 2017. The Company adopted ASC Topic 610-20 as of January 1, 2018 using the modified retrospective approach. The adoption of ASC Topic 610-20 did not impact the accounting of the Company’s historical property sales or sales of joint venture interests and its adoption had no impact on the Company’s consolidated financial statements.

 

In August 2018, the FASB issued ASU No. 2018-15 "Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40)" (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). ASU 2018-15 is effective for annual periods (including interim periods within those periods) beginning after December 15, 2019, though early adoption, including adoption in interim periods, is permissible. The Company has elected early adoption and there has been no material impact to the Company’s consolidated financial statements upon its adoption of ASU 2018-15.

 

Note 3 – Sale of Real Estate Assets and Joint Venture Equity Interests and Abandonment of Development Project

 

Sale of Village Green Ann Arbor

 

On February 22, 2017, the Company closed on the sale of the Village Green Ann Arbor property, located in Ann Arbor, Michigan. The property was sold for approximately $71.4 million, subject to certain prorations and adjustments typical in such real estate transactions. After deduction for the payoff of the existing mortgage indebtedness encumbering the Village Green Ann Arbor property in the amount of $41.4 million and payment of closing costs and fees of $1.3 million, the sale of the property generated net proceeds of approximately $28.6 million and a gain on sale of approximately $16.7 million, of which the Company’s pro rata share of proceeds was approximately $13.6 million and pro rata share of the gain was approximately $7.8 million.

 

Sale of Lansbrook Village

 

On April 26, 2017, the Company closed on the sale of Lansbrook Village, located in Palm Harbor, Florida. The 90% owned property was sold for approximately $82.4 million, subject to certain prorations and adjustments typical in such real estate transactions. After deduction for assumption of the existing mortgage indebtedness encumbering Lansbrook Village in the amount of $57.2 million and payment of closing costs and fees of $1.2 million, the sale of the property generated net proceeds of approximately $24.1 million and a gain on sale of approximately $22.8 million, of which the Company’s pro rata share of proceeds was approximately $19.1 million and pro rata share of the gain was approximately $16.1 million.

 

 F-16 

 

 

Sale of Fox Hill

 

On May 24, 2017, the Company closed on the sale of the Fox Hill property, located in Austin, Texas. The property was sold for approximately $46.5 million, subject to certain prorations and adjustments typical in such real estate transactions. After deduction for the payoff of the existing mortgage indebtedness encumbering the Fox Hill property in the amount of $26.7 million, the payment of early extinguishment of debt costs of $1.6 million and payment of closing costs and fees of $0.5 million, the sale of the property generated net proceeds of approximately $19.2 million and a gain on sale of approximately $10.7 million, of which the Company’s pro rata share of proceeds was approximately $16.4 million and pro rata share of the gain was approximately $10.3 million.

 

Sale of MDA Apartments

 

On June 30, 2017, the Company closed on the sale of its interest in MDA Apartments, located in Chicago, Illinois. The Company’s 35% interest in the property was sold for approximately $18.3 million, subject to certain prorations and adjustments typical in such real estate transactions. After deduction for the payment of closing costs and fees of $0.7 million, the sale of the joint venture interest in the property generated net proceeds of approximately $17.6 million and gain on sale of $10.2 million, of which the Company’s pro rata share of proceeds was approximately $11.0 million and pro rata share of the gain was approximately $6.4 million.

 

Election to Abandon East San Marco Development

 

On November 24, 2015, the Company entered into a cost-sharing agreement to pursue the acquisition of a tract of real property located in Jacksonville, Florida for the development of a 266-unit, Class A multifamily apartment community with 44,276 square feet of retail space, or the East San Marco Property.  In 2017 the Company elected to abandon pursuit of the development of the East San Marco Property due to significant cost escalations arising from scope changes imposed on the project after the start and from both general and market specific labor and material inflation, which negatively impacted the risk and return profile of the project.  The Company had invested approximately $2.9 million in a controlling equity position in the East San Marco Property prior to abandonment, all of which was recorded within acquisition and pursuit costs on the consolidated statements of operations.

 

 F-17 

 

 

Note 4 – Investments in Real Estate

 

As of December 31, 2018, the Company owned interests in thirty-three consolidated operating properties and fourteen properties through preferred equity and mezzanine loan investments. The following tables provide summary information regarding the Company’s consolidated operating properties and preferred equity and mezzanine loan investments, which are either consolidated or accounted for under the equity method of accounting.

 

Consolidated Operating Properties

 

Multifamily Community Name  Location 

Number of

Units

   Date Built /
Renovated (1)		   Ownership 
ARIUM at Palmer Ranch  Sarasota, FL   320    2016    100.0%
ARIUM Glenridge  Atlanta, GA   480    1990    90.0%
ARIUM Grandewood  Orlando, FL   306    2005    100.0%
ARIUM Gulfshore  Naples, FL   368    2016    100.0%
ARIUM Hunter’s Creek  Orlando, FL   532    1999    100.0%
ARIUM Metrowest  Orlando, FL   510    2001    100.0%
ARIUM Palms  Orlando, FL   252    2008    100.0%
ARIUM Pine Lakes  Port St. Lucie, FL   320    2003    85.0%
ARIUM Westside  Atlanta, GA   336    2008    90.0%
Ashford Belmar  Lakewood, CO   512    1988/1993    85.0%
Ashton Reserve  Charlotte, NC   473    2015    100.0%
Citrus Tower  Orlando, FL   336    2006    96.8%
Enders Place at Baldwin Park  Orlando, FL   220    2003    92.0%
James on South First  Austin, TX   250    2016    90.0%
Marquis at Crown Ridge  San Antonio, TX   352    2009    90.0%
Marquis at Stone Oak  San Antonio, TX   335    2007    90.0%
Marquis at The Cascades  Tyler, TX   582    2009    90.0%
Marquis at TPC  San Antonio, TX   139    2008    90.0%
Outlook at Greystone  Birmingham, AL   300    2007    100.0%
Park & Kingston  Charlotte, NC   168    2015    100.0%
Plantation Park  Lake Jackson, TX   238    2016    80.0%
Preston View  Morrisville, NC   382    2000    100.0%
Roswell City Walk  Roswell, GA   320    2015    98.0%
Sands Parc  Daytona Beach, FL   264    2017    100.0%
Sorrel  Frisco, TX   352    2015    95.0%
Sovereign  Fort Worth, TX   322    2015    95.0%
The Brodie  Austin, TX   324    2001    92.5%
The Links at Plum Creek  Castle Rock, CO   264    2000    88.0%
The Mills  Greenville, SC   304    2013    100.0%
The Preserve at Henderson Beach  Destin, FL   340    2009    100.0%
Veranda at Centerfield  Houston, TX   400    1999    93.0%
Villages of Cypress Creek  Houston, TX   384    2001    80.0%
Wesley Village  Charlotte, NC   301    2010    100.0%
Total      11,286           

 

(1) Represents date of last significant renovation or year built if there were no renovations.

 

Depreciation expense was $53.9 million, $35.5 million and $23.6 million for the years ended December 31, 2018, 2017 and 2016, respectively.

 

Intangibles related to the Company’s consolidated investments in real estate consist of the value of in-place leases. In-place leases are amortized over the remaining term of the in-place leases, which is approximately six months. Amortization expense related to the in-place leases was $8.8 million, $13.1 million and $7.6 million for the years ended December 31, 2018, 2017 and 2016, respectively.

 

The Company’s real estate assets are leased to tenants under operating leases for which the terms and expirations vary.  The leases may have provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated.  The Company retains substantially all of the risks and benefits of ownership of the consolidated real estate assets leased to tenants.  Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit.  Amounts required as a security deposit vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not individually significant amounts.  Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of their security deposit.  Security deposits received in cash related to tenant leases are included in other accrued liabilities in the accompanying consolidated balance sheets and totaled $2.4 million and $2.3 million as of December 31, 2018 and 2017, respectively, for the Company’s consolidated real estate properties.  No individual tenant represents over 10% of the Company’s annualized base rent for the consolidated real estate properties.

 

 F-18 

 

 

Preferred Equity and Mezzanine Loan Investments

 

Multifamily Community Name  Location 

Actual /

Planned

Number of Units

   Actual /
Estimated
Initial
Occupancy		  Actual /
Estimated
Construction
Completion
Whetstone Apartments  Durham, NC   204   3Q 2014  3Q 2015
Alexan CityCentre  Houston, TX   340   2Q 2017  4Q 2017
Helios  Atlanta, GA   282   2Q 2017  4Q 2017
Alexan Southside Place  Houston, TX   270   4Q 2017  1Q 2018
Leigh House, formerly Lake Boone Trail  Raleigh, NC   245   3Q 2017  3Q 2018
Vickers Historic Roswell, formerly Vickers Village  Roswell, GA   79   2Q 2018  3Q 2018
Domain at The One Forty, formerly Domain  Garland, TX   299   2Q 2018  4Q 2018
Arlo, formerly West Morehead  Charlotte, NC   286   2Q 2018  2Q 2019
Cade Boca Raton, formerly APOK Townhomes  Boca Raton, FL   90   4Q 2018  2Q 2019
Novel Perimeter, formerly Crescent Perimeter  Atlanta, GA   320   3Q 2018  2Q 2019
Flagler Village  Fort Lauderdale, FL   385   2Q 2020  3Q 2020
North Creek Apartments  Leander, TX   259   4Q 2019  3Q 2020
Riverside Apartments  Austin, TX   222   3Q 2020  4Q 2020
Wayforth at Concord  Concord, NC   150   1Q 2020  2Q 2021
Total      3,431       

 

Note 5 – Acquisition of Real Estate

 

The following describes the Company’s significant acquisition activity during the years ended December 31, 2018 and 2017 (dollars in thousands):

 

Property  Location  Date   Interest   Price   Mortgage 
Preston View  Morrisville, NC   February 17, 2017    91.8%(a)  $59,500   $41,066 
Wesley Village  Charlotte, NC   March 9, 2017    91.8%(a)   57,150    40,545 
Texas Portfolio (b)  (b)  June 9, 2017    90.0%   188,850    146,377 
Villages at Cypress Creek  Houston, TX   September 8, 2017    80.0%   40,700    26,200 
Citrus Tower  Orlando, FL   September 28, 2017    96.8%   55,250    41,438 
Outlook at Greystone  Birmingham, AL   October 19, 2017    100.0%   36,250    (c)     
ARIUM Metrowest  Orlando, FL   October 30, 2017    100.0%   86,000    (c)     
ARIUM Hunter’s Creek  Orlando, FL   October 30, 2017    100.0%   96,888    72,294 
The Mills  Greenville, SC   November 29, 2017    100.0%   40,250    26,817 
The Links at Plum Creek  Castle Rock, CO   March 26, 2018    88.0%   61,100    40,000 
Sands Parc  Daytona Beach, FL   May 1, 2018    100.0%   46,200    (c)    
Plantation Park  Lake Jackson, TX   June 14, 2018    80.0%   

35,600		    26.625 
Veranda at Centerfield  Houston, TX   July 26, 2018    93.0%   40,150    26,100 
Ashford Belmar  Lakewood, CO   November 15, 2018    85.0%   143,444    100,675 

 

(a) Subsequently increased to 100.0% as discussed below.
(b) Marquis at Crown Ridge, Marquis at Stone Oak and Marquis at TPC located in San Antonio, Texas, and Marquis at The Cascades I and II (considered one property subsequent to acquisition) located in Tyler, Texas.
(c) Funded, in part, with the Company’s Senior Credit Facility secured by the property. See Note 8 for further information about the Company’s Secured Credit Facility.

 

Purchase Price Allocation

 

The real estate acquisitions above have been accounted for as asset acquisitions. The purchase prices were allocated to the acquired assets based on their estimated fair values at the dates of acquisition.

 

The following table summarizes the assets acquired at the acquisition date for acquisitions made during the year ended December 31, 2018 (amounts in thousands): 

 

   Purchase
Price
Allocation		 
Land  $31,250 
Building   225,857 
Building improvements   24,240 
Land improvements   38,750 
Furniture and fixtures   5,119 
In-place leases   5,629 
Total assets acquired  $330,845 

 

 F-19 

 

 

In addition to the summary of assets acquired noted above, the Company capitalized $2.7 million in acquisition costs during the year ended December 31, 2018. 

 

Acquisition of Additional Interests in Properties

 

In addition to the property acquisitions discussed above, the Company also acquired the noncontrolling partner’s interest in the following properties (dollars in thousands):

 

Property  Date   Amount   Previous Interest   New Interest 
ARIUM Grandewood   November 6, 2017   $3,054    95.0%   100.0%
Park & Kingston (a)   December 29, 2017    483    96.0%   100.0%
Enders Place at Baldwin Park (a)   December 29, 2017    499    89.5%   92.0%
Preston View and Wesley Village (b)   December 29, 2017    3,391    91.8%   100.0%
ARIUM at Palmer Ranch   April 26, 2018    4,174    95.0%   100.0%
ARIUM Gulfshore   April 26, 2018    4,838    95.0%   100.0%
ARIUM Palms   August 29, 2018    3,023    95.0%   100.0%

 

(a) The additional interests were purchased from Bluerock Special Opportunity + Income Fund III, LLC (“Fund III”) based on a broker’s opinion of value.
(b) The additional interests were purchased from Bluerock Special Opportunity + Income Fund I, LLC (“Fund I”) based on an 8% return on equity from the original purchase dates in February 2017 and March 2017.

 

 F-20 

 

 

Note 6 – Notes and Interest Receivable due from Related Parties

 

Following is a summary of the notes and accrued interest receivable due from related parties as of December 31, 2018 and 2017 (amounts in thousands):

 

Property  December 31,
 2018		   December 31,
 2017		 
Arlo, formerly West Morehead  $24,893   $24,893 
Cade Boca Raton, formerly APOK Townhomes   11,854    11,365 
Domain at The One Forty, formerly Domain   20,536    20,536 
Flagler Village   75,436    53,668 
Novel Perimeter, formerly Crescent Perimeter   20,867    20,622 
Vickers Historic Roswell, formerly Vickers Village   10,498    9,819 
Total  $164,084   $140,903 

 

Following is a summary of the interest income from related parties for the years ended December 31, 2018 and 2017 (amounts in thousands):

 

Property  December 31,
 2018		   December 31,
 2017		 
Arlo  $3,687   $3,680 
Cade Boca Raton   1,694    1,656 
Domain at The One Forty   3,042    2,525 
Flagler Village   9,249    44 
Novel Perimeter   3,091    17 
Vickers Historic Roswell   1,492    8 
Total  $22,255   $7,930 

 

Arlo Mezzanine Financing

 

On December 29, 2016, the Company, through BRG Morehead NC, LLC, an indirect subsidiary, provided a $21.3 million mezzanine loan (the “BRG Arlo Mezz Loan”) to BR Morehead JV Member, LLC (the “Arlo JV Member”), an affiliate of the former Manager. The BRG Arlo Mezz Loan is secured by Arlo JV Member’s approximate 95.0% interest in a multi-tiered joint venture along with Bluerock Special Opportunity + Income Fund II, LLC (“Fund II”), an affiliate of the former Manager, and an unaffiliated third party (the “Arlo JV”), which is developing a 286-unit, Class A apartment community located in Charlotte, North Carolina known as Arlo. On January 5, 2017, the Company increased the amount of the BRG Arlo Mezz Loan to approximately $24.6 million. The BRG Arlo Mezz Loan matures on the earlier of January 5, 2020, or the maturity date of the Arlo Construction Loan, as defined below, as extended, and bears interest at a fixed rate of 15.0%. Regular monthly payments are interest-only during the initial term. The BRG Arlo Mezz Loan can be prepaid without penalty. The Company has the right to exercise an option to purchase, at the greater of a 25 basis point discount to fair market value or 15% internal rate of return for Fund II, up to a 100% common membership interest in Arlo JV Member (the mezzanine borrower), which is 99.5% owned by Fund II and which currently holds an approximate 95.0% interest in the Arlo JV and in the Arlo property, subject to certain promote rights of our unaffiliated development partner.

 

In conjunction with the Arlo development, on December 29, 2016, the Arlo property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a $34.5 million construction loan (the “Arlo Construction Loan”) with an unaffiliated party, of which $29.1 million is outstanding at December 31, 2018, and which is secured by the Arlo property. The Arlo Construction Loan matures on December 29, 2019 and contains two one-year extension options, subject to certain conditions including a debt service coverage, loan to value ratio and payment of an extension fee. The Arlo Construction Loan bears interest on a floating basis on the amount drawn based on LIBOR plus 3.75%, subject to a minimum of 4.25%. Regular monthly payments are interest-only until September 2019, with further payments based on twenty-five-year amortization. The Arlo Construction Loan can be prepaid without penalty.

 

In addition, on December 29, 2016, the Arlo property owner entered into a $7.3 million mezzanine loan with an unaffiliated party, of which $7.3 million is outstanding at December 31, 2018, and which is secured by the membership interest in the joint venture developing the Arlo property. The loan matures on December 29, 2019 and contains two one-year extension options, subject to certain conditions including a debt service coverage, loan to value ratio, extension of the Arlo Construction Loan and payment of an extension fee. The loan bears interest on a fixed rate of 11.5%. Regular monthly payments are interest-only. The loan can be prepaid prior to maturity provided the lender receives a cumulative return of 30% of its loan amount including all principal and interest paid.

 

The development was 37% occupied at December 31, 2018.

 

 F-21 

 

 

Cade Boca Raton Mezzanine Financing

 

On January 6, 2017, the Company, through BRG Boca, LLC (“BRG Boca”), an indirect subsidiary, provided an $11.2 million mezzanine loan (the “BRG Boca Mezz Loan”) to BRG Boca JV Member, LLC (“BR Boca JV Member”), an affiliate of the former Manager. The BRG Boca Mezz Loan is secured by BR Boca JV Member’s approximate 90.0% interest in a multi-tiered joint venture along with Fund II, an affiliate of the former Manager, and an unaffiliated third party (the “Boca JV”), which is developing a 90-unit, Class A apartment community located in Boca Raton, Florida known as Cade Boca Raton. The BRG Boca Mezz Loan matures on the earlier of January 6, 2020, or the maturity of the Boca Construction Loan, as defined below, as extended, and bears interest at a fixed rate of 15.0%. Regular monthly payments are interest-only during the initial term. The BRG Boca Mezz Loan can be prepaid without penalty. The Company has the right to exercise an option to purchase, at the greater of a 25 basis point discount to fair market value or 15% internal rate of return for Fund II, up to a 100% common membership interest in BR Boca JV Member (the mezzanine borrower), which is 99.5% owned by Fund II and which currently holds an approximate 90.0% interest in the Boca JV and in the Cade Boca Raton property, subject to certain promote rights of our unaffiliated development partner.

 

In conjunction with the Cade Boca Raton development, on December 29, 2016, the Cade Boca Raton property owner, which is owned by an entity in which the Company owns an indirect interest, entered into an $18.7 million construction loan (the “Boca Construction Loan”) with an unaffiliated party, of which $16.9 million is outstanding at December 31, 2018, which is secured by the Cade Boca Raton property. The Boca Construction Loan matures on June 29, 2019 and contains two one-year extensions, subject to certain conditions including a debt service coverage, stabilized occupancy and payment of an extension fee. The Boca Construction Loan requires interest-only payments at prime plus 0.625%, subject to a floor of 4.125% and can be prepaid without penalty. As the current loan matures on June 29, 2019, the Cade Boca Raton property owner is engaged in discussions to refinance the loan.

 

On November 9, 2018, the Company, through BRG Boca, and on behalf of Fund II, funded a capital call of $0.5 million by increasing its mezzanine loan to BR Boca JV Member. In exchange for contributing Fund II’s share of the total $0.5 million capital call, the Company received an additional 2.5 basis point discount purchase option and has the right to exercise an option to purchase, at the greater of a 27.5 basis point discount to fair market value or 15% internal rate of return for Fund II, up to a 100% common membership interest in BR Boca JV Member.

 

The development was 8% occupied at December 31, 2018.

 

Domain at The One Forty Mezzanine Financing

 

On March 3, 2017, the Company, through BRG Domain Phase 1, LLC (“BRG Domain 1”), an indirect subsidiary, provided a $20.3 million mezzanine loan (the “BRG Domain 1 Mezz Loan”) to BR Member Domain Phase 1, LLC (“BR Domain 1 JV Member”), an affiliate of the former Manager. The BRG Domain 1 Mezz Loan is secured by BR Domain 1 JV Member’s approximate 95.0% interest in a multi-tiered joint venture along with Fund II, an affiliate of the former Manager, and an unaffiliated third party (the “Domain 1 JV”), which is developing a 299-unit, Class A apartment community located in Garland, Texas known as Domain at The One Forty. The BRG Domain 1 Mezz Loan matures on the earlier of March 3, 2020, or the maturity of the Domain 1 Construction Loan, as defined below, as extended, and bears interest at a fixed rate of 15.0%. Regular monthly payments are interest-only during the initial term. The BRG Domain 1 Mezz Loan can be prepaid without penalty. The Company has the right to exercise an option to purchase, at the greater of a 25 basis point discount to fair market value or 15% internal rate of return for Fund II, up to a 100% common membership interest in BR Domain 1 JV Member (the mezzanine borrower), which is 99.5% owned by Fund II and which currently holds an approximate 95.0% interest in the Domain 1 JV and in the Domain at The One Forty property, subject to certain promote rights of our unaffiliated development partner.

 

In conjunction with the Domain at The One Forty development, on March 3, 2017, the Domain at The One Forty property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a $30.3 million construction loan (the “Domain 1 Construction Loan”) with an unaffiliated party, of which $26.3 million is outstanding at December 31, 2018, and which is secured by the Domain at The One Forty property. The Domain 1 Construction Loan matures on March 3, 2020 and contains two one-year extension options, subject to certain conditions including construction completion, a debt service coverage, loan to value ratio and payment of an extension fee. The Domain 1 Construction Loan bears interest on a floating basis on the amount drawn based on LIBOR plus 3.25%. Regular monthly payments are interest-only until March 2020, with further payments based on thirty-year amortization. The Domain 1 Construction Loan can be prepaid without penalty.

 

In addition, on March 3, 2017, the Domain at The One Forty property owner entered into a $6.4 million mezzanine loan with an unaffiliated party, of which $6.4 million is outstanding at December 31, 2018, and which is secured by the membership interest in the joint venture developing the Domain at The One Forty property. The loan matures on March 3, 2020 and contains two one-year extension options, subject to certain conditions including a debt service coverage, loan to value ratio, extension of the Domain 1 Construction Loan and payment of an extension fee. The loan bears interest on a fixed rate of 12.5%, with 9.5% paid currently. Regular monthly payments are interest-only. The loan can be prepaid prior to maturity provided the lender receives a minimum profit and 1% exit fee.

 

The development was 34% occupied at December 31, 2018.

 

 F-22 

 

 

Novel Perimeter Mezzanine Financing

 

On December 29, 2017, the Company, through BRG Perimeter, LLC (“BRG Perimeter”), an indirect subsidiary, provided a $20.6 million mezzanine loan (the “BRG Perimeter Mezz Loan”) to BR Perimeter JV Member, LLC (“BR Perimeter JV Member”), an affiliate of the former Manager. The BRG Perimeter Mezz Loan is secured by BR Perimeter JV Member’s approximate 60.0% interest in a multi-tiered joint venture along with Fund III, an affiliate of the former Manager, and an unaffiliated third party, which is developing a 320-unit, Class A apartment community located in Atlanta, Georgia known as Novel Perimeter. The BRG Perimeter Mezz Loan matures on the later of December 29, 2021, or the maturity date of the Novel Perimeter Construction Loan, as defined below, as extended, and bears interest at a fixed rate of 15.0%. Regular monthly payments are interest-only during the initial term. The BRG Perimeter Mezz Loan can be prepaid without penalty.

 

On December 12, 2016, the Novel Perimeter property owner, which is owned by an entity in which the Company owns an indirect interest, entered into an approximately $44.7 million construction loan (the “Novel Perimeter Construction Loan”) with an unaffiliated party, of which $39.2 million is outstanding at December 31, 2018, and which is secured by the Novel Perimeter development. The Novel Perimeter Construction Loan matures December 12, 2020 and contains a one-year extension option subject to certain conditions including a debt service coverage, loan to value ratio and payment of an extension fee. The Novel Perimeter Construction Loan bears interest at a rate of LIBOR plus 3.00%, with interest only payments until December 12, 2020 and future payments based on thirty-year amortization. The Novel Perimeter Construction Loan can be prepaid without penalty.

 

The development was 22% occupied at December 31, 2018.

 

Vickers Historic Roswell Mezzanine Financing

 

On December 29, 2017, the Company, through BRG Vickers Roswell, LLC (“BRG Vickers”), an indirect subsidiary, provided a $9.8 million mezzanine loan (the “BRG Vickers Mezz Loan”) to BR Vickers Roswell JV Member, LLC (“BR Vickers JV Member”), an affiliate of the former Manager. The BRG Vickers Mezz Loan is secured by BR Vickers JV Member’s approximate 80.0% interest in a multi-tiered joint venture along with Fund III, an affiliate of the former Manager, and an unaffiliated third party (the “Vickers JV”), which is developing a 79-unit, Class A apartment community located in Roswell, Georgia known as Vickers Historic Roswell. The BRG Vickers Mezz Loan matures on the later of December 29, 2020, or the maturity date of the Vickers Construction Loan, as defined below, as extended, and bears interest at a fixed rate of 15.0%. Regular monthly payments are interest-only during the initial term. The BRG Vickers Mezz Loan can be prepaid without penalty.

 

On December 22, 2016, the Vickers Historic Roswell property owner, which is owned by an entity in which the Company owns an indirect interest, entered into an approximately $18.0 million construction loan (the “Vickers Construction Loan”) with an unaffiliated party, of which $17.4 million is outstanding at December 31, 2018, and which is secured by the Vickers Historic Roswell development. The Vickers Construction Loan matures December 1, 2020 and bears interest at a rate of LIBOR plus 3.00%, with interest only payments until December 1, 2018 and future payments based on twenty-five-year amortization. The Vickers Construction Loan can be prepaid without penalty.

 

On August 13, 2018, the Company, through BRG Vickers, and on behalf of Fund III, funded a capital call of $0.3 million by increasing its mezzanine loan to BR Vickers JV Member, which is 99.5% owned by Fund III and which currently holds an approximate 80.0% interest in the Vickers JV. In exchange for contributing Fund III’s share of the total $0.3 million capital call, the Company received the right to exercise an option to purchase, at the greater of a 10 basis point discount to fair market value or 15% internal rate of return for Fund III, up to a 100% common membership interest in BR Vickers JV Member.

 

On November 9, 2018, the Company, through BRG Vickers, and on behalf of Fund III, funded a capital call of $0.3 million by increasing its mezzanine loan to BR Vickers JV Member. In exchange for contributing Fund III’s share of the total $0.3 million capital call, the Company received an additional 2.5 basis point discount purchase option and has the right to exercise an option to purchase, at the greater of a 12.5 basis point discount to fair market value or 15% internal rate of return for Fund III, up to a 100% common membership interest in BR Vickers JV Member.

 

The development was 41% occupied at December 31, 2018.

 

Flagler Village Mezzanine Financing

 

On December 29, 2017, the Company, through BRG Flagler Village, LLC (“BRG Flagler”), an indirect subsidiary, provided a $53.6 million mezzanine loan (the “BRG Flagler Mezz Loan”) to BR Flagler JV Member, LLC (“BR Flagler JV Member”), an affiliate of the former Manager. The BRG Flagler Mezz Loan was secured by BR Flagler JV Member’s 100.0% interest in a multi-tiered joint venture along with Fund II and Fund III, affiliates of the former Manager, and an unaffiliated third party (the “Flagler JV”), which is developing an approximately 385-unit, Class A apartment community located in Fort Lauderdale, Florida known as Flagler Village. The BRG Flagler Mezz Loan had a maturity date of December 29, 2022 and bore interest at a fixed rate of 15.0%, with interest-only monthly payments during the initial term. The BRG Flagler Mezz Loan can be prepaid without penalty.

 

On March 28, 2018, in conjunction with the closing of the Flagler Construction Loan, as defined below, the Company, through BRG Flagler, restated the BRG Flagler Mezz Loan and increased the amount to approximately $74.6 million. The restated BRG Flagler Mezz Loan matures on March 28, 2023 and bears interest at a fixed rate of 12.9%. The BRG Flagler Mezz Loan is secured by BR Flagler JV Member’s approximate 97.4% interest in the Flagler JV, subject to certain promote rights of the Company’s unaffiliated development partner, and which is subject to preferred equity of partners holding preferred membership interests in the Flagler Village property. The Company has the right of first offer to purchase the member’s ownership interests in BR Flagler JV Member, or, if applicable, to purchase Flagler Village if BR Flagler JV Member exercises its rights under the Flagler JV to cause the sale of Flagler Village.

 

 F-23 

 

 

On March 28, 2018, the Flagler Village property owner, which is owned by an entity in which the Company owns an indirect interest, entered into an approximately $70.4 million construction loan (the “Flagler Construction Loan”) with an unaffiliated party, of which $1,042 is outstanding at December 31, 2018, and which is secured by the Flagler Village development. The Flagler Construction Loan matures March 28, 2022 and contains a one-year extension option, subject to certain conditions including a debt service coverage, loan to value ratio, certificate of occupancy and payment of an extension fee. The Flagler Construction Loan bears interest at the greater of 5.0% or a rate of LIBOR plus 3.85%, with interest only payments until March 28, 2022 and future payments after extension based on thirty-year amortization. The Flagler Construction Loan can be prepaid subject to payment of a make-whole premium and exit fee.

 

The development was not in lease-up at December 31, 2018.

