BLUEROCK RESIDENTIAL GROWTH REIT, INC.
 
FORM 10-K
December 31, 2016

PART I
Item 1. Business			1
Item 1A. Risk Factors			7
Item 1B. Unresolved Staff Comments			56
Item 2. Properties			56
Item 3. Legal Proceedings			58
Item 4. Mining Safety Disclosures			58
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			59
Item 6. Selected Financial Data			64
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			65
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			89
Item 8. Financial Statements and Supplementary Data			89
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure			90
Item 9A. Controls and Procedures			90
Item 9B. Other Information			90
PART III
Item 10. Directors, Executive Officers and Corporate Governance			91
Item 11. Executive Compensation			97
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			99
Item 13. Certain Relationships and Related Transactions, and Director Independence			101
Item 14. Principal Accounting Fees and Services			108
PART IV
Item 15. Exhibits, Financial Statement Schedules			110
SIGNATURES			111

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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:

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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

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.

We have no employees and are supported by a related-party service agreement with BRG Manager, LLC (the “Manager”), a Delaware limited liability company organized in 2014. We are externally managed by the Manager, which manages our day-to-day operations under a Management Agreement. On November 7, 2016, the Company announced that it had begun the process of internalizing the external management functions that are currently provided to us by our Manager. See “Formation of Special Committee for Internalization Transaction” below. Our Management Agreement has a three-year term expiring April 2, 2017, and will be automatically renewed for a one-year term each year on April 2, unless previously terminated in accordance with the terms of the Management Agreement. The Manager is responsible for managing our affairs on a day-to-day basis and for identifying and making real estate investments on our behalf. Substantially all our business is conducted through our Operating Partnership, Bluerock Residential Holdings, L.P., a Delaware limited partnership (our “Operating Partnership”).

The principal executive offices of our Company and the 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, 2016, our portfolio consisted of interests in thirty-one properties (twenty-one operating and ten development properties). The thirty-one properties contain an aggregate of 9,570 units, comprised of 6,972 operating units and 2,598 units under development. As of December 31, 2016, our stabilized properties, exclusive of our development 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 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 Core-Plus, Value-Add, Opportunistic and Invest-to-Own investment strategies.

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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 increase 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 Core-Plus, Value-Add, Opportunistic and Invest-to-Own investment strategies in order to maximize our return on investment. Our Manager will work with each member of our Partner 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. Our Manager then provides an aggressive asset management presence to manage our 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, 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 $25 to $75 million) in order to manage concentration risk, while driving both current income and capital appreciation throughout the portfolio. Our Partner 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

In conjunction with the completion of the initial firmly underwritten public offering that closed in April 2014 (the “IPO”), we completed a series of related contribution transactions pursuant to which we acquired interests in five apartment properties for an aggregate asset value of $152.3 million (inclusive of Villas at Oak Crest, which was accounted for under the equity method, and Springhouse, in which we already owned an interest and which was reported as consolidated for the periods presented) that added to our pre-IPO portfolio.

The following table presents a summary of our investments for the years ended December 31, 2016, 2015 and 2014:

Properties Acquired		Location				Date Acquired				Ownership Interest				Number of Units
Springhouse (additional interest only)(1)			Newport News, VA				4/2/2014				75.0	%			432
Village Green of Ann Arbor			Ann Arbor, MI				4/2/2014				48.6	%			520
Villas at Oak Crest			Chattanooga, TN				4/2/2014				67.2	%			209
North Park Towers			Southfield, MI				4/3/2014				100.0	%			313
Lansbrook Village(2)			Palm Harbor, FL				5/23/2014				90.0	%			619
Alexan CityCentre			Houston, TX				7/1/2014				(3)				340
EOS, formerly UCF Orlando			Orlando, FL				7/29/2014				(3)				296
Enders (additional interest & units)(4)			Orlando, FL				9/10/2014				89.5	%			220
ARIUM Grandewood			Orlando, FL				11/4/2014				95.0	%			306
Alexan Southside Place			Houston, TX				1/12/2015				(3)				270
Park & Kingston(5)			Charlotte, NC				3/16/2015				96.0	%			153
Fox Hill(6)			Austin, TX				3/26/2015				94.6	%			288
Whetstone			Durham, NC				5/20/2015				(3)				204
Helios, formerly known as Cheshire Bridge			Atlanta, GA				5/29/2015				(3)				285
Ashton I			Charlotte, NC				8/19/2015				100.0	%			322
ARIUM Palms			Orlando, FL				8/20/2015				95.0	%			252
Sorrel			Frisco, TX				10/29/2015				95.0	%			352
Sovereign			Fort Worth, TX				10/29/2015				95.0	%			322
Domain Phase 1			Garland, TX				11/20/2015				(3)				299
Park & Kingston Phase II			Charlotte, NC				11/30/2015				100	%			15
Ashton II			Charlotte, NC				12/14/2015				100	%			151
Flagler Village			Ft. Lauderdale				12/18/2015				(7)				384
Lake Boone Trail			Raleigh, NC				12/18/2015				(3)				245
ARIUM Gulfshore			Naples, FL				1/5/2016				95.0	%			368
ARIUM at Palmer Ranch			Sarasota, FL				1/5/2016				95.0	%			320
West Morehead			Charlotte, NC				1/6/2016				(8)				286
The Preserve at Henderson Beach			Destin, FL				3/15/2016				100	%			340
ARIUM Westside			Atlanta, GA				7/14/2016				90.0	%			336
APOK Townhomes			Boca Raton, FL				9/1/2016				(7)				90
Nevadan			Atlanta, GA				10/13/2016				90.0	%			480
ARIUM Pine Lakes			Port St. Lucie, FL				10/31/2016				85.0	%			320
The Brodie, formerly referred to as Deerfield			Austin, TX				11/10/2016				92.5	%			324
Roswell City Walk			Roswell, GA				12/1/2016				98.0	%			320
Crescent Perimeter(9)			Atlanta, GA				12/12/2016				60.0	%			320
Legacy at Southpark			Austin, TX				12/15/2016				90.0	%			250
Vickers Village(9)			Roswell, GA				12/20/2016				80.0	%			79

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The following table presents a summary of our dispositions for the years ended December 31, 2016, 2015 and 2014:

Property Dispositions		Location				Date Sold				Ownership Interest in Property				Number of Units
The Reserve at Creekside Village			Chattanooga, TN				3/28/2014				24.7	%			192
The Estates at Perimeter			Augusta, GA				12/10/2014				25.0	%			240
Grove at Waterford			Hendersonville, TN				12/18/2014				60.0	%			252
23Hundred@Berry Hill			Nashville, TN				1/14/2015				19.8	%			266
Villas at Oak Crest			Chattanooga, TN				9/1/2015				67.2	%			209
North Park Towers			Southfield, MI				10/16/2015				100.0	%			313
Springhouse at Newport News			Newport News, VA				8/10/2016				75.0	%			432
EOS			Orlando, FL				12/19/2016				26.3	%			296

Formation of Special Committee for Internalization Transaction

On November 7, 2016, the Company announced that it had begun the process of internalizing the external management functions that are currently provided to us by our Manager. The board of directors appointed a special committee, (or the “Special Committee”), comprised solely of independent directors of our board of directors to pursue the internalization. The Special Committee has engaged independent legal and financial advisors to assist the Special Committee in connection with the internalization transaction. The Compensation Committee of our board of directors has also engaged an independent compensation consulting firm to provide a market-based compensation study with respect to key REIT executives and directors of internalized REITs. As of February 16, 2017, negotiations have begun with respect to the internalization, but no definitive agreements have been entered into. We currently anticipate consummating the internalization transaction at the beginning of the third quarter of 2017, although we are providing no assurances that the internalization transaction will be completed on the timeframe we currently anticipate or at all. For risks associated with our internalization, see the section entitled “Risk Factors”.

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 monthly 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 on a quarterly basis. When determining the amount of future distributions, we expect that our board

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of directors 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 of directors 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 5^th, April 5^th, July 5^th and October 5^th of each year, commencing on January 5, 2016, to holders of record on each December 25^th, March 25^th, June 25^th and September 25^th, 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 of directors 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 5^th day of each month to holders of record on the 25^th 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 of directors 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 5^th, April 5^th, July 5^th and October 5^th of each year, commencing on October 5, 2016, to holders of record on each December 25^th, March 25^th, June 25^th and September 25^th, 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 7.6250% 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%.

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 of directors 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 5^th, April 5^th, July 5^th and October 5^th of each year, commencing on January 5, 2017, to holders of record on each December 25^th, March 25^th, June 25^th and September 25^th, 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).

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

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 (File Nos. 333-208956, 333-200359, 333-203415 and 333-208988) and Form S-8 (333-202569). 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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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:

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 twenty-one apartment communities and ten development 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, 2016, properties in Florida, Texas, North Carolina, Michigan, Illinois, and Georgia and comprised 47%, 19%, 11%, 10%, 7% and 6%, respectively, of our total rental revenue, excluding Springhouse which was sold in August 2016 and EOS which was sold in December 2016. 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.

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

Our investment strategy requires us, through our Manager while we are externally managed, to identify suitable investment opportunities compatible with our investment criteria. Our Manager 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.

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:

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 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 the 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.

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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 of directors. 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.

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.

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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:

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.

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

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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 our properties 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, through our Manager while we are externally managed, 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:

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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.

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:

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.

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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 Partner Network performs poorly at one of our projects, which could adversely affect returns to our stockholders.

In general, we expect to rely on our Partner Network for the day-to-day management and development of our real estate investments. Members of our Partner Network are not fiduciaries to us, and generally will have limited capital invested in a project, if any. One or more members of our Partner 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 Partner 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 Partner 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 Partner 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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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

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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.

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 company 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.

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

From inception of our Company through December 31, 2016, we had a cumulative net loss of $13.8 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 $5.9 million for the year ended December 31, 2016, which reflected an increase of $1.8 million over the same period in 2015. During 2016 the size of our portfolio increased significantly and cash flow from our investments in real estate joint ventures increased to cover our 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.

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. However, there are no assurances that we will be able to continue to borrow from affiliates or extend the maturity date of any loans that may be outstanding and due to affiliates.

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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 of directors may change our major operational policies without your approval.

Our board of directors determines our major policies, including our policies regarding financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors 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.