 

Note 7 – Preferred Equity Investments and Investments in Unconsolidated Real Estate Joint Ventures

 

As of December 31, 2018, the Company, through wholly-owned subsidiaries of the Operating Partnership, had outstanding equity investments in fourteen joint ventures, each of which was created to develop a multifamily property.

 

Eight of the fourteen equity investments, Alexan CityCentre, Alexan Southside Place, Helios, Leigh House, North Creek Apartments, Riverside Apartments, Wayforth at Concord and Whetstone Apartments, are preferred investments, generate a stated preferred return on outstanding capital contributions, and the Company is not allocated any of the income or loss in the joint ventures. The joint venture is the controlling member in an entity whose purpose is to develop a multifamily property.

 

The carrying amount of the Company’s preferred equity investments and investments in unconsolidated real estate joint ventures as of December 31, 2018 and 2017 is summarized in the table below (amounts in thousands):

 

Property  December 31,
 2018		   December 31,
 2017		 
         
Alexan CityCentre  $11,205   $9,258 
Alexan Southside Place   22,801    20,584 
Arlo, formerly West Morehead   14    14 
Cade Boca Raton, formerly APOK Townhomes   7    7 
Domain at The One Forty, formerly Domain   12    12 
Flagler Village   44    30 
Helios   19,189    16,360 
Leigh House, formerly Lake Boone Trail   13,319    11,930 
North Creek Apartments   5,892    — 
Novel Perimeter, formerly Crescent Perimeter   12    12 
Riverside Apartments   3,600    — 
Vickers Historic Roswell, formerly Vickers Village   6    6 
Wayforth at Concord   —    — 
Whetstone Apartments   12,932    12,932 
Total  $89,033   $71,145 

 

 F-24 

 

 

The preferred returns and equity in income (loss) of the Company’s unconsolidated real estate joint ventures for the years ended December 31, 2018, 2017 and 2016 is summarized below (amounts in thousands):

 

Property 

December 31,

2018

  

December 31,

2017

  

December 31,

2016

 
Alexan CityCentre  $1,668   $1,395   $1,085 
Alexan Southside Place   3,201    2,879    2,605 
Arlo   —    —    677 
Cade Boca Raton   —    —    226 
Domain at The One Forty   —    141    614 
Flagler Village   —    (7)   (6)
Helios   2,459    2,454    2,461 
Leigh House   1,910    1,770    1,492 
North Creek Apartments   108    —    — 
Other   —    (26)   530 
Riverside Apartments   31    —    — 
Whetstone Apartments   935    1,730    1,948 
Preferred returns and equity in income of unconsolidated joint ventures  $10,312   $10,336   $11,632 

 

Summary combined financial information for the Company’s investments in unconsolidated real estate joint ventures as of December 31, 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016, is as follows (amounts in thousands):

 

   December 31,
 2018		   December 31,
 2017		 
Balance Sheets:          
Real estate, net of depreciation  $577,624   $399,111 
Other assets   45,324    62,667 
Total assets  $622,948   $461,778 
           
Mortgage payable  $480,903   $325,702 
Other liabilities   21,250    25,956 
Total liabilities  $502,153   $351,658 
Members’ equity   120,795    110,120 
Total liabilities and members’ equity  $622,948   $461,778 

 

  

December 31,

2018

  

December 31,

2017

  

December 31,

2016

 
Operating Statement:               
Rental revenues  $19,222   $5,517   $6,652 
Operating expenses   (14,824)   (4,990)   (3,760)
Income before debt service, acquisition costs, and depreciation and amortization   4,398    527    2,892 
Interest expense, net   (12,935)   (3,098)   (1,409)
Acquisition costs   —    —    (3)
Depreciation and amortization   (10,385)   (3,384)   (2,881)
Operating loss   (18,922)   (5,955)   (1,401)
Gain on sale   —    —    16,733 
Net (loss) income  $(18,922)  $(5,955)  $15,332 

 

Alexan CityCentre Interests

 

On July 1, 2014, through BRG T&C BLVD Houston, LLC, a wholly-owned subsidiary of its Operating Partnership, the Company made a convertible preferred equity investment in a multi-tiered joint venture along with Bluerock Growth Fund, LLC (“BGF”), Bluerock Growth Fund II, LLC (“BGF II”), Fund II and Fund III, affiliates of the former Manager, and an unaffiliated third party (the “Alexan CityCentre JV”), to develop a 340-unit, Class A apartment community located in Houston, Texas, known as Alexan CityCentre. The Company has made a commitment to invest in $11.2 million of preferred equity interests in BR T&C BLVD JV Member, LLC, all of which has been funded as of December 31, 2018 (of which, $6.5 million and $4.7 million earns a 15% and 20% preferred return, respectively). The Alexan CityCentre JV is required to redeem the Company’s preferred membership interest plus any accrued but unpaid return on the earlier date which is six months following the maturity of the construction loan, detailed below, including extension and refinancing, or any earlier acceleration or due date.

 

 F-25 

 

 

On June 7, 2016, the Alexan CityCentre property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a loan modification agreement to amend the terms of its construction loan financing the construction and development of the Alexan CityCentre property (the “Alexan Development”). The maximum principal amount available to the borrower under the terms of the modified loan is $55.1 million, of which approximately $55.1 million is outstanding at December 31, 2018. The loan matures on January 1, 2020, subject to a single one-year extension exercisable at the option of the borrower. The interest rate on the loan is a variable per annum rate equal to the prime rate plus 0.5% or LIBOR plus 3.00%, at the borrower’s option. The loan requires monthly interest payments until the maturity date, after which $60,000 monthly payments of principal will be required in addition to payment of accrued interest during the maturity extension period. Certain unaffiliated third parties agreed to guaranty the completion of the development of the Alexan Development and provided partial guaranties of the borrower’s principal and interest obligations under the loan.

 

The Company had the right, in its sole discretion, to convert its preferred membership interest into a common membership interest for a period of six months from the date upon which 70% of the units in Alexan CityCentre had been leased and occupied. The six-month period during which the Company had the right to convert commenced on January 21, 2018, the date on which Alexan Development achieved 70% leased and occupied units. The Company did not elect to convert into a common membership and its option to convert expired on July 21, 2018.

 

The development was 93% occupied at December 31, 2018.

 

Alexan Southside Place Interests

 

On January 12, 2015, through BRG Southside, LLC (“BRG Southside”), a wholly-owned subsidiary of its Operating Partnership, the Company made a convertible preferred equity investment in a multi-tiered joint venture along with Fund II and Fund III, affiliates of the former Manager, and an unaffiliated third party (the “Alexan Southside JV”), to develop a 270-unit, Class A apartment community located in Houston, Texas, known as Alexan Southside Place. Alexan Southside Place is developed upon a tract of land ground leased from Prokop Industries BH, L.P., a Texas limited partnership, by BR Bellaire BLVD, LLC (“BR Bellaire BLVD”), as tenant under an 85-year ground lease. The Company has made a commitment to invest in $22.8 million of preferred equity interests in BR Southside Member, LLC, all of which has been funded as of December 31, 2018. The Alexan Southside JV is required to redeem the Company’s preferred membership interest plus any accrued but unpaid return on the earlier date which is six months following the maturity of the loan, detailed below, including extension and refinancing, or any earlier acceleration or due date.

 

In conjunction with the Alexan Southside development, on April 7, 2015, BR Bellaire BLVD, which is owned by an entity in which the Company owns an indirect interest, entered into a $31.8 million construction loan, of which $31.7 million is outstanding at December 31, 2018, which is secured by its interest in the Alexan Southside Place property. The loan matures on April 7, 2019 and contains a one-year extension option, subject to certain conditions including a debt service coverage, loan to value ratio and payment of an extension fee. The loan bears interest on a floating basis on the amount drawn based on the base rate plus 1.25% or LIBOR plus 2.25%, at the borrower’s option. Regular monthly payments are interest-only during the initial term, with payments during the extension period based on thirty-year amortization. The loan can be prepaid without penalty. As the current loan matures on April 7, 2019, BR Bellaire BLVD is engaged in discussions to refinance the loan.

 

On November 9, 2018, the Company, through BRG Southside, entered into an amended agreement with Fund II and Fund III (together “the Funds”) that reduced the Company’s preferred return in exchange for certain grants made by the Funds. The Company’s previous preferred return of 15% per annum was reduced as follows: (i) 6.5% per annum effective November 9, 2018 through the end of calendar year 2019, (ii) 5.0% per annum for the calendar year 2020, and (iii) 3.5% per annum for the calendar year 2021 and thereafter. The Funds agreed to (i) grant the Company a right to compel a sale of the project beginning November 1, 2021 and (ii) grant the Company a 50.0% participation in any profits achieved in a sale after the Company receives its full preferred return and repayment of principal, and the Funds receive full return of their capital contributions. The Funds are obligated to fund their prorata share of future capital calls, absent a default event. If a default event shall occur and is continuing at the time of a sale, BRG Southside would be entitled to 100% of the profits after the Funds receive full return of their capital contributions. Additionally, the Company agreed to extend the mandatory redemption date of its preferred equity to be reflective of any changes in the loan maturity date as a result of refinancing.

 

The development was 85% occupied at December 31, 2018.

 

Arlo Interests

 

On January 6, 2016, through BRG Morehead NC, LLC (“BRG Arlo”), a wholly-owned subsidiary of its Operating Partnership, the Company made a convertible preferred equity investment in a multi-tiered joint venture along with Fund II, an affiliate of the former Manager, and an unaffiliated third party, to develop a 286-unit, Class A apartment community located in Charlotte, North Carolina known as Arlo. On December 26, 2016, (i) Fund II redeemed the preferred equity investment held by BRG Arlo in Arlo JV Member for $6.5 million, (ii) BRG Arlo maintained a 0.5% common interest in Arlo JV Member, and (iii) the Company, through BRG Arlo, provided a mezzanine loan in the amount of $21.3 million to Arlo JV Member. See Note 6 for further details regarding Arlo and the BRG Arlo Mezz Loan.

 

Cade Boca Raton Interests

 

On September 1, 2016, through BRG Boca, a wholly-owned subsidiary of its Operating Partnership, the Company made an investment in a multi-tiered joint venture along with Fund II, an affiliate of the former Manager, and an unaffiliated third party, to develop a 90-unit Class A apartment community located in Boca Raton, Florida known as Cade Boca Raton. On January 6, 2017, (i) Fund II substantially redeemed the common equity investment held by BRG Boca in BR Boca JV Member for $7.3 million, (ii) BRG Boca maintained a 0.5% common interest in BR Boca JV Member, and (iii) the Company, through BRG Boca, provided a mezzanine loan in the amount of $11.2 million to BR Boca JV Member. See Note 6 for further details regarding Cade Boca Raton and the BRG Boca Mezz Loan.

 

 F-26 

 

 

Domain at The One Forty Interests

 

On November 20, 2015, through a wholly-owned subsidiary of its Operating Partnership, BRG Domain I, the Company made a convertible preferred equity investment in a multi-tiered joint venture along with Fund II, an affiliate of the former Manager, and an unaffiliated third party, to develop a 299-unit, Class A apartment community located in Garland, Texas known as Domain at The One Forty. On March 3, 2017, (i) Fund II substantially redeemed the preferred equity investment held by BRG Domain 1 in BR Domain 1 JV Member for $7.1 million, (ii) BRG Domain 1 maintained a 0.5% common interest in BR Domain 1 JV Member, and (iii) the Company, through BRG Domain 1, provided a mezzanine loan in the amount of $20.3 million to BR Domain 1 JV Member. See Note 6 for further details regarding Domain at The One Forty and the BRG Domain 1 Mezz Loan.

 

Flagler Village Interests

 

On December 18, 2015, through BRG Flagler, a wholly-owned subsidiary of its Operating Partnership, the Company made an investment in a multi-tiered joint venture along with Fund II, an affiliate of the former Manager, and an unaffiliated third party, to develop an approximately 385-unit, Class A apartment community located in Fort Lauderdale, Florida known as Flagler Village. On December 29, 2017, (i) Fund II substantially redeemed the equity investment held by BRG Flagler in BR Flagler JV Member for $26.3 million, (ii) BRG Flagler maintained a 0.5% common interest in BR Flagler JV Member, and (iii) the Company, through BRG Flagler, provided a mezzanine loan in the amount of $53.6 million to BR Flagler JV Member, which was restated and increased to $74.6 million in March 2018. See Note 6 for further details regarding Flagler Village and the BRG Flagler Mezz Loan.

 

Helios Interests

 

On May 29, 2015, through BRG Cheshire, LLC (“BRG Cheshire”), a wholly-owned subsidiary of its Operating Partnership, the Company made a convertible preferred equity investment in a multi-tiered joint venture along with Fund III, an affiliate of the former Manager, and an unaffiliated third party (the “Helios JV”), to develop a 282-unit, Class A apartment community located in Atlanta, Georgia known as Helios. The Company has made a commitment to invest in $19.2 million of preferred equity interests in BR Cheshire Member, LLC, all of which has been funded as of December 31, 2018. The Helios JV is required to redeem the Company’s preferred membership interest plus any accrued but unpaid return on the earlier date which is six months following the maturity of the loan, detailed below, including refinancing, or any earlier acceleration or due date.

 

In conjunction with the Helios development, on December 16, 2015, the Helios property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a $38.1 million construction loan. The construction loan was secured by the fee simple interest in the Helios property with an original maturity date of December 16, 2018. In November, the loan was modified to extend the maturity date to February 16, 2019. On December 28, 2018, the Helios property owner refinanced the construction loan and entered into a $39.5 million senior mortgage loan (“senior loan”), which is secured by the Helios property, and paid off the previous construction loan of $38.1 million. The Helios property owner accounted for the refinancing as an extinguishment of debt. The senior loan matures on January 1, 2029 and bears interest at a floating basis of LIBOR plus 1.75%, with interest only payments through January 2023, and then monthly payments based on thirty-year amortization. On or after September 29, 2028, the loan may be prepaid without prepayment fee or yield maintenance.

 

On November 9, 2018, the Company, through BRG Cheshire, entered into an amended agreement with Fund III that reduced the Company’s preferred return in exchange for certain grants made by Fund III. The Company’s previous preferred return of 15% per annum was reduced as follows: (i) 7.0% per annum effective November 9, 2018 through the end of calendar year 2019, (ii) 6.0% per annum for the calendar year 2020, and (iii) 4.5% per annum for the calendar year 2021 and thereafter. Fund III agreed to (i) grant the Company a right to compel a sale of the project beginning November 1, 2021 and (ii) grant the Company a 50.0% participation in any profits achieved in a sale after the Company receives its full preferred return and repayment of principal, and Fund III receives full return of its capital contribution. Fund III is obligated to fund its prorata share of future capital calls, absent a default event. If a default event shall occur and is continuing at the time of a sale, BRG Cheshire would be entitled 100% of the profits after Fund III receives full return of its capital contribution. Additionally, the Company agreed to extend the mandatory redemption date of its preferred equity to be reflective of any changes in the loan maturity date as a result of refinancing.

 

The development was 90% occupied at December 31, 2018.

 

Leigh House Interests

 

On December 18, 2015, through BRG Lake Boone, LLC, a wholly-owned subsidiary of its Operating Partnership, the Company made a convertible preferred equity investment in a multi-tiered joint venture along with Fund II, an affiliate of the former Manager, and an unaffiliated third party (the “Leigh House JV”), to develop a 245-unit, Class A apartment community located in Raleigh, North Carolina known as Leigh House. The Company has the right, in its sole discretion, to convert its preferred membership interest into a common membership interest for a period of six months from the date upon which 70% of the units in Leigh House have been leased and occupied. The Company has made a commitment to invest in $13.3 million of preferred equity interests in BR Lake Boone JV Member, LLC, all of which has been funded at December 31, 2018 (of which, $11.9 million and $1.4 million earns a 15% and 20% preferred return, respectively). The Leigh House JV is required to redeem the Company’s preferred membership interest plus any accrued but unpaid return on the earlier date which is six months following the maturity of the construction loan, detailed below, including extension, or any earlier acceleration or due date.

 

 F-27 

 

 

In conjunction with the Leigh House development, on June 23, 2016, the Leigh House property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a $25.2 million construction loan which is secured by the fee simple interest in the Leigh House property, of which $24.8 million is outstanding as of December 31, 2018. The loan matures on December 23, 2019 and contains one extension option for one year to five years, subject to certain conditions including construction completion, a debt service coverage, loan to value ratio and payment of an extension fee. The loan bears interest on a floating basis on the amount drawn based on one-month LIBOR plus 2.65%. Regular monthly payments are interest-only during the initial term, with payments during the extension period based on thirty-year amortization. The loan can be prepaid without penalty.

 

The six-month period during which the Company has the right to convert its preferred membership interest into a common membership interest commenced on August 9, 2018, the date on which Leigh House achieved 70% leased and occupied units. As of December 31, 2018, the Company has not elected to convert into a common membership interest.

 

The development was 90% occupied at December 31, 2018.

 

North Creek Apartments Interests

 

On October 29, 2018, through BRG Leander Investor, LLC, a wholly-owned subsidiary of its Operating Partnership, the Company made a preferred equity investment in a multi-tiered joint venture with an unaffiliated third party (the “North Creek JV”) to develop an approximately 259-unit, Class A apartment community located in Leander, Texas to be known as North Creek Apartments. The Company has made a commitment to invest in $17.9 million of preferred equity interests in BR SW Leander JV, LLC, of which $5.9 million has been funded as of December 31, 2018. The Company will earn an 8.5% current return and a 4.0% accrued return, for a total preferred return of 12.5% on outstanding capital contributions. The North Creek JV is required to redeem the Company’s preferred membership interest plus any accrued but unpaid preferred return on October 29, 2023 (extended by one year if the property has not yet reached stabilization) or earlier upon the occurrence of certain events.

 

In conjunction with the North Creek Apartments development, on October 29, 2018, the North Creek Apartments property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a $23.6 million construction loan which is secured by the fee simple interest in the North Creek Apartments property, of which approximately $6,005 is outstanding at December 31, 2018. The loan matures on October 29, 2021 and contains two one-year extension options, subject to certain conditions including a debt service coverage, loan to value ratio and payment of an extension fee. The loan bears interest on a floating basis on the amount drawn based on the greater of 6.06% or one-month LIBOR plus 3.75%. Regular monthly payments are interest-only through April 2021, and then monthly payments based on thirty-year amortization. The loan can be prepaid without penalty, subject to a make-whole provision.

 

Novel Perimeter Interests, formerly known as Crescent Perimeter

 

On December 12, 2016, through BRG Perimeter, a wholly-owned subsidiary of the Operating Partnership, the Company made a common equity investment of approximately $15.2 million to obtain an approximately 60% interest in a multi-tiered joint venture structure along with Fund III, an affiliate of the former Manager, and an unaffiliated third party, to acquire a tract of real property located in Atlanta, Georgia for the development of a 320-unit, Class A apartment community known as Novel Perimeter. The acquisition was accounted for as an asset acquisition.

 

On December 29, 2017, (i) Fund III substantially redeemed the common equity investment held by BRG Perimeter in BR Perimeter JV Member for $15.3 million, (ii) BRG Perimeter maintained a 0.5% common interest in BR Perimeter JV Member, and (iii) the Company, through BRG Perimeter, provided a mezzanine loan in the amount of $20.6 million to BR Perimeter JV Member. See Note 6 for further details regarding Novel Perimeter and the BRG Perimeter Mezz Loan.

 

Riverside Apartments Interests

 

On December 6, 2018, through BRG Montopolis Investor, LLC, a wholly-owned subsidiary of its Operating Partnership, the Company made a preferred equity investment in a multi-tiered joint venture with an unaffiliated third party (the “Riverside JV”) to develop an approximately 222-unit, Class A apartment community located in Austin, Texas to be known as Riverside Apartments. The Company has made a commitment to invest in $15.6 million of preferred equity interests in BR SW Montopolis JV, LLC, of which $3.6 million has been funded as of December 31, 2018. The Company will earn an 8.5% current return and a 4.0% accrued return, for a total preferred return of 12.5% on outstanding capital contributions. The Riverside JV is required to redeem the Company’s preferred membership interest plus any accrued but unpaid preferred return on November 21, 2023 (extended by one year if the property has not yet reached stabilization) or earlier upon the occurrence of certain events.

 

 F-28 

 

 

In conjunction with the Riverside Apartments development, on December 6, 2018, the Riverside Apartments property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a $20.2 million construction loan which is secured by the fee simple interest in the Riverside Apartments property, of which approximately $1,000 is outstanding at December 31, 2018. The loan matures on December 6, 2021 and contains two one-year extension options, subject to certain conditions including a debt service coverage, loan to value ratio and payment of an extension fee. The loan bears interest on a floating basis on the amount drawn based on the greater of 6.14% or one-month LIBOR plus 3.75%. Regular monthly payments are interest-only through June 2021, and then monthly payments based on thirty-year amortization. The loan can be prepaid without penalty, subject to a make-whole provision.

 

Vickers Historic Roswell Interests, formerly known as Vickers Village

 

On December 22, 2016, through BRG Vickers, a wholly-owned subsidiary of the Operating Partnership, the Company made a common equity investment of approximately $8.5 million to obtain an approximately 80% interest in a multi-tiered joint venture structure along with Fund III, an affiliate of the former Manager, and an unaffiliated third party, for the development of a 79-unit, Class A apartment community in the Roswell submarket of Atlanta, Georgia known as Vickers Village. The acquisition was accounted for as an asset acquisition.

 

On December 29, 2017, (i) Fund III substantially redeemed the common equity investment held by BRG Vickers in BR Vickers JV Member for $8.7 million, (ii) BRG Vickers maintained a 0.5% common interest in BR Vickers JV Member, and (iii) the Company, through BRG Vickers, provided a mezzanine loan in the amount of $9.8 million to BR Vickers Roswell JV Member. See Note 6 for further details regarding Vickers Village and the BRG Vickers Mezz Loan.

 

Wayforth at Concord Interests

 

On November 9, 2018, through BRG Wayforth Investor, LLC, a wholly-owned subsidiary of its Operating Partnership, the Company entered into a multi-tiered joint venture agreement with an unaffiliated third party (the “Wayforth JV”) to develop an approximately 150-unit, Class A apartment community located in Concord, North Carolina to be known as Wayforth at Concord. The Company has made a commitment to invest in $6.5 million of preferred equity interests in Wayforth at Concord, LLC, of which none has been funded as of December 31, 2018. The Company will begin funding capital once the unaffiliated third party has contributed its full common equity commitment. The Company will earn a 9.0% current return and a 4.0% accrued return, for a total preferred return of 13.0% on outstanding capital contributions. The Wayforth JV is required to redeem the Company’s preferred membership interest plus any accrued but unpaid preferred return on November 9, 2023 (extended one year if the property has not yet reached stabilization) or earlier upon the occurrence of certain events.

 

In conjunction with the Wayforth at Concord development, on November 9, 2018, the Wayforth at Concord property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a $22.3 million construction loan which is secured by the fee simple interest in the Wayforth at Concord property, of which none is outstanding at December 31, 2018. The loan matures on November 9, 2021 and contains two one-year extension options, subject to certain conditions including a debt service coverage, loan to value ratio and payment of an extension fee. The loan bears interest on a floating basis on the amount drawn based on one-month LIBOR plus 2.50%. Regular monthly payments are interest-only during the initial term, with payments during the extension period based on thirty-year amortization. The loan can be prepaid without penalty.

 

Whetstone Apartments Interests

 

On May 20, 2015, through BRG Whetstone Durham, LLC, a wholly-owned subsidiary of its Operating Partnership, the Company made a convertible preferred equity investment in a multi-tiered joint venture along with Fund III, an affiliate of the former Manager, and an unaffiliated third party, to acquire a 204-unit, Class A apartment community located in Durham, North Carolina known as Whetstone Apartments. The Company has made a commitment to invest in $12.9 million of preferred equity interests in BR Whetstone Member, LLC, all of which has been funded as of December 31, 2018. On October 2, 2016, the Company entered into an agreement that provided for an extended twelve-month period in which it had a right to convert into common ownership. The Company did not elect to convert into common ownership on October 6, 2017, and therefore its preferred return decreased to 6.5%. Effective April 1, 2017, Whetstone Apartments ceased paying its preferred return on a current basis. The accrued preferred return of $2.2 million and $1.2 million as of December 31, 2018 and December 31, 2017, respectively, is included in due from affiliates in the consolidated balance sheets. The Company has evaluated the preferred equity investment and accrued preferred return and determined that the investment is fully recoverable. The development was 97% occupied at December 31, 2018.

 

On October 6, 2016, the Whetstone Apartments property owner, which is owned by an entity in which the Company owns an indirect interest, entered into a mortgage loan of approximately $26.5 million secured by the Whetstone Apartments property, of which $26.0 million is outstanding as of December 31, 2018. The loan matures on November 1, 2023. The loan bears interest at a fixed rate of 3.81%. Regular monthly payments were interest-only until November 1, 2017, with monthly payments beginning December 1, 2017 based on thirty-year amortization. The loan may be prepaid with the greater of 1% prepayment fee or yield maintenance until October 31, 2021, and thereafter at par. The loan is nonrecourse to the Company and its joint venture partners with certain standard scope non-recourse carve-outs for certain deeds, acts or failures to act on the part of the Company and the joint venture partners.

 

 F-29 

 

 

Note 8 – Revolving credit facility

 

The outstanding balances on the revolving credit facilities as of December 31, 2018 and 2017 are as follows (amounts in thousands):

 

Revolving credit facilities  December 31,
 2018		   December 31,
 2017		 
Senior Credit Facility  $67,709   $67,670 
Amended Junior Credit Facility   14,500    — 
Total  $82,209   $67,670 

 

Senior Credit Facility

 

On October 4, 2017, the Company, through its Operating Partnership, entered into a credit agreement (the “Senior Credit Facility”) with KeyBank National Association (“KeyBank”) and a syndicate of other lenders. The Senior Credit Facility provided for an initial loan commitment amount of $150 million, which commitment contained an accordion feature to a maximum commitment of up to $250 million.

 

The Senior Credit Facility matures on October 4, 2020 and contains a one-year extension option, subject to certain conditions and the payment of an extension fee. Borrowings under the Senior Credit Facility bear interest, at the Company’s option, at LIBOR plus 1.80% to 2.45%, or the base rate plus 0.80% to 1.45%, depending on the Company’s leverage ratio. The weighted average interest rate was 4.66% at December 31, 2018. The Company pays an unused fee at an annual rate of 0.20% to 0.25% of the unused portion of the Senior Credit Facility, depending on the amount of borrowings outstanding. The Senior Credit Facility contains certain financial and operating covenants, including a maximum leverage ratio, minimum liquidity, minimum debt service coverage ratio, and minimum tangible net worth. At December 31, 2018, the Company was in compliance with all covenants under the Senior Credit Facility. The Company has guaranteed the obligations under the Senior Credit Facility and provided certain properties as collateral.

 

On December 28, 2018, the Company elected to reduce the initial loan commitment amount of the Secured Credit Facility from $150 million to $75 million, and the maximum commitment of the accordion feature was reduced from $250 million to $175 million.

 

Amended Junior Credit Facility

 

On March 20, 2018, the Company, through a subsidiary of its Operating Partnership, entered into a credit agreement (the “Junior Credit Facility”) with KeyBank and other lenders. The Junior Credit Facility provided for a maximum loan commitment amount of $50 million.

 

The Junior Credit Facility had a maturity date of March 20, 2019. Borrowings under the Junior Credit Facility bore interest, at the Company’s option, at LIBOR plus 4.0%, or the base rate plus 3.0%. The Company paid an unused fee at an annual rate of 0.35% to 0.40% of the unused portion of the Junior Credit Facility, depending on the amount of borrowings outstanding.

 

On December 21, 2018, the Company, through a subsidiary of its Operating Partnership, entered into an amended and restated, in its entirety, Junior Credit Facility (the “Amended Junior Credit Facility”). The Amended Junior Credit Facility provides for a revolving loan facility and a term loan facility with maximum commitment amounts of $50 million and $25 million, respectively. The revolving loan facility matures on December 21, 2019, with borrowings under the revolving loan facility bearing interest, at the Company’s option, at LIBOR plus 3.5%, or the base rate plus 2.5%. The weighted average interest rate of the revolving loan facility was 5.94% at December 31, 2018. The Company pays an unused fee at an annual rate of 0.35% to 0.40% of the unused portion of the revolving loan facility, depending on the amount of borrowings outstanding. The term loan facility matures 180 days after the earlier of (i) the date on which the Company draws the maximum commitment amount of $25 million or (ii) March 31, 2019. The Amended Junior Credit Facility contains certain financial and operating covenants, including a maximum leverage ratio, minimum liquidity, minimum debt service coverage ratio, minimum tangible net worth and minimum equity raise and collateral values.

 

At December 31, 2018, the Company was in compliance with all covenants under the Amended Junior Credit Facility. The Company has guaranteed the obligations under the Amended Junior Credit Facility and has pledged certain assets as collateral.

 

The availability of borrowings under the revolving credit and term loan facilities at December 31, 2018 is based on the collateral and compliance with various ratios related to those assets and was approximately $48.3 million.