While we are externally managed, our Manager is responsible for the day-to-day operations of our Company and the selection and management of investments and has 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 our Manager, who will manage our Company in accordance with the Management Agreement. In addition, our Manager 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 of directors or our Manager 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, directors and Manager 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, our Manager 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 our Manager and its 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 or our Manager 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 of directors. 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 of directors 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 of directors 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 of directors has authorized a total of 19,025,000 shares of preferred stock for issuance, from which we have issued 5,721,460 shares of Series A Preferred Stock, 21,482 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 of directors could also authorize the issuance of up to approximately 230,975,000 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.

Risks Related to the Internalization Transaction

We cannot assure you that we will be able to complete the internalization transaction, which could materially adversely affect our business, financial condition and results of operations.

We cannot assure you that we will be able to complete the internalization transaction, which we expect will be subject to the approval of the Special Committee and the satisfaction of various closing conditions, including obtaining certain third party consents and other obligations. There can be no guarantee that the Special Committee will approve the internalization transaction or, if it does, that any of the other closing conditions will be satisfied or that the internalization will be consummated. Failure to complete the internalization transaction could materially adversely delay our strategy of simplifying our business and focusing on our core objectives of maximizing long-term stockholder value through the acquisition of well-located, institutional-quality apartment properties in demographically attractive growth markets across the United States. These consequences could materially adversely affect our business, financial condition and results of operations.

If the internalization occurs, we will incur significant additional costs associated with being self-managed.

While we believe there are substantial benefits to the internalization of the functions performed for us by our Manager and of bringing onboard our Manager’s management team, there is no assurance that internalization will be beneficial to us and our stockholders, and internalizing our management functions could reduce earnings per share and funds from operation per share. For example, we may not realize the perceived benefits or we may not be able to properly integrate a new staff of managers and employees or we may not be able to effectively replicate the services provided previously by our Manager or its affiliates. Internalization transactions involving the internalization of managers affiliated with entity sponsors have also, in some cases, been the subject of litigation. Even if such claims were without merit, we could be forced to spend significant amounts of money and management resources defending claims, which would reduce the amount of funds available for us to invest in properties or other investments or to pay distributions. All these factors could have a material adverse effect on our results of operations, financial condition and ability to pay distributions.

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

We intend for the internalization to be part of our long-term strategy of focusing on our core objectives. We may not be able to identify suitable investments for a period of time which may reduce our operating performance. We may not manage the internalization effectively, and the internalization could be a time-consuming and costly process. 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.

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The agreements to be entered into in connection with the internalization transaction will be negotiated between the Special Committee and certain of our officers and directors that are affiliated with our Manager, which may create conflicts of interests and result in terms and conditions that may not be as favorable to us as if they had been negotiated with unaffiliated third parties.

Our Manager is affiliated with certain of our officers and directors. Accordingly, those officers and directors may receive economic benefits as a result of the internalization transaction, which may differ from, and be in conflict with, our interests and the interests of our stockholders. Furthermore, the agreements to be entered into in connection with the internalization transaction will be negotiated between the Special Committee and our Manager, and their terms and conditions may not be as favorable to us as if they had been negotiated with unaffiliated third parties. Moreover, if any of the Manager-related parties to the applicable transaction agreements were to breach any of the representations, warranties or covenants it makes therein, we may choose not to enforce, or to enforce less vigorously, our rights because of our desire to maintain our ongoing relationship with our Manager and the certain of our officers and directors who are affiliated with our Manager. Moreover, the representations, warranties, covenants and indemnities in any applicable transaction agreements are expected to be subject to limitations and qualifiers, which may also limit our ability to enforce any remedy under such agreements.

Following the internalization transaction, we may continue to be reliant on our Manager for some period of time and certain officers of our Manager may engage in activities that divert their attention from our business, which could adversely affect the execution of our business and our results of operations.

Following the consummation of the internalization transaction, we may remain reliant on certain employees of our Manager for certain transitional services for a period of time after the closing, which may include but may not be limited to information technology, human resources, insurance, investor relations, legal, tax and accounting services. We can provide no assurances that we will be successful in internalizing those functions or identifying and engaging third-parties to provide those services to us. Moreover, certain of our officers and non-independent directors are also employees of our Manager or one of its affiliates, and have significant responsibilities for certain investment funds and programs currently managed by affiliates of our Manager. As a result, those officers and directors will not devote 100% of their time to the management of our business and we may not receive the level of support and assistance that we otherwise might receive if those officers and directors did not have such outside obligations. In addition, certain of the private investment funds and programs managed by affiliates of Manager may compete with us for investment opportunities, which could result in the loss of investment opportunities to such other vehicles and could adversely affect our business and growth prospects.

If we internalize our management functions, the interest of current stockholders’ in our Company could be diluted.

If we internalize the functions performed for us by our Manager, the method by which we could internalize the functions of the Manager could take many forms, subject to certain limitations set forth in our Management Agreement. An internalization of the functions of our Manager could result in dilution of your interests as a stockholder and could reduce earnings per share and funds from operations per share.

Risks Related to Our Contribution Transactions and Other Related Party Transactions

We may be subject to unknown liabilities in connection with the contribution transactions in our IPO which could result in unexpected liabilities and expenses.

As part of the contribution transactions consummated in connection with the IPO, we (through our Operating Partnership) received certain assets or interests in certain assets subject to existing liabilities, which may include liabilities that are unknown to us. Unknown liabilities might include liabilities for cleanup or remediation of undisclosed environmental conditions, claims of tenants, vendors or other persons dealing with the entities prior to an offering (including those that had not been asserted or threatened prior to such offering), tax liabilities, and accrued but unpaid liabilities incurred in the ordinary course of business. Although we are not aware of any, our recourse with respect to any such liabilities may be limited. Depending upon the amount or nature of such liabilities, our business, financial condition and results of operations, our ability to make distributions to our stockholders and the trading price of our shares may be adversely affected.

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We did not obtain new owner’s title insurance policies in connection with the acquisition of our real estate investments in the contribution transactions in our IPO.

Each of the properties underlying the contributed real estate investments in our contribution transactions in our IPO is insured by a title insurance policy. We did not, however, obtain new owner’s title insurance policies in connection with the contribution transactions unless the existing mortgage loans remained in place upon completion of the acquisition, in which case we may have obtained new title policies or updated existing title policies if required by a lender. Although we are not aware of any, if there were a material title defect related to any of these properties that is not adequately covered by a title insurance policy, we could lose some or all of our capital invested in and our anticipated profits from such property.

We did not obtain new Phase I environmental site assessments in connection with our contribution transactions, and the assessments our sellers obtained before acquisition of these properties did not provide assurance that we will not be exposed to environmental liabilities at our properties.

We did not obtain new Phase I environmental site assessments with respect to all of the properties underlying our contributed real estate investments prior to the contribution transactions. No assurances can be given that any of the prior Phase I environmental site assessments previously obtained by Bluerock Special Opportunity + Income Fund, LLC (“Fund I”), Bluerock Special Opportunity + Income Fund II, LLC (“Fund II”), Bluerock Special Opportunity + Income Fund III, LLC (“Fund III”) and Bluerock Growth Fund, LLC (“BGF”, and together, with Fund I, Fund II and Fund III, the “Bluerock Funds”), each of which are affiliates of our Manager, identify all environmental conditions impacting the properties because material environmental conditions may have developed since the Phase I environmental site assessments were conducted. The Phase I environmental site assessments are also of limited scope and do not include comprehensive asbestos, lead-based paint or lead in drinking water assessments. Therefore, the properties developed earlier than 1989 may contain such hazardous substances. Comprehensive mold and radon assessments also were not conducted and some of the initial properties were identified in areas with radon levels above action levels for residential buildings by the Environmental Protection Agency. We also cannot guarantee that a prior owner or tenant of a property or that an adjacent property owner has not created a material environmental condition that is unknown to us or that there are no other unknown material environmental conditions as to any one or more of the properties underlying our contributed real estate investments. There also exists the risk that material environmental conditions, liabilities or compliance concerns may arise in the future. The realization of any or all of these risks may have an adverse effect on our business, financial condition and results of operations, our ability to make distributions to our stockholders and the trading price of shares of our stock.

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, Chief Executive Officer and President, currently serves as an officer of Bluerock Real Estate, L.L.C., an affiliate of our Manager, or Bluerock, and Mr. Kachadurian, a director and our Manager’s Vice Chairman, is affiliated with Bluerock, and each will have a conflict with respect to any matters that require consideration by our board of directors 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.

Our tax protection agreement requires our Operating Partnership to maintain certain debt levels that otherwise would not be required to operate our business.

Under our tax protection agreement with BR-NPT Springing Entity, LLC (“NPT”), our Operating Partnership will provide NPT the opportunity to guarantee debt or enter into a deficit restoration obligation upon a future repayment, retirement, refinancing or other reduction (other than scheduled amortization) of currently outstanding debt prior to the sixth anniversary of the completion of our contribution transactions. If

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we fail to make such opportunity available, we will be required to deliver to NPT a cash payment intended to approximate the tax liability of certain members of NPT resulting from our failure to make such opportunity available and the tax liabilities incurred as a result of such tax protection payment. We agreed to these provisions in order to assist certain members of NPT in deferring the recognition of taxable gain as a result of and after our contribution transactions. These obligations may require us to maintain more or different indebtedness than we would otherwise require for our business. We estimate that the amount of indebtedness we are required to maintain for this purpose will not exceed $20 million.

Risks Related to our Management and Relationships with our Manager

We are dependent on our Manager and its key personnel for our success.

Currently, we are externally advised by our Manager and, pursuant to the Management Agreement, our Manager is not obligated to dedicate any specific personnel exclusively to us, nor is its personnel obligated to dedicate any specific portion of their time to the management of our business. As a result, we cannot provide any assurances regarding the amount of time our Manager will dedicate to the management of our business. Moreover, each of our officers and non-independent directors is also an employee of our Manager or one of its affiliates, and has significant responsibilities for other investment vehicles currently managed by Bluerock affiliates, and may not always be able to devote sufficient time to the management of our business. Consequently, we may not receive the level of support and assistance that we otherwise might receive if we were internally managed.