 

 F-30 

 

 

Note 9 – Mortgages Payable

 

The following table summarizes certain information as of December 31, 2018 and 2017, with respect to the Company’s senior mortgage indebtedness (amounts in thousands):

 

   Outstanding Principal  As of December 31, 2018
Property 

December 31,

2018

  December 31,
2017		  Interest Rate  Interest-only
through date		  Maturity Date
                
Fixed Rate:                         
ARIUM at Palmer Ranch  $41,348   $26,925    4.41%    May 2020    May 1, 2025 
ARIUM Grandewood (1)   19,713    —      4.35%   July 2020    July 1, 2025 
ARIUM Gulfshore   —      32,626    —      —      —   
ARIUM Hunter’s Creek   72,294    72,294    3.65%   November 2019    November 1, 2024 
ARIUM Metrowest   64,559    —      4.43%   May 2021    May 1, 2025 
ARIUM Pine Lakes   26,950    26,950    3.95%   Interest-only    November 1, 2023 
ARIUM Westside   52,150    52,150    3.68%   August 2021    August 1, 2023 
Ashford Belmar   100,675    —      4.53%   December 2022    December 1, 2025 
Ashton Reserve I   30,878    31,401    4.67%   (2)    December 1, 2025 
Citrus Tower   41,438    41,438    4.07%    October 2019    October 1, 2024 
Enders Place at Baldwin Park (3)   23,822    24,287    4.30%   (2)    November 1, 2022 
James on South First   26,500    26,500    4.35%   January 2019    January 1, 2024 
Outlook at Greystone   22,105    —      4.30%   June 2021    June 1, 2025 
Park & Kingston (4)   18,432    18,432    3.41%   Interest-only    April 1, 2020 
Plantation Park   26,625    —      4.64%   July 2024    July 1, 2028 
Roswell City Walk   51,000    51,000    3.63%   December 2019    December 1, 2026 
Sovereign   28,227    28,788    3.46%   (2)    November 10, 2022 
The Brodie   34,825    34,825    3.71%   (2)    December 1, 2023 
The Links at Plum Creek   40,000    —      4.31%   April 2020    October 1, 2025 
The Mills   26,298    26,777    4.21%   (2)    January 1, 2025 
The Preserve at Henderson Beach   35,602    36,311    4.65%   (2)    January 5, 2023 
Villages of Cypress Creek   26,200    26,200    3.23%   October 2020    October 1, 2022 (5) 
Wesley Village   40,545    40,545    4.25%   April 2019    April 1, 2024 
                          
Floating Rate (6):                         
ARIUM Glenridge   49,500    48,431    3.68%   September 2021    September 1, 2025 
ARIUM Grandewood (1)   19,672    34,294    3.75%   July 2020    July 1, 2025 
ARIUM Palms   30,320    24,999    3.75%   September 2020    September 1, 2025 
Ashton Reserve II   15,213    15,270    3.85%   August 2022    August 1, 2025 
Marquis at Crown Ridge   28,634    29,217    3.96%   (2)    June 1, 2024 (7) 
Marquis at Stone Oak   42,725    43,125    3.96%   (2)    June 1, 2024 (7) 
Marquis at The Cascades I   32,899    33,207    3.96%   (2)    June 1, 2024 (7) 
Marquis at The Cascades II   22,960    23,175    3.96%   (2)    June 1, 2024 (7) 
Marquis at TPC   16,826    17,184    3.96%   (2)    June 1, 2024 (7) 
Preston View   41,657    41,066    3.85%   August 2022    August 1, 2025 
Sorrel   38,684    38,684    4.64%   November 2019    May 1, 2023 
Veranda at Centerfield   26,100    —      3.60%   July 2021    July 26, 2023 (5) 
Total   1,215,376    946,101                
Fair value adjustments   2,204    2,638                
Deferred financing costs, net   (11,444)   (9,245)               
Total  $1,206,136   $939,494                

 

(1)ARIUM Grandewood has a fixed rate loan and a floating rate loan.
(2)The loan requires monthly payments of principal and interest.
(3)The principal balance includes a $16.2 million loan at a fixed rate of 3.97% and a $7.6 million supplemental loan at a fixed rate of 5.01%.
(4)The principal balance includes a $15.3 million loan at a fixed rate of 3.21% and a $3.2 million supplemental loan at a fixed rate of 4.34%.
(5)The loan has two one-year extension options subject to certain conditions.
(6)All the Company’s floating rate mortgages bear interest at one-month LIBOR + margin. In December 2018, one-month LIBOR in effect was 2.35%. LIBOR rate is subject to a rate cap. Please refer to Note 11 for further information.
(7)The loan can be extended, subject to certain conditions, in connection with an election to convert to a fixed interest rate loan.

  

 F-31 

 

 

Deferred financing costs

 

Costs incurred in obtaining long-term financing are amortized on a straight-line basis to interest expense over the terms of the related financing agreements, as applicable, which approximates the effective interest method. Amortization of deferred financing costs, including the amounts related to the Revolving credit facilities, was $4.3 million, $2.5 million and $1.3 million for the years ended December 31, 2018, 2017 and 2016, respectively.

 

Fair value adjustments of debt

 

The Company records a fair value adjustment based upon the fair value of the loans on the date they were assumed in conjunction with acquisitions. The fair value adjustments are being amortized to interest expense over the remaining life of the loans. Amortization of fair value adjustments was $0.4 million, $0.3 million and $0.4 million for the years ended December 31, 2018, 2017 and 2016, respectively.

 

Loss on Extinguishment of Debt and Modification Costs

 

Upon repayment of or in conjunction with a material change (i.e. a 10% or greater difference in the cash flows between instruments) in the terms of an underlying debt agreement, the Company writes-off any unamortized deferred financing costs and fair market value adjustments related to the original debt that was extinguished. Prepayment penalties incurred on the early repayment of debt and costs incurred in a debt modification that are not capitalized are also included in loss on extinguishment of debt and debt modification costs on the consolidated statements of operations.

 

Refinancing of ARIUM Gulfshore

 

On April 26, 2018, the Company, with borrowings under the Senior Credit Facility and secured by the ARIUM Gulfshore property, paid off the previous loan of $32.6 million plus prepayment costs of approximately $0.3 million. The Company accounted for the refinancing as an extinguishment of debt.

 

Refinancing of ARIUM at Palmer Ranch

 

On April 26, 2018, the Company, through an indirect subsidiary, entered into an approximately $41.3 million loan, which is secured by ARIUM at Palmer Ranch, and paid off the previous loan of $26.9 million. The Company accounted for the refinancing as a debt modification.

  

Refinancing of ARIUM Glenridge

 

On August 28, 2018, the Company, through an indirect subsidiary, entered into a $49.5 million loan, which is secured by ARIUM Glenridge, and paid off the previous loan of $48.4 million plus prepayment costs of approximately $0.5 million. The Company accounted for the refinancing as an extinguishment of debt.

 

Refinancing of ARIUM Palms

 

On August 29, 2018, the Company, through an indirect subsidiary, entered into an approximately $30.3 million loan, which is secured by ARIUM Palms, and paid off the previous loan of $25.0 million. The Company accounted for the refinancing as a debt modification.

 

Master Credit Facility with Fannie Mae

 

On April 30, 2018, the Company, through certain subsidiaries of the Operating Partnership, entered into a Master Credit Facility Agreement (the “Fannie Facility”), which was issued through Fannie Mae’s Multifamily Delegated Underwriting and Servicing Program. The Fannie Facility includes certain restrictive covenants, including indebtedness, liens, investments, mergers and asset sales, and distributions. The Fannie Facility also contains events of default, including payment defaults, covenant defaults, bankruptcy events, and change of control events. Each note under the Fannie Facility is cross-defaulted and cross-collateralized and the Company has guaranteed the obligations under the Fannie Facility. As of December 31, 2018, the mortgage loans secured by ARIUM Grandewood, ARIUM Metrowest, Ashton Reserve II, Outlook at Greystone and Preston View were issued under the Fannie Facility.

 

The following information is presented with respect to the Company’s refinancing activity under its Fannie Facility.

  

Refinancing of Ashton Reserve II

 

On July 31, 2018, the Fannie Facility provided for a $15.2 million variable rate advance, which was used with additional funding at close to pay off the previous loan of $15.3 million plus prepayment costs of approximately $0.2 million. The Company accounted for the refinancing as an extinguishment of debt.

 

 F-32 

 

   

Refinancing of Preston View

 

On July 31, 2018, the Fannie Facility provided for a $41.7 million variable rate advance, which was used to pay off the previous loan of $41.1 million plus prepayment costs of approximately $0.4 million. The Company accounted for the refinancing as an extinguishment of debt.

 

The Company may request future fixed rate advances or variable rate advances under the Fannie Facility either by borrowing against the value of the mortgaged properties (based on the valuation methodology established in the Fannie Facility) or adding eligible properties to the collateral pool, subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. The proceeds of any future advances made under the Fannie Facility may be used, among other things, for the acquisition and refinancing of additional properties to be identified in the future.

  

Debt maturities

 

As of December 31, 2018, contractual principal payments for the five subsequent years and thereafter are as follows (amounts in thousands):

 

Year  Total 
2019  $7,365 
2020   30,753 
2021   15,905 
2022   91,472 
2023   221,215 
Thereafter   848,666 
   $1,215,376 
Add: Unamortized fair value debt adjustment   2,204 
Subtract: Deferred financing costs   (11,444)
Total  $1,206,136 

 

The net book value of real estate assets providing collateral for these above borrowings, including the Senior Credit Facility, Amended Junior Credit Facility and Fannie Facility, was $1,691.2 million as of December 31, 2018.

 

The mortgage loans encumbering the Company’s properties are generally nonrecourse, subject to certain exceptions for which the Company would be liable for any resulting losses incurred by the lender.  These exceptions vary from loan to loan but generally include fraud or a material misrepresentation, misstatement or omission by the borrower, intentional or grossly negligent conduct by the borrower that harms the property or results in a loss to the lender, filing of a bankruptcy petition by the borrower, either directly or indirectly, and certain environmental liabilities.  In addition, upon the occurrence of certain events, such as fraud or filing of a bankruptcy petition by the borrower, the Company or our joint ventures would be liable for the entire outstanding balance of the loan, all interest accrued thereon and certain other costs, including penalties and expenses. The mortgage loans generally have a period where a prepayment fee or yield maintenance would be required.

 

Note 10 – Fair Value of Financial Instruments

 

As of December 31, 2018 and December 31, 2017, based on the discounted amount of future cash flows using rates currently available to the Company for similar liabilities, the fair value of the Company’s mortgages payable is estimated at $1,205.0 million and $940.7 million, respectively, compared to the carrying amounts, before adjustments for deferred financing costs, net, of $1,217.6 million and $948.7 million, respectively.  The fair value of mortgages payable is estimated based on the Company’s current interest rates (Level 3 inputs, as defined in ASC Topic 820, “Fair Value Measurement”) for similar types of borrowing arrangements.

 

Note 11 – Derivative Financial Instruments

 

Risk Management Objective of Using Derivatives

 

The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash payments principally related to the Company’s borrowings.

 

The Company’s objectives in using interest rate derivative financial instruments are to add stability to interest expense and to manage the Company’s exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate caps as part of its interest rate risk management strategy. Interest rate caps involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

 

 F-33 

 

 

The Company has not designated any of the interest rate derivatives as hedges. Although these derivative financial instruments were not designated or did not qualify for hedge accounting, the Company believes the derivative financial instruments are effective economic hedges against increases in interest rates. The Company does not use derivative financial instruments for trading or speculative purposes.

 

As of December 31, 2018, the Company had interest rate caps which effectively limit the Company’s exposure to interest rate risk by providing a ceiling on the underlying variable interest rate for $415.2 million of the Company’s floating rate debt.

 

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of December 31, 2018 and 2017 and the effect of Company's derivative financial instruments on the consolidated statements of operations for the years ended December 31, 2018, 2017, and 2016 (amounts in thousands):

 

Derivatives not
designated as
hedging instruments
under ASC 815-20		 

 

 

 

Balance Sheet Location

  Fair values of derivative
instruments as of
December 31,		  

 

Location of Gain or (Loss)
Recognized in Income

  The Effect of Derivative
Instruments on the Statement of
Operations for the Years Ended
December 31,		 
      2018   2017      2018   2017   2016 
Interest rate caps  Accounts receivable, prepaids and other assets  $2,596   $ —   Interest Expense  $(2,846)  $ —  $ — 

 

Credit-risk-related Contingent Features

 

The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on the indebtedness.

 

Note 12 – Related Party Transactions

 

As holders of shares of the Company’s Class A common stock issued in the contribution transactions in connection with the IPO, Fund II and Fund III and their respective managers have certain registration rights covering the resale of their shares of Class A common stock. In addition, BR-NPT Springing Entity, LLC and Bluerock Property Management, LLC, as holders of OP Units issued in the contribution transactions, and the former Manager and Bluerock Multifamily Advisor, LLC, the Company’s former advisor, as holders of OP Units or LTIP Units, have certain registration rights covering the resale of shares of the Class A common stock issued or issuable, at the Company’s option, in exchange for OP Units, including OP Units into which LTIP Units may be converted. On January 13, 2016, the Company filed, and on January 29, 2016, the SEC declared effective, a resale registration statement on Form S-3 (File No. 333-208988) (the “Resale Registration Statement”) with respect to the resale of their shares of Class A common stock, including the Class A common stock issued or issuable, at the Company’s option, in exchange for OP Units, including OP Units into which LTIP Units may be converted.

 

Management Agreement

 

While the Company was externally managed prior to the Internalization, the Management Agreement required the former Manager to manage the Company’s business affairs in conformity with the investment guidelines and other policies that were approved and monitored by the Company’s Board. The former Manager acted under the supervision and direction of the Board. Specifically, the former Manager was responsible for (1) the selection, purchase and sale of the Company’s investment portfolio, (2) the Company’s financing activities, and (3) providing the Company with advisory and management services. The former Manager provided the Company with a management team, including a chief executive officer, president, chief accounting officer and chief operating officer, along with appropriate support personnel.

 

The Company paid the former Manager a base management fee calculated quarterly based on the Company’s stockholders’ existing and contributed equity for the most recently completed calendar quarter and payable in quarterly installments in arrears. The base management fee was payable independent of the performance of the Company’s investments. The Company amended the Management Agreement to provide that the base management fee could be payable in cash or LTIP Units, at the election of the Board. The number of LTIP Units issued for the base management fee or incentive fee was based on the fees earned divided by the 5-day trailing average Class A common stock price prior to issuance. For the year ended December 31, 2016, base management fees for the former Manager of $6.4 million were expensed. For the year ended December 31, 2017, base management fees for the former Manager of $8.7 million were expensed and paid through the issuance of 783,881 LTIP Units.

 

The Company also paid the former Manager an incentive fee with respect to each calendar quarter in arrears. For the year ended December 31, 2016, incentive fees for the former Manager of $0.2 million were expensed. For the year ended December 31, 2017, incentive fees of $4.0 million were expensed and paid through the issuance of 333,848 LTIP Units.

 

Management fee expense was recorded in 2017 and 2016 related to the vesting of 179,562 LTIP Units granted in connection with the IPO and was based on the Class A common stock closing price at the vesting date or end of the period, as applicable. These LTIP Units vested over a three-year period that began in April 2014. For the years ended December 31, 2017 and 2016, the management fee expense related to the vesting of these LTIP Units and recorded as part of general and administrative expenses was $0.01 million and $0.4 million, respectively.

 

 F-34 

 

 

On August 3, 2016, the Company issued a grant of LTIP Units under the Amended 2014 Incentive Plans to the former Manager. The equity grant consisted of 176,610 LTIP Units (the “2016 LTIP Units”). The 2016 LTIP Units will vest ratably over a three-year period that began in August 2016, subject to certain terms and conditions. In conjunction with the Internalization, 212,203 outstanding LTIP Units issued as incentive equity to our former Manager (of which, 117,740 were 2016 LTIP Units and 94,463 were LTIP Units issued in 2015 (the “2015 LTIP Units”)) became vested in accordance with their original terms. These LTIP Units may be convertible into OP Units under certain conditions and then may be settled in shares of the Company’s Class A common stock.

 

LTIP expense of $2.2 million and $2.4 million was recorded as part of general and administrative expenses for the years ended December 31, 2017 and 2016, respectively, related to the 2015 LTIP Units and the 2016 LTIP Units. The expense recognized during 2017 and 2016 was based on the Class A common stock closing price at the vesting date or the end of the period, as applicable.

 

The Company was also required to reimburse the former Manager for certain expenses and pay all operating expenses, except those specifically required to be borne by the former Manager under the Management Agreement. Reimbursements of $1.5 million and $0.6 million were expensed during the years ended December 31, 2017 and 2016, respectively, and were recorded as part of general and administrative expenses.

 

The initial term of the Management Agreement expired on April 2, 2017 (the third anniversary of the closing of the IPO), and automatically renewed for a one-year term expiring April 2, 2018.

 

On August 4, 2017, the Company and the former Manager announced that the parties had entered into a Contribution Agreement (as amended by that certain Amendment No. 1 thereto, dated August 9, 2017), and other definitive agreements providing for the acquisition of a newly-formed entity to own the assets used by the former Manager in its performance of the management functions then provided to the Company pursuant to the Management Agreement. A special committee comprised entirely of independent and disinterested members of the Board, (the “Special Committee”), which retained independent legal and financial advisors, unanimously determined that the entry into the Contribution Agreement and the completion of the Internalization were in the best interests of the Company. The Board, by unanimous vote, made a similar determination, and on October 26, 2017, the Company held its annual meeting of stockholders, at which the Company’s stockholders approved the proposals necessary for the completion of the Internalization.

 

On October 31, 2017, the Company completed the Internalization pursuant to the Contribution Agreement for total consideration of approximately $41.24 million (which was recorded as management internalization expense for the year ended December 31, 2017), as determined pursuant to a formula established in the Management Agreement at the time of the IPO in April 2014. Upon completion of the Internalization, the current management and investment teams, who were previously employed by an affiliate of the former Manager, became employed by the Company’s indirect subsidiary, and the Company become an internally managed real estate investment trust. In order to further align the interests of the management with those of the Company’s stockholders, payment of the aggregate Internalization consideration was paid 99.9% in equity: the Company caused the Operating Partnership to issue an aggregate of 3,753,593 OP Units, and the Company issued an aggregate of 76,603 shares of a newly reclassified Class C common stock and paid an aggregate of approximately $40,794 in cash to the applicable Contributors and its affiliates and related persons in connection with the Internalization.

 

The former Manager retained, at its sole cost and expense, the services of such persons and firms as the former Manager deemed necessary in connection with the Company’s management and operations (including accountants, legal counsel and other professional service providers), provided that such expenses was in amounts no greater than those that would be payable to third-party professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s-length basis.

 

All of the Company’s executive officers, and one of its directors, are also executive officers, managers and/or holders of a direct or indirect controlling interest in the former Manager and other Bluerock-affiliated entities.  As a result, they owe fiduciary duties to each of these entities, their members, limited partners and investors, which fiduciary duties may from time to time conflict with the fiduciary duties that they owe to the Company and its stockholders.

 

Administrative Services Agreement

 

In connection with the closing of the Internalization, the Company entered into an Administrative Services Agreement (the “Administrative Services Agreement”) with Bluerock Real Estate, LLC and its affiliate, Bluerock Real Estate Holdings, LLC (together “BRE”). Pursuant to the Administrative Services Agreement, BRE provides the Company with certain human resources, investor relations, marketing, legal and other administrative services (the “Services”) to facilitate a smooth transition in the Company’s management of its operations and enable the Company to benefit from operational efficiencies created by access to such services following closing, to give the Company time to develop such services in-house or to hire other third-party service providers for such services. The Services are provided on an at-cost basis, generally allocated based on the use of such Services for the benefit of the Company’s business, and are invoiced on a quarterly basis. In addition, the Administrative Services Agreement permits, from time to time, certain employees of the Company to provide or cause to be provided services to BRE, on an at-cost basis, generally allocated based on the use of such services for the benefit of the business of BRE and invoiced on a quarterly basis, and otherwise subject to the terms of the Services provided by BRE to the Company under the Administrative Services Agreement. Payment by the Company of invoices and other amounts payable under the Administrative Services Agreement will be made in cash or, in the sole discretion of the Board, in the form of fully-vested LTIP Units.

 

 F-35 

 

 

The initial term of the Administrative Services Agreement was one year from the date of execution, subject to the Company’s right to renew it for successive one-year terms upon sixty (60) days written notice prior to expiration. The initial term of the Administrative Services Agreement expired on October 31, 2018. On August 6, 2018, the Company delivered written notice to BRE of the Company’s intention to renew the Administrative Services Agreement for an additional one-year term, to expire on October 31, 2019. The Administrative Services Agreement will automatically terminate (i) upon termination by the Company of all Services, or (ii) in the event of non-renewal by the Company. Any Company party will also be able to terminate the Administrative Services Agreement with respect to any individual Service upon written notice to the applicable BRE entity, in which case the specified Service will discontinue as of the date stated in such notice, which date must be at least ninety (90) days from the date of such notice. Further, either BRE entity may terminate the Administrative Services Agreement at any time upon the occurrence of a “Change of Control Event” (as defined therein) upon at least one hundred eighty (180) days prior written notice to the Company.

 

Pursuant to the Administrative Services Agreement, BRE is responsible for the payment of all employee benefits and any other direct and indirect compensation for the employees of BRE (or their affiliates or permitted subcontractors) assigned to perform the Services, as well as such employees’ worker’s compensation insurance, employment taxes, and other applicable employer liabilities relating to such employees.

 

Recorded as part of general and administrative expenses, payroll expense reimbursements of $0.4 million were expensed during the year ended December 31, 2018. Payroll expense reimbursements of $0.1 million were expensed for November and December 2017, the period after the Internalization.

 

Recorded as part of general and administrative expenses, operating expense reimbursements of $1.7 million were expensed during the year ended December 31, 2018. Operating expense reimbursements of $0.3 million were expensed for November and December 2017, the period after the Internalization.

  

Pursuant to the terms of the Management Agreement and the Administrative Services Agreement, summarized below are the related party amounts payable to the Company’s former Manager and BRE as of December 31, 2018 and 2017 (amounts in thousands):

 

   December 31,
2018		   December 31,
2017		 
Amounts Payable to the former Manager under the Management Agreement          
Base management fee  $—   $993 
Total amounts payable to former Manager  $—   $993 
Amounts Payable to BRE under the Administrative Services Agreement          
Operating expense reimbursements and direct expense reimbursements  $568   $508 
Offering expense reimbursements   158    74 
Total amounts payable to BRE  $726   $582 
Total  $726   $1,575 

 

As of December 31, 2018 and 2017, the Company had no other payables due to related parties other than the Company’s former Manager and BRE.

 

As of December 31, 2018 and 2017, the Company had $2.9 million and $2.0 million, respectively, in receivables due from related parties other than from BRE or the former Manager, primarily for accrued preferred returns on unconsolidated real estate investments for the most recent month.

 

Premises Agreements

 

In connection with the closing of the Internalization, BRE and the former Manager entered into a use and occupancy agreement (the “NY Agreement”) for certain corporate space located in New York, NY (the “NY Premises”) and for certain space located in Southfield, MI (the “MI Premises,” and together with the NY Premises, the “Premises”). On December 1, 2017, BRE and Bluerock REIT Operator, LLC (the “Manager Sub”), a wholly owned subsidiary of our former Manager, entered into a sublease for the MI Premises (“MI Sublease,” and together with the NY Agreement, the “Premises Agreements”). Pursuant to the Premises Agreements, collectively, BRE permits the Manager Sub and certain of its subsidiaries and/or affiliates to share occupancy of the Premises. The expense reimbursements related to these agreements are included above.

 

Stockholders Agreement

 

In connection with the closing of the Internalization, the Company and the Contributors entered into a Stockholders Agreement, (the “Stockholders Agreement”), pursuant to which the Company may grant certain registration rights for the benefit of the Contributors and impose certain limitations on the voting rights of the Class C Common Stock.

 

Pursuant to the Stockholders Agreement, each Contributor, in respect of any Class A Common Stock that they may receive in connection with any redemption or conversion, as applicable, of any OP Units or Class C Common Stock received as a result of the Internalization (“Registrable Shares”), may require the Company from time to time to register the resale of their Registrable Shares under the Securities Act on a registration statement filed with the SEC. The Stockholders Agreement grants each Contributor certain rights to demand a registration of some or all of their Registrable Shares (a “Demand Registration”) or to request the inclusion of some or all of their Registrable Shares in a registration being effected by the Company for itself or on behalf of another person (a “Piggyback Registration”), in each case subject to certain customary restrictions, limitations, registration procedures and indemnity provisions. The Company is obligated to use commercially reasonable efforts to prepare and file a registration statement within specified time periods and to cause that registration statement to be declared effective by the SEC as soon as reasonably practicable thereafter.

 

 F-36 

 

 

The ability to cause the Company to effect a Demand Registration is subject to certain conditions. The Company is not required to effect such registration within 180 days of the effective date of any prior registration statement with respect to the Company’s Class A Common Stock and may delay the filing for up to 60 days under certain circumstances.

 

If, pursuant to an underwritten Demand Registration or Piggyback Registration, the managing underwriter advises that the number of Registrable Shares requested to be included in such registration exceeds a maximum number that the underwriter believes can be sold without delaying or jeopardizing the success of the proposed offering, the Stockholders Agreement specifies the priority in which Registrable Shares are to be included.

 

Pursuant to the Stockholders Agreement, the Contributors have agreed to limit certain of their voting rights with respect to the Class C Common Stock. 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 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 capital stock of the Company that have 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 capital stock of the Company 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 will 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 our Board. All Subject Shares other than the Excess Shares may be voted for or against any matter in the Class C Common Stock Holder’s sole and absolute discretion.

 

Selling Commissions and Dealer Manager Fees

 

In conjunction with the offering of the Series B Preferred Stock, the Company engaged a related party, as dealer manager, and pays up to 10% of the gross offering proceeds from the offering as selling commissions and dealer manager fees. The dealer manager re-allows the substantial majority of the selling commissions and dealer manager fees to participating broker-dealers and incurs costs in excess of the 10%, which costs are borne by the dealer manager without reimbursement by the Company. For the years ended December 31, 2018 and 2017, the Company has incurred $8.7 million and $11.4 million, and $3.7 million and $4.9 million, in selling commissions and dealer manager fees, respectively. BRE was reimbursed for offering costs in conjunction with the Series B Preferred Offering of $1.3 million in 2018. In addition, the former Manager and BRE were reimbursed for offering costs in conjunction with the Series B Preferred Offering of $0.7 million and $0.1 million, respectively, in 2017. The selling commissions, dealer manager fees and reimbursements for offering costs were recorded as a reduction to the proceeds of the offering.

 

Acquisition of Additional Interests

 

The Company invests with related parties in consolidated operating properties and may acquire the interests held by such related parties. Please refer to Note 5 for further information.

 

Preferred Equity Investments and Investments in Unconsolidated Real Estate Joint Ventures

 

The Company invests with related parties in various joint ventures in which the Company owns either preferred or common interests. Please refer to Note 7 for further information.

 

Notes and interest receivable from related parties

 

The Company provides mezzanine loans to related parties in conjunction with the developments of multifamily communities. Please refer to Notes 6 and 7 for further information.

 

Note 13 – Stockholders’ Equity

 

Net Loss Per Common Share

 

Basic net loss per common share is computed by dividing net loss attributable to common stockholders, less dividends on LTIP Units expected to vest, by the weighted average number of common shares outstanding for the period.  Diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the sum of the weighted average number of common shares outstanding and any potential dilutive shares for the period.  Net loss attributable to common stockholders is computed by adjusting net loss for the non-forfeitable dividends paid on non-vested LTIP Units.

 

 F-37 

 

 

The Company considers the requirements of the two-class method when preparing earnings per share. The Company has two classes of common stock outstanding: (i) Class A common stock, $0.01 par value per share, and (ii) Class C common stock, $0.01 par value per share. The Class C common stock was issued in connection with the Company’s Internalization and is entitled to participate in the Company’s dividends on a one-for-one basis with the Class A common stock. Earnings per share is not affected by the two-class method because the Company’s Class A and C common stock participate in dividends on a one-for-one basis.

 

The following table reconciles the components of basic and diluted net loss per common share (amounts in thousands, except share and per share amounts):

 

   Year Ended December 31, 
   2018   2017   2016 
Net loss attributable to common stockholders  $(42,759)  $(45,679)  $(18,985)
Dividends on LTIP Units expected to vest   (674)   —    (4)
Basic net loss attributable to common stockholders  $(43,433)  $(45,679)  $(18,989)
                
Weighted average common shares outstanding (1)   23,845,800    25,561,673    20,805,852 
Potential dilutive shares (2)   —    —    — 
Weighted average common shares outstanding and potential dilutive shares (1)   23,845,800    25,561,673    20,805,852 
                
Net loss per common share, basic  $(1.82)  $(1.79)  $(0.91)
Net loss per common share, diluted  $(1.82)  $(1.79)  $(0.91)

 

The effect of the conversion of OP Units is not reflected in the computation of basic and diluted earnings per share, as they are exchangeable for Class A Common Stock on a one-for-one basis. The income allocable to such units is allocated on this same basis and reflected as noncontrolling interests in the accompanying consolidated financial statements. As such, the assumed conversion of these units would have no net impact on the determination of diluted earnings per share. 

 

(1)For 2018, amounts relate to shares of the Company’s Class A and Class C common stock outstanding.  For 2017, amounts relate to shares of Class A and Class C common stock and LTIP Units outstanding.  For 2016, amounts relate to shares of the Company’s Class A and B-3 common stock and LTIP Units outstanding.

 

(2)Excludes 194,338, 391 and 4,282 shares of common stock for the years ended December 31, 2018, 2017 and 2016, respectively, related to anti-dilutive, non-vested LTIP Units.

 

Follow-On Equity Offerings

 

On January 17, 2017, the Company completed an underwritten offering (the “January 2017 Class A Common Stock Offering”) of 4,000,000 shares of its Class A common stock, par value $0.01 per share. The offer and sale of the shares were registered with the SEC pursuant to the January 2016 Shelf Registration Statement. The public offering price of $13.15 per share was announced on January 11, 2017. Net proceeds of the January 2017 Class A Common Stock Offering were approximately $49.8 million after deducting underwriting discounts and commissions and estimated offering costs. On January 24, 2017, the Company closed on the sale of 600,000 shares of Class A common stock for proceeds of approximately $7.5 million pursuant to the underwriters’ full exercise of the overallotment option.

 

Series B Preferred Stock Offering

 

During the year ended December 31, 2018, the Company issued 123,592 shares of Series B Preferred Stock under a continuous registered offering with net proceeds of approximately $111.2 million after commissions and dealer manager fees of approximately $12.4 million. As of December 31, 2018, the Company has sold 308,278 shares of Series B Preferred Stock and 308,278 Warrants to purchase 6,165,560 shares of Class A common stock for net proceeds of approximately $277.5 million after commissions and fees. During the year ended December 31, 2018, the Company redeemed 1,564 Series B Preferred shares through the issuance of 155,978 Class A common shares and redeemed 149 Series B Preferred shares for $135,700 in cash.

 

At-the-Market Offerings

 

On August 8, 2016, the Company, its Operating Partnership and its Manager entered into an At Market Issuance Sales Agreement (the “Class A Sales Agreement”) with FBR Capital Markets & Co. (“FBR”). Pursuant to the Class A Sales Agreement, FBR will act as distribution agent with respect to the offering and sale of up to $100,000,000 in shares of Class A common stock in “at the market offerings” as defined in Rule 415 under the Securities Act, including without limitation sales made directly on or through the NYSE American, or on any other existing trading market for Class A common stock or through a market maker (the “Class A Common Stock ATM Offering”). The Company has not commenced any sales through the Class A Common Stock ATM Offering. The Class A Common Stock ATM Offering expires January 29, 2019.

 

 F-38 

 

 

Class A common stock repurchase program

 

In February 2018, the Company authorized the repurchase of up to $25 million of the Company’s outstanding shares of Class A common stock over a period of one year pursuant to a stock repurchase plan. In December 2018, we renewed the stock repurchase plan for a period of one year and announced a new plan for the repurchase of up to $5.0 million of the outstanding shares of Class A common stock in accordance with the guidelines specified under Rule 10b5-1 of the Exchange Act, which shares will be applied against the $25 million under the original stock repurchase plan. The repurchase plan may be discontinued at any time. The extent to which the Company repurchases shares of its Class A common stock, and the timing of any such purchases, depends on a variety of factors including general business and market conditions and other corporate considerations. The Company purchased 1,055,057 shares of Class A common stock during the year ended December 31, 2018 for a total purchase price of approximately $9.0 million.

 

The following table is a summary of the Class A common stock repurchase activity as of December 31, 2018:

 

Period   Total Number
of Shares
Purchased		   Weighted
Average Price
Paid Per Share		   Cumulative Number of
Shares Purchased as
Part of the Publicly
Announced Plan		   Maximum Dollar Value
of Shares that May Yet
Be Purchased Under
the Plan
First quarter 2018     530,693     $7.92     530,693      $20,795,897
Second quarter 2018   107,040   $8.96   637,733   $19,837,157
Third quarter 2018   —   —   637,733   $19,837,157
Fourth quarter 2018   417,324   $9.24   1,055,057   $15,982,102

 

Class C Common Stock

 

The Class C Common Stock is equivalent in all material respects to, and ranks 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 mirrors 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 consideration in the Internalization. The Class C Common Stock provides 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 in the Internalization, as if all such OP Units were redeemed by us for shares of Class A Common Stock, but without providing any disproportionate voting rights. Shares of Class C Common Stock will only be issued (a) to the Contributors, (b) in conjunction with the issuance of OP Units as 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.

 

See Note 12 Related Party Transactions – Stockholders Agreement for limitations on voting rights of the Class C Common Stock.

 

8.250% Series A Cumulative Redeemable Preferred Stock

 

The Series A Preferred Stock ranks senior to common stock and on parity with the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock as to rights upon our liquidation, dissolution or winding up. The Series A Preferred Stock is entitled to priority cumulative dividends to be paid quarterly, in arrears, when, as and if authorized by the Board. Commencing October 21, 2022, the annual dividend rate will increase by 2.0% annually, up to a maximum of 14.0%, if not redeemed by the holder or not previously redeemed by the Company. Commencing on October 21, 2022, holders may, at their option, elect to have the Company redeem their shares at a redemption price of $25.00 per share, plus an amount equal to accrued but unpaid dividends, payable by the Company at its option in cash or shares of Class A common stock. The Company may not redeem the Series A Preferred Stock before October 21, 2020, except in limited circumstances related to its qualification as a REIT, complying with an asset coverage ratio or upon a change in control. After October 21, 2020, the Company can redeem for a redemption price of $25.00 per share plus any accrued and unpaid dividends.

 

At the date of issuance, the carrying amount of the Series A Preferred Stock was less than the redemption value. As a result of the Company’s determination that redemption is probable, the carrying value will be increased by periodic accretions so that the carrying value will equal the redemption amount at the earliest redemption date. Such accretion is recorded as a preferred stock dividend on the Statements of Stockholders’ Equity.

 

Series B Redeemable Preferred Stock

 

The Series B Preferred Stock ranks senior to common stock and on parity with the Series A Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock as to rights upon our liquidation, dissolution or winding up. The Series B Preferred Stock is entitled to priority cumulative dividends to be paid monthly, in arrears, when, as and if authorized by the Board. Holders may, at their option, elect to have the Company redeem their shares through the first year from issuance subject to a 13% redemption fee. After year one, the redemption fee decreases to 10%, after year three it decreases to 5%, after year four it decreases to 3%, and after year five there is no redemption fee. Any redeemed shares are entitled to any accrued but unpaid dividends at the time of the redemption, payable by the Company at its option in cash or shares of Class A common stock. The Company may redeem the Series B Preferred Stock beginning two years from the original issuance for the liquidation preference per share plus any accrued and unpaid dividends in either cash or shares of Class A common stock, based on the volume weighted average price for the Class A common shares for the 20 trading days prior to the redemption.

 

 F-39 

 

 

At the date of issuance, the carrying amount of the Series B Preferred Stock was less than the redemption value. As a result of the Company’s determination that redemption is probable, the carrying value will be increased by periodic accretions so that the carrying value will equal the redemption amount at the earliest redemption date. Such accretion is recorded as a preferred stock dividend on the Statements of Stockholders’ Equity.

 

7.625% Series C Cumulative Redeemable Preferred Stock

 

The Series C Preferred Stock ranks senior to common stock and on parity with the Series A Preferred Stock, the Series B Preferred Stock and the Series D Preferred Stock as to rights upon liquidation, dissolution or winding up. The Series C Preferred Stock is entitled to priority cumulative dividends to be paid quarterly, in arrears, when, as and if authorized by the Board. Commencing July 19, 2023, the annual dividend rate will increase by 2.0% annually, up to a maximum of 14.0%, if not redeemed by the holder or not previously redeemed by the Company. Commencing on July 19, 2023, holders may, at their option, elect to have the Company redeem their shares at a redemption price of $25.00 per share, plus an amount equal to accrued but unpaid dividends, payable by the Company at its option in cash or shares of Class A common stock. The Company may not redeem the Series C Preferred Stock before July 19, 2021, except in limited circumstances related to its qualification as a REIT, complying with an asset coverage ratio or upon a change in control. After July 19, 2021, the Company can redeem for a redemption price of $25.00 per share plus any accrued and unpaid dividends.

 

At the date of issuance, the carrying amount of the Series C Preferred Stock was less than the redemption value. As a result of the Company’s determination that redemption is probable, the carrying value will be increased by periodic accretions so that the carrying value will equal the redemption amount at the earliest redemption date. Such accretion is recorded as a preferred stock dividend on the Statements of Stockholders’ Equity.

 

7.125% Series D Cumulative Preferred Stock

 

The Series D Preferred Stock ranks senior to common stock and on parity with the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock as to rights upon liquidation, dissolution or winding up. The Series D Preferred Stock is entitled to priority cumulative dividends to be paid quarterly, in arrears, when, as and if authorized by the Board. After October 13, 2021, the Company can redeem for a redemption price of $25.00 per share plus any accrued and unpaid dividends.

 

Operating Partnership and Long-Term Incentive Plan Units

 

On April 2, 2014, concurrently with the completion of the IPO, the Company entered into the Second Amended and Restated Agreement of Limited Partnership of its Operating Partnership, Bluerock Residential Holdings, L.P. (the “Partnership Agreement”). Pursuant to the amendment, the Company is the sole general partner of the Operating Partnership and may not be removed as general partner by the limited partners with or without cause.

 

The Partnership Agreement, as amended, provides, among other things, that the Operating Partnership initially has two classes of limited partnership interests: OP Units and LTIP Units. In calculating the percentage interests of the partners in the Operating Partnership, LTIP Units are treated as OP Units. In general, LTIP Units will receive the same per-unit distributions as the OP Units. Initially, each LTIP Unit will have a capital account balance of zero and, therefore, will not have full parity with OP Units with respect to any liquidating distributions. However, the Partnership Agreement, as amended provides that “book gain,” or economic appreciation, in the Company’s assets realized by the Operating Partnership as a result of the actual sale of all or substantially all of the Operating Partnership’s assets, or the revaluation of the Operating Partnership’s assets as provided by applicable U.S. Department of Treasury regulations, will be allocated first to the holders of LTIP Units until their capital account per unit is equal to the average capital account per-unit of the Company’s OP Unit holders in the Operating Partnership. The Company expects that the Operating Partnership will issue OP Units to limited partners, and the Company, in exchange for capital contributions of cash or property, will issue LTIP Units pursuant to the Company’s Incentive Plans, as defined below, to persons who provide services to the Company, including the Company’s officers, directors and employees.

 

As of December 31, 2018, limited partners other than the Company owned approximately 25.91% of the common units of the Operating Partnership (6,386,841 OP Units, or 20.22%, is held by OP Unit holders, and 1,796,029 LTIP Units, or 5.69%, is held by LTIP Unit holders, including 3.09% which are not vested at December 31, 2018). Subject to certain restrictions set forth in the Operating Partnership’s Partnership Agreement, OP Units are exchangeable for Class A common stock on a one-for-one basis, or, at the Company’s election, redeemable for cash. LTIP Units may be convertible into OP Units under certain conditions and then may be settled in shares of the Company’s Class A common stock, or, at the Company’s election, cash.

 

The Operating Partnership, in conjunction with the issuance of preferred stock by the Company, has issued preferred OP Units which provide for similar rights as for each class of preferred stock.

 

 F-40 

 

 

Equity Incentive Plans

 

On October 26, 2017, the Company’s stockholders approved 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”). The Second Amended 2014 Incentive Plans allowed for the issuance of up to an additional 1,075,000 shares of Class A common stock. The Second Amended 2014 Incentive Plans provided for the grant of options to purchase shares of the Company’s common stock, stock awards, stock appreciation rights, performance units, incentive awards and other equity-based awards.

 

On September 28, 2018, the Company’s stockholders approved the amendment and restatement of each of the Second Amended 2014 Individuals Plan (the “Third Amended 2014 Individuals Plan”) and the Second Amended 2014 Entities Plan (the “Third Amended 2014 Entities Plan”, and together with the Third Amended 2014 Individuals Plan, the “Third Amended 2014 Incentive Plans,” and together with the Second Amended 2014 Incentive Plans, the “Incentive Plans”). The Third Amended 2014 Incentive Plans, which superseded and replaced in their entirety the Second Amended 2014 Incentive Plans, allow for the issuance of up to an aggregate of 2,250,000 additional shares of Class A common stock. The Third Amended 2014 Incentive Plans provide for the grant of options to purchase shares of the Company’s common stock, stock awards, stock appreciation rights, performance units, incentive awards and other equity-based awards.

 

A summary of the status of the Company’s non-vested shares/LTIP Units under the Incentive Plans for individuals as of December 31, 2018, 2017 and 2016, is as follows (dollars in thousands): 

 

Non-Vested shares/LTIP Units  Shares / LTIPs   Weighted average grant-
date fair value		 
Balance at January 1, 2016   14,476   $14.46 
Granted   7,500    10.33 
Vested   (21,317)   12.75 
Forfeited   —    — 
Balance at December 31, 2016   659   $22.75 
Granted   7,500    13.34 
Vested   (8,159)   14.10 
Forfeited   —    — 
Balance at December 31, 2017   —   $— 
Granted   1,158,963    10.06 
Vested   (183,754)   10.10 
Forfeited   —    — 
Balance at December 31, 2018   975,209   $10.05 

 

On March 24, 2016, the Company granted a total of 7,500 shares of Class A common stock to its independent directors. The fair value of the grants was approximately $0.1 million, and the shares vested immediately. On February 14, 2017, the Company granted a total of 7,500 LTIP Units to its independent directors under the Amended 2014 Individuals Plan. The fair value of the grants was approximately $0.1 million and the LTIP Units vested immediately.

 

On January 1, 2018, the Company granted certain equity grants of LTIPs of the Company’s operating partnership to various executive officers under the Second Amended 2014 Incentive Plans. These awards, amounting to 1,056,211 LTIPs, were issued pursuant to the executive officers’ employment and service agreements as time-based LTIPs and performance-based LTIPs. All of these LTIP grants require continuous employment for vesting. Due to a limitation on the number of LTIP Units available for issuance under the Second Amended 2014 Incentive Plans, the long-term performance awards were, in aggregate, approximately 81,000 LTIP Units (the “Shortfall LTIP Units”) lower than those which the recipients were entitled pursuant to the terms of their respective employments agreements, with the Company planning to issue the remaining LTIP Units at such time as such LTIP Units become available under the Incentive Plans. Time-based LTIPs were issued amounting to 770,854 LTIPs that vest over approximately five years and 160,192 LTIPs that vest over approximately three years. The Company recognizes compensation expense ratably over the requisite service periods for the time-based LTIPs based on the fair value at the date of grant. Performance-based LTIPs were issued amounting to 125,165 LTIPs, are subject to a three-year performance period, and will vest immediately upon successful achievement of performance-based conditions. Performance criteria are primarily based on a mixture of objective internal achievement goals and relative performance against its industry peers, with a minimum, threshold, and maximum performance standard for performance criteria. After the determination of the achievement of the performance criteria, any performance-based LTIP Units that were awarded but do not vest will be canceled. The Company recognizes compensation expense based on the fair value at the date of grant and the probability of achievement of performance criteria over the performance period for the performance-based LTIPs.

 

In addition, on January 1, 2018, the Company granted 6,263 LTIP Units under the Second Amended 2014 Incentive Plans to each independent member of the Board in payment of the equity portion of their respective annual retainers. The LTIP Units were fully vested upon issuance and the Company recognized expense immediately based on the fair value at the date of grant.

 

On September 28, 2018, at the annual meeting of the Company’s stockholders, the stockholders approved the Third Amended 2014 Incentive Plans. The increased capacity under the Third Amended 2014 Incentive Plans enabled the Company to issue the Shortfall LTIP Units, and on October 4, 2018, the Company granted the Shortfall LTIP Units to the executive officers pursuant to their employment and service agreements. The awards, amounting to 80,798 LTIP Units, vest over a period of three years from the date of grant of each Initial Long-Term Performance Award, followed by immediate vesting based on successful achievement of the performance conditions.

 

In addition, on October 4, 2018, the Company granted 3,165 LTIP Units pursuant to the Third Amended 2014 Incentive Plans to the newly appointed independent member of the Board in payment of the prorated portion of the annual retainer. The LTIP Units vested immediately upon issuance.

 

Compensation expense related to the Incentive Plans for individuals was approximately $5.3 million, $0.1 million and $0.2 million for the years ended December 31, 2018, 2017 and 2016.

 

As of December 31, 2018, there was $6.3 million of total unrecognized compensation cost related to unvested LTIPs granted under the Incentive Plans. The remaining cost is expected to be recognized over a period of 3.2 years.

 

The Company currently uses authorized and unissued shares to satisfy share award grants.

 

 F-41 

 

 

Equity Incentive Plans - LTIP Grants to the former Manager

 

On August 3, 2016, the Company issued a grant of LTIP Units under the Amended 2014 Incentive Plans to the former Manager. The equity grant consisted of 176,610 LTIP Units (the “2016 LTIP Units”). The 2016 LTIP Units vest ratably over a three-year period that began in August 2016, subject to certain terms and conditions. In conjunction with the Internalization, 212,203 outstanding LTIP Units issued as incentive equity to our former Manager (of which, 117,740 were 2016 LTIP Units and 94,463 were 2015 LTIP Units) became vested in accordance with their original terms. These LTIP Units may be convertible into OP Units under certain conditions and then may be settled in shares of the Company’s Class A common stock.

 

LTIP expense of $2.2 million and $2.4 million was recorded as part of general and administrative expenses for the years ended December 31, 2017 and 2016, respectively, related to the 2015 LTIP Units and the 2016 LTIP Units. The expense recognized during 2017 and 2016 was based on the Class A common stock closing price at the vesting date or the end of the period, as applicable.

 

 F-42 

 

  

Distributions

 

Declaration Date 

Payable to stockholders

of record as of

 

 

Amount

  

 

Date Paid or Payable

Class A Common Stock           
October 13, 2017  December 22, 2017  $0.096667   January 5, 2018
December 20, 2017  March 23, 2018  $0.162500   April 5, 2018
June 8, 2018  June 25, 2018  $0.162500   July 5, 2018
September 7, 2018  September 25, 2018  $0.162500   October 5, 2018
December 7, 2018  December 24, 2018  $0.162500   January 4, 2019
Class C Common Stock           
October 13, 2017  December 22, 2017  $0.096667   January 5, 2018
December 20, 2017  March 23, 2018  $0.162500   April 5, 2018
June 8, 2018  June 25, 2018  $0.162500   July 5, 2018
September 7, 2018  September 25, 2018  $0.162500   October 5, 2018
December 7, 2018  December 24, 2018  $0.162500   January 4, 2019
Series A Preferred Stock           
December 8, 2017  December 22, 2017  $0.515625   January 5, 2018
March 9, 2018  March 23, 2018  $0.515625   April 5, 2018
June 8, 2018  June 25, 2018  $0.515625   July 5, 2018
September 7, 2018  September 25, 2018  $0.515625   October 5, 2018
December 7, 2018  December 24, 2018  $0.515625   January 4, 2019
Series B Preferred Stock           
October 13, 2017  December 22, 2017  $5.00   January 5, 2018
January 12, 2018  January 25, 2018  $5.00   February 5, 2018
January 12, 2018  February 23, 2018  $5.00   March 5, 2018
January 12, 2018  March 23, 2018  $5.00   April 5, 2018
April 13, 2018  April 25, 2018  $5.00   May 4, 2018
April 13, 2018  May 25, 2018  $5.00   June 5, 2018
April 13, 2018  June 25, 2018  $5.00   July 5, 2018
July 10, 2018  July 25, 2018  $5.00   August 3, 2018
July 10, 2018  August 24, 2018  $5.00   September 5, 2018
July 10, 2018  September 25, 2018  $5.00   October 5, 2018
October 12, 2018  October 25, 2018  $5.00   November 5, 2018
October 12, 2018  November 23, 2018  $5.00   December 5, 2018
October 12, 2018  December 24, 2018  $5.00   January 4, 2019
Series C Preferred Stock           
December 8, 2017  December 22, 2017  $0.4765625   January 5, 2018
March 9, 2018  March 23, 2018  $0.4765625   April 5, 2018
June 8, 2018  June 25, 2018  $0.4765625   July 5, 2018
September 7, 2018  September 25, 2018  $0.4765625   October 5, 2018
December 7, 2018  December 24, 2018  $0.4765625   January 4, 2019
Series D Preferred Stock           
December 8, 2017  December 22, 2017  $0.4453125   January 5, 2018
March 9, 2018  March 23, 2018  $0.4453125   April 5, 2018
June 8, 2018  June 25, 2018  $0.4453125   July 5, 2018
September 7, 2018  September 25, 2018  $0.4453125   October 5, 2018
December 7, 2018  December 24, 2018  $0.4453125   January 4, 2019

 

A portion of each dividend may constitute a return of capital for tax purposes. There is no assurance that the Company will continue to declare dividends or at this rate. Holders of OP and LTIP Units are entitled to receive "distribution equivalents" at the same time as dividends are paid to holders of the Company's Class A common stock.

 

The Company has a dividend reinvestment plan that allows for participating stockholders to have their dividend distributions automatically invested in additional Class A common shares based on the average price of the Class A common shares on the investment date. The Company plans to issue Class A common shares to cover shares required for investment.

 

 F-43 

 

 

Distributions declared and paid for the year ended December 31, 2018 were as follows (amounts in thousands):

 

   Distributions 
2018  Declared   Paid 
First Quarter          
Class A Common Stock (1)  $(79)  $2,341 
Class C Common Stock   —    7 
Series A Preferred Stock   2,950    2,950 
Series B Preferred Stock   2,921    2,816 
Series C Preferred Stock   1,107    1,107 
Series D Preferred Stock   1,270    1,270 
OP Units   —    602 
LTIP Units   175    53 
Total first quarter 2018  $8,344   $11,146 
Second Quarter          
Class A Common Stock  $3,863   $3,858 
Class C Common Stock   12    12 
Series A Preferred Stock   2,950    2,950 
Series B Preferred Stock   3,316    3,161 
Series C Preferred Stock   1,107    1,107 
Series D Preferred Stock   1,269    1,269 
OP Units   1,013    1,013 
LTIP Units   311    266 
Total second quarter 2018  $13,841   $13,636 
Third Quarter          
Class A Common Stock  $3,847   $3,864 
Class C Common Stock   12    12 
Series A Preferred Stock   2,950    2,950 
Series B Preferred Stock   3,779    3,631 
Series C Preferred Stock   1,107    1,107 
Series D Preferred Stock   1,269    1,269 
OP Units   1,013    1,013 
LTIP Units   297    272 
Total third quarter 2018  $14,274   $14,118 
Fourth Quarter          
Class A Common Stock  $3,819   $3,846 
Class C Common Stock   12    12 
Series A Preferred Stock   2,950    2,950 
Series B Preferred Stock   4,316    4,101 
Series C Preferred Stock   1,107    1,107 
Series D Preferred Stock   1,269    1,269 
OP Units   1,038    1,012 
LTIP Units   292    279 
Total fourth quarter 2018  $14,803   $14,576 
TOTAL  $51,262   $53,476 

 

(1) On December 20, 2017, the Company’s Board authorized, and the Company declared, a quarterly dividend for the first quarter of 2018 equal to a quarterly rate of $0.1625 per share on the Class A and Class C common stock, payable to the stockholders of record as of March 23, 2018, which was paid in cash on April 5, 2018. Holders of OP and LTIP Units are entitled to receive “distribution equivalents” at the same time as dividends are paid to holders of the Class A common stock. The Company recorded an estimated accrued distribution at December 31, 2017 based on the Class A common stock outstanding. Due to the impact of the Class A common stock repurchase program that was initiated in February 2018, the distribution required based on the outstanding Class A common stock at the March 23, 2018 record date was lower than the accrued distribution recorded at December 31, 2017 and therefore, a negative declared distribution is reflected.

 

Note 14 – Commitments and Contingencies

 

The Company is subject to various legal actions and claims arising in the ordinary course of business. Although the outcome of any legal matter cannot be predicted with certainty, management does not believe that any of these legal proceedings or matters will have a material adverse effect on the consolidated financial position or results of operations or liquidity of the Company.

 

 F-44 

 

 

Note 15 - Selected Quarterly Financial Data (Unaudited)

 

The following table sets forth summarized quarterly financial data for the year ended December 31, 2018:

 

   Quarters Ended 2018 
   March 31   June 30   September 30   December 31 
   (In thousands, except per share amounts) 
Total revenue  $41,871   $44,959   $47,877   $50,011 
Operating income  $4,701   $7,636   $8,629   $8,728 
Net loss  $(2,955)  $(3,432)  $(3,111)  $(5,772)
Net loss available to common stockholders  $(9,425)  $(10,212)  $(10,334)  $(12,785)
Loss per common share, basic: (1)  $(0.40)  $(0.44)  $(0.44)  $(0.55)
Loss per common share, diluted: (1)  $(0.40)  $(0.44)  $(0.44)  $(0.55)

 

(1) EPS amounts are based on weighted average common shares outstanding during the quarter and, therefore, may not agree with the EPS calculated for the year ended December 31, 2018.                                

 

The following table sets forth summarized quarterly financial data for the year ended December 31, 2017:

 

   Quarters Ended 2017 
   March 31   June 30   September 30   December 31 
   (In thousands, except per share amounts) 
Total revenue  $28,183   $28,666   $30,154   $36,574 
Operating (loss) income  $(1,992)  $(2,202)  $126   $(40,579)
Net income (loss)  $9,928   $34,768   $(4,581)  $(47,141)
Net (loss) income available to common stockholders  $(4,990)  $17,569   $(12,017)  $(46,241)
(Loss) earnings per common share, basic: (1)  $(0.20)  $0.67   $(0.45)  $(1.87)
(Loss) earnings per common share, diluted: (1)  $(0.20)  $0.67   $(0.45)  $(1.87)

 

(1) EPS amounts are based on weighted average common shares outstanding during the quarter and, therefore, may not agree with the EPS calculated for the year ended December 31, 2017.

 

Note 16 – Subsequent Events

 

Issuance of LTIP Units under the Third Amended 2014 Incentive Plans

 

On January 1, 2019, the Company granted certain equity grants of LTIPs of the Company’s operating partnership to various executive officers under the Third Amended 2014 Incentive Plans pursuant to the executive officers’ employment and service agreements as time-based LTIPs and performance-based LTIPs. All of these LTIP grants require continuous employment for vesting. Time-based LTIPs were issued amounting to 196,023 LTIPs that vest over approximately three years. Performance-based LTIPs were issued amounting to 294,031 LTIPs, are subject to a three-year performance period, and will vest immediately upon successful achievement of performance-based conditions.

 

In addition, on January 1, 2019, the Company granted 6,836 LTIP Units pursuant to the Third Amended 2014 Incentive Plans to each independent member of the Board in payment of the equity portion of their respective annual retainers. The LTIP Units vested immediately upon issuance.

 

Distributions Declared

 

On January 11, 2019, the Company’s Board authorized, and the Company declared, monthly dividends for the first quarter of 2019 equal to monthly rate of $5.00 per share on the Series B Preferred Stock, payable monthly to the stockholders of record as of January 25, 2019, February 25, 2019 and March 25, 2019, which was paid in cash on February 5, 2019, and which will be paid in cash on March 5, 2019 and April 5, 2019, respectively.

 

 F-45 

 

 

Distributions Paid

 

The following distributions were paid to the Company’s stockholders, as well as holders of OP and LTIP Units, subsequent to December 31, 2018 (amounts in thousands):

 

Shares  Declaration
Date		  Record Date  Date Paid  Distributions
per Share		   Total
Distribution		 
Class A Common Stock  December 7, 2018  December 24, 2018  January 4, 2019  $0.1625000   $3,819 
Class C Common Stock  December 7, 2018  December 24, 2018  January 4, 2019  $0.1625000   $12 
Series A Preferred Stock  December 7, 2018  December 24, 2018  January 4, 2019  $0.5156250   $2,950 
Series B Preferred Stock  October 12, 2018  December 24, 2018  January 4, 2019  $5.0000000   $1,530 
Series C Preferred Stock  December 7, 2018  December 24, 2018  January 4, 2019  $0.4765625   $1,107 
Series D Preferred Stock  December 7, 2018  December 24, 2018  January 4, 2019  $0.4453125   $1,269 
OP Units  December 7, 2018  December 24, 2018  January 4, 2019  $0.1625000   $1,038 
LTIP Units  December 7, 2018  December 24, 2018  January 4, 2019  $0.1625000   $262 
                    
Series B Preferred Stock  January 11, 2019  January 25, 2019  February 5, 2019  $5.0000000   $1,625 
Total                $13,612 

 

Chapel Hill Interests

 

On January 23, 2019, the Company, through BRG Chapel Hill Lender, LLC “BRG Chapel Hill Lender”, an indirect subsidiary, provided a $7.8 million senior loan (the “BRG Chapel Hill Loan”) to BR Chapel Hill, LLC (“BR Chapel Hill”). BR Chapel Hill JV, LLC (“BR Chapel Hill JV”) owns a 100.0% interest in BR Chapel Hill and is a joint venture with common interests held by Fund I, Fund II, and BR Chapel Hill Investment, LLC, all managed by affiliates of the former Manager. The BRG Chapel Hill Loan is secured by BR Chapel Hill’s fee simple interest in the Chapel Hill property. The BRG Chapel Hill Loan matures on January 23, 2021 and bears interest at a fixed rate of 10.0%. Regular monthly payments are interest-only during the initial term. The BRG Chapel Hill Loan can be prepaid without penalty.

 

In conjunction with the BRG Chapel Hill Loan, on January 23, 2019, the Company, through BRG Chapel Hill Lender, provided a $0.8 million mezzanine loan to BR Chapel Hill JV, which is secured by the Chapel Hill property. The loan bears interest at a fixed rate of 10.0% per annum and matures on the earliest to occur of: (i) the latest to occur of (a) January 23, 2021, or (b) the applicable maturity date under any extension granted under any construction financing, (ii) the date of sale or transfer of property, and (iii) such earlier date, by declaration of acceleration or otherwise, on which the final payment of principal becomes due. The loan can be prepaid without penalty.

 

Acquisition of Additional Interest in ARIUM Pine Lakes

 

On January 29, 2019, the Company, through subsidiaries of its Operating Partnership, purchased the non-controlling partner’s interest in ARIUM Pine Lakes for $7.8 million, increasing the Company’s interest in the property from 85.0% to 100.0%.