In addition, we offer no assurance that our Manager will remain our manager or that we will continue to have access to our Manager’s principals and professionals. The initial term of our Management Agreement with our Manager only extends until April 2, 2017 (the third anniversary of the closing of the IPO), with automatic one-year renewals thereafter, and may be terminated earlier under certain circumstances. If the Management Agreement is terminated or not renewed and no suitable replacement or alternative is found for our management, we may not be able to execute our business plan, which could have a material adverse effect on our results of operations and our ability to make distributions to our stockholders.

The inability of our Manager to retain or obtain key personnel could delay or hinder implementation of our investment strategies, which could impair our ability to make distributions and could reduce the value of your investment.

Our Manager is obligated to supply us with substantially all of our senior management team, including our chief executive officer, president, chief accounting officer and chief operating officer. Subject to investment, leverage and other guidelines or policies adopted by our board of directors, our Manager has significant discretion regarding the implementation of our investment and operating policies and strategies. Accordingly, we believe that our success will depend significantly upon the experience, skill, resources, relationships and contacts of the senior officers and key personnel of our Manager and its affiliates. In particular, our success depends to a significant degree upon the contributions of Messrs. Kamfar, Kachadurian, Babb, Ruddy, Konig and MacDonald, all of whom are senior officers of our Manager. We do not have employment agreements with any of these key personnel and do not have key man life insurance on any of them. If any of Messrs. Kamfar, Kachadurian, Babb, Ruddy, Konig and MacDonald were to cease their affiliation with us or our Manager, our Manager may be unable to find suitable replacements, and our operating results could suffer. We believe that our future success depends, in large part, upon our Manager’s ability to hire and retain highly skilled managerial, operational and marketing personnel. Competition for highly skilled personnel is intense, and our Manager may be unsuccessful in attracting and retaining such skilled personnel. If we lose or are unable to obtain the services of highly skilled personnel, our ability to implement our investment strategies could be delayed or hindered, and the value of your investment may decline.

Our Manager’s limited operating history makes it difficult for you to evaluate this investment.

Our Manager has less than three years of operating history and may not be able to successfully operate our business or achieve our investment objectives. We may not be able to conduct our business as described in our plan of operation.

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Termination of our Management Agreement, even for poor performance, could be difficult and costly, including as a result of termination fees, and may cause us to be unable to execute our business plan.

Termination of our Management Agreement without cause, even for poor performance, could be difficult and costly. We may terminate our Management Agreement without cause if at least two-thirds of our independent directors determine either (i) there has been unsatisfactory performance by our Manager that is materially detrimental to us or (ii) the base management and incentive fees payable by us to our Manager are above current market rates. We may generally terminate our Manager for “cause” (as defined in our Management Agreement); provided, that if we are terminating due to a “change of control” of our Manager (as defined in our Management Agreement), a majority of our independent directors must determine such change of control is materially detrimental to us prior to any termination. If we terminate the Management Agreement without cause or in connection with an internalization, or if the Manager terminates the Management Agreement because of a material breach thereof by us or as a result of a change of control of our Company, we must pay our Manager a termination fee payable in cash or, in connection with an internalization, acquire our Manager at an equivalent price, which may include a contribution of the Manager’s assets in exchange for units of limited partnership interest in our Operating Partnership (“OP Units”) or other tax-efficient transaction. The termination fee, if any, will be equal to three times the sum of the base management fee and incentive fee earned, in each case, by our Manager during the 12-month period prior to such termination, calculated as of the end of the most recently completed fiscal quarter. These provisions may substantially restrict our ability to terminate the Management Agreement without cause and would cause us to incur substantial costs in connection with such a termination. Furthermore, in the event that our Management Agreement is terminated, with or without cause, and we are unable to identify a suitable replacement to manage us, our ability to execute our business plan could be adversely affected.

Because we are dependent upon our Manager and its affiliates to conduct our operations, any adverse changes in the financial health of our Manager or its affiliates or our relationship with them could hinder our operating performance and the return on your investment.

While we are externally managed, we are dependent on our Manager and its affiliates to manage our operations and acquire and manage our portfolio of real estate assets. Under the direction of our board of directors, and subject to our investment guidelines, our Manager makes all decisions with respect to the management of our Company. Our Manager depends upon the fees and other compensation that it receives from us in connection with managing our Company to conduct its operations. Any adverse changes in the financial condition of our Manager or its affiliates, or our relationship with our Manager, could hinder its ability to successfully manage our operations and our portfolio of investments, which would adversely affect us and our stockholders.

Our board of directors has approved very broad investment guidelines for our Manager and will not approve each investment and financing decision made by our Manager unless required by our investment guidelines.

Our Manager is authorized to follow very broad investment guidelines established by our board of directors. Our board of directors 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 of directors may rely primarily on information provided to them by our Manager. Furthermore, transactions entered into by our Manager may be costly, difficult or impossible to unwind by the time they are reviewed by our board of directors. Our Manager 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.

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Our Manager and our senior management team have limited experience managing a REIT and limited experience managing a publicly traded REIT.

The experience of our senior management team in managing a REIT is limited to the time since 2008, and that of our Manager is limited to the time since the completion of the IPO. Moreover, our Manager and most members of our senior management team have limited experience managing a publicly traded REIT. We cannot assure you that the past experience of our Manager and our senior management team will be sufficient to successfully operate our Company as a REIT or a publicly traded company, including the requirements to timely meet disclosure requirements of the SEC, and comply with the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”).

Risks Related to Conflicts of Interest

The Management Agreement with our Manager was not negotiated on an arm’s-length basis and may not be as favorable to us as if it had been negotiated with an unaffiliated third party.

Our executive officers, including one of our five directors (who is also chairman of our board of directors), are executives of Bluerock. Our Management Agreement was negotiated between related parties and its terms, including fees payable to our Manager, may not be as favorable to us as if it had been negotiated with an unaffiliated third party. In addition, we may choose not to enforce, or to enforce less vigorously, our rights under the Management Agreement because of our desire to maintain our ongoing relationship with Bluerock and its affiliates.

We may have conflicts of interest with our Manager and other affiliates, which could result in investment decisions that are not in the best interests of our stockholders.

There are numerous conflicts of interest between our interests and the interests of our Manager, Bluerock and their respective affiliates, including conflicts arising out of allocation of personnel to our activities, allocation of investment opportunities between us and investment vehicles affiliated with Bluerock, purchase or sale of apartment properties, including from or to Bluerock or its affiliates and fee arrangements with our Manager that might induce our Manager to make investment decisions that are not in our best interests. Examples of these potential conflicts of interest include:

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Any of these and other conflicts of interest between us and our Manager 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.

Certain current or future private investment funds managed by Bluerock or its affiliates may have the right to co-invest with us in Class A apartment properties in our target markets, which could adversely affect our ability to invest timely in our target assets, thereby materially and adversely affecting our results of operations and our ability to make distributions to our stockholders.

Certain current or future private investment funds managed by Bluerock or its affiliates may have the right to co-invest with us in Class A apartment properties in our target markets under an investment allocation agreement, subject to us and each fund having capital available for investment and the determination by our Manager and the general partner of each of such funds, which is, or will be, an affiliate of Bluerock, that the proposed investment is suitable for us and such fund, respectively. Pursuant to the investment allocation agreement, the Bluerock-affiliated funds will have the right to co-invest with us under certain circumstances. Depending on the circumstances, we may co-invest in a particular asset with one or any combination of the Bluerock-affiliated funds. To the extent that one of the Bluerock-affiliated funds has significant available capital, the likelihood that we may co-invest in a particular asset with such fund could increase significantly. To the extent that we acquire assets with the Bluerock-affiliated funds, our ability to invest the net proceeds from an offering in revenue-generating assets in the near term may be hindered, which would have a material adverse effect on our results of operations and ability to make distributions to our stockholders. In addition, because affiliates of Bluerock also manage the Bluerock-affiliated funds, and fees payable to such affiliates by the Bluerock-affiliated funds may be more advantageous than fees payable by us to our Manager, our interests in such investments may conflict with the interests of the Bluerock-affiliated funds, and our Manager or its affiliates may take actions that may not be most favorable to us, including in the event of a default or restructuring of assets subject to co-investment rights.

In addition, because these funds are, and other co-investment funds managed by Bluerock and its affiliates in the future likely will be closed-end funds with finite lives, such funds are expected to dispose of substantially all of the assets in their respective portfolios prior to dissolution. As a result, prior to such dissolutions, we may need to sell our interests in the co-investment assets before we otherwise would in order to avoid a potential conflict. Our decision to sell such interests will depend, among other things, on our ability to sell the interests at favorable prices or at all. It is also possible that our Manager or its affiliates, who also manage such funds, may sell such co-investment assets at times or prices that are not in the best interests of

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us or our stockholders. In addition, to the extent that such funds dispose of co-investment assets that are qualifying assets, we may be required to purchase additional qualifying assets (subject to the availability of capital at favorable prices or at all) or sell non-qualifying assets at inopportune times or prices in order to maintain our qualification as a REIT and our exemption from registration under the Investment Company Act. Even if our interests are not in conflict with those of funds with co-investment rights, we will not realize the full economic benefits of the investment. If any of the foregoing were to occur, our Manager’s ability to operate our business in a manner consistent with our business strategy could be hindered materially, which could have a material adverse effect on our results of operations and our ability to make distributions to our stockholders.

Bluerock and the Bluerock Funds’ ownership of a significant portion of the outstanding shares of our common stock on a fully diluted basis could give Bluerock the ability to control the outcome of matters submitted for stockholder approval and otherwise allow Bluerock to exert significant influence over our Company in a manner that may not be in the best interests of our other stockholders.

As of December 31, 2016, the Bluerock Funds beneficially own approximately 1.1% of our outstanding Class A common stock on a fully diluted basis and Bluerock, along with our Manager, senior executives of our Manager, and our directors, along with their affiliates, will beneficially own approximately 9.0% of our outstanding Class A common stock on a fully diluted basis. As a result of Bluerock and the Bluerock Funds’ significant ownership in our Company, Bluerock 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 of directors support. Conversely, Bluerock’s concentrated voting control could result in the consummation of such a transaction that our other stockholders and our board of directors do not support.

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

Our executive officers are also affiliated with or are executive and/or senior officers of our Manager, 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.

We may pursue less vigorous enforcement of terms of the contribution agreements for the apartment properties we acquired from Fund I and the Bluerock Funds in connection with the IPO because of conflicts of interest with our senior management team.

Our executive officers, and one of our directors (who is also chairman of our board of directors), have professional responsibilities with Fund I and the Bluerock Funds, which contributed interests in apartment properties to our Operating Partnership in connection with the IPO. As part of the contribution of these interests, Fund I and the Bluerock Funds made limited representations and warranties to us regarding the interests acquired. Any indemnification from Fund I and the Bluerock Funds related to the contributions is limited. We may choose not to enforce, or to enforce less vigorously, our rights under the contribution agreements due to our ongoing relationship between our executive officers and Bluerock.

Our Manager, our executive officers and their affiliates may face conflicts of interest and competing demands on their time, which could adversely impact your investment.

We rely on our Manager and its affiliates to select our properties and manage our assets and daily operations. Many of the same persons serve as directors, officers and employees of our Company, our Manager and its affiliates. This amount will vary from week to week depending on our needs, as well as the needs of our affiliates for which our officers perform functions. Certain of our Manager’s affiliates, including

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its principals, are presently, and plan in the future to continue to be, and our Manager plans in the future to be, involved with real estate programs and activities which are unrelated to us. As a result of these activities, our Manager, its employees and certain of its affiliates have conflicts of interest in allocating their time between us and other activities in which they are or may become involved. Our Manager and its employees will devote only as much of their time to our business as our Manager, in its judgment, determines is reasonably required, which may be substantially less than their full time. Therefore, our Manager and its employees may experience conflicts of interest in allocating management time, services, and functions among us and other of our affiliates and any other business ventures in which they or any of their key personnel, as applicable, are or may become involved. This could result in actions that are more favorable to other of our affiliates than to us. However, our Manager believes that it and its affiliates have sufficient personnel to discharge fully their responsibilities to all of the activities of our affiliates in which they are involved.

The incentive fee we pay our Manager may induce it to make riskier investments, which could adversely affect our financial condition, results of operations and the trading price of our stock.

The incentive fee payable by us to our Manager is determined based on AFFO, which may create an incentive for our Manager to make investments that are risky or more speculative than would otherwise be in our best interests. In evaluating investments and other management strategies, the incentive fee structure may lead our Manager to place undue emphasis on the maximization of AFFO at the expense of other criteria, such as preservation of capital, in order to increase its incentive fee. Investments with higher yields generally have higher risk of loss than investments with lower yields, and could result in higher investment losses, particularly during cyclical economic downturns, which could adversely affect the trading price of our stock.

We may be obligated to pay our Manager quarterly incentive fees even if we incur a net loss during a particular quarter and our Manager will receive a base management fee regardless of the performance of our portfolio.

Our Manager is entitled to a quarterly incentive fee based on our pre-incentive fee AFFO, which will reward our Manager if our quarterly AFFO exceeds an 8% hurdle on our adjusted stockholders’ equity. Our AFFO for a particular quarter will exclude the effect of any unrealized gains, losses or other items during that quarter that do not affect realized net income, even if these adjustments result in a net loss on our statement of operations for that quarter. Thus, we may be required to pay our Manager an incentive fee for a fiscal quarter even if we incur a net loss for that quarter as determined in accordance with GAAP. In addition, our Manager is entitled to receive a base management fee based on a percentage of stockholders’ equity, regardless of our performance or its performance in managing our business. Our Manager will also receive reimbursement of expenses and fees incurred directly on our behalf regardless of its or our performance. As a result, even if our Manager does not identify profitable investment opportunities for us, it will still receive material compensation from us. This compensation structure may reduce our Manager’s incentive to devote time and effort to seeking profitable opportunities for our portfolio.

If we acquire properties from affiliates of our Manager, the price may be higher than we would pay if the transaction were the result of arm’s-length negotiations.

We may acquire properties or investments from Bluerock, our Manager, directors or officers, or their respective affiliates. The prices we pay for such properties 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. Even though we expect to use an independent third-party appraiser to determine fair market value when acquiring properties from our Manager and its affiliates, we may pay more for particular properties 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

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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 Manager or 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, 2016, sixteen 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. We expect that our Manager will continue to be presented with opportunities to purchase all or a portion of a property. In such instances, it is likely that we will continue to work together with programs sponsored by Bluerock to apportion the assets within the property among us and such other programs in accordance with the investment objectives of the various programs and the terms of our investment allocation agreement. After such apportionment, the property would be owned by two or more programs sponsored by Bluerock or joint ventures composed of programs sponsored by affiliates of Bluerock. The negotiation of how to divide the property among the various programs 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 or our Manager. It is possible that in connection with the purchase of a property or in the course of negotiations with programs sponsored by Bluerock to allocate portions of such property, we may be required to purchase a property that we would otherwise consider inappropriate for our portfolio, in order to also purchase a property that our Manager considers desirable. Although we expect to conduct independent appraisals of the assets comprising the property prior to apportionment, 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 a third party unaffiliated with our Manager.

The terms pursuant to which affiliates of Bluerock manage one of our joint venture partners will differ from the terms pursuant to which our Manager manages us. Moreover, affiliates of Bluerock may also have a much more significant ownership interest in such joint venture partner than in us. As a result, Bluerock may have financial incentives to structure the terms of the joint venture in a way that favors such joint venture partner. 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 control both us and 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.

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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.

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. As of December 31, 2016, the ratio of our total indebtedness to the fair market value of our real estate investments as determined by our Manager was 65%, which is high relative to other listed REITs.

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 replace our Manager. 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

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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.

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:

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.

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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.

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

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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 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 MKT, the stock markets, including the NYSE MKT 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.

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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:

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 of directors.

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 2014 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.

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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.

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, 2016 have been paid from proceeds from our continuous registered offerings conducted prior to the IPO, proceeds from the IPO, proceeds from our subsequent underwritten 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.

We have issued 5,721,460 shares of Series A Preferred Stock, 21,482 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 128,518 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. 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.

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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 our Manager in payment of some or all of the base management fee or incentive fee or operating expense reimbursements that may be earned by our Manager. 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.

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 to be redeemed, 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

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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 of directors 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 of directors 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 B Preferred Stock, Series C Preferred Stock or Series D 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, 2016, our total long term indebtedness was approximately $710.6 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 we have issued 5,721,460 shares of Series A Preferred

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Stock, 21,482 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.

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.

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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 of directors must approve the actual payment of such distributions. Our board of directors 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 of directors could do so for any reason, and may be prohibited from doing so in the following instances:

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.

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/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/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/Delisting while any Series A Preferred Stock is outstanding also triggers a right of redemption for cash by the holders thereof, the effect of a 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 A Preferred Stock to receive dividends or other amounts on their shares of Series A Preferred Stock.

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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:

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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.

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 MKT, 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

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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.

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.

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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 each contain restrictions upon ownership and transfer of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock which may impair the ability of holders to acquire the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock and the shares of our common stock 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 each contain restrictions on ownership and transfer of each such series of preferred stock 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). 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 MKT 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 MKT 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 MKT 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 MKT. If our Class A common stock is no longer listed on the NYSE MKT 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 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 this offering, and we currently have no plan to list these securities on a securities exchange or to include these 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, 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 MKT. 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 MKT.

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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 MKT under the symbol “BRG.” Listing on the NYSE MKT 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.

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.

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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:

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.

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. 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 Units pursuant to negotiations among us and our affiliated dealer manager; as a result, the actual value of your investment may be substantially less than what you pay.

The selling price of the 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 this 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 you would receive upon liquidation.

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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 of directors 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 of directors in its sole discretion may determine. Any such issuance could result in dilution of the equity of our stockholders. Our board of directors may, in its sole discretion, authorize us to issue common stock or other equity or debt securities (a) to persons from whom we purchase apartment communities, as part or all of the purchase price of the community, or (b) to our Manager in lieu of cash payments required under the management agreement or other contract or obligation. Our board of directors, 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 of directors, 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 of directors 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 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

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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.

Our ability to redeem shares of Series B Preferred Stock may be limited by Maryland law.

Under Maryland law, a corporation may redeem stock as long as, after giving effect to the redemption, the corporation is able to pay its debts as they become due in the usual course (the equity solvency test) and its total assets exceed the sum of its total liabilities plus, unless its charter permits otherwise, the amount that would be needed, if the corporation were to be dissolved at the time of the redemption, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights on dissolution are superior to those whose stock is being redeemed (the balance sheet solvency test). If the Company is insolvent at any time when a redemption of shares of Series B Preferred Stock is required to be made, the Company may not be able to effect such redemption.

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

Our charter and the articles supplementary establishing the Series B Preferred Stock each contain, and the Warrant Agreement contains, restrictions on ownership and transfer of the Series B 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 B Preferred Stock prohibits 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 B Preferred Stock. 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 the Units.

There is a risk of delay in our redemption of the Series B 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 B Preferred Stock might be adversely affected, and stockholders entitled to a redemption payment may not receive payment.

Holders of the Series B 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 B Preferred Stock and dividends payable on such shares declines.

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

Our board of directors determines our major policies, including with regard to investment objectives, financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders. Holders of our Series B Preferred Stock may only vote, together as a single class with holders of Series A Preferred Stock, Series C Preferred Stock

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and Series D Preferred Stock, with respect to the creation of additional classes or series of preferred stock that are senior to the Series B Preferred Stock with respect to a liquidation, dissolution or winding up of our affairs. Holders of our Series B Preferred Stock otherwise have no voting rights.

We may have conflicts of interest with our Manager and other affiliates, which could result in investment decisions that are not in the best interests of our stockholders.

There are numerous conflicts of interest between our interests and the interests of our Manager, Bluerock and their respective affiliates, including conflicts arising out of allocation of personnel to our activities, allocation of investment opportunities between us and investment vehicles affiliated with Bluerock, purchase or sale of apartment properties, including from or to Bluerock or its affiliates and fee arrangements with our Manager that might induce our Manager to make investment decisions that are not in our best interests. Examples of these potential conflicts of interest include:

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Any of these and other conflicts of interest between us and our Manager 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 incentive fee we pay our Manager may induce it to make riskier investments, which could adversely affect our financial condition, results of operations and the trading price of our stock.