 

Vickers Historic Roswell Mezzanine Financing

 

On February 25, 2019, the Company’s audit committee authorized and approved a proposal for the Company, through BRG Vickers, and on behalf of Fund III, to fund a capital call of $1.2 million by increasing its mezzanine loan to BR Vickers JV Member. In exchange for contributing Fund III’s share of the total $1.2 million capital call, the Company will receive an additional 5.0 basis point discount purchase option and will have the right to exercise an option to purchase, at the greater of a 17.5 basis point discount to fair market value or 15% internal rate of return for Fund III, up to a 100% common membership interest in BR Vickers JV Member.

 

 F-46 

 

 

Bluerock Residential Growth REIT, Inc.  
Schedule III - Real Estate and Accumulated Depreciation December 31, 2018

 

 

COLUMN A   COLUMN B     COLUMN C     COLUMN D     COLUMN E     COLUMN F     COLUMN G     COLUMN H
                                                              Life on Which
              Initial Cost     Costs
Capitalized		     Gross Amount at Which Carried at Close of Period                 Depreciation in
Latest Income
                    Building and     Subsequent           Building and
           Accumulated     Date of     Statement is
Property   Location   Encumbrance     Land     Improvements     to Acquisition     Land     Improvements     Total     Depreciation     Acquisition     Computed
Real Estate Held for Investment                                                                                
Enders Place at Baldwin Park   FL     23,822       4,750       20,171       5,341       5,454       24,808       30,262       5,454       2012     3 - 40 Years
ARIUM Grandewood   FL     39,385       5,200       37,220       1,498       5,200       38,718       43,918       5,432       2014     3 - 40 Years
Park & Kingston   NC     18,432       3,060       24,353       3,091       3,360       27,144       30,504       3,564       2015     3 - 40 Years
Ashton I   NC     30,878       4,000       40,944       348       4,000       41,292       45,292       4,973       2015     3 - 40 Years
ARIUM Palms   FL     30,320       4,030       32,248       1,287       4,030       33,535       37,565       4,530       2015     3 - 40 Years
Sorrel   TX     38,684       6,710       47,444       524       6,710       47,968       54,678       6,488       2015     3 - 40 Years
Sovereign   TX     28,227       2,800       40,609       383       2,800       40,992       43,792       5,343       2015     3 - 40 Years
Ashton II   NC     15,213       1,900       19,517       134       1,900       19,651       21,551       2,105       2015     3 - 40 Years
ARIUM at Palmer Ranch   FL     41,348       7,800       30,597       3,836       7,800       34,433       42,233       3,776       2016     3 - 40 Years
ARIUM Gulfshore   FL     - (1)     10,000       36,047       3,627       10,000       39,674       49,674       4,357       2016     3 - 40 Years
The Preserve at Henderson Beach   FL     35,602       4,100       50,117       1,846       4,100       51,963       56,063       4,754       2016     3 - 40 Years
ARIUM Westside   GA     52,150       8,657       63,402       2,403       8,657       65,805       74,462       5,065       2016     3 - 40 Years
ARIUM Glenridge   GA     49,500       14,513       52,324       6,943       14,513       59,267       73,780       4,340       2016     3 - 40 Years
ARIUM Pine Lakes   FL     26,950       5,760       31,854       1,488       5,760       33,342       39,102       3,417       2016     3 - 40 Years
The Brodie   TX     34,825       5,400       42,497       1,966       5,400       44,463       49,863       3,812       2016     3 - 40 Years
Roswell City Walk   GA     51,000       8,423       66,249       199       8,423       66,448       74,871       4,723       2016     3 - 40 Years
James on South First   TX     26,500       3,500       32,471       653       3,500       33,124       36,624       2,381       2016     3 - 40 Years
Preston View   NC     41,657       8,800       49,610       846       8,800       50,456       59,256       3,302       2017     3 - 40 Years
Wesley Village   NC     40,545       5,600       50,062       1,404       5,600       51,466       57,066       2,718       2017     3 - 40 Years
Wesley Village II   NC     -       270       -       4       270       4       274       -       2017     3 - 40 Years
Marquis at Crown Ridge   TX     28,634       4,000       35,209       1,372       4,000       36,581       40,581       1,987       2017     3 - 40 Years
Marquis at Stone Oak   TX     42,725       4,400       50,548       1,797       4,400       52,345       56,745       3,089       2017     3 - 40 Years
Marquis at The Cascades I   TX     32,899       3,200       41,120       989       3,200       42,109       45,309       2,227       2017     3 - 40 Years
Marquis at The Cascades II   TX     22,960       2,450       25,827       909       2,450       26,736       29,186       1,440       2017     3 - 40 Years
Marquis at TPC   TX     16,826       1,900       18,795       668       1,900       19,463       21,363       1,211       2017     3 - 40 Years
Villages at Cypress Creek   TX     26,200       4,650       35,990       1,787       4,650       37,777       42,427       1,717       2017     3 - 40 Years
Citrus Tower   FL     41,438       5,208       49,388       1,072       5,208       50,460       55,668       2,354       2017     3 - 40 Years
Outlook at Greystone   AL     22,105       3,950       31,664       2,013       3,950       33,677       37,627       1,383       2017     3 - 40 Years
ARIUM Hunter's Creek   FL     72,294       9,600       86,202       1,629       9,600       87,831       97,431       3,555       2017     3 - 40 Years
ARIUM Metrowest   FL     64,559       10,200       74,768       1,205       10,200       75,973       86,173       3,217       2017     3 - 40 Years
The Mills   SC     26,298       3,300       36,969       466       3,300       37,435       40,735       1,358       2017     3 - 40 Years
The Links at Plum Creek   CO     40,000       2,960       57,803       1,877       2,960       59,680       62,640       1,803       2018     3 - 40 Years
Sands Parc   FL     - (1)     3,170       42,443       109       3,170       42,552       45,722       953       2018     3 - 40 Years
Plantation Park   TX     26,625       1,600       34,065       41       1,600       34,106       35,706       672       2018     3 - 40 Years
Veranda at Centerfield   TX     26,100       5,120       35,506       1,070       5,120       36,576       41,696       578       2018     3 - 40 Years
Ashford Belmar   CO     100,675       18,400       124,149       24       18,400       124,173       142,573       782       2018     3 - 40 Years
Subtotal         1,215,376       199,381       1,548,182       54,849       200,385       1,602,027       1,802,412       108,860              
                                                                                 
Non-Real Estate assets                                                                                
REIT Operator   MI     -       -       185       71       -       256       256       51       2017     5 Years
Subtotal         -       -       185       71       -       256       256       51              
                                                                                 
Total       $ 1,215,376     $ 199,381     $ 1,548,367     $ 54,920     $ 200,385     $ 1,602,283     $ 1,802,668     $ 108,911              

 

 

(1) ARIUM Gulfshore and Sands Parc were funded, in part, by a secured credit facility. As of December 31, 2018, the outstanding credit facility balance is $67.7 million.

 

 F-47 

 

 

Bluerock Residential Growth REIT, Inc.

Notes to Schedule III

 

1. Reconciliation of Real Estate Properties

The following table reconciles the Real Estate Properties from January 1, 2016 to December 31, 2018.

 

   2018   2017   2016 
             
Balance at January 1  $1,452,759   $1,029,214   $556,820 
Construction and acquisition cost   349,909    701,262    508,218 
Disposition of real estate   -    (277,717)   (35,824)
Balance at December 31  $1,802,668   $1,452,759   $1,029,214 

 

2. Reconciliation of Accumulated Depreciation

The following table reconciles the Real Estate Properties from January 1, 2016 to December 31, 2018.

 

   2018   2017   2016 
             
Balance at January 1  $55,177   $42,137   $23,437 
Current year depreciation expense   53,734    35,538    23,580 
Disposition of real estate   -    (22,498)   (4,880)
Balance at December 31  $108,911   $55,177   $42,137 

 

 F-48 

 

  

EXHIBIT INDEX

 

Effective February 22, 2013, Bluerock Enhanced Multifamily Trust, Inc. changed its name to Bluerock Multifamily Growth REIT, Inc. Effective November 19, 2013, Bluerock Multifamily Growth REIT, Inc. changed its name to Bluerock Residential Growth REIT, Inc. Effective February 27, 2013, Bluerock Enhanced Multifamily Advisor, LLC and Bluerock Enhanced Multifamily Holdings, L.P. changed their names to Bluerock Multifamily Advisor, LLC and Bluerock Multifamily Holdings, L.P., respectively. Effective November 19, 2013, Bluerock Multifamily Holdings, L.P. changed its name to Bluerock Residential Holdings, L.P. With respect to documents executed prior to the name change, the following Exhibit Index refers to the entity names used prior to the name changes in order to accurately reflect the names of the entities that appear on such documents.

 

Exhibit

Number

   Description
2.1   Contribution and Sale Agreement, dated as of August 3, 2017, by and among Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., and Bluerock TRS Holdings, LLC, BRG Manager, LLC, Bluerock REIT Operator, LLC, Bluerock Real Estate, L.L.C., Konig & Associates, LLC., Jenco Business Advisors, Inc., The Kachadurian Group LLC, James G. Babb, III, Jordan B. Ruddy, and Ryan S. MacDonald, incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on August 4, 2017.
     
2.2   Amendment No. 1 to Contribution and Sale Agreement, dated as of August 9, 2017, by and among Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., and Bluerock TRS Holdings, LLC, BRG Manager, LLC, Bluerock REIT Operator, LLC, Bluerock Real Estate, L.L.C., Konig & Associates, LLC., Jenco Business Advisors, Inc., The Kachadurian Group LLC, James G. Babb, III, Jordan B. Ruddy, and Ryan S. MacDonald, incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on August 15, 2017.
     
3.1   Articles of Amendment and Restatement of the Company, incorporated by reference to Exhibit 3.1 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-153135)
     
3.2   Articles of Amendment of the Company, incorporated by reference to Exhibit 3.3 to Pre-Effective Amendment No. 2 to the Company’s Registration Statement on Form S-11 (No. 333-184006)
     
3.3   Second Articles of Amendment and Restatement of the Company, incorporated by reference to Exhibit 3.3 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-192610)
     
3.4   Articles of Amendment to the Second Articles of Amendment and Restatement of the Company, dated March 26, 2014, incorporated by reference to Exhibit 3.6 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-192610)
     
3.5   Articles of Amendment to the Second Articles of Amendment and Restatement of the Company, dated March 26, 2014, incorporated by reference to Exhibit 3.7 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-192610)
     
3.6   Articles of Amendment to the Second Articles of Amendment and Restatement of the Company, dated March 31, 2014, incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed April 1, 2014
     
3.7   Articles of Amendment to the Second Articles of Amendment and Restatement of the Company, dated March 31, 2014, incorporated by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K filed April 1, 2014
     
3.8   Articles Supplementary of the Company, dated October 20, 2015, incorporated by reference to Exhibit 3.6 to the Company’s Current Report on Form 8-A filed October 20, 2015
     
3.9   Articles Supplementary of the Company, dated December 16. 2015, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed December 22, 2015
     
3.10   Articles Supplementary of the Company, dated February 26, 2016, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed March 1, 2016
     
3.11   Articles Supplementary of the Company, dated March 29, 2016, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed March 29, 2016
     
3.12   Articles Supplementary of the Company, dated July 15, 2016, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed July 18, 2016
     
3.13   Articles Supplementary of the Company, dated October 10, 2016, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed October 12, 2016

 

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3.14   Second Amended and Restated Bylaws of the Company, incorporated by reference to Exhibit 3.5 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-192610)
     
3.15   Third Amended and Restated Bylaws of the Company, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 9, 2017
     
3.16   Articles Supplementary of the Company, dated July 20, 2017, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on July 21, 2017
     
3.17   Articles Supplementary of the Company, dated October 26, 2017, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 6, 2017
     
3.18   Articles Supplementary of the Company, dated November 14, 2017, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 20, 2017
     
3.19   Certificate of Correction to Articles Supplementary of the Company, dated May 11, 2018, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 14, 2018
     
3.20   Articles Supplementary of the Company, dated November 16, 2018, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 19, 2018
     
4.1   LTIP Unit Vesting Agreement, between and among the Company, Bluerock Residential Holdings, L.P. and BRG Manager, LLC, dated April 2, 2014, incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
4.2   Registration Rights Agreement by and among Bluerock Special Opportunity + Income Fund II, LLC, Bluerock Special Opportunity + Income Fund III, LLC, BR SOIF II Manager, LLC, BR SOIF III Manager, LLC and the Company, dated April 2, 2014, incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on April 8, 2014
     
4.3   Registration Rights Agreement among BR-NPT Springing Entity, LLC, BR-North Park Towers, LLC and the Company, dated April 2, 2014, incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed on April 8, 2014
     
4.4   Tax Protection Agreement by and among the Company, Bluerock Residential Holdings, L.P. and BR-NPT Springing Entity, LLC, dated April 2, 2014, incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed on April 8, 2014
     
4.5   Indemnification Agreement by and among the Company, Bluerock Residential Holdings, L.P. and R. Ramin Kamfar, dated April 2, 2014, incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K filed April 8, 2014
     
4.6   Indemnification Agreement by and among the Company, Bluerock Residential Holdings, L.P. and Gary T. Kachadurian, dated April 2, 2014, incorporated by reference to Exhibit 10.15 to the Company’s Current Report on Form 8-K filed April 8, 2014
     
4.7   Indemnification Agreement by and among the Company, Bluerock Residential Holdings, L.P. and Michael L. Konig, dated April 2, 2014, incorporated by reference to Exhibit 10.16 to the Company’s Current Report on Form 8-K filed April 8, 2014
     
4.8   Indemnification Agreement by and among the Company, Bluerock Residential Holdings, L.P. and Christopher J. Vohs, dated April 2, 2014, incorporated by reference to Exhibit 10.17 to the Company’s Current Report on Form 8-K filed April 8, 2014
     
4.9   Indemnification Agreement by and among the Company, Bluerock Residential Holdings, L.P. and I. Bobby Majumder, dated April 2, 2014, incorporated by reference to Exhibit 10.18 to the Company’s Current Report on Form 8-K filed April 8, 2014
     
4.10   Indemnification Agreement by and among the Company, Bluerock Residential Holdings, L.P. and Brian D. Bailey, dated April 2, 2014, incorporated by reference to Exhibit 10.19 to the Company’s Current Report on Form 8-K filed April 8, 2014
     
4.11   Indemnification Agreement by and among the Company, Bluerock Residential Holdings, L.P. and Romano Tio, dated April 2, 2014, incorporated by reference to Exhibit 10.20 to the Company’s Current Report on Form 8-K filed April 8, 2014

 

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4.12   LTIP Unit Vesting Agreement by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., and BRG Manager, LLC, dated July 2, 2015, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 9, 2015
     
4.13   Stock Award Agreement by and between the Company and Brian D. Bailey, dated as of March 24, 2015, incorporated by reference to Exhibit 4.60 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
4.14   Stock Award Agreement by and between the Company and I. Bobby Majumder, dated as of March 24, 2015, incorporated by reference to Exhibit 4.61 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
4.15   Stock Award Agreement by and between the Company and Romano Tio, dated as of March 24, 2015, incorporated by reference to Exhibit 4.62 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
4.16   Form of Amendment to Stock Award Agreement, incorporated by reference to Exhibit 4.63 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
4.17   LTIP Unit Vesting Agreement by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., and BRG Manager, LLC, dated August 3, 2016, incorporated by reference to Exhibit 10.33 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2016
     
4.18   Letter Agreement, by and between Bluerock Residential Growth REIT, Inc. and Cetera Financial Group, Inc., dated as of February 6, 2017, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 8, 2016
     
4.19   Letter Agreement, by and between Bluerock Residential Growth REIT, Inc. and Cetera Financial Group, Inc., dated as of February 6, 2017, incorporated by reference to Exhibit 4.1 to the Company Current Report on Form 8-K filed on February 8, 2017
     
10.1   Management Agreement by and among the Company, Bluerock Residential Holdings, L.P. and BRG Manager, LLC, dated April 2, 2014, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 8, 2014
     
10.2   Second Amended and Restated Agreement of Limited Partnership of Bluerock Residential Holdings, L.P., dated April 2, 2014, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 10-K filed on April 8, 2014
     
10.3   First Amendment to the Second Amended and Restated Agreement of Limited Partnership of Bluerock Residential Holdings, L.P., dated October 21, 2015, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 21, 2015
     
10.4   Second Amendment to the Second Amended and Restated Agreement of Limited Partnership of Bluerock Residential Holdings, L.P., dated December 21, 2015, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed December 22, 2015
     
10.5   Third Amendment to the Second Amended and Restated Agreement of Limited Partnership of Bluerock Residential Holdings, L.P., dated March 1, 2016, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed March 1, 2016
     
10.6   Fifth Amendment to the Second Amended and Restated Agreement of Limited Partnership of Bluerock Residential Holdings, L.P., dated July 15, 2016, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 18, 2016
     
10.7   Sixth Amendment to the Second Amended and Restated Agreement of Limited Partnership of Bluerock Residential Holdings, L.P., dated October 11, 2016, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 12, 2016
     
10.8   Limited Liability Company/Joint Venture Agreement of BR Springhouse Managing Member, LLC, dated as of December 3, 2009, incorporated by reference to Exhibit 10.7 to Post-Effective Amendment No. 1 to the Company’s Registration Statement on Form S-11 (No. 333-153135)
     
10.9   Limited Liability Company/Joint Venture Agreement of BR Hawthorne Springhouse JV, LLC, dated as of December 3, 2009, incorporated by reference to Exhibit 10.8 to Post-Effective Amendment No. 1 to the Company’s Registration Statement on Form S-11 (No. 333-153135)
     
10.10   First Amendment to Limited Liability Company Agreement of BR Springhouse Managing Member, LLC, dated as of June 27, 2012, incorporated by reference to Exhibit 10.54 to Post-Effective Amendment No. 11 to the Company’s Registration Statement on Form S-11 (No. 333-153135)

 

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10.11   Limited Liability Company Agreement of BR Enders Managing Member, LLC, dated as of October 2, 2012, incorporated by reference to Exhibit 10.59 to Post-Effective Amendment No. 12 to the Company’s Registration Statement on Form S-11 (No. 333-153135)
     
10.12   Limited Liability Company Agreement of Waypoint Bluerock Enders JV, LLC, dated as of October 2, 2012, incorporated by reference to Exhibit 10.60 to Post-Effective Amendment No. 12 to the Company’s Registration Statement on Form S-11 (No. 333-153135)
     
10.13   Amended and Restated Limited Liability Company Agreement of Waypoint Enders Owner, LLC, dated as of October 2, 2012, incorporated by reference to Exhibit 10.61 to Post-Effective Amendment No. 12 to the Company’s Registration Statement on Form S-11 (No. 333-153135)
     
10.14   Multifamily Note — CME by and between Waypoint Enders Owner, LLC and Jones Lang LaSalle Operations, L.L.C., dated October 2, 2012, incorporated by reference to Exhibit 10.62 to Post-Effective Amendment No. 12 to the Company’s Registration Statement on Form S-11 (No. 333-153135)
     
10.15   Multifamily Loan and Security Agreement — CME by and among Waypoint Enders Owner, LLC and Jones Lang LaSalle Operations, L.L.C., dated October 2, 2012, incorporated by reference to Exhibit 10.63 to Post-Effective Amendment No. 12 to the Company’s Registration Statement on Form S-11 (No. 333-153135)
     
10.16   Backstop Agreement by and among Robert C. Rohdie, Waypoint Enders Investors, LP, Waypoint Enders GP, LLC and BR Enders Managing Member, LLC, dated October 2, 2012, incorporated by reference to Exhibit 10.64 to Post-Effective Amendment No. 12 to the Company’s Registration Statement on Form S-11 (No. 333-153135)
     
10.17   Property Management Agreement by and among Waypoint Enders Owner, LLC and Bridge Real Estate Group, LLC d/b/a Waypoint Management, dated October 2, 2012, incorporated by reference to Exhibit 10.65 to Post-Effective Amendment No. 12 to the Company’s Registration Statement on Form S-11 (No. 333-153135)
     
10.18   Asset Management Agreement by and among Waypoint Enders Owner, LLC and Waypoint Residential, LLC dated October 2, 2012, incorporated by reference to Exhibit 10.66 to Post-Effective Amendment No. 12 to the Company’s Registration Statement on Form S-11 (No. 333-153135)
     
10.19   Operating Agreement of BR Stonehenge 23Hundred JV, LLC, dated as of October 18, 2012, incorporated by reference to Exhibit 10.73 to Post-Effective Amendment No. 14 to the Company’s Registration Statement on Form S-11 (No. 333-153135)
     
10.20   Membership Interest Purchase Agreement by and among BEMT Berry Hill, LLC and Bluerock Special Opportunity + Income Fund III, LLC, dated December 17, 2012, incorporated by reference to Exhibit 10.85 to Post-Effective Amendment No. 14 to the Company’s Registration Statement on Form S-11 (No. 333-153135)
     
10.21   Amended and Restated Limited Liability Company Agreement of BR Berry Hill Managing Member, LLC, dated December 26, 2012, incorporated by reference to Exhibit 10.88 to Post-Effective Amendment No. 14 to the Company’s Registration Statement on Form S-11 (No. 333-153135)
     
10.22   First Amendment to Amended and Restated Limited Liability Company Agreement of BR Berry Hill Managing Member, LLC, dated August 13, 2013, incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2013
     
10.23   Second Amended and Restated Limited Liability Company Agreement of BR Berry Hill Managing Member, LLC, dated August 29, 2013, incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2013
     
10.24   Contribution Agreement by and between BR-NPT Springing Entity, LLC and Bluerock Residential Holdings, L.P., effective as of March 10, 2014, incorporated by reference to Exhibit 10.91 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-192610)
     
10.25   Contribution Agreement by and among Bluerock Special Opportunity + Income Fund II, LLC, Bluerock Special Opportunity + Income Fund III, LLC and the Company, effective as of March 10, 2014, incorporated by reference to Exhibit 10.92 to Pre-Effective Amendment No. 4 to the Company’s Registration Statement on Form S-11 (No. 333-192610)

 

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10.26   Contribution Agreement by and between Bluerock Special Opportunity + Income Fund II, LLC and the Company, effective as of March 10, 2014, incorporated by reference to Exhibit 10.93 to Pre-Effective Amendment No. 4 to the Company’s Registration Statement on Form S-11 (No. 333-192610)
     
10.27   Contribution Agreement by and among Bluerock Special Opportunity + Income Fund, LLC, Bluerock Special Opportunity + Income Fund II, LLC and the Company, effective as of March 10, 2014, incorporated by reference to Exhibit 10.94 to Pre-Effective Amendment No. 4 to the Company’s Registration Statement on Form S-11 (No. 333-192610)
     
10.28   Contribution Agreement by and between Bluerock Special Opportunity + Income Fund, LLC and the Company, effective as of March 10, 2014, incorporated by reference to Exhibit 10.95 to Pre-Effective Amendment No. 4 to the Company’s Registration Statement on Form S-11 (No. 333-192610)
     
10.29   Assignment of Membership Interest in BR Oak Crest Villas, LLC by and between Bluerock Special Opportunity + Income Fund II, LLC and BRG Oak Crest, LLC, dated April 2, 2014, incorporated by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.30   Assignment of Membership Interest in BR Waterford JV Member, LLC by and between Bluerock Special Opportunity + Income Fund, LLC and BRG Waterford, LLC, dated April 2, 2014, incorporated by reference to Exhibit 10.41 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.31   Assignment of Membership Interest in BR Waterford JV Member, LLC by and between Bluerock Special Opportunity + Income Fund II, LLC and BRG Waterford, LLC, dated April 2, 2014, incorporated by reference to Exhibit 10.42 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.32   Membership Interest Purchase and Sale Agreement between and among Bluerock Special Opportunity + Income Fund II, LLC, Bluerock Special Opportunity + Income Fund III, LLC and Bluerock Residential Holdings, L.P., effective as of May 15, 2014, incorporated by reference to Exhibit 10.52 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.33   Membership Interest Purchase Agreement between and among Waypoint Enders Investors, LP, Waypoint Enders GP, LLC, and Waypoint Bluerock Enders JV, LLC, effective as of May 28, 2014, incorporated by reference to Exhibit 10.96 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.34   Limited Liability Company Agreement of BR Oak Crest Villas, LLC, by Bluerock Special Opportunity + Income Fund II, LLC, dated December 12, 2011, incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.35   First Amendment to Limited Liability Company Agreement of BR Oak Crest Villas, LLC between and among BRG Oak Crest, LLC, Dr. Reza Kamfar and Forough Kamfar, as joint tenants with rights of survivorship, Susan Kamfar and Stephanie Kamfar, effective as of April 2, 2014, incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.36   Limited Liability Company Agreement of Villas Partners, LLC by and between Oak Crest Villas JV, LLC, Ryan L. Hanks and Jordan Ruddy, effective as of November 18, 2011, incorporated by reference to Exhibit 10.15 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.37   Limited Liability Company/Joint Venture Agreement of BR Waterford JV Member, LLC by and between Bluerock Special Opportunity + Income Fund, LLC and Bluerock Special Opportunity + Income Fund II, LLC, dated February 23, 2012, incorporated by reference to Exhibit 10.36 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.38   First Amendment to Limited Liability Company/Joint Venture Agreement of BR Waterford JV Member, LLC by BRG Waterford, LLC, dated April 2, 2014, incorporated by reference to Exhibit 10.37 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.39   Limited Liability Company/Joint Venture Agreement of Agreement of Bell BR Waterford Crossing JV, LLC, by and between BR Waterford JV Member, LLC and Bell HNW Nashville Portfolio, LLC, dated March 29, 2012, incorporated by reference to Exhibit 10.38 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.40   First Amendment to Limited Liability Company/Joint Venture Agreement for Bell BR Waterford Crossing JV, LLC, by and between BR Waterford JV Member, LLC and Bell HNW Nashville Portfolio, LLC, dated April 2, 2014, incorporated by reference to Exhibit 10.39 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.41   Limited Liability Company Agreement of Oak Crest Villas JV, LLC by and between BR Oak Crest Villas, LLC and Oak Crest Investors, LLC, dated January 31, 2012, incorporated by reference to Exhibit 10.14 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014

 

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10.42   Consent and Modification Agreement Regarding Transfer of Interests by and among Villas Partners, LLC, Ryan Hanks, and U.S. Bank National Association as Trustee for the registered holders of Wells Fargo Commercial Mortgage Securities, Inc., Multifamily Mortgage Pass-Through Certificates, Series 2012-K709, dated April 2, 2014, incorporated by reference to Exhibit 10.20 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.43   Limited Liability Company Agreement of BRG T&C BLVD Houston, LLC, by and between BRG T&C BLVD Houston, LLC and Bluerock Residential Holdings, L.P., dated June 30, 2014, incorporated by reference to Exhibit 10.69 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.44   Limited Liability Company Agreement of BR T&C BLVD JV Member, LLC by and among BRG T&C BLVD Houston, LLC, Bluerock Special Opportunity + Income Fund II, LLC, Bluerock Special Opportunity + Income Fund III, LLC, and Bluerock Growth Fund, LLC, dated July 1, 2014, incorporated by reference to Exhibit 10.161 to Pre-Effective Amendment No. 1 to the Company’s Registration Statement on Form S-11 (No. 333-198770)
     
10.45   Limited Liability Company Agreement of BR T&C BLVD., LLC, by and between HCH 106 Town and County L.P. and BR T&C BLVD JV Member, LLC, dated June 30, 2014, incorporated by reference to Exhibit 10.71 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.46   Development Agreement by and between BR T&C BLVD., LLC and Maple Multi-Family Operations, L.L.C., dated June 30, 2014, incorporated by reference to Exhibit 10.72 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.47   Owner-Contractor Construction Agreement by and between BR T&C BLVD., LLC and Maple Multi-Family TX Contractor, L.L.C., dated June 30, 2014, incorporated by reference to Exhibit 10.73 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.48   Construction Loan Agreement by and between BR T&C BLVD., LLC, Compass Bank, and the lenders that are or become a signatory thereto, dated July 1, 2014, incorporated by reference to Exhibit 10.165 to the Company’s Registration Statement on Form S-11 (No. 333-198770)
     
10.49   Guaranty Agreement by and between CFP Residential, L.P. CFH Maple Residential Investor, L.P., VF MultiFamily Holdings, Ltd. VF Residential, Ltd., and Maple Residential, L.P. in favor of Compass Bank and the lenders that are or become a signatory to the Loan Agreement, dated July 1, 2014, incorporated by reference to Exhibit 10.166 to the Company’s Registration Statement on Form S-11 (No. 333-198770)
     
10.50   Environmental Indemnity Agreement by and between BR T&C BLVD., LLC, Compass Bank, and the lenders that are or become a signatory to the Loan Agreement, dated July 1, 2014, incorporated by reference to Exhibit 10.167 to the Company’s Registration Statement on Form S-11 (No. 333-198770)
     
10.51   Promissory Note by and between BR T&C BLVD, LLC and Compass Bank, dated July 1, 2014, incorporated by reference to Exhibit 10.168 to the Company’s Registration Statement on Form S-11 (No. 333-198770)
     
10.52   Promissory Note by and between BR T&C BLVD, LLC and Patriot Bank, dated July 1, 2014, incorporated by reference to Exhibit 10.169 to the Company’s Registration Statement on Form S-11 (No. 333-198770)
     
10.53   Assignment and Subordination of Development Agreement by and between BR T&C BLVD., LLC and Maple Multi-Family Operations, L.L.C. for the benefit of Compass Bank and the lenders that are or become a signatory to the Loan Agreement, dated July 1, 2014, incorporated by reference to Exhibit 10.170 to the Company’s Registration Statement on Form S-11 (No. 333-198770)
     