The incentive fee payable by us to our Manager is determined based on AFFO, which may create an incentive for our Manager to make investments that are risky or more speculative than would otherwise be in our best interests. In evaluating investments and other management strategies, the incentive fee structure may lead our Manager to place undue emphasis on the maximization of AFFO at the expense of other criteria, such as preservation of capital, in order to increase its incentive fee. Investments with higher yields generally have higher risk of loss than investments with lower yields, and could result in higher investment losses, particularly during cyclical economic downturns, which could adversely affect the trading price of our stock.

We may be obligated to pay our Manager quarterly incentive fees even if we incur a net loss during a particular quarter and our Manager will receive a base management fee regardless of the performance of our portfolio.

Our Manager is entitled to a quarterly incentive fee based on our pre-incentive fee AFFO, which will reward our Manager if our quarterly AFFO exceeds an 8% hurdle on our adjusted stockholders’ equity. Our AFFO for a particular quarter will exclude the effect of any unrealized gains, losses or other items during that quarter that do not affect realized net income, even if these adjustments result in a net loss on our statement of operations for that quarter. Thus, we may be required to pay our Manager an incentive fee for a fiscal quarter even if we incur a net loss for that quarter as determined in accordance with GAAP. In addition, our Manager is entitled to receive a base management fee based on a percentage of stockholders’ equity, regardless of our performance or its performance in managing our business. Our Manager will also receive reimbursement of expenses and fees incurred directly on our behalf regardless of its or our performance. As a result, even if our Manager does not identify profitable investment opportunities for us, it will still receive material compensation from us. This compensation structure may reduce our Manager’s incentive to devote time and effort to seeking profitable opportunities for our portfolio.

If you fail to meet the fiduciary and other standards under ERISA or the Code as a result of an investment in our stock, you could be subject to liability 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 ERISA, including pension or profit sharing plans and entities that hold assets of such ERISA Plans, and plans and accounts that 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”). If you are investing the assets of any Benefit Plan, you should satisfy yourself that:

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Fiduciaries may be held personally liable under ERISA for losses as a result of failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA. In addition, if an investment in our stock or holding of Warrants constitutes a non-exempt prohibited transaction under ERISA or the Code.

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. We may be unable to pay or maintain cash distributions or increase distributions over time.

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:

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 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 25% 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

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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.

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 of directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.

Our charter provides that our board of directors 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 25% 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 25% 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.

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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 of directors, 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 of directors 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 of directors 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.

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%. Dividends payable by REITs, however, generally are not eligible for the reduced rates. 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:

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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 penalties.

Special considerations apply to the purchase of stock 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:

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 claims for damages or for equitable remedies. In addition, if an investment in our shares 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.

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None.

As of December 31, 2016, we were invested in twenty-one operating real estate properties and ten development properties generally through joint venture partnerships. The following tables provide summary information regarding our operating and development investments, which are either consolidated or presented on the equity method of accounting.

Operating Properties

Multifamily Community, Name, Location		Number of Units				Year Built/Renovated(1)				Ownership Interest				Average Rent(2)				Occupancy %(3)
ARIUM at Palmer Ranch, Sarasota, FL			320				2016				95.0	%		$	1,168				96	%
ARIUM Grandewood, Orlando, FL			306				2005				95.0	%			1,226				97	%
ARIUM Gulfshore, Naples, FL			368				2016				95.0	%			1,171				96	%
ARIUM Palms, Orlando, FL			252				2008				95.0	%			1,222				96	%
ARIUM Pine Lakes, Port St. Lucie, FL			320				2003				85.0	%			1,075				96	%
ARIUM Westside, Atlanta, GA			336				2008				90.0	%			1,451				95	%
Ashton Reserve, Charlotte, NC			473				2015				100.0	%			1,041				95	%
Enders at Baldwin Park, Orlando, FL			220				2003				89.5	%			1,648				95	%
Fox Hill, Austin, TX			288				2010				94.6	%			1,176				98	%
Lansbrook Village, Palm Harbor, FL			619				2004				90.0	%			1,258				91	%
Legacy at Southpark, Austin, TX			250				2016				90.0	%			1,265				91	%
MDA Apartments, Chicago, IL			190				2006				35.3	%			2,283				97	%
Nevadan, Atlanta, GA			480				1990				90.0	%			1,090				93	%
Park & Kingston, Charlotte, NC			168				2015				96.0	%			1,183				96	%
Roswell City Walk, Roswell, GA			320				2015				98.0	%			1,438				86	%
Sorrel, Frisco, TX			352				2015				95.0	%			1,300				91	%
Sovereign, Fort Worth, TX			322				2015				95.0	%			1,306				95	%
The Brodie, formerly known as Deerfield, Austin, TX			324				2001				92.5	%			1,166				93	%
The Preserve at Henderson Beach, Destin, FL			340				2009				100.0	%			1,284				93	%
Village Green of Ann Arbor, Ann Arbor, MI			520				2013				48.6	%			1,216				94	%
Whetstone, Durham, NC			204				2015				(4)				1,252				90	%
Total/Average			6,972											$	1,266				94	%

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Development Properties

Multifamily Community Name, Location		Number of Units				Total Estimated Construction Cost (in millions)				Cost to Date (in millions)				Estimated Construction Cost Per Unit				Initial Occupancy				Final Units to be Delivered				Pro Forma Average Rent(1)
Alexan CityCentre, Houston, TX			340			$	83.0			$	58.8			$	244,118				2Q17				4Q17			$	2,144
Alexan Southside Place, Houston, TX			270			$	49.0			$	16.0			$	181,481				4Q17				2Q18			$	2,012
APOK Townhomes, Boca Raton, FL			90			$	28.9			$	5.7			$	321,111				1Q18				3Q18			$	2,549
Crescent Perimeter, Sandy Springs, GA			320			$	70.0			$	17.6			$	218,750				3Q18				1Q19			$	1,749
Domain 1, Garland, TX			299			$	52.1			$	5.9			$	174,247				3Q18				1Q19			$	1,469
Flagler Village, Fort Lauderdale, FL			384			$	132.8			$	21.6			$	345,833				3Q19				3Q20			$	2,481
Helios, formerly known as Cheshire Bridge, Atlanta, GA			285			$	50.9			$	28.5			$	178,596				2Q17				4Q17			$	1,486
Lake Boone Trail, Raleigh, NC			245			$	40.2			$	15.4			$	164,082				1Q18				3Q18			$	1,271
Vickers Village, Roswell, GA			79			$	30.4			$	8.6			$	384,810				1Q18				3Q18			$	3,176
West Morehead, Charlotte, NC			286			$	60.0			$	11.3			$	209,790				4Q18				2Q19			$	1,507
			2,598																							$	1,875

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 our investments in joint ventures to determine if the joint venture 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 with changes in the fair value of the VIE’s net assets. We continuously re-assess whether at each level of the joint venture whether the entity in which we hold an interest is (i) a VIE, and (ii) if we are the primary beneficiary of the VIE. If it was determined that the joint venture qualified as a VIE and we were the primary beneficiary, it 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

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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.

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

None.

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PART II

Market Information

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

On February 10, 2017, the closing price of our Class A common stock, as reported on the NYSE MKT, was $13.37.

The following table sets forth, for the periods indicated, the high and low intraday sale prices of our Class A common stock for each quarter since the completion of our IPO, as reported on the NYSE MKT, and the distributions paid by us with respect to those periods.

Quarter Ended		High				Low				Distributions(1)
March 31, 2015		$	13.73			$	12.42			$	0.290
June 30, 2015		$	14.07			$	12.27			$	0.290
September 30, 2015		$	13.08			$	10.53			$	0.290
December 31, 2015		$	12.84			$	10.33			$	0.290
March 31, 2016		$	12.14			$	9.06			$	0.290
June 30, 2016		$	13.03			$	10.65			$	0.290
September 30, 2016		$	13.90			$	12.26			$	0.290
December 31, 2016		$	14.77			$	11.40			$	0.290

On January 6, 2017, our board of directors authorized, and we declared monthly dividends for the first quarter of 2017 equal to a quarterly rate of $0.29 per share on our Class A common stock, payable monthly to the stockholders of record as of January 25, 2017, February 24, 2017 and March 24, 2017, which was paid in cash on February 3, 2017, and which will be paid in cash on March 3, 2017 and April 5, 2017, respectively. Holders of OP and LTIP Units are entitled to receive “distribution equivalents” at the same time as dividends are paid to holders of our Class A common stock.

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On January 6, 2017, our board of directors authorized, and we declared monthly dividends for the first quarter of 2017 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, 2017, February 24, 2017 and March 24, 2017, which was paid in cash on February 3, 2017, and which will be paid in cash on March 3, 2017 and April 5, 2017, respectively.

		Period Ending
Index		04/02/14				06/30/14				12/31/14				06/30/15				12/31/15				06/30/16				12/31/16
Bluerock Residential Growth REIT, Inc			100.00				89.77				88.62				94.28				92.60				107.22				118.18
Russell 2000			100.00				100.35				102.01				106.86				97.50				99.66				118.28
MSCI US REIT (RMS)			100.00				106.44				117.92				110.62				120.89				137.28				131.29

Stockholder Information

As of February 10, 2017, we had approximately 24,168,169 shares of Class A common stock outstanding held by a total of 584 stockholders, one of which is the holder for all beneficial owners who hold in street name.

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Distributions

Future distributions paid by the Company will be at the discretion of our board of directors 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 of directors deems relevant.

Distributions paid on our Class A common shares, and our Class B-1, B-2 and B-3 common shares (all of which were converted to Class A common stock on March 23, 2015, September 19, 2015 and March 17, 2016, respectively), and 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, 2016 and 2015, respectively, were as follows (amounts in thousands, except per share amounts):

		Distributions
		Declared Per Share				Total Paid
2015
First Quarter		$	0.290			$	3,560
Second Quarter			0.290				4,628
Third Quarter			0.290				5,931
Fourth Quarter			0.290				6,008
Total		$	1.160			$	20,127
2016
First Quarter		$	0.290			$	6,030
Second Quarter			0.290				6,082
Third Quarter			0.290				6,111
Fourth Quarter			0.290				6,214
Total		$	1.160			$	24,437

On January 6, 2017, our board of directors declared monthly dividends for the first quarter of 2017 equal to a quarterly rate of $0.29 per share on our Class A common stock, payable monthly to the stockholders of record as of January 25, 2017, February 24, 2017 and March 24, 2017, which was paid in cash on February 3, 2017, and which will be paid in cash on March 3, 2017 and April 5, 2017, respectively. Holders of OP and LTIP Units are entitled to receive “distribution equivalents” at the same time as dividends are paid to holders of our Class A common stock.

The declared dividends equal a monthly dividend on the Class A common stock as follows: $0.096666 per share for the dividend paid to stockholders of record as of January 25, 2017, $0.096667 per share for the dividend paid to stockholders of record as of February 24, 2017, and $0.096667 per share for the dividend paid to stockholders of record as of March 24, 2017. A portion of each dividend may constitute a return of capital for tax purposes. There is no assurance that we will continue to declare dividends or at this rate.

On January 6, 2017, our board of directors authorized, and we declared monthly dividends for the first quarter of 2017 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, 2017, February 24, 2017 and March 24, 2017, which was paid in cash on February 3, 2017, and which will be paid in cash on March 3, 2017 and April 5, 2017, respectively.

Distributions paid for the years ended December 31, 2016, 2015 and 2014, respectively, were funded from cash provided by operating activities except with respect to $3,283,000, $5,524,000 and $6,400,000, respectively, which was funded from sales of real estate, borrowings, and/or proceeds from our equity offerings.

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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,
		2016				2015				2014
		(In thousands)
Cash provided by operating activities		$	34,444			$	16,708			$	5,145
Cash distributions to preferred shareholders			(9,664	)			—				—
Cash distributions to common shareholders			(24,437	)			(20,127	)			(5,771	)
Cash distributions to Operating Partnership unit holders			(3,626	)			(2,105	)			(5,774	)
Total distributions		$	(37,727	)		$	(22,232	)		$	(11,545	)
Shortfall		$	(3,283 )			$	(5,524 )			$	(6,400 )
Proceeds from sale of joint venture interests		$	20,521			$	—			$	4,985
Proceeds from sale of real estate		$	36,675			$	17,862			$	—
Proceeds from sale of unconsolidated real estate joint ventures		$	—			$	15,590			$	10,830

Change in Transfer Agent and Registrar

On November 3, 2016, we entered into the Transfer Agency and Services Agreement with Computershare Trust Company, N.A. (“Computershare Trust Company”) and Computershare, Inc., whereby Computershare Trust Company agreed to serve as transfer agent and registrar for our Class A common stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock. Prior to the entry into this agreement, American Stock Transfer & Trust Company, LLC had served as transfer agent for each of the respective classes and series of securities listed above.

Equity Compensation Plans

Incentive Plans

On December 16, 2013, our board of directors adopted, and on January 23, 2014 our stockholders approved, the 2014 Equity Incentive Plan for Individuals (the “2014 Individuals Plan”) and the 2014 Equity Incentive Plan for Entities (the “2014 Entities Plan). The purpose of the 2014 Individuals Plan and the 2014 Entities Plan was to attract and retain independent directors, executive officers and other key employees, including officers and employees of our Manager and Operating Partnership and their affiliates and other service providers, including our Manager and its affiliates. We refer to both the 2014 Individuals Plan and the 2014 Entities Plan collectively as the 2014 Incentive Plans. The 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.

On April 7, 2015, our board of directors adopted, and on May 28, 2015 our stockholders approved, the amendment and restatement of the 2014 Individuals Plan (“Amended 2014 Individuals Plan”) and the 2014 Entities Plan (“Amended 2014 Entities Plan”). Upon the approval by our stockholders of the Amended 2014 Individuals Plan and the Amended 2014 Entities Plan (the “Amended 2014 Individuals Plan and the Amended 2014 Entities Plan, together the “Amended 2014 Incentive Plans”), the 2014 Individuals Plan and the 2014 Entities Plan were terminated. Under the Amended 2014 Incentive Plans, we have reserved and authorized an aggregate number of 475,000 shares of our common stock for issuance. As of February 6, 2017, 7,500 shares were available for future issuance.

Administration of the Amended 2014 Incentive Plans

The Amended 2014 Incentive Plans are administered by the compensation committee of our board of directors, except that the Amended 2014 Plans will be administered by our board of directors with respect to awards made to directors who are not employees. This summary uses the term “administrator” to refer to the compensation committee or our board of directors, as applicable. The administrator will approve all terms of awards under the Amended 2014 Incentive Plans. The administrator will also approve who will receive grants under the Amended 2014 Incentive Plans and the number of shares of our Class A common stock subject to each grant.

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Eligibility

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

Entities that provide significant services to us or our affiliates, including our Manager, that are selected by the administrator may receive grants under the Amended 2014 Entities Plan.

The following table provides information about our common stock that may be issued upon the exercise of options, warrants and rights under our Amended 2014 Incentive Plans, as of December 31, 2016.

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			—				—				7,500
Equity compensation plans not approved by security holders			—				—				—
Total			—				—				7,500

We have adopted a Code of Ethics, which we refer to as the Code, for our directors, officers and employees intended to satisfy NYSE MKT 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 the Code or waivers of a provision of the Code required to be disclosed pursuant to Item 5.05 of Form 8-K will be disclosed through our website.

Unregistered Sale of Equity Securities

We previously disclosed our issuances during the years ended December 31, 2016, 2015 and 2014 of equity securities that were not registered under the Securities Act of 1933, as amended, in Item 33 of Part II of Pre-Effective Amendment No. 1 to our Registration Statement on Form S-11 filed with the Securities and Exchange Commission (the “SEC”) on September 29, 2014, and in our Current Reports on Form 8-K and amendments thereto on Form 8-K/A, as applicable, filed with the SEC on February 17, 2015, February 18, 2015, May 13, 2015, May 15, 2015, July 9, 2015, August 12, 2015, August 17, 2015, September 11, 2015, September 11, 2015, November 17, 2015, November 19, 2015, February 26, 2016, March 1, 2016, May 9, 2016, May 11, 2016, August 8, 2016, August 9, 2016, and November 14, 2016, and in our Form 10-Q filed on August 8, 2016.

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The following table sets forth our selected consolidated financial data and should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) included elsewhere in this report.

		Year Ended December 31,
		2016				2015				2014				2013				2012
		(In thousands, except per share)
Operating Data:
Total revenue		$	77,051			$	44,255			$	30,363			$	12,070			$	2,571
Operating income (loss)			(1,032	)			(1,623	)			(3,565	)			(1,125	)			(4,074	)
Preferred returns and equity in income (loss) of unconsolidated real estate joint ventures			11,632				6,590				1,066				(103	)			—
Equity in gain on sale of unconsolidated real estate joint venture interests			—				11,303				4,067				1,604				—
Gain on sale of real estate assets			4,947				2,677				—				—				—
Income (loss) from continuing operations			(2,974	)			7,643				(6,674	)			(4,219	)			8,086
Net income (loss)			(2,974	)			7,643				(6,558	)			(4,413	)			7,365
Net (income) loss attributable to noncontrolling partner interest			1,355				5,855				(1,386	)			(1,442	)			3,444
Preferred share dividends			(13,763	)			(1,153	)			—				—				—
Net income (loss) available to common shareholders			(18,985	)			635				(5,172	)			(2,971	)			3,921
Earnings (loss) per common share, basic
Continuing operations		$	(0.91	)		$	0.04			$	(0.98	)		$	(2.70	)		$	2.22
Discontinued operations			—				—				0.02				(0.19	)			0.11
Basic Earnings (loss)		$	(0.91	)		$	0.04			$	(0.96	)		$	(2.89	)		$	2.33
Earnings (loss) per common share, diluted
Continuing operations		$	(0.91	)		$	0.04			$	(0.98	)		$	(2.70	)		$	2.20
Discontinued operations			—				—				0.02				(0.19	)			0.11
Diluted earnings (loss)		$	(0.91	)		$	0.04			$	(0.96	)		$	(2.70	)		$	2.31
Weighted average shares outstanding:
Basic			20,805,852				17,404,348				5,381,787				1,032,339				1,679,778
Diluted			20,805,852				17,417,198				5,381,787				1,032,339				1,696,253
Cash dividends declared per BRG common share		$	1.16			$	1.16			$	0.92			$	0.31			$	0.31
Balance Sheet Data (at December 31):
Investment in real estate (before accumulated depreciation)			1,029,214				556,820				299,686				168,514				147,740
Total assets			1,241,322				699,227				343,887				171,764				155,816
Total mortgages payable, net			710,575				380,102				210,644				95,773				95,285
Total liabilities			735,412				392,350				217,876				125,681				112,332
Total BRG shareholders' equity			241,728				207,184				92,385				12,001				11,038
Noncontrolling interest			50,833				30,528				33,626				34,082				32,073
Total equity			292,561				237,712				126,011				46,083				43,111

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		Year Ended December 31,
		2016				2015				2014				2013				2012
		(In thousands, except per share)
Other Data:
Funds from operations (“FFO”) attributable to common shareholders(1)		$	1,274			$	5,044			$	(4,375	)		$	(2,217	)		$	(3,084	)
Net cash provided by operating activities			34,444				16,708				5,145				245				(2,048	)
Net cash used in investing activities			(512,903	)			(288,710	)			(89,085	)			(16,545	)			(10,852	)
Net cash provided by financing activities			491,546				317,903				104,015				16,495				15,269

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, as “Bluerock”, and we refer to our external manager, BRG Manager, LLC, as our “Manager.” Both Bluerock and our 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.

We are currently externally managed by our Manager, an affiliate of Bluerock. 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, 2016, our portfolio consisted of interests in thirty-one properties (twenty-one operating and ten development properties). The thirty-one properties contain an aggregate of 9,570 units, comprised of 6,972 operating units and 2,598 units under development. As of December 31, 2016, these properties, exclusive of our development 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.

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Significant Developments

During 2016, we acquired nine operating multifamily communities generally through various multi-tiered joint ventures in which we have indirect ownership ranging from 85% to 100%, representing an aggregate of 3,058 units, for an aggregate purchase price of approximately $484.0 million. These properties were located in: Naples, Florida; Sarasota, Florida; Destin, Florida; Atlanta, Georgia; Port St. Lucie, Florida; Austin, Texas; and Roswell, Georgia. In addition, we have made common equity investments amounting to $26.2 million ranging from 60% to 80% in which we have indirect ownership in two properties for the development of multifamily communities, representing an aggregate of 399 units, located in Atlanta and Roswell, Georgia.