10.54   Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing by and between BR T&C BLVD., LLC to Lee Q. Vardaman, Trustee for the benefit of Compass Bank as administrative agent for the lenders that are or become a signatory to the Loan Agreement, dated July 1, 2014, incorporated by reference to Exhibit 10.171 to the Company’s Registration Statement on Form S-11 (No. 333-198770)
     
10.55   Senior Secured Credit Facility Fee Letter by and between BR T&C BLVD., LLC and Compass Bank as administrative agent for the lenders that are or become a signatory to the Loan Agreement, dated July 1, 2014, incorporated by reference to Exhibit 10.172 to the Company’s Registration Statement on Form S-11 (No. 333-198770)
     
10.56   Amended and Restated Limited Liability Company Agreement of BR Orlando UCFP, LLC, by and between BRG UCFP Investor, LLC and Bluerock Special Opportunity + Income Fund, LLC, dated July 30, 2014, incorporated by reference to Exhibit 10.84 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014

 

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10.57   Operating Agreement of BR/CDP UCFP Venture, LLC, by and between CDP UCFP Developer, LLC and BR Orlando UCFP, LLC, dated January 15, 2014, incorporated by reference to Exhibit 10.86 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.58   Limited Liability Company Agreement of BRG UCFP Investor, LLC, by Bluerock Residential Holdings, L.P., dated July 30, 2014, incorporated by reference to Exhibit 10.87 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014
     
10.59   Redemption Agreement by and between BR Berry Hill Managing Member, LLC, Bluerock Growth Fund, LLC, BEMT Berry Hill, LLC and Bluerock Special Opportunity + Income Fund, LLC, dated December 9, 2014, incorporated by reference to Exhibit 10.187 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.60   Contribution and Distribution Agreement by and among BR Berry Hill Managing Member, LLC, BR Berry Hill Managing Member II, LLC, Bluerock Special Opportunity + Income Fund III, LLC, and BEMT Berry Hill, LLC, dated December 9, 2014, incorporated by reference to Exhibit 10.188 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.61   Amended and Restated Limited Liability Company Agreement of BR Stonehenge 23Hundred JV, LLC by and among BR Berry Hill Managing Member, LLC and BR Berry Hill Managing Member II, LLC, dated December 9, 2014, incorporated by reference to Exhibit 10.189 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.62   Redemption Agreement by and among BR Stonehenge 23Hundred JV, LLC, BR Berry Hill Managing Member, LLC, BR Berry Hill Managing Member II, LLC, Bluerock Growth Fund, LLC, and Stonehenge 23Hundred JV Member, LLC, dated December 9, 2014, incorporated by reference to Exhibit 10.190 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.63   Tenancy in Common Agreement by and among SH 23 Hundred TIC, LLC, 23Hundred, LLC, and BGF 23Hundred, LLC, dated December 9, 2014, incorporated by reference to Exhibit 10.191 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.64   Redemption Agreement between and among BR Stonehenge 23Hundred JV, LLC, Bluerock Growth Fund, LLC, BR Berry Hill Managing Member, LLC, and BR Berry Hill Managing Member II, LLC, dated December 9, 2014, incorporated by reference to Exhibit 10.193 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.65   Assumption Agreement by and among Fifth Third Bank, 23Hundred, LLC, SH 23Hundred TIC, LLC, and BGF 23Hundred, LLC, dated December 9, 2014, incorporated by reference to Exhibit 10.194 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.66   Limited Liability Company Agreement of BR Berry Hill Managing Member II, LLC, by and between BEMT Berry Hill, LLC and Bluerock Special Opportunity + Growth Fund III, LLC, dated December 9, 2014, incorporated by reference to Exhibit 10.195 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.67   Purchase and Sale Agreement by and between 23Hundred, LLC, BGF 23Hundred, LLC and SH 23Hundred TIC, LLC and Sentinel Acquisitions Corp., dated December 10, 2014, incorporated by reference to Exhibit 10.196 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.68   First Amendment to Purchase and Sale Agreement by and between 23Hundred, LLC, BGF 23Hundred, LLC and SH 23Hundred TIC, LLC and Sentinel Acquisitions Corp., dated December 15, 2014, incorporated by reference to Exhibit 10.197 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.69   Second Amendment to Purchase and Sale Agreement by and between 23Hundred, LLC, BGF 23Hundred, LLC and SH 23Hundred TIC, LLC and Sentinel Acquisitions Corp., dated December 17, 2014, incorporated by reference to Exhibit 10.198 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.70   Purchase and Sale Agreement by and between Bell HNW Waterford, LLC, Bell BR Waterford Crossing JV, LLC, and Bel Hendersonville LLC, dated December 9, 2014, incorporated by reference to Exhibit 10.199 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.71   Assumption and Release Agreement by and among Bell BR Waterford Crossing JV, LLC, Bell HNW Waterford, LLC, Bluerock Residential Growth REIT Inc., Bell Partners Inc., and Bell HNW Nashville Portfolio, LLC, dated December 3, 2014, incorporated by reference to Exhibit 10.200 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014

 

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10.72   Redemption Agreement by and among Bell BR Waterford Crossing JV, LLC, BR Waterford JV Member, LLC, BR Waterford JV Minority Member, LLC, and Bell HNW Nashville Portfolio, LLC, dated December 3, 2014, incorporated by reference to Exhibit 10.201 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.73   Tenants In Common Agreement by and among Bell BR Waterford Crossing JV, LLC and Bell HNW Waterford, LLC, dated December 3, 2014, incorporated by reference to Exhibit 10.202 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.74   Amended and Restated Limited Liability Company Agreement by and among BR Waterford JV Member, LLC and BR Waterford JV Minority Member, LLC, dated December 3, 2014, incorporated by reference to Exhibit 10.203 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.75   Second Amendment to Multifamily Loan and Security Agreement by and between Bell BR Waterford Crossing JV LLC, Bell HNW Waterford, LLC, and Fannie Mae, dated December 3, 2014, incorporated by reference to Exhibit 10.204 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.76   Development Agreement by and between BR Bellaire Blvd, LLC, and Maple Multi-Family Operations, L.L.C., dated January 9, 2015, incorporated by reference to Exhibit 10.205 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.77   Limited Liability Company Agreement of BR Bellaire Blvd, LLC by and between Blaire House, LLC, and BR Southside Member, LLC, dated January 9, 2015, incorporated by reference to Exhibit 10.206 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.78   Guaranty Agreement by CFP Residential, L.P., CFH Maple Residential Investor, L.P., VF MultiFamily Holdings, Ltd., VF Residential, Ltd., and Maple Residential, L.P., in favor of BR Southside Member, LLC and BR Bellaire Blvd, LLC, dated January 9, 2015, incorporated by reference to Exhibit 10.207 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.79   Owner-Contractor Construction Agreement by and between BR Bellaire Blvd, LLC and Maple Multi-Family TX Contractor, L.L.C. dated January 9, 2015, incorporated by reference to Exhibit 10.208 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.80   Property Management Agreement by and between BR Carroll Arium Grande Lakes Owner, LLC and Carroll Management Group, LLC, dated November 4, 2014, incorporated by reference to Exhibit 10.209 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.81   Assignment of Management Agreement by and among BR Carroll Arium Grande Lakes Owner, LLC, Walker & Dunlop, LLC, and Carroll Management Group, LLC, dated November 4, 2014, incorporated by reference to Exhibit 10.210 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.82   Consolidated, Amended and Restated Multifamily Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing by BR Carroll Arium Grande Lakes Owner, LLC, to and for the benefit of Walker & Dunlop, LLC, dated November 4, 2014, incorporated by reference to Exhibit 10.211 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.83   Operations and Maintenance Agreement – Moisture Management Plan by and between BR Carroll Arium Grande Lakes Owner, LLC and Walker & Dunlop, LLC, dated November 4, 2014, incorporated by reference to Exhibit 10.212 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.84   Interest Rate Cap Reserve and Security Agreement by and between BR Carroll Arium Grande Lakes Owner, LLC and Walker & Dunlop, LLC, dated November 4, 2014, incorporated by reference to Exhibit 10.213 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.85   Environmental Indemnity Agreement by BR Carroll Arium Grande Lakes Owner, LLC, to and for the benefit of Walker & Dunlop, LLC, dated November 4, 2014, incorporated by reference to Exhibit 10.214 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.86   Guaranty of Non-Recourse Obligations by MPC Partnership Holdings LLC, to and for the benefit of Walker & Dunlop, LLC, dated November 4, 2014, incorporated by reference to Exhibit 10.215 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.87   Assignment of Security Instrument (Multifamily Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing) by Walker & Dunlop, LLC, to and for the benefit of Fannie Mae, dated November 4, 2014, incorporated by reference to Exhibit 10.216 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014

 

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10.88   Consolidated, Amended and Restated Multifamily Note by and between BR Carroll Arium Grande Lakes Owner, LLC and Walker & Dunlop, LLC, dated November 4, 2014, incorporated by reference to Exhibit 10.217 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.89   Multifamily Loan and Security Agreement (Non-Recourse) by and between BR Carroll Arium Grande Lakes Owner, LLC and Walker & Dunlop, LLC, dated November 4, 2014, incorporated by reference to Exhibit 10.218 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.90   Limited Liability Company Agreement of BR Carroll Grande Lakes JV, LLC by and between BRG Grande Lakes, LLC and Carroll Co-Invest III Grande Lakes, LLC, dated November 4, 2014, incorporated by reference to Exhibit 10.219 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.91   Limited Liability Company Agreement of BR Carroll Arium Grande Lakes Owner, LLC by and between BR Carroll Grande Lakes JV, LLC and Bluerock Asset Management LLC, effective as of October 2, 2014, incorporated by reference to Exhibit 10.220 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.92   Limited Liability Agreement of BRG Grande Lakes, LLC, by and between BRG Grande Lakes, LLC and Bluerock Residential Holdings, L.P., dated October 2, 2014, incorporated by reference to Exhibit 10.221 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014
     
10.93   Amended and Restated Limited Liability Company Agreement of 23Hundred, LLC by BR Stonehenge 23Hundred JV, LLC, dated as of December 31, 2014, incorporated by reference to Exhibit 10.169 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2015
     
10.94   Limited Liability Company Agreement of BR Southside Member, LLC by and among BRG Southside, LLC, Bluerock Special Opportunity + Income Fund II, LLC, and Bluerock Special Opportunity + Income Fund III, LLC, dated December 22, 2014, incorporated by reference to Exhibit 10.170 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2015
     
10.95   Limited Liability Company Agreement of BEMT Berry Hill, LLC by and between Bluerock Multifamily Holdings, L.P. and BEMT Berry Hill, LLC, dated as of October 18, 2012, incorporated by reference to Exhibit 10.171 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2015
     
10.96   Purchase and Sale Agreement by and between Park Kingston Investors, LLC and Bluerock Real Estate, L.L.C., dated as of January 15, 2015, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 20, 2015
     
10.97   Amendment to Purchase and Sale Agreement by and between Park Kingston Investors, LLC and Bluerock Real Estate, L.L.C., dated as of February 17, 2015, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 20, 2015
     
10.98   Second Amendment to Purchase and Sale Agreement by and between Park Kingston Investors, LLC and Bluerock Real Estate, L.L.C., dated as of February 20, 2015, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 20, 2015
     
10.99   Partial Assignment and Assumption of Purchase and Sale Agreement by and between Bluerock Real Estate, L.L.C. and BR Park & Kingston Charlotte, LLC, dated as of February 20, 2015, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on March 20, 2015
     
10.100   Limited Liability Company Agreement of BR Park & Kingston Charlotte, LLC by 23Hundred, LLC, dated effective as of January 8, 2015, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on March 20, 2016
     
10.101   Amendment to Amended and Restated Limited Liability Company Agreement of 23Hundred, LLC by BR Stonehenge 23Hundred JV, LLC, dated January 8, 2015, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on March 20, 2015
     
10.102   Multifamily Loan and Security Agreement (Non-Recourse) by and between BR Park & Kingston Charlotte, LLC and CBRE Multifamily Capital, Inc., dated as of March 16, 2015, incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on March 20, 2015
     
10.103   Multifamily Note by and between BR Park & Kingston Charlotte, LLC and CBRE Multifamily Capital, Inc., dated as of March 16, 2015, incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on March 20, 2016

 

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10.104   Multifamily Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing by BR Park & Kingston Charlotte, LLC for the benefit of CBRE Multifamily Capital, Inc., dated as of March 16, 2015, incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on March 20, 2015
     
10.105   Assignment of Management Agreement by and between BR Park & Kingston Charlotte, LLC, CBRE Multifamily Capital, Inc., and Bell Partners Inc., dated as of March 16, 2015, incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on March 20, 2015
     
10.106   Environmental Indemnity Agreement and between BR Park & Kingston Charlotte, LLC and CBRE Multifamily Capital, Inc., dated as of March 16, 2015, incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on March 20, 2015
     
10.107   Assignment of Collateral Agreements and Other Loan Documents by and between BR Park & Kingston Charlotte, LLC and CBRE Multifamily Capital, Inc., dated as of March 16, 2015, incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed on March 20, 2015
     
10.108   Second Amended and Restated Limited Liability Company Agreement of Bell BR Waterford Crossing JV, LLC by and among BR Waterford JV Member, LLC, BR Waterford JV Minority Member, LLC, Durant Holdings, LLC, V BELLS LLC, and Craig S. West, effective as of March 26, 2015, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on April 1, 2015
     
10.109   Property Management Agreement by and between BR Park & Kingston Charlotte, LLC and Bell Partners Inc., dated March 16, 2015, incorporated by reference to Exhibit 10.28 to the Company’s Quarterly Report on Form 10-Q for the period ending March 31, 2015
     
10.110   Property Management Agreement by and between Bluerock Property Management, LLC and Bell Partners, Inc., dated March 26, 2015, incorporated by reference to Exhibit 10.29 to the Company’s Quarterly Report on Form 10-Q for the period ending March 31, 2015
     
10.111   Leasehold Deed of Trust, Assignment of Rents and Leases, Security Agreement, Fixture Filing and Financing Statement by BR Bellaire BLVD , LLC for the benefit of Bank of America, N.A., dated April 7, 2015, incorporated by reference to Exhibit 10.30 to the Company’s Quarterly Report on Form 10-Q for the period ending March 31, 2015
     
10.112   Construction Loan Agreement among BR Bellaire Blvd, LLC, Bank of America, N.A. as Administrative Agent and Lender and the other financial institutions party thereto dated as of April 7, 2015, incorporated by reference to Exhibit 10.31 to the Company’s Quarterly Report on Form 10-Q for the period ending March 31, 2015
     
10.113   Deed of Trust Note made by BR Bellaire Blvd, LLC in favor of Bank of America, N.A. dated as of April 7, 2015, incorporated by reference to Exhibit 10.32 to the Company’s Quarterly Report on Form 10-Q for the period ending March 31, 2015
     
10.114   Ground Lease by and between Prokop Industries BH, L.P. and BR Bellaire BLVD, LLC, dated as of January 12, 2015, incorporated by reference to Exhibit 10.33 to the Company’s Quarterly Report on Form 10-Q for the period ending March 31, 2015
     
10.115   Assignment Agreement by and between Bluerock Real Estate, L.L.C. and BRG Ashton NC, LLC, dated May 12, 2015, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ending June 30, 2015
     
10.116   Purchase Agreement by and between AR I Borrower, LLC and Bluerock Real Estate, L.L.C., dated May 12, 2015, incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ending June 30, 2015
     
10.117   Operating Agreement of BR-TBR Whetstone Venture, LLC by and between TriBridge Co-Invest 27, LLC and BR Whetstone Member, LLC, dated as of May 20, 2015, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 27, 2015
     
10.118   Limited Liability Company Agreement of BR Whetstone Member, LLC by and among BRG Whetstone Durham, LLC and Bluerock Special Opportunity + Income Fund III, LLC, dated as of May 20, 2015, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed May 27, 2015
     
10.119   Limited Liability Company Agreement of BR-TBR Whetstone Owner, LLC by BR-TBR Whetstone Venture, LLC, dated as of May 20, 2015, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed May 27, 2015

 

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10.120   Purchase and Sale Agreement by and between AH Durham Apartments, LLC and TriBridge, LLC, dated as of December 1, 2014, incorporated by reference to Exhibit 10.210 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.121   First Amendment to Purchase and Sale Agreement by and between AH Durham Aparttments, LLC and TriBridge, LLC, dated as of February 20, 2015, incorporated by reference to Exhibit 10.211 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.122   Second Amendment to Purchase and Sale Agreement by and between AH Durham Apartments, LLC and TriBridge, LLC, dated as of February 24, 2015, incorporated by reference to Exhibit 10.212 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.123   Third Amendment to Purchase and Sale Agreement by and between AH Durham Apartments, LLC and TriBridge, LLC, dated as of February 26, 2015, incorporated by reference to Exhibit 10.213 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.124   Fourth Amendment to Purchase and Sale Agreement by and between AH Durham Apartments, LLC and TriBridge, LLC, dated as of March 4, 2015, incorporated by reference to Exhibit 10.214 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.125   Property Management Agreement by and between BR-TBR Whetstone Owner, LLC and TriBridge Residential Property Management Advisors, LLC, dated as of May 20, 2015, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed May 27, 2015
     
10.126   Backstop Agreement by and between TriBridge Residential, LLC and Bluerock Residential Growth REIT, Inc., dated as of May 20, 2015, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed May 27, 2015
     
10.127   Loan Agreement by and between BR-TBR Whetstone Owner, LLC and KeyBank National Association, dated as of May 20, 2015, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed May 27, 2015
     
10.128   Guaranty Agreement by Bluerock Residential Growth REIT, Inc. in favor of KeyBank National Association, dated as of May 20, 2015, incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed May 27, 2015
     
10.129   Environmental and Hazardous Substances Indemnity Agreement by BR-TBR Whetstone Owner, LLC and Bluerock Residential Growth REIT, Inc. for the benefit of KeyBank National Association, dated as of May 20, 2015, incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed May 27, 2015
     
10.130   Assignment of Leases and Rents by BR-TBR Whetstone Owner, LLC for the benefit of KeyBank National Association, dated as of May 20, 2015, incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed May 27, 2015
     
10.131   Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing Securing Future Advances by BR-TBR Whetstone Owner, LLC, in favor of Christopher T. Neil, Trustee for the benefit of KeyBank National Association, dated as of May 20, 2015, incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed May 27, 2015
     
10.132   Promissory Note by BR-TBR Whetstone Owner, LLC for the benefit of KeyBank National Association, dated as of May 20, 2015, incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed May 27, 2015
     
10.133   Bluerock Residential Growth REIT, Inc. Amended and Restated 2014 Equity Incentive Plan for Individuals, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 29, 2015
     
10.134   Bluerock Residential Growth REIT, Inc. Amended and Restated 2014 Equity Incentive Plan for Entities, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed May 29, 2015
     
10.135   Operating Agreement of BR/CDP CB Venture, LLC by and between BR Cheshire Member, LLC and CB Developer, LLC dated as of May 29, 2015, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 4, 2015

 

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10.136   Limited Liability Company Agreement of BR Cheshire Member, LLC by and among BRG Cheshire, LLC and Bluerock Special Opportunity + Income Fund III, LLC, dated as of May 29, 2015, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed June 4, 2015
     
10.137   Limited Liability Company Agreement of CB Owner, LLC by BR/CDP CB Venture, LLC, dated as of May 29, 2015, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed June 4, 2015
     
10.138   Tenancy in Common Agreement by and among BR/CDP CB Venture, LLC, Duke of Lexington, LLC, and Commander Habersham, LLC, dated as of May 29, 2015, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed June 4, 2015
     
10.139   TIC Management Agreement by and among BR/CDP CB Venture, LLC, Duke of Lexington, LLC, and Commander Habersham, LLC, dated as of May 29, 2015, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed June 4, 2015
     
10.140   Trust Agreement by and among BR/CDP CB Venture, LLC, Duke of Lexington, LLC, Commander Habersham, LLC and CB Owner, LLC, dated as of May 29, 2015, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed June 4, 2015
     
10.141   Development Agreement by and among CB Owner, LLC and CDP Developer I, LLC, dated as of May 29, 2015, incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed June 4, 2015
     
10.142   Second Amendment to Management Agreement, by and among Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P. and BRG Manager, LLC, dated August 6, 2015, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed August 12, 2015
     
10.143   Promissory Note by AR I Borrower, LLC for the benefit of Sun Life Assurance Company of Canada, dated as of November 22, 2013, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 25, 2015
     
10.144   Deed of Trust and Security Agreement and Fixture Filing by AR I Borrower, LLC, in favor of Sun Life Assurance Company of Canada, dated as of November 22, 2013, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 25, 2015
     
10.145   Assignment of Leases and Rents by AR I Borrower, LLC for the benefit of Sun Life Assurance Company of Canada, dated as of November 22, 2013, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on August 25, 2015
     
10.146   Note, Deed of Trust, and Related Loan Documents Assignment, Assumption and Modification Agreement by and among Sun Life Assurance Company of Canada, BR Ashton I Owner, LLC, Bluerock Residential Growth REIT, Inc., AR I Borrower, LLC, and Rob Meyer, Mark Mechlowitz, Jorge Sardinas, Robert Fishel, and Harold Katz, dated as of August 19, 2015, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on August 25, 2015
     
10.147   Environmental Indemnity by Bluerock Residential Growth REIT, Inc. and BR Ashton I Owner, LLC for the benefit of Sun Life Assurance Company of Canada, dated as of August 19, 2015, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on August 25, 2015
     
10.148   Guaranty of Non-Recourse Carve-Outs by Bluerock Residential Growth REIT, Inc. in favor of Sun Life Assurance Company of Canada, dated as of August 19, 2015, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on August 25, 2015
     
10.149   Letter of Undertaking by and between BR Ashton I Owner, LLC and Sun Life Assurance Company of Canada, dated as of August 19, 2015, incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on August 25, 2015
     
10.150   Management Agreement by and between BR Ashton I Owner, LLC and GREP Southeast, LLC, dated as of August 19, 2015, incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on August 25, 2015
     
10.151   Estoppel and Agreement by AR I Borrower, LLC for the benefit of BR Ashton I Owner, LLC, dated as of August 18, 2015, incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on August 25, 2015
     
10.152   Assignment of Purchase and Sale Agreement and Escrow Instructions by and between BRG Ashton NC, LLC and BR Ashton I Owner, LLC, dated as of August 19, 2015, incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on August 25, 2015

 

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10.153   Bill of Sale and Assignment and Assumption of Leases and Service Contracts by and between AR I Borrower, LLC and BR Ashton I Owner, LLC, dated as of August 19, 2015, incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on August 25, 2015
     
10.154   Limited Liability Company Agreement of BRG Ashton NC, LLC by and between BRG Ashton NC, LLC and Bluerock Residential Holdings, L.P., dated as of April 15, 2015, incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed on August 25, 2015
     
10.155   Limited Liability Company Agreement of BR Ashton I Owner, LLC by and between BR Ashton I Owner, LLC and BRG Ashton NC, LLC, dated as of July 7, 2015, incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed on August 25, 2015
     
10.156   Limited Liability Company Agreement of BR Carroll World Gateway, LLC by and between BR Carroll World Gateway Orlando JV, LLC, Michael L. Konig and Jordan B. Ruddy, effective as of July 7, 2015, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2015
     
10.157   Limited Liability Company Agreement of BR Carroll World Gateway Orlando JV, LLC by and between BR World Gateway JV Member, LLC and Carroll Co-Invest III World Gateway, LLC, dated as of August 20, 2015, incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2015
     
10.158   Limited Liability Company Agreement of BRG World Gateway Orlando, LLC by Bluerock Residential Holdings, L.P., effective as of June 24, 2015, incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2015
     
10.159   Multifamily Loan and Security Agreement by and between BR Carroll World Gateway, LLC and Jones Lang LaSalle Operations, L.L.C., dated as of August 20, 2015, incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2015
     
10.160   Guaranty by Bluerock Residential Growth REIT, Inc. and MPC Partnership Holdings LLC for the benefit of Jones Lang LaSalle Operations, L.L.C., dated as of August 20, 2015, incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2015
     
10.161   Florida Amended and Restated Multifamily Note by and between BR Carroll World Gateway, LLC and Jones Lang LaSalle Operations, L.L.C., dated as of August 20, 2015, incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2015
     
10.162   Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement by and between BR Carroll World Gateway, LLC and Jones Lang LaSalle Operations, L.L.C., dated as of August 20, 2015, incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2015
     
10.163   Agreement to Amend or Comply by and between BR Carroll World Gateway, LLC and Jones Lang LaSalle Operations, L.L.C., dated as of August 20, 2015, incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2015
     
10.164   Assignment of Management Agreement and Subordination of Management Fees by and between BR Carroll World Gateway, LLC, Jones Lang LaSalle Operations, L.L.C. and Carroll Management Group, LLC, dated as of August 20, 2015, incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2015
     
10.165   60-Day Letter by BR Carroll World Gateway, LLC for the benefit of Jones Lang LaSalle Operations, L.L.C., dated as of August 20, 2015, incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2015
     
10.166   Borrower’s Underwriting Certificate by BR Carroll World Gateway, LLC for the benefit of Jones Lang LaSalle Operations, L.L.C., dated as of August 20, 2015, incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2015
     
10.167   MMP and O&M Programs Implementation Certificate by BR Carroll World Gateway, LLC for the benefit of Jones Lang LaSalle Operations, L.L.C., dated as of August 20, 2015, incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2015
     
10.168   Backstop Agreement by and between MPC Partnership Holdings LLC, Carroll Management Group, LLC, and Bluerock Residential Growth REIT, Inc., dated as of August 20, 2015, incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2015

 

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10.169   Assignment Agreement, between and among Bluerock Multifamily Advisor, LLC and BRG Manager, LLC, dated September 4, 2015, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 11, 2015
     
10.170   Limited Liability Company Agreement of BRG DFW Portfolio, LLC by Bluerock Residential Holdings, L.P., dated as of September 15, 2015, incorporated by reference to Exhibit 10.260 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.171   Limited Liability Company Agreement of BR DFW Portfolio JV Member, LLC by BRG DFW Portfolio, dated as of September 15, 2015, incorporated by reference to Exhibit 10.261 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.172   Limited Liability Company Agreement of BR Carroll DFW Portfolio JV, LLC by and between BR DFW Portfolio JV Member, LLC and Carroll Co-Invest III DFW Portfolio, LLC, dated as of October 29, 2015, incorporated by reference to Exhibit 10.262 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.173   Limited Liability Company Agreement of BR Carroll Phillips Creek Ranch, LLC by and among BR Carroll DFW Portfolio JV, LLC, Michael L. Konig and Jordan B. Ruddy, dated as of September 22, 2015, incorporated by reference to Exhibit 10.263 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.174   Limited Liability Company Agreement of BR Carroll Phillips Creek Ranch Holdings, LLC by and among BR Carroll DFW Portfolio JV, LLC, Michael L. Konig and Jordan B. Ruddy, dated as of September 22, 2015, incorporated by reference to Exhibit 10.264 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.175   Limited Liability Company Agreement of BR Carroll Keller Crossing, LLC by and among BR Carroll DFW Portfolio JV, LLC, Michael L. Konig and Jordan B. Ruddy, dated as of September 15, 2015, incorporated by reference to Exhibit 10.265 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.176   Limited Liability Company Agreement of BR Carroll Keller Crossing Holdings, LLC by and among BR Carroll DFW Portfolio JV, LLC, Michael L. Konig and Jordan B. Ruddy, dated as of September 15, 2015, incorporated by reference to Exhibit 10.266 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.177   Property Management Agreement by and between BR Carroll Phillips Creek Ranch, LLC and Carroll Management LLC, dated as of October 29, 2015, incorporated by reference to Exhibit 10.267 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.178   Property Management Agreement by and between BR Carroll Keller Crossing, LLC and Carroll Management LLC, dated as of October 29, 2015, incorporated by reference to Exhibit 10.268 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.179   Guaranty by Carroll Multifamily Real Estate Fund III, LP and Bluerock Residential Growth REIT, Inc. in favor of CBRE Capital Markets, Inc., dated as of October 29, 2015, incorporated by reference to Exhibit 10.269 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.180   Multifamily Loan and Security Agreement by and between BR Carroll Phillips Creek Ranch, LLC and CBRE Capital Markets, Inc., dated October 29, 2015, incorporated by reference to Exhibit 10.270 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.181   Multifamily Note by BR Carroll Phillips Creek Ranch, LLC in favor of CBRE Capital Markets, Inc., dated as of October 29, 2015, incorporated by reference to Exhibit 10.271 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.182   Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing by BR Carroll Phillips Creek Ranch, LLC and Rebecca S. Conrad, as trustee, in favor of CBRE Capital Markets, Inc., dated as of October 29, 2015, incorporated by reference to Exhibit 10.272 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.183   Assignment of Management Agreement and Subordination of Management Fees by BR Carroll Phillips Creek Ranch, LLC and Carroll Management Group, LLC in favor of CBRE Capital Markets, Inc., dated as of October 29, 2015, incorporated by reference to Exhibit 10.273 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.184   Promissory Note by BR Carroll Keller Crossing, LLC in favor of The Northwestern Mutual Life Insurance Company, dated as of October 22, 2015, incorporated by reference to Exhibit 10.274 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015

 