We also invested in or continued to invest in eight multi-tiered development joint ventures through common or preferred equity investments or mezzanine loans, representing an aggregate of 2,199 units. These properties are located in: Ft. Lauderdale, Florida; Raleigh, North Carolina; Charlotte, North Carolina; Houston, Texas; Atlanta, Georgia; Garland, Texas; and Boca Raton, Florida.

During the year ended December 31, 2016, we issued 2,846,460 shares of Series A Preferred Stock pursuant to underwritten offerings and at the market offerings (“ATM”) with net proceeds of approximately $68.7 million after deducting underwriting discounts and commissions and offering costs. In addition, during the same period, we issued 21,482 shares of Series B Preferred Stock under a continuous registered offering with net proceeds of approximately $19.3 million after commissions, fees and offering costs. We also issued 2,323,750 shares of Series C Preferred Stock pursuant to underwritten offerings and at the market offerings (“ATM”) with net proceeds of approximately $56.0 million after deducting underwriting discounts and commissions and offering costs. We also issued 2,850,602 shares of Series D Preferred Stock pursuant to an underwritten offering with net proceeds of approximately $69.0 million after deducting underwriting discounts and commissions and offering costs. Together these offerings are referred to as the 2016 Follow-On Offerings.

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. As a result, we believe that the top 40 primary markets below the gateway markets, including our target markets, provide the opportunity to source investments at cap rates that are at significant premiums to the gateway markets, and have the potential to provide not only significant current income, but also attractive capital appreciation.

We additionally believe that a number of our target growth markets are underserved by highly amenitized institutional quality apartment properties, especially as the wave of Millennials moves into its prime rental years over 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 financial buyers who entered the market following the recent U.S. recession to take advantage of historical spreads between higher acquisition cap rates and lower, long-term financing interest rates exit as their disposition periods commence, we believe the next phase of the cycle provides opportunity for real estate-centric buyers (i.e., buyers who have real estate-specific investment expertise and deep intellectual capital in specific markets), to create value using proven real estate investment strategies.

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

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due to affordability issues, and negative sentiments toward home ownership following the housing crisis experienced during the Great Recession.

Results of Operations

Note 3, “Real Estate Assets Held for Sale, Discontinued Operations and Sale of Joint Venture Equity Interests,” to our Consolidated Financial Statements provides a 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.

The following is a summary of our stabilized operating real estate investments as of December 31, 2016:

Multifamily Community		Year Built/Renovated(1)				Number of Units				Ownership Interest				Occupancy %
ARIUM at Palmer Ranch			2016				320				95.0	%			96	%
ARIUM Grandewood			2005				306				95.0	%			97	%
ARIUM Gulfshore			2016				368				95.0	%			96	%
ARIUM Palms			2008				252				95.0	%			96	%
ARIUM Pine Lakes			2003				320				85.0	%			96	%
ARIUM Westside			2008				336				90.0	%			95	%
Ashton Reserve			2015				473				100.0	%			95	%
Enders Place at Baldwin Park			2003				220				89.5	%			95	%
Fox Hill			2010				288				94.6	%			98	%
Lansbrook Village			2004				619				90.0	%			91	%
Legacy at Southpark			2016				250				90.0	%			91	%
MDA Apartments			2006				190				35.3	%			97	%
Nevadan			1990				480				90.0	%			93	%
Park & Kingston			2015				168				96.0	%			96	%
Roswell City Walk			2015				320				98.0	%			86	%
Sorrel			2015				352				95.0	%			91	%
Sovereign			2015				322				95.0	%			95	%
The Brodie, formerly known as Deerfield			2001				324				92.5	%			93	%
The Preserve at Henderson Beach			2009				340				100.0	%			93	%
Village Green of Ann Arbor			2013				520				48.6	%			84	%
Whetstone			2015				204				(2)				90	%
Total/Average							6,972								94	%

Year ended December 31, 2016 as compared to the year ended December 31, 2015

Revenue

Net rental income increased $31.1 million, or 73.5%, to $73.4 million for the year ended December 31, 2016 as compared to $42.3 million for the same prior year period. This increase was primarily due to the acquisition of interests in various properties subsequent to January 1, 2015, accounted for on a consolidated basis, as shown in Item 1. Business “Summary of Investments and Dispositions”.

Other property revenue increased $1.7 million, or 85.0%, to $3.7 million for the year ended December 31, 2016 as compared to $2.0 million for the same prior year period. This increase was primarily due to the acquisition of interests in the properties noted above.

Expenses

Property operating expenses increased $12.0 million, or 67.0%, to $29.9 million for the year ended December 31, 2016 as compared to $17.9 million for the same prior year period. This increase was primarily

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due to the acquisition of interests in the properties noted above. Property NOI margins improved to 61.2% of total revenues for the year ended December 31, 2016, from 59.7% in the prior year period.

General and administrative expenses amounted to $5.9 million for the year ended December 31, 2016 as compared to $4.1 million for the same prior year period. Excluding non-cash amortization of LTIPs and restricted stock expense of $3.0 million and $2.1 million, for the years ended December 31, 2016 and 2015, respectively, general and administrative expenses increased to $2.8 million, or 3.7% of revenues for the year ended December 31, 2016 as compared to $2.0 million, or 4.4% of revenues, for the same prior year end period.

Management fees amounted to $6.5 million for the year ended December 31, 2016 as compared to $4.2 million for the same prior year period. Base management fees were $6.4 million and $3.3 million for the years ended December 31, 2016 and 2015, respectively. Incentive fees were $0.2 million and $0.9 million for the years ended December 31, 2016 and 2015, respectively. These increases were primarily due to the significant increase in our equity base as a result of our Follow-On Offerings. LTIP Units were issued for the payment of base management and incentive fees of $6.5 million and $3.7 million for the years ended December 31, 2016 and 2015, respectively, while cash payment was made for none and $0.5 million for the years ended December 31, 2016 and 2015, respectively.

Acquisition costs amounted to $4.6 million for the year ended December 31, 2016 as compared to $3.5 million for the same prior year period. These costs relate to the acquisition of 13 properties during 2016 and 14 acquisitions in 2015.

Depreciation and amortization expenses increased to $31.2 million for the year ended December 31, 2016 as compared to $16.2 million for the same prior year period. This increase was primarily due to the acquisition of interests in the properties noted above.

Other Income and Expenses

Other income and expenses amounted to net other expense of $1.9 million for the year ended December 31, 2016 as compared to net other income of $9.3 million for the same prior year period. This was primarily due to an increase in the gain on the sale of assets of $2.2 million in 2016 related to Springhouse at Newport News, an increase in income from unconsolidated joint venture interest of $5.0 million due to additional investments, and a $3.8 million gain related to the revaluation of equity on business combination, partially offset by a gain on the sale of an unconsolidated joint venture interest of $11.3 million in 2015 related to Berry Hill, an $8.5 million increase in interest expense, net, as the result of the increase in mortgage payables resulting from the acquisition of interests in the properties mentioned above, and loss on early extinguishment of debt of $2.4 million.

Year ended December 31, 2015 as compared to the year ended December 31, 2014

Revenue

Net rental income increased $13.1 million, or 44.9%, to $42.3 million for the year ended December 31, 2015 as compared to $29.2 million for the same prior year period. This increase was primarily due to the acquisition of interests in various properties subsequent to January 1, 2014, accounted for on a consolidated basis, as shown in Item 1. Business “Summary of Investments and Dispositions”.

Other property revenue increased $0.8 million, or 66.7%, to $2.0 million for the year ended December 31, 2015 as compared to $1.2 million for the same prior year period. This increase was primarily due to the acquisition of interests in the properties noted above.

Expenses

Property operating expenses increased $4.7 million, or 35.6%, to $17.9 million for the year ended December 31, 2015 as compared to $13.2 million for the same prior year period. This increase was primarily due to the acquisition of interests in the properties noted above. Property NOI margins improved to 59.7% of total revenues for the year ended December 31, 2015, from 56.5% in the prior year period.

General and administrative expenses amounted to $4.1 million for the year ended December 31, 2015 as compared to $2.7 million for the same prior year period. Excluding non-cash amortization of LTIPs and

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restricted stock expense of $2.1 million and $1.0 million, for the years ended December 31, 2015 and 2014, respectively, general and administrative expenses increased to $2.0 million, or 4.4% of revenues for the year ended December 31, 2015 as compared to $1.7 million, or 5.5% of revenues, for the same prior year end period.

Management fees amounted to $4.2 million for the year ended December 31, 2015 as compared to $1.0 million for the same prior year period. Base management fees were $3.3 million and $0.9 million for the years ended December 31, 2015 and 2014, respectively. Incentive fees were $0.9 million and $0.1 million for the years ended December 31, 2015 and 2014, respectively. These increases were primarily due to the significant increase in our equity base as a result of our Follow-On Offerings prior to 2016. LTIP Units were issued for the payment of base management and incentive fees of $3.7 million and $0.1 million for the years ended December 31, 2015 and 2014, respectively, while cash payment was made for $0.5 million and $0.9 million for the years ended December 31, 2015 and 2014, respectively.

Acquisition costs amounted to $3.5 million for the year ended December 31, 2015 as compared to $4.4 million for the same prior year period. This decrease was primarily due to the acquisition of numerous properties during the second quarter of 2014 in conjunction with the IPO contribution transactions and subsequent 2014 acquisitions as compared to the acquisitions in 2015, as reflected in Item 1. Business “Summary of Investments and Dispositions”.

Depreciation and amortization expenses increased to $16.2 million for the year ended December 31, 2015 as compared to $12.6 million for the same prior year period. This increase was primarily due to the acquisition of interests in the properties noted above.

Other Income and Expenses

Other income and expenses amounted to net other income of $9.3 million for the year ended December 31, 2015 as compared to net expenses of $3.1 million for the same prior year period. This was primarily due to a gain on the sale of an unconsolidated joint venture interest of $11.3 million in 2015 related to Berry Hill, a gain on the sale of assets of $2.7 million in 2015 related to North Park Towers, an increase in income from unconsolidated joint venture interest of $5.5 million due to additional investments, partially offset by a $2.9 million increase in interest expense, net, as the result of the increase in mortgage payables resulting from the acquisition of interests in the properties mentioned above and the gain on sale of unconsolidated joint ventures of $4.1 million in 2014.