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10.185   Guarantee of Recourse Obligations by Carroll Multifamily Real Estate Fund III, LP and Bluerock Residential Growth REIT, Inc. in favor of The Northwestern Mutual Life Insurance Company, dated as of October 22, 2015, incorporated by reference to Exhibit 10.275 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.186   Environmental Indemnity Agreement by BR Carroll Keller Crossing, LLC, Carroll Multifamily Real Estate Fund III, LP, Bluerock Residential Growth REIT, Inc. in favor of The Northwestern Mutual Life Insurance Company, dated as of October 22, 2015, incorporated by reference to Exhibit 10.276 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.187   Deed of Trust and Security Agreement by BR Carroll Keller Crossing, LLC in favor of The Northwestern Mutual Life Insurance Company, dated as of October 22, 2015, incorporated by reference to Exhibit 10.277 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.188   Absolute Assignment of Leases and Rents by BR Carroll Keller Crossing, LLC in favor of The Northwestern Mutual Life Insurance Company, dated as of October 22, 2015, incorporated by reference to Exhibit 10.278 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.189   Third Amendment to Management Agreement, by and among Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P. and BRG Manager, LLC, dated November 10, 2015, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on form 8-K filed on November 17, 2015
     
10.190   Limited Liability Company Agreement of BRG Domain Phase 1, LLC by Bluerock Residential Holdings, L.P., dated as of November 20, 2015, incorporated by reference to Exhibit 10.280 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.191   Limited Liability Company Agreement of BR Member Domain Phase 1, LLC by and between BRG Domain Phase 1, LLC and Special Opportunity and Income Fund II, LLC, dated as of November 20, 2015, incorporated by reference to Exhibit 10.281 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.192   Amended and Restated Limited Liability Company Agreement of BR-ArchCo Domain Phase 1 JV, LLC by and between BR Member Domain Phase 1, LLC and ArchCo Domain Member, LLC, dated as of November 20, 2015, incorporated by reference to Exhibit 10.282 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.193   Limited Liability Company Agreement of BR-ArchCo Domain Phase 1, LLC by BR-ArchCo Phase 1 JV, LLC, dated as of November 20, 2015, incorporated by reference to Exhibit 10.283 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.194   Agreement of Purchase and Sale by and between ArchCo Residential, LLC and RCM Firewheel, LLC, dated as of April 29, 2015, incorporated by reference to Exhibit 10.284 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.195   Amendment to Agreement of Purchase and Sale by and between ArchCo Residential, LLC and RCM Firewheel, LLC, dated as of July 13, 2015, incorporated by reference to Exhibit 10.285 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.196   Second Amendment to Agreement of Purchase and Sale by and between ArchCo Residential, LLC and RCM Firewheel, LLC, dated as of July 29, 2015, incorporated by reference to Exhibit 10.286 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.197   Third Amendment to Agreement of Purchase and Sale by and between ArchCo Residential, LLC and RCM Firewheel, LLC, dated as of August 6, 2015, incorporated by reference to Exhibit 10.287 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.198   Fourth Amendment to Agreement of Purchase and Sale by and between ArchCo Residential, LLC and RCM Firewheel, LLC, dated as of August 14, 2015, incorporated by reference to Exhibit 10.288 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.199   Fifth Amendment to Agreement of Purchase and Sale by and between ArchCo Residential, LLC and RCM Firewheel, LLC, dated as of October 7, 2015, incorporated by reference to Exhibit 10.289 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.200   Sixth Amendment to Agreement of Purchase and Sale by and between ArchCo Residential, LLC and RCM Firewheel, LLC, dated as of October 12, 2015, incorporated by reference to Exhibit 10.290 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015

 

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10.201   Seventh Amendment to Agreement of Purchase and Sale by and between ArchCo Residential, LLC and RCM Firewheel, LLC, dated as of November 17, 2015, incorporated by reference to Exhibit 10.291 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.202   Eighth Amendment to Agreement of Purchase and Sale by and between ArchCo Residential, LLC and RCM Firewheel, LLC, dated as of November 20, 2015, incorporated by reference to Exhibit 10.292 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.203   Phase I Partial Assignment and Assumption by and between BR-ArchCo Domain Phase 1, LLC and ArchCo Residential LLC, dated as of November 20, 2015, incorporated by reference to Exhibit 10.293 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.204   Phase II Partial Assignment and Assumption by and between BR-ArchCo Domain Phase 2, LLC and ArchCo Residential LLC, dated as of November 20, 2015, incorporated by reference to Exhibit 10.294 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.205   Phase III Partial Assignment and Assumption by and between BR-ArchCo Domain Phase 3, LLC and ArchCo Residential LLC, dated as of November 20, 2015, incorporated by reference to Exhibit 10.295 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.206   Project Administration Agreement by and between BRG Domain Phase 1 Development Manager, LLC, ArchCo Domain PM LLC, and BR-ArchCo Domain Phase 1, LLC, dated as of November 20, 2015, incorporated by reference to Exhibit 10.296 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.207   Development Services Agreement by and between BRG Domain Phase 1 Development Manager, LLC and BR-ArchCo Domain Phase 1, LLC, dated as of November 20, 2015, incorporated by reference to Exhibit 10.297 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.208   Amended and Restated Operating Agreement of BR/CDP CB Venture, LLC by and between BR Cheshire Member, LLC and CB Developer, LLC dated effective as of May 29, 2015, incorporated by reference to Exhibit 10.298 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.209   Amended and Restated Limited Liability Company Agreement of BR Cheshire Member, LLC by and among BRG Cheshire, LLC and Bluerock Special Opportunity + Income Fund III, LLC, dated effective as of May 29, 2015, incorporated by reference to Exhibit 10.299 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.210   Amended and Restated Limited Liability Company Agreement of CB Owner, LLC by BR/CDP CB Venture, LLC and Michael L. Konig and Robert G. Meyer, as co-trustees under the Amended and Restated BR/CDP Cheshire Bridge Trust Agreement bearing an effective date of May 29, 2015, dated effective as of May 29, 2015, incorporated by reference to Exhibit 10.300 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.211   Amended and Restated TIC Management Agreement by and among Duke of Lexington, LLC, Commander Habersham, LLC, and BR/CDP CB Venture, LLC, dated effective as of May 29, 2015, incorporated by reference to Exhibit 10.301 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.212   Amended and Restated BR/CDP Cheshire Bridge Trust Agreement by and between Duke of Lexington, LLC, Commander Habersham, LLC and BR/CDP CB Venture, LLC, and Robert G. Meyer and Michael L. Konig as Co-Trustees, dated effective as of May 29, 2015, incorporated by reference to Exhibit 10.302 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.213   Amended and Restated Tenancy in Common Agreement by and among Duke of Lexington, LLC, Commander Habersham, LLC, and BR/CDP CB Venture, LLC, dated effective as of May 29, 2015, incorporated by reference to Exhibit 10.303 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.214   Amended and Restated Development Agreement by and between CB Owner, LLC and CDP Developer I, LLC, dated effective as of May 29, 2015, incorporated by reference to Exhibit 10.304 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.215   Assignment of Contacts, Licenses and Permits by CB Owner, LLC in favor of The PrivateBank and Trust Company, dated as of December 16, 2015, incorporated by reference to Exhibit 10.305 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015

 

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10.216   Fee Letter by and between CB Owner, LLC and The PrivateBank and Trust Company, dated as of December 16, 2015, incorporated by reference to Exhibit 10.306 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.217   Assignment and Subordination of Development Agreement by CB Owner, LLC in favor of The PrivateBank and Trust Company, dated as of December 16, 2015, incorporated by reference to Exhibit 10.307 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.218   Security Agreement by CB Owner, LLC in favor of The PrivateBank and Trust Company, dated as of December 16, 2015, incorporated by reference to Exhibit 10.308 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.219   Assignment and Leases, Rents and Profits by CB Owner, LLC in favor of The PrivateBank and Trust Company, dated as of December 16, 2015, incorporated by reference to Exhibit 10.309 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.220   Indemnity Agreement Regarding Hazardous Materials by CB Owner, LLC, Robert Meyer, Mark Mechlowitz, Jorge Sardinas, Robert Fishel, and Alsar Limited Partnership in favor of The PrivateBank and Trust Company, dated as of December 16, 2015, incorporated by reference to Exhibit 10.310 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.221   Promissory Note by CB Owner, LLC in favor of The PrivateBank and Trust Company, dated as of December 16, 2015, incorporated by reference to Exhibit 10.311 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.222   Construction Loan and Security Agreement by CB Owner, LLC in favor of The PrivateBank and Trust Company, LLC, dated as of December 16, 2015, incorporated by reference to Exhibit 10.312 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.223   Deed to Secure Debt, Assignment of Rents and Leases and Security Agreement by CB Owner, LLC in favor of The PrivateBank and Trust Company, LLC, dated as of December 16, 2015, incorporated by reference to Exhibit 10.313 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.224   Dealer Manager Agreement by and among Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P. and Bluerock Capital Markets, LLC, dated December 17, 2015, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 22, 2015
     
10.225   Warrant Agreement by and between Bluerock Residential Growth REIT, Inc. and American Stock Transfer & Trust Company, LLC, dated December 17, 2015, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 22, 2015
     
10.226   Limited Liability Company Agreement of BR-TBR Lake Boone NC Owner, LLC, by and between BR-TBR Lake Boone NC Venture, LLC and Michael L. Konig, dated effective as of July 15, 2015, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 24, 2015
     
10.227   Operating Agreement of BR-TBR Lake Boone NC Venture, LLC by and between TriBridge Co-Invest 29, LLC and BR Lake Boone JV Member, LLC, dated as of November 30, 2015, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 24, 2015
     
10.228   Operating Agreement of BR Lake Boone JV Member, LLC, by and between BRG Lake Boone NC, LLC and Bluerock Special Opportunity + Income Fund II, LLC, dated as of July 15, 2015, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on December 24, 2015
     
10.229   Limited Liability Company Agreement of BRG Lake Boone NC, LLC, by Bluerock Residential Holdings, L.P., dated as of July 28, 2015, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on December 24, 2015
     
10.230   Contribution Agreement by and between TriBridge Co-Invest 29, LLC and BR-TBR Lake Boone NC Venture, LLC, dated as of November 30, 2015, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on December 24, 2015
     
10.231   Development Agreement, by and between BR-TBR Lake Boone NC Owner, LLC and Tribridge Residential Development, LLC, dated as of October 30, 2015, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on December 24, 2015

 

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10.232   Limited Liability Company Agreement of BRG Flagler Village, LLC by Bluerock Residential Holdings, L.P., dated as of December 18, 2015, incorporated by reference to Exhibit 10.323 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.233   Limited Liability Company Agreement of BR Flagler JV Member, LLC by and between BRG Flagler Village, LLC and Special Opportunity + Income Fund II, LLC, dated as of December 18, 2015, incorporated by reference to Exhibit 10.324 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.234   Limited Liability Company Agreement of BR ArchCo Flagler Village JV, LLC by and between BR Flagler JV Member, LLC and ArchCo Metropolitan Member, LLC, dated as of December 18, 2015, incorporated by reference to Exhibit 10.325 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.235   Limited Liability Company Agreement of BR ArchCo Flagler Village, LLC by BR ArchCo Flagler Village JV, LLC, dated as of December 18, 2015, incorporated by reference to Exhibit 10.326 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.236   Commercial Contract by and between ArchCo Residential LLC and Metropolitan Property Investment, LLC, dated as of November 30, 2015, incorporated by reference to Exhibit 10.327 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.237   Assignment and Assumption of Commercial Contract by and between ArchCo Residential LLC and BR ArchCo Flagler Village, dated as of December 18, 2015, incorporated by reference to Exhibit 10.328 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.238   Agreement of Purchase and Sale by and between ArchCo Residential LLC and Andrews Village, LLC, dated as of January 12, 2015, incorporated by reference to Exhibit 10.329 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.239   Amendment to Agreement of Purchase and Sale by and between ArchCo Residential LLC and Andrews Village, LLC, dated as of February 9, 2015, incorporated by reference to Exhibit 10.330 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.240   Second Amendment to Agreement of Purchase and Sale by and between ArchCo Residential LLC and Andrews Village, LLC, dated as of April 30, 2015, incorporated by reference to Exhibit 10.331 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.241   Third Amendment to Agreement of Purchase and Sale by and between ArchCo Residential LLC and Andrews Village, LLC, dated as of June 30, 2015, incorporated by reference to Exhibit 10.332 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.242   Fourth Amendment to Agreement of Purchase and Sale by and between ArchCo Residential LLC and Andrews Village, LLC, dated as of September 15, 2015, incorporated by reference to Exhibit 10.333 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.243   Fifth Amendment to Agreement of Purchase and Sale by and between ArchCo Residential LLC and Andrews Village, LLC, dated as of October 2015, incorporated by reference to Exhibit 10.334 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.244   Assignment and Assumption of Agreement of Purchase and Sale by and between ArchCo Residential LLC and BR ArchCo Flagler Village, LLC, dated as of December 18, 2015, incorporated by reference to Exhibit 10.335 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.245   Limited Liability Company Agreement of BRG SW FL Portfolio, LLC by Bluerock Residential Holdings, L.P., dated effective as of November 23, 2015, incorporated by reference to Exhibit 10.336 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.246   Limited Liability Company Agreement of BR SW FL Portfolio JV Member, LLC by BRG SW FL Portfolio, LLC, dated effective as of November 23, 2015, incorporated by reference to Exhibit 10.337 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.247   Limited Liability Company Agreement of BR Carroll SW Portfolio JV, LLC by and between BR SW FL Portfolio JV Member, LLC and Carroll Co-Invest IV SW FL Portfolio, LLC, dated as of January 5, 2016, incorporated by reference to Exhibit 10.338 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015

 

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10.248   Limited Liability Company Agreement of BR Carroll Naples, LLC by BR Carroll SW Portfolio JV, LLC, dated effective as of November 23, 2015, incorporated by reference to Exhibit 10.339 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.249   Limited Liability Company Agreement of BR Carroll Palmer Ranch, LLC by BR Carroll SW Portfolio JV, LLC, dated effective as of November 23, 2015, incorporated by reference to Exhibit 10.340 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.250   60 Day Letter executed by BR Carroll Palmer Ranch, LLC, dated January 5, 2016, incorporated by reference to Exhibit 10.341 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.251   Assignment of Management Agreement and Subordination of Management Fees by BR Carroll Palmer Ranch, LLC and Carroll Management Group, LLC in favor of Jones Lang LaSalle Multifamily, LLC, dated as of January 5, 2016, incorporated by reference to Exhibit 10.342 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.252   Guaranty by Bluerock Residential Growth REIT, Inc. and MPC Partnership Holdings LLC in favor of Jones Lang LaSalle Multifamily, LLC, dated as of January 5, 2016, incorporated by reference to Exhibit 10.343 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.253   Multifamily Loan and Security Agreement by and between BR Carroll Palmer Ranch, LLC and Jones Lang LaSalle Multifamily, LLC, dated as of January 5, 2016, incorporated by reference to Exhibit 10.344 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.254   Multifamily Mortgage, Assignment of Rents and Security Agreement by BR Carroll Palmer Ranch, LLC in favor of Jones Lang LaSalle Multifamily, LLC, dated as of January 5, 2016, incorporated by reference to Exhibit 10.345 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.255   Multifamily Note by BR Carroll Palmer Ranch, LLC in favor of Jones Lang LaSalle Multifamily, LLC, dated as of January 5, 2016, incorporated by reference to Exhibit 10.346 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.256   60 Day Letter executed by BR Carroll Naples, LLC, dated January 5, 2016, incorporated by reference to Exhibit 10.347 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.257   Assignment of Management Agreement and Subordination of Management Fees by BR Carroll Naples, LLC and Carroll Management Group, LLC in favor of Jones Lang LaSalle Multifamily, LLC, dated as of January 5, 2016, incorporated by reference to Exhibit 10.348 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.258   Guaranty by Bluerock Residential Growth REIT, Inc. and MPC Partnership Holdings LLC in favor of Jones Lang LaSalle Multifamily, LLC, dated as of January 5, 2016, incorporated by reference to Exhibit 10.349 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.259   Multifamily Loan and Security Agreement by and between BR Carroll Naples, LLC and Jones Lang LaSalle Multifamily, LLC, dated as of January 5, 2016, incorporated by reference to Exhibit 10.350 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.260   Multifamily Mortgage, Assignment of Rents and Security Agreement by BR Carroll Naples, LLC in favor of Jones Lang LaSalle Multifamily, LLC, dated as of January 5, 2016, incorporated by reference to Exhibit 10.351 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.261   Multifamily Note by BR Carroll Naples, LLC in favor of Jones Lang LaSalle Multifamily, LLC, dated as of January 5, 2016, incorporated by reference to Exhibit 10.352 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.262   Limited Liability Company Agreement of BRG Morehead NC, LLC by Bluerock Residential Holdings, L.P., dated as of November 24, 2015, incorporated by reference to Exhibit 10.353 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.263   Limited Liability Company Agreement of BR Morehead JV Member, LLC by and between BRG Morehead NC, LLC and Special Opportunity + Income Fund II, LLC, dated as of November 24, 2015, incorporated by reference to Exhibit 10.354 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.264   Amended and Restated Limited Liability Company Agreement of BR ArchCo Morehead JV, LLC by and between BR Morehead JV Member, LLC and WMH Sponsor LLC, dated as of January 6, 2016, incorporated by reference to Exhibit 10.355 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015

 

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10.265   Limited Liability Company Agreement of BR ArchCo Morehead, LLC by BR ArchCo Morehead JV, LLC, dated as of November 24, 2015, incorporated by reference to Exhibit 10.356 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.266   First Amendment to Limited Liability Company Agreement of BR ArchCo Morehead, LLC by BR ArchCo Morehead JV, LLC, dated as of January 6, 2016, incorporated by reference to Exhibit 10.357 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.267   Assignment of Membership Interest by and between BRG Morehead NC, LLC and BR Morehead JV Member, LLC, dated as of January 6, 2016, incorporated by reference to Exhibit 10.358 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.268   Project Administration Agreement by and between BRG Morehead Development Manager, LLC and ArchCo WMH PM LLC, dated as of November 24, 2015, incorporated by reference to Exhibit 10.359 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.269   Agreement of Purchase and Sale by and between ArchCo Residential LLC and Southern Apartment Group-49, LLC, dated as of April 21, 2015, incorporated by reference to Exhibit 10.360 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.270   Amendment to Agreement of Purchase and Sale by and between ArchCo Residential LLC and Southern Apartment Group-49, LLC, dated as of June 8, 2015, incorporated by reference to Exhibit 10.361 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.271   Second Amendment to Agreement of Purchase and Sale by and between ArchCo Residential LLC and Southern Apartment Group-49, LLC, dated as of June 26, 2015, incorporated by reference to Exhibit 10.362 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.272   Third Amendment to Agreement of Purchase and Sale by and between ArchCo Residential LLC and Southern Apartment Group-49, LLC, dated as of June 30, 2015, incorporated by reference to Exhibit 10.363 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.273   Fourth Amendment to Agreement of Purchase and Sale by and between ArchCo Residential LLC and Southern Apartment Group-49, LLC, dated as of November 24, 2015, incorporated by reference to Exhibit 10.364 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.274   Assignment and Assumption of Agreement of Purchase and Sale by and between ArchCo Residential, LLC and BR ArchCo Morehead, LLC, dated as of November 24, 2015, incorporated by reference to Exhibit 10.365 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2015
     
10.275   Real Estate Purchase Agreement between Bluerock Real Estate, L.L.C and AHB Apartments LLC, dated January 22, 2016, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 26, 2016
     
10.276   Assignment of Rights by and between Bluerock Real Estate, L.L.C. and Bluerock Residential Growth REIT, Inc., through its direct and indirect subsidiaries, BR Henderson Beach, LLC and BRG Henderson Beach, LLC, dated as of February 22, 2016, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 26, 2016
     
10.277   Dealer Manager Agreement by and among Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P. and Bluerock Capital Markets, LLC, dated February 24, 2016, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 1, 2016
     
10.278   Warrant Agreement by and between Bluerock Residential Growth REIT, Inc. and American Stock Transfer & Trust Company, LLC, dated February 24, 2016, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 1, 2016
     
10.279   Subscription Escrow Agreement by and between Bluerock Residential Growth REIT, Inc., Bluerock Capital Markets, LLC and UMB Bank, N.A., dated February 24, 2016, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 1, 2016
     
10.280   Loan Assumption and Mortgage Modification Agreement, by and between Western-Southern Life Assurance Company and BR Henderson Beach, LLC, dated March 15, 2016, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 21, 2016

 

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10.281   Environmental Indemnity Agreement, by and between BR Henderson Beach, LLC, Bluerock Residential Growth REIT, Inc., and Western-Southern Life Assurance Company, dated March 15, 2016, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 21, 2016
     
10.282   Limited Recourse Guaranty, by and between Bluerock Residential Growth REIT, Inc. and Western-Southern Life Assurance Company, dated March 15, 2016, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 21, 2016
     
10.283   Management Agreement by and between BR Henderson Beach, LLC and GREP Southeast, LLC, dated March 15, 2016, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on March 21, 2016
     
10.284   Amended and Restated Open End Mortgage, Security Agreement, Assignment of Rents and Leases, and Fixture Filing, by and between AHB Apartments, LLC and Western-Southern Life Assurance Company, dated January 3, 2013, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on March 21, 2016
     
10.285   Amended and Restated Promissory Note, by and between AHB Apartments, LLC and Western-Southern Life Assurance Company, dated January 3, 2013, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on March 21, 2016
     
10.286   Declaration of Restrictive Covenants, by AHB Apartments, LLC, dated March 15, 2016, incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on March 21, 2016
     
10.287   Modification Agreement by and among BR T&C BLVD., LLC, as borrower, CFP Residential, L.P., Maple Residential, L.P., CFH Maple Residential Investor, L.P., VF Residential, Ltd., and VF Multifamily Holdings, Ltd., as guarantors, and Compass Bank and Green Bank, as Lenders, dated as of June 7, 2016, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 10, 2016
     
10.288   Limited Liability Company Agreement of BRG Tenside, LLC by Bluerock Residential Holdings, L.P., dated as of June 2, 2016, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 20, 2016
     
10.289   Limited Liability Company Agreement of BR Tenside JV Member, LLC by BRG Tenside, LLC, dated as of June 2, 2016, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 20, 2016
     
10.290   Limited Liability Company Agreement of BR Carroll Tenside JV, LLC by and between BR Tenside JV Member, LLC and Carroll Co-Invest IV Tenside, LLC, dated as of July 14, 2016, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on July 20, 2016
     
10.291   Limited Liability Company Agreement of BR Carroll Tenside, LLC by BR Carroll Tenside JV, LLC, dated as of June 2, 2016, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on July 20, 2016
     
10.292   Agreement of Purchase and Sale by and between Waterton Tenside Owner, L.L.C. and Carroll Acquisitions, LLC, dated as of May 25, 2016, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on July 20, 2016
     
10.293   Assignment and Assumption of Purchase Agreement by and between Carroll Acquisitions, LLC and BR Carroll Tenside, LLC, dated as of July 14, 2016, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on July 20, 2016
     
10.294   Multifamily Loan and Security Agreement (Non-Recourse) by and Between BR Carroll Tenside, LLC and Walker & Dunlop, LLC, dated as of July 14, 2016, incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on July 20, 2016
     
10.295   Multifamily Note by BR Carroll Tenside, LLC to and for the benefit of Walker & Dunlop, LLC, dated as of July 14, 2016, incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on July 20, 2016
     
10.296   Multifamily Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing by BR Carroll Tenside, LLC to and for the benefit of Walker & Dunlop, LLC, dated as of July 14, 2016, incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on July 20, 2016
     
10.297   Assignment of Management Agreement by and among BR Carroll Tenside, LLC, Walker & Dunlop, LLC and Carroll Management Group, LLC, dated as of July 14, 2016, incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on July 20, 2016

 

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10.298   Guaranty of Non-Recourse Obligations by Bluerock Residential Growth REIT, Inc. and Carroll Multifamily Real Estate Fund IV, LP to and for the benefit of Walker & Dunlop, LLC, dated as of July 14, 2016, incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on July 20, 2016
     
10.299   Environmental Indemnity Agreement by BR Carroll Tenside, LLC to and for the benefit of Walker & Dunlop, LLC, dated as of July 14, 2016, incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed on July 20, 2016
     
10.300   Assignment of Security Instrument (Multifamily Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing) by Walker & Dunlop, LLC to Fannie Mae, dated as of July 14, 2016, incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed on July 20, 2016
     
10.301   Property Management Agreement by and between BR Carroll Tenside, LLC and Carroll Management Group, LLC, dated as of July 14, 2016, incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K filed on July 20, 2016
     
10.302   Indenture of Trust by and between The Atlanta Development Authority and Bank of New York Mellon Trust Company, N.A., dated December 1, 2009, incorporated by reference to Exhibit 10.26 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2016
     
10.303   Lease Agreement by and between The Atlanta Development Authority, a public body corporate and politic of the State of Georgia, and Ten Side Holdings, LLC, dated December 1, 2009, incorporated by reference to Exhibit 10.27 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2016
     
10.304   Taxable Lease Purchase Revenue Bond by and between The Atlanta Development Authority, a public body corporate and politic of the State of Georgia, and Ten Side Holdings, LLC, dated December 30, 2009, incorporated by reference to Exhibit 10.28 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2016
     
10.305   Bond Pledge and Security Agreement by and between KeyBank National Association and Ten Side Holdings, LLC, dated December 29, 2009, incorporated by reference to Exhibit 10.29 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2016
     
10.306   Allonge to Bond R-1 by and between Waterton Tenside Owner, L.L.C. and BR Carroll Tenside, LLC, incorporated by reference to Exhibit 10.30 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2016
     
10.307   Assignment and Assumption of Bond Documents by and between Waterton Tenside Owner, L.L.C. and BR Carroll Tenside, LLC, dated July 14, 2016, incorporated by reference to Exhibit 10.31 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2016
     
10.308   Assignment and Assumption of Lease Documents by and between Waterton Tenside Owner, L.L.C. and BR Carroll Tenside, LLC, dated July 14, 2016, incorporated by reference to Exhibit 10.32 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2016
     
10.309   Sale-Purchase Agreement by and between RPG Glenridge LLC and Carroll Acquisitions, LLC, dated August 12, 2016, incorporated by reference to Exhibit 10.33 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2016
     
10.310   First Amendment to Sale-Purchase Agreement by and between RPG Glenridge LLC and Carroll Acquisitions, LLC, dated August 19, 2016, incorporated by reference to Exhibit 10.34 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2016
     
10.311   Second Amendment to Sale-Purchase Agreement by and between RPG Glenridge LLC and Carroll Acquisitions, LLC, dated August 24, 2016, incorporated by reference to Exhibit 10.35 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2016
     
10.312   Third Amendment to Sale-Purchase Agreement by and between RPG Glenridge LLC and Carroll Acquisitions, LLC, dated August 25, 2016, incorporated by reference to Exhibit 10.36 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2016
     
10.313   Assignment and Assumption of Purchase Agreement by and between Carroll Acquisitions, LLC and BR Carroll Glenridge, dated October 13, 2016, incorporated by reference to Exhibit 10.37 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2016

 

 137 

 

 

10.314   Rate Cap Agreement by and between SMBC Capital Markets, Inc. and BR Carroll Glenridge, dated October 11, 2016, incorporated by reference to Exhibit 10.38 to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2016
     
10.315   Limited Liability Company Agreement of BRG Glenridge, LLC by Bluerock Residential Holdings, L.P., dated as of August 2, 2016, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 19, 2016
     
10.316   Limited Liability Company Agreement of BR Glenridge JV Member, LLC by BRG Glenridge, LLC, dated as of August 2, 2016, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 19, 2016
     
10.317   Limited Liability Company Agreement of BR Carroll Glenridge JV, LLC by and between BR Glenridge JV Member, LLC and Carroll Co-Invest IV Glenridge, LLC, dated as of October 13, 2016, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on October 19, 2016
     
10.318   Limited Liability Company Agreement of BR Carroll Glenridge, LLC by BR Carroll Glenridge JV, LLC, dated as of August 2, 2016, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on October 19, 2016
     
10.319   Multifamily Loan and Security Agreement (Non-Recourse) by and between BR Carroll Glenridge, LLC and KeyBank National Association, dated as of October 13, 2016, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on October 19, 2016
     
10.320   Multifamily Note by BR Carroll Glenridge, LLC to and for the benefit of KeyBank National Association, dated as of October 13, 2016, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on October 19, 2016
     
10.321   Multifamily Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement by BR Carroll Glenridge, LLC to and for the benefit of KeyBank National Association, dated as of October 13, 2016, incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on October 19, 2016
     
10.322   Assignment of Management Agreement and Subordination of Management Fees by and among BR Carroll Glenridge, LLC, KeyBank National Association and Carroll Management Group, LLC, dated as of October 13, 2016, incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on October 19, 2016
     
10.323   Guaranty by Bluerock Residential Growth REIT, Inc. and Carroll Multifamily Real Estate Fund IV, LP to and for the benefit of KeyBank National Association, dated as of October 13, 2016, incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on October 19, 2016
     
10.324   Assignment of Security Instrument by KeyBank National Association to Federal Home Loan Mortgage Corporation, dated as of October 13, 2016, incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on October 19, 2016
     
10.325   Property Management Agreement by and between BR Carroll Glenridge, LLC and Carroll Management Group, LLC, dated as of October 13, 2016, incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on October 19, 2016
     
10.326   Limited Liability Company Agreement of BEMT Springhouse, LLC by Bluerock Enhanced Multifamily Holdings, L.P., dated as of December 3, 2009, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 7, 2016
     
10.327   Limited Liability Company/Joint Venture Agreement of BR Springhouse Managing Member, LLC by and between BEMT Springhouse, LLC and Bluerock Special Opportunity + Income Fund, LLC, dated as of December 3, 2009, incorporated by reference to Exhibit 10.7 to Post-Effective Amendment No. 2 to the Company’s Prospectus, dated October 15, 2009, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 7, 2016
     
10.328   BR Springhouse Managing Member, LLC Assignment of Membership Interest by Bluerock Special Opportunity + Income Fund, LLC to BEMT Springhouse, LLC, dated as of April 2, 2014, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on December 7, 2016
     
10.329   Amended and Restated Limited Liability Company Agreement of BR Hawthorne Springhouse JV, LLC by and among BR Springhouse Managing Member, LLC, BR Springhouse TRS, LLC and Carroll Co-Invest IV Roswell, LLC, dated as of October 13, 2016, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on December 7, 2016

 

 138 

 

 

10.330   Limited Liability Company Agreement of BR Roswell, LLC by BR Hawthorne Springhouse JV, LLC, effective as of September 20, 2016, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on December 7, 2016
     
10.331   Loan Agreement by and between BR Roswell, LLC and MetLife HCMJV 1 REIT, LLC, dated as of December 1, 2016, incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on December 7, 2016
     
10.332   Promissory Note by BR Roswell, LLC to and for the benefit of MetLife HCMJV 1 REIT, LLC, dated as of December 1, 2016, incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on December 7, 2016
     
10.333   Deed to Secure Debt, Security Agreement and Fixture Filing by BR Roswell, LLC to and for the benefit of MetLife HCMJV 1 REIT, LLC, dated as of December 1, 2016, incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on December 7, 2016
     
10.334   Assignment and Subordination of Management Agreement by and among BR Roswell, LLC, MetLife HCMJV 1 REIT, LLC and Carroll Management Group, LLC, dated as of December 1, 2016, incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on December 7, 2016
     
10.335   Guaranty of Recourse Obligations by Bluerock Residential Growth REIT, Inc. to and for the benefit of MetLife HCMJV 1 REIT, LLC, dated as of December 1, 2016, incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on December 7, 2016
     
10.336   Assignment of Leases by BR Roswell, LLC to and for the benefit of MetLife HCMJV 1 REIT, LLC, dated as of December 1, 2016, incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed on December 7, 2016
     
10.337   Unsecured Indemnity Agreement by BR Roswell, LLC and Bluerock Residential Growth REIT, Inc. in favor of MetLife HCMJV 1 REIT, LLC, dated as of December 1, 2016, incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed on December 7, 2016
     
10.338   Property Management Agreement by and between BR Roswell, LLC and Carroll Management Group, LLC, dated as of December 1, 2016, incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K filed on December 7, 2016
     
10.339   Purchase and Sale Agreement by and between GGT LMI City Walk GA, LLC and Bluerock Real Estate, LLC, dated as of September 15, 2016, incorporated by reference to Exhibit 10.15 to the Company’s Current Report on Form 8-K filed on December 7, 2016
     
10.340   First Amendment to Purchase and Sale Agreement by and between GGT LMI City Walk GA, LLC and Bluerock Real Estate, LLC, dated as of September 19, 2016, incorporated by reference to Exhibit 10.16 to the Company’s Current Report on Form 8-K filed on December 7, 2016
     
10.341   Second Amendment to Purchase and Sale Agreement by and between GGT LMI City Walk GA, LLC and Bluerock Real Estate, LLC, dated as of September 29, 2016, incorporated by reference to Exhibit 10.17 to the Company’s Current Report on Form 8-K filed on December 7, 2016
     
10.342   Third Amendment to Purchase and Sale Agreement by and between GGT LMI City Walk GA, LLC and Bluerock Real Estate, LLC, dated as of November 3, 2016, incorporated by reference to Exhibit 10.18 to the Company’s Current Report on Form 8-K filed on December 7, 2016
     
10.343   Assignment of Purchase and Sale Agreement by and between Bluerock Real Estate, LLC and BR Roswell, LLC, dated as of December 1, 2016, incorporated by reference to Exhibit 10.19 to the Company’s Current Report on Form 8-K filed on December 7, 2016
     
10.344   Amended and Restated Limited Liability Company Agreement of BR ArchCo Morehead, LLC by BR ArchCo Morehead Mezz, LLC, dated as of December 29, 2016, incorporated by reference to Exhibit 10.447 to the Company’s Annual Report on Form 10-K filed on February 22, 2017
     
10.345   LLC Agreement of BR ArchCo Morehead Mezz, LLC by BR ArchCo Morehead JV, LLC, dated as of December 29, 2016, incorporated by reference to Exhibit 10.448 to the Company’s Annual Report on Form 10-K filed on February 22, 2017

 

 139 

 

 

10.346   Second Amended and Restated Limited Liability Company Agreement of BR ArchCo Morehead JV, LLC by and between BR Morehead JV Member, LLC and WMH Sponsor LLC, dated as of December 29, 2016, incorporated by reference to Exhibit 10.449 to the Company’s Annual Report on Form 10-K filed on February 22, 2017
     
10.347   Second Amended and Restated Limited Liability Company Agreement of BR Morehead JV Member, LLC by and between BRG Morehead, LLC and Bluerock Special Opportunity + Income Fund II, LLC, dated as of January 5, 2017, incorporated by reference to Exhibit 10.450 to the Company’s Annual Report on Form 10-K filed on February 22, 2017
     
10.348   Amended and Restated Limited Liability Company Agreement of BR Henderson Beach, LLC by BRG Henderson Beach, LLC, dated as of March 15, 2016, incorporated by reference to Exhibit 10.451 to the Company’s Annual Report on Form 10-K filed on February 22, 2017
     

10.349

  

Limited Liability Company Agreement of BRG Henderson Beach, LLC by Bluerock Residential Holdings, L.P., dated as of January 7, 2016, incorporated by reference to Exhibit 10.452 to the Company’s Annual Report on Form 10-K filed on February 22, 2017

     

10. 350

  

First Amendment to Limited Liability Company Agreement of BR Vickers Roswell JV Member, LLC by and between BR Vickers Roswell, LLC and Bluerock Special Opportunity + Income Fund III, LLC, dated as of February 15, 2017, incorporated by reference to Exhibit 10.453 to the Company’s Annual Report on Form 10-K filed on February 22, 2017

     

10.351

  

First Amendment to Limited Liability Company Agreement of BR Flagler JV Member, LLC by and between BRG Flagler Village, LLC and Bluerock Special Opportunity + Income Fund II, LLC, dated as of February 15, 2017, incorporated by reference to Exhibit 10.454 to the Company’s Annual Report on Form 10-K filed on February 22, 2017

     

10.352

  

First Amendment to Amended and Restated Limited Liability Company Agreement of BR Perimeter JV Member, LLC by and between BRG Perimeter, LLC and Bluerock Special Opportunity + Income Fund III, LLC, dated as of February 15, 2017, incorporated by reference to Exhibit 10.455 to the Company’s Annual Report on Form 10-K filed on February 22, 2017

     
10.353   First Amendment to Amended and Restated Limited Liability Company Agreement of BR Boca JV Member, LLC by and between BRG Boca, LLC and Bluerock Special Opportunity + Income Fund II, LLC, dated as of February 15, 2017, incorporated by reference to Exhibit 10.456 to the Company’s Annual Report on Form 10-K filed on February 22, 2017
     
10.354  

Assignment of Agreement of Purchase and Sale by and between CWS Apartment Homes LLC and CWS 2017 Portfolio JV, LLC, dated as of March 22, 2017, incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q filed on March 31, 2017

 

10.355  

Limited Liability Company Agreement of CWS 2017 Portfolio JV, LLC by and among CWS Portfolio Member, CWS 2017 Portfolio, LLC and CWS 2017 Portfolio PM, LLC, dated as of March 22, 2017, incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q filed on March 31, 2017

 

10.356  

Amendment to Dealer Manager Agreement by and among Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P. and Bluerock Capital Markets, LLC, dated July 21, 2017, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 21, 2017

 

10.357  

Amendment to Amended and Restated Warrant Agreement by and between Bluerock Residential Growth REIT, Inc., Computershare Inc. and Computershare Trust Company N.A., dated July 21, 2017, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 21, 2017

 

10.358  

Seventh Amendment to the Second Amended and Restated Agreement of Limited Partnership of Bluerock Residential Holdings, L.P., dated July 21, 2017, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on July 21, 2017

 

10.359  

Employment Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, and R. Ramin Kamfar, incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed August 4, 2017

 

10.360  

Employment Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, and James G. Babb, III, incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed August 4, 2017

 

 140 

 

 

10.361  

Employment Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, and Ryan S. MacDonald, incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed August 4, 2017

 

10.362  

Employment Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, and Jordan B. Ruddy, incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed August 4, 2017

 

10.363  

Employment Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, and Christopher J. Vohs, incorporated herein by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed August 4, 2017

 

10.364  

Services Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, Konig & Associates, LLC and Michael L. Konig, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on August 4, 2017

 

10.365  

Agreement of Purchase and Sale by and among BRE MF Crown Ridge LLC, BRE MF Canyon Springs LLC, BRE MF Cascades I LLC, BRE MF Cascades II LLC, BRE MF TPC LLC and CWS Apartment Homes LLC, dated as of March 15, 2017, incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.366  

First Amendment to Agreement of Purchase and Sale by and among BRE MF Crown Ridge LLC, BRE MF Canyon Springs LLC, BRE MF Cascades I LLC, BRE MF Cascades II LLC, BRE MF TPC LLC and CWS Apartment Homes LLC, dated as of March 20, 2017, incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.367  

Second Amendment to Agreement of Purchase and Sale by and among BRE MF Crown Ridge LLC, BRE MF Canyon Springs LLC, BRE MF Cascades I LLC, BRE MF Cascades II LLC, BRE MF TPC LLC and CWS Apartment Homes LLC, dated as of May 9, 2017, incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.368  

Assignment of Agreement of Purchase and Sale by and between CWS Apartment Homes LLC, dated as of March 22, 2017, incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.369  

Multifamily Loan and Security Agreement (Non-Recourse) by and between BRE MF Canyon Springs LLC and Wells Fargo Bank, National Association, dated as of May 27, 2014, incorporated by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.370  

Multifamily Note by BRE MF Canyon Springs LLC for the benefit of Wells Fargo Bank, National Association, dated as of May 27, 2014, incorporated by reference to Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.371  

Multifamily Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing by BRE MF Canyon Springs LLC for the benefit of Wells Fargo Bank, National Association, dated as of May 27, 2014, incorporated by reference to Exhibit 10.7 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.372   First Amendment to Multifamily Loan and Security Agreement and Other Loan Documents (Multipurpose) by and between BR CWS Canyon Springs Owner, LLC and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.8 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.373  

Assumption and Release Agreement by and among BRE MF Canyon Springs LLC, BR CWS Canyon Springs Owner, LLC, BRE Apartment Holdings LLC, Steven J. Sherwood, The Steven J. Sherwood Trust, Established September 8, 1994 and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.9 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.374  

Interest Rate Cap Reserve and Security Agreement by and between BR CWS Canyon Springs Owner, LLC and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.10 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.375  

Assignment of Management Agreement by and among BR CWS Canyon Springs Owner, LLC, CWS Apartment Homes LLC and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.11 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.376  

Multifamily Loan and Security Agreement (Non-Recourse) by and between BRE MF TPC LLC and Wells Fargo Bank, National Association, dated as of May 27, 2014, incorporated by reference to Exhibit 10.12 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

 141 

 

 

10.377  

Multifamily Note by BRE MF TPC LLC for the benefit of Wells Fargo Bank, National Association, dated as of May 27, 2014, incorporated by reference to Exhibit 10.13 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.378  

Multifamily Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing by BRE MF TPC LLC for the benefit of Wells Fargo Bank, National Association, dated as of May 27, 2014, incorporated by reference to Exhibit 10.14 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.379  

First Amendment to Multifamily Loan and Security Agreement and Other Loan Documents (Multipurpose) by and between BR CWS Ciobolo Canyon Owner, LLC and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.15 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.380  

Assumption and Release Agreement by and among BRE MF TPC LLC, BR CWS Ciobolo Canyon Owner, LLC, BRE Apartment Holdings LLC, Steven J. Sherwood, The Steven J. Sherwood Trust, Established September 8, 1994 and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.16 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.381  

Interest Rate Cap Reserve and Security Agreement by and between BR CWS Ciobolo Canyon Owner, LLC and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.17 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.382  

Assignment of Management Agreement by and among BR CWS Ciobolo Canyon Owner, LLC, CWS Apartment Homes LLC and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.18 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.383  

Multifamily Loan and Security Agreement (Non-Recourse) by and between BRE MF Crown Ridge LLC and Wells Fargo Bank, National Association, dated as of May 27, 2014, incorporated by reference to Exhibit 10.19 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.384  

Multifamily Note by BRE MF Crown Ridge LLC for the benefit of Wells Fargo Bank, National Association, dated as of May 27, 2014, incorporated by reference to Exhibit 10.20 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.385  

Multifamily Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing by BRE MF Crown Ridge LLC for the benefit of Wells Fargo Bank, National Association, dated as of May 27, 2014, incorporated by reference to Exhibit 10.21 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.386  

First Amendment to Multifamily Loan and Security Agreement and Other Loan Documents (Multipurpose) by and between BR CWS Crown Ridge Owner, LLC and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.22 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.387  

Assumption and Release Agreement by and among BRE MF Crown Ridge LLC, BR CWS Crown Ridge Owner, LLC, BRE Apartment Holdings LLC, Steven J. Sherwood, The Steven J. Sherwood Trust, Established September 8, 1994 and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.23 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.388  

Interest Rate Cap Reserve and Security Agreement by and between BR CWS Crown Ridge Owner, LLC and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.24 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.389  

Assignment of Management Agreement by and among BR CWS Crown Ridge Owner, LLC, CWS Apartment Homes LLC and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.25 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.390  

Multifamily Loan and Security Agreement (Non-Recourse) by and between BRE MF Cascades I LLC and Wells Fargo Bank, National Association, dated as of May 27, 2014, incorporated by reference to Exhibit 10.26 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.391  

Multifamily Note by BRE MF Cascades I LLC for the benefit of Wells Fargo Bank, National Association, dated as of May 27, 2014, incorporated by reference to Exhibit 10.27 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.392  

Multifamily Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing by BRE MF Cascades I LLC for the benefit of Wells Fargo Bank, National Association, dated as of May 27, 2014, incorporated by reference to Exhibit 10.28 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

 142 

 

 

10.393 

  

First Amendment to Multifamily Loan and Security Agreement and Other Loan Documents (Multipurpose) by and between BR CWS Cascades I Owner, LLC and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.29 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.394

 

  

Assumption and Release Agreement by and among BRE MF Cascades I LLC, BR CWS Cascades I Owner, LLC, BRE Apartment Holdings LLC, Steven J. Sherwood, The Steven J. Sherwood Trust, Established September 8, 1994 and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.30 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.395  

Interest Rate Cap Reserve and Security Agreement by and between BR CWS Cascades I Owner, LLC and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.31 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.396  

Assignment of Management Agreement by and among BR CWS Cascades I Owner, LLC, CWS Apartment Homes LLC and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.32 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.397  

Multifamily Loan and Security Agreement (Non-Recourse) by and between BRE MF Cascades II LLC and Wells Fargo Bank, National Association, dated as of May 27, 2014, incorporated by reference to Exhibit 10.33 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.398  

Multifamily Note by BRE MF Cascades II LLC for the benefit of Wells Fargo Bank, National Association, dated as of May 27, 2014, incorporated by reference to Exhibit 10.34 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.399  

Multifamily Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing by BRE MF Cascades II LLC for the benefit of Wells Fargo Bank, National Association, dated as of May 27, 2014, incorporated by reference to Exhibit 10.35 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.400  

First Amendment to Multifamily Loan and Security Agreement and Other Loan Documents (Multipurpose) by and between BR CWS Cascades II Owner, LLC and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.36 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.401  

Assumption and Release Agreement by and among BRE MF Cascades II LLC, BR CWS Cascades I Owner, LLC, BRE Apartment Holdings LLC, Steven J. Sherwood, The Steven J. Sherwood Trust, Established September 8, 1994 and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.37 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.402  

Interest Rate Cap Reserve and Security Agreement by and between BR CWS Cascades II Owner, LLC and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.38 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.403  

Assignment of Management Agreement by and among BR CWS Cascades II Owner, LLC, CWS Apartment Homes LLC and Fannie Mae, dated as of June 9, 2017, incorporated by reference to Exhibit 10.39 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.404  

Limited Liability Company Agreement of BRG CWS Portfolio, LLC by Bluerock Residential Holdings, L.P., dated as of March 9, 2017, incorporated by reference to Exhibit 10.40 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.405  

Limited Liability Company Agreement of BR CWS Portfolio Member, LLC by BRG CWS Portfolio, LLC, dated as of March 9, 2017, incorporated by reference to Exhibit 10.41 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.406  

Limited Liability Company Agreement of BR CWS 2017 Portfolio JV, LLC by and among BR CWS Portfolio Member, LLC, CWS 2017 Portfolio, LLC and CWS 2017 Portfolio PM, LLC dated as of March 22, 2017, incorporated by reference to Exhibit 10.42 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.407  

Limited Liability Company Agreement of BR CWS Canyon Springs Owner, LLC by BR CWS Portfolio JV, LLC, dated as of March 22, 2017, incorporated by reference to Exhibit 10.43 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.408  

Limited Liability Company Agreement of BR CWS Ciobolo Canyon Owner, LLC by BR CWS Portfolio JV, LLC, dated as of March 22, 2017, incorporated by reference to Exhibit 10.44 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

 143 

 

 

10.409  

Limited Liability Company Agreement of BR CWS Crown Ridge Owner, LLC by BR CWS Portfolio JV, LLC, dated as of March 22, 2017, incorporated by reference to Exhibit 10.45 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.410  

Limited Liability Company Agreement of BR CWS Cascades I Owner, LLC by BR CWS Portfolio JV, LLC, dated as of March 22, 2017, incorporated by reference to Exhibit 10.46 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.411  

Limited Liability Company Agreement of BR CWS Cascades II Owner, LLC by BR CWS Portfolio JV, LLC, dated as of March 22, 2017, incorporated by reference to Exhibit 10.47 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017

 

10.412  

Purchase and Sale Agreement by and between Bluerock Real Estate, L.L.C., CH Realty VII – Carroll MF Orlando Hunter’s Creek, L.L.C., and CH Realty VII – Carroll MF Orlando Metrowest, L.L.C., dated as of September 7, 2017, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 20, 2017

 

10.413  

Assignment of Purchase and Sale Agreement by and between Bluerock Real Estate, L.L.C. and Bluerock Residential Growth REIT, Inc., through its direct and indirect subsidiaries, BR Hunters Creek, LLC and BR Metrowest, LLC, dated as of September 15, 2017, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 20, 2017

 

10.414  

Credit Agreement by and among Bluerock Residential Holdings, L.P. as Parent Borrower, the other borrowers from time to time party thereto, Bluerock Residential Growth REIT, Inc. as Guarantor, KeyBank National Association, and the other lenders party thereto, dated as of October 4, 2017, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 11, 2017

 

10.415  

Guaranty by Bluerock Residential Growth REIT, Inc. to and for the benefit of KeyBank National Association, dated as of October 4, 2017, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 11, 2017

 

10.416  

$50,000,000 Note by Bluerock Residential Holdings, L.P. to and for the benefit of KeyBank National Association, dated as of October 4, 2017, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on October 11, 2017

 

10.417  

$50,000,000 Note by Bluerock Residential Holdings, L.P. to and for the benefit of JPMorgan Chase Bank, N.A., dated as of October 4, 2017, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on October 11, 2017

 

10.418  

$50,000,000 Note by Bluerock Residential Holdings, L.P. to and for the benefit of Bank of America, N.A., dated as of October 4, 2017, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on October 11, 2017

 

10.419  

Subordination of Advisory Contract by Bluerock Residential Holdings, L.P. and Bluerock Residential Growth REIT, Inc. to and for the benefit of KeyBank National Association, dated as of October 4, 2017, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on October 11, 2017

 

10.420  

Form of Second Amended and Restated 2014 Equity Incentive Plan for Individuals, incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 19, 2017

 

10.421  

Form of Second Amended and Restated 2014 Equity Incentive Plan for Entities, incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed October 19, 2017

 

10.422  

Bluerock Residential Growth REIT, Inc. Second Amended and Restated 2014 Equity Incentive Plan for Individuals, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 31, 2017

 

10.423  

Bluerock Residential Growth REIT, Inc. Second Amended and Restated 2014 Equity Incentive Plan for Entities, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 31, 2017

 

10.424  

Amended and Restated Employment Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, and R. Ramin Kamfar, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on October 31, 2017

 

10.425  

Amended and Restated Employment Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, and James G. Babb, III, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on October 31, 2017

 

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10.426  

Amended and Restated Employment Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, and Ryan S. MacDonald, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on October 31, 2017

 

10.427  

Amended and Restated Employment Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, and Jordan B. Ruddy, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on October 31, 2017

 

10.428  

Amended and Restated Employment Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, and Christopher J. Vohs, incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on October 31, 2017

 

10.429  

Amended and Restated Services Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, Konig & Associates, LLC, and Michael L. Konig, incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on October 31, 2017

 

10.430  

Multifamily Loan and Security Agreement by and between BR Hunters Creek, LLC and Walker & Dunlop, LLC, dated as of October 30, 2017, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 3, 2017

 

10.431  

Amended and Restated Multifamily Note by BR Hunters Creek, LLC for the benefit of Walker & Dunlop, LLC, dated as of October 30, 2017, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 3, 2017

 

10.432  

Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement by BR Hunters Creek, LLC for the benefit of Walker & Dunlop, LLC, dated as of October 30, 2017, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on November 3, 2017

 

10.433  

Guaranty Multistate by Bluerock Residential Growth REIT, Inc. for the benefit of Walker & Dunlop, LLC, dated as of October 30, 2017, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on November 3, 2017

 

10.434  

Assignment of Management Agreement and Subordination of Management Fees by and among BR Hunters Creek, LLC, Walker & Dunlop, LLC and Carroll Management Group, LLC, dated as of October 30, 2017, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on November 3, 2017

 

10.435  

Assignment of Security Instrument by and between Walker & Dunlop, LLC and Freddie Mac, dated as of October 30, 2017, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on November 3, 2017.

 

10.436  

Joinder Agreement by BR Metrowest, LLC and delivered to KeyBank National Association, dated as of October 30, 2017, incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on November 3, 2017

 

10.437  

Subsidiary Guaranty by BR Metrowest, LLC in favor of KeyBank National Association, dated as of October 30, 2017, incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on November 3, 2017

 

10.438  

Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing by BR Metrowest, LLC in favor of KeyBank National Association, dated as of October 30, 2017, incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on November 3, 2017

 

10.439  

Collateral Assignment of Leases and Rents by and between BR Metrowest, LLC and KeyBank National Association, dated as of October 30, 2017, incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on November 3, 2017

 

10.440  

Joinder to Environmental Indemnity by BR Metrowest and delivered to KeyBank National Association, dated as of October 30, 2017, incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on November 3, 2017

 

10.441  

Collateral Assignment and Security Agreement in respect of Contracts, Licenses and Permits by BR Metrowest, LLC to KeyBank National Association, dated as of October 30, 2017, incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed on November 3, 2017

 

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10.442  

Collateral Assignment of Management Agreement by and between BR Metrowest, LLC and KeyBank National Association, dated as of October 30, 2017, incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed on November 3, 2017

 

10.443  

Stockholders Agreement, dated October 31, 2017, by and among Bluerock Residential Growth REIT, Inc. and Bluerock Real Estate, L.L.C., The Kachadurian Group, LLC, Konig & Associates, LLC, Jenco Business Advisors, Inc., James G. Babb, III, Jordan B. Ruddy, and Ryan S. MacDonald, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 6, 2017

 

10.444  

Eighth Amendment to the Second Amended and Restated Agreement of Limited Partnership of Bluerock Residential Holdings, L.P., dated October 31, 2017, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 6, 2017

 

10.445  

Administrative Services Agreement, dated October 31, 2017, by and among Bluerock Real Estate, L.L.C., Bluerock Real Estate Holdings, LLC, Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock TRS Holdings, LLC and Bluerock REIT Operator, LLC, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on November 6, 2017

 

10.446  

Amended and Restated Employment Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, and R. Ramin Kamfar, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on November 6, 2017

 

10.447  

Amended and Restated Employment Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, and James G. Babb, III, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on November 6, 2017

 

10.448  

Amended and Restated Employment Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, and Ryan S. MacDonald, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on November 6, 2017

 

10.449  

Amended and Restated Employment Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, and Jordan B. Ruddy, incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on November 6, 2017

 

10.450  

Amended and Restated Employment Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, and Christopher J. Vohs, incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on November 6, 2017

     
10.451  

Amended and Restated Services Agreement, dated as of August 3, 2017, by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock REIT Operator, LLC, Konig & Associates, LLC and Michael L. Konig, incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on November 6, 2017

     
10.452  

Dealer Manager Agreement by and among Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P. and Bluerock Capital Markets, LLC, dated November 15, 2017, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 20, 2017

 

10.453  

Warrant Agreement by and between Bluerock Residential Growth REIT, Inc., Computershare Inc. and Computershare Trust Company N.A., dated November 15, 2017, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 20, 2017

 

10.454   Ninth Amendment to the Second Amended and Restated Agreement of Limited Partnership of Bluerock Residential Holdings, L.P., dated November 15, 2017, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on November 20, 2017
     
10.455  

Master Credit Facility Agreement, by and among BR Metrowest, LLC, BRG FNMA Shelf 1, LLC, BRG FNMA Shelf 2, LLC, BRG FNMA Shelf 3, LLC, BRG FNMA Shelf 4, LLC, BRG FNMA Shelf 5, LLC, BRG FNMA Shelf 6, LLC, BRG FNMA Shelf 7, LLC, BRG FNMA Shelf 8, LLC, BRG FNMA Shelf 9, LLC, BRG FNMA Shelf 10, LLC, as the Borrowers, and Walker & Dunlop, LLC, as the Lender, dated as of April 30, 2018, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 4, 2018

     
10.456  

Assignment of Master Credit Facility Agreement and Other Loan Documents, by and between Walker & Dunlop, LLC, as assignor, and Fannie Mae, as assignee, dated as of April 30, 2018, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 4, 2018

 

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10.457  

Guaranty of Non-Recourse Obligations, by Bluerock Residential Growth REIT, Inc., to and for the benefit of Walker & Dunlop, LLC, dated as of April 30, 2018, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 4, 2018

 

10.458  

Multifamily Note by BR Metrowest, LLC, BRG FNMA Shelf 1, LLC, BRG FNMA Shelf 2, LLC, BRG FNMA Shelf 3, LLC, BRG FNMA Shelf 4, LLC, BRG FNMA Shelf 5, LLC, BRG FNMA Shelf 6, LLC, BRG FNMA Shelf 7, LLC, BRG FNMA Shelf 8, LLC, BRG FNMA Shelf 9, LLC, BRG FNMA Shelf 10, LLC, to and for the benefit of Walker & Dunlop, LLC, dated as of April 30, 2018, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on May 4, 2018

 

10.459  

Environmental Indemnity Agreement, by BR Metrowest, LLC, BRG FNMA Shelf 1, LLC, BRG FNMA Shelf 2, LLC, BRG FNMA Shelf 3, LLC, BRG FNMA Shelf 4, LLC, BRG FNMA Shelf 5, LLC, BRG FNMA Shelf 6, LLC, BRG FNMA Shelf 7, LLC, BRG FNMA Shelf 8, LLC, BRG FNMA Shelf 9, LLC, BRG FNMA Shelf 10, LLC, to and for the benefit of Walker & Dunlop, LLC, dated as of April 30, 2018, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on May 4, 2018

 

10.460   Tenth Amendment to the Second Amended and Restated Agreement of Limited Partnership of Bluerock Residential Holdings, L.P., dated August 6, 2018, incorporated by reference to Exhibit 10.6 to the Company’s quarterly report on Form 10-Q filed on August 8, 2018
     
10.461   Notice of Renewal, dated August 6, 2018, of Administrative Services Agreement dated October 31, 2018, incorporated by reference to Exhibit 10.7 to the Company’s quarterly report on Form 10-Q filed on August 8, 2018
     
10.462   Dealer Manager Agreement by and among Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P. and Bluerock Capital Markets, LLC, dated November 16, 2018, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 19, 2018
     
10.463   Warrant Agreement by and between Bluerock Residential Growth REIT, Inc., Computershare Inc. and Computershare Trust Company N.A., dated November 16, 2018, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 19, 2018
     
10.464   Eleventh Amendment to the Second Amended and Restated Agreement of Limited Partnership of Bluerock Residential Holdings, L.P., dated November 16, 2018, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on November 19, 2018
     
21.1   List of Subsidiaries
     
23.1   Consent of BDO USA, LLP
     
 31.1   Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
31.2   Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
32.1   Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
     
99.1   Fourth Amendment to the Second Amended and Restated Agreement of Limited Partnership of Bluerock Residential Holdings, L.P., dated March 29, 2016, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on April 19, 2016
     
99.2   Press Release dated November 5, 2018, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed November 5, 2018
     
99.3   Supplemental Financial Information, incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed November 5, 2018
     
99.4   Consent of Duff & Phelps, LLC, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on November 9, 2018
     
99.5    Press Release dated December 26, 2018, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed December 26, 2018
     
101.1   The following information from the Company’s annual report on Form 10-K for the year ended December 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Balance Sheets; (ii) Statements of Operations; (iii) Statement of Stockholders’ Equity; (iv) Statements of Cash Flows

 

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