Income from Discontinued Operations

Income from discontinued operations was $0.1 million for the year ended December 31, 2014. There was no income from discontinued operations in 2015. The 2014 amount related to the discontinued operations of our Creekside property, which was sold on March 28, 2014.

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, 2016 and 2015, the same store properties included properties owned at January 1, 2015. Our same store properties for the twelve months ended December 31, 2016 and 2015 were Enders Place at Baldwin Park, Village Green of Ann Arbor, MDA Apartments, Lansbrook Village and ARIUM Grandewood. Our non-same store properties for the same period were 23Hundred@Berry Hill, Springhouse at Newport News, Fox Hill, Park & Kingston, Ashton Reserve, ARIUM Palms, Sovereign, Sorrel, ARIUM Gulfshore, ARIUM at Palmer Ranch, The Preserve at Henderson Beach, ARIUM Westside, Nevadan, Roswell City Walk, ARIUM Pine Lakes, The Brodie, Legacy at

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Southpark, Vickers Village, North Park Towers and Crescent Perimeter. 23Hundred@Berry Hill was accounted for under the equity method during the twelve months December 31, 2015, but is reflected in our table of net operating income as if it was consolidated. For the twelve months ended December 31, 2015, the components of non-same store property revenues, property expenses and net operating income represented by this property were $0.2 million, $0.1 million and $0.1 million, respectively. For the three months ended December 31, 2015, the components of non-same store property revenues, property expenses and net operating income represented by this property were insignificant. 23Hundred@Berry Hill financial information can be found at Note 3, “Sale of Unconsolidated Real Estate Joint Ventures and Held for Sale Property.” 23Hundered@Berry Hill was sold on January 14, 2015. Certain amounts in prior year same store presentation have been reclassified to conform to the current period presentation.

For comparison of our three months ended December 31, 2016 and 2015, the same store properties included properties owned at October 1, 2015. Our same store properties for the three months ended December 31, 2016 and 2015 were Enders Place at Baldwin Park, Village Green of Ann Arbor, MDA Apartments, Lansbrook Village, ARIUM Grandewood, Fox Hill, ARIUM Palms and Park & Kingston. Our non-same store properties for the same period were Springhouse at Newport News, Ashton Reserve, Sovereign, Sorrel, ARIUM Gulfshore, ARIUM at Palmer Ranch, The Preserve at Henderson Beach, ARIUM Westside, Nevadan, Roswell City Walk, ARIUM Pine Lakes, The Brodie, Legacy at Southpark, Vickers Village, and Crescent Perimeter.

Because of the limited number of same store properties as compared to the number of properties in our portfolio in 2016 and 2105, 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, 2016 and 2015 (dollars in thousands):

		Year Ended December 31,								Change
		2016				2015				$				%
Property Revenues
Same Store		$	30,018			$	28,405			$	1,613				5.7	%
Non-Same Store			47,016				16,003				31,013				193.8	%
Total property revenues			77,034				44,408				32,626				73.5	%
Property Expenses
Same Store			11,165				10,848				317				2.9	%
Non-Same Store			18,705				7,058				11,647				165.0	%
Total property expenses			29,870				17,906				11,964				66.8	%
Same Store NOI			18,853				17,557				1,296				7.4	%
Non-Same Store NOI			28,311				8,945				19,366				216.5	%
Total NOI(1)		$	47,164			$	26,502			$	20,662				78.0	%

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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, 2016 and 2015 (dollars in thousands):

		Three Months Ended December 31,								Change
		2016				2015				$				%
Property Revenues
Same Store		$	10,114			$	9,565			$	549				5.7	%
Non-Same Store			12,263				3,630				8,633				237.8	%
Total property revenues			22,377				13,195				9,182				69.6	%
Property Expenses
Same Store			3,694				3,516				178				5.1	%
Non-Same Store			4,657				1,424				3,233				227.0	%
Total property expenses			8,351				4,940				3,411				69.0	%
Same Store NOI			6,420				6,049				371				6.1	%
Non-Same Store NOI			7,606				2,206				5,400				244.8	%
Total NOI(1)		$	14,026			$	8,255			$	5,771				69.9	%

Twelve Months Ended December 31, 2016 Compared to Twelve Months Ended December 31, 2015

Same store NOI for the twelve months ended December 31, 2016 increased by 7.4% to $18.9 million from $17.6 million for the 2015 period. There was a 5.7% increase in same store property revenues as compared to the 2015 period, primarily attributable to a 4.6% increase in average rental rates, the acquisition of 17 additional units at our Lansbrook property during 2016 and the acquisition of 15 units at Park and Kingston at the end of 2015, and a 40 basis point increase in average occupancy. Same stores expenses increased $0.4 million primarily due to increased 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 2016 and certain dispositions in 2015 and 2016. The results of operations for these properties have been included in our consolidated statements of operations from the date of acquisition.

Three Months Ended December 31, 2016 Compared to Three Months Ended December 31, 2015

Same store NOI for the three months ended December 31, 2016 increased by 6.1% to $6.4 million from $6.1 million for the 2015 period. There was a 5.7% increase in same store property revenues as compared to the 2015 period, primarily attributable to a 4.0% increase in average rental rates and the acquisition of 17 additional units at our Lansbrook property during 2016, and the acquisition of 15 additional units at Park and Kingston at the end of 2015, and an 80 basis point increase in average occupancy. Same stores expenses increased $0.2 million; the increased expenses were over multiple account categories and were driven by multiple factors.

Property revenues and property expenses for our non-same store properties increased significantly due to the properties acquired during 2016. The results of operations for these properties have been included in our consolidated statements of operations from the date of acquisition.

Prior year’s comparisons

For comparison of our three months ended December 31, 2015 and 2014, the same store properties included properties owned at October 1, 2014, excluding the Berry Hill property, which was under construction. Our same store properties for the three months ended December 31, 2015 and 2014 were Springhouse at Newport News, Enders Place at Baldwin Park, Village Green of Ann Arbor, MDA Apartments and Lansbrook Village. Our non-same store properties for the same periods were The Estates at Perimeter/Augusta, 23Hundred@Berry Hill, Grove at Waterford, ARIUM Grandewood, Park

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& Kingston, Fox Hill, Ashton Reserve and ARIUM Palms. Our same store properties for the twelve months ended December 31, 2015 and 2014 were Springhouse at Newport News, Enders Place at Baldwin Park and MDA Apartments. Our non-same store properties for the same period were The Estates at Perimeter/Augusta, 23Hundred@Berry Hill, Grove at Waterford, Village Green of Ann Arbor, North Park Towers, Lansbrook Village, ARIUM Grandewood, Park & Kingston, Fox Hill, Ashton, ARIUM Palms, Sorrel and Sovereign.

The Estates at Perimeter/Augusta was accounted for under the equity method during the three months ended December 31, 2014. 23Hundred@Berry Hill was accounted for under the equity method during a portion of the three months ended December 31, 2014. For the three months ended December 31, 2014, the components of non-same store property revenues, property expenses and net operating income represented by these properties were $0.8 million, $0.3 million and $0.5 million, respectively. There were no operating properties accounted for under the equity method during the three months ended December 31, 2015.

The Estates at Perimeter/Augusta was accounted for under the equity method and Creekside was accounted for as discontinued operations during the year ended December 31, 2014. 23Hundred@Berry Hill was accounted for under the equity method during a portion of the year ended December 31, 2014. For the year ended December 31, 2014, the components of non-same store property revenues, property expenses and net operating income represented by these properties were $3.3 million, $1.3 million, and $2.0 million, respectively. The Estates at Perimeter/Augusta, 23Hundred@Berry Hill, and Grove were accounted for under the equity method during the year ended December 31, 2015, but are reflected in our table of net operating income as if they were consolidated. For the year ended December 31, 2015, the components of non-same store property revenues, property expenses and net operating income represented by these properties were $0.2 million, $0.05 million and $0.1 million, respectively.

The following table presents the same store and non-same store results from operations for the years ended December 31, 2015 and 2014 (dollars in thousands):

		Year Ended December 31,								Change
		2015				2014				$				%
Property Revenues
Same Store		$	13,096			$	12,402			$	694				5.6	%
Non-Same Store			31,313				21,229				10,084				47.5	%
Total property revenues			44,409				33,631				10,778				32.0	%
Property Expenses
Same Store			5,024				5,035				(11	)			(0.2	)%
Non-Same Store			12,833				9,434				3,399				36.0	%
Total property expenses			17,857				14,469				3,388				23.4	%
Same Store NOI			8,072				7,367				705				9.6	%
Non-Same Store NOI			18,480				11,796				6,684				56.7	%
Total NOI(1)		$	26,552			$	19,163			$	7,389				38.6	%

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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, 2015 and 2014 (dollars in thousands):

		Three Months Ended December 31,								Change
		2015				2014				$				%
Property Revenues
Same Store		$	7,173			$	6,839			$	334				4.9	%
Non-Same Store			6,020				3,745				2,275				60.7	%
Total property revenues			13,193				10,584				2,609				24.7	%
Property Expenses
Same Store			2,600				2,848				(248	)			(8.7	)%
Non-Same Store			2,373				1,623				750				46.2	%
Total property expenses			4,973				4,471				502				11.2	%
Same Store NOI			4,573				3,991				582				14.6	%
Non-Same Store NOI			3,647				2,122				1,525				71.9	%
Total NOI(1)		$	8,220			$	6,113			$	2,107				34.5	%

Twelve Months Ended December 31, 2015 Compared to Twelve Months Ended December 31, 2014

Same store NOI for the twelve months ended December 31, 2015 increased by 9.6% to $8.1 million from $7.4 million for the 2014 period. There was a 5.6% increase in same store property revenues as compared to the 2014 period, primarily attributable to a 3.3% increase in average rental rates, the acquisition of 22 additional units at our Enders property in April 2014, the acquisition of 29 additional units at our Lansbrook property (15 units in 2014 and 14 units in 2015) and a 120 basis point increase in average occupancy. Same stores expenses remained flat at $5.0 million in each of the two periods.

Property revenues and property expenses for our non-same store properties increased significantly due to the properties acquired during 2015. The results of operations for these properties have been included in our consolidated statements of operations from the date of acquisition.

Three Months Ended December 31, 2015 Compared to Three Months Ended December 31, 2014

Same store NOI for the three months ended December 31, 2015 increased by 14.6% to $4.6 million from $4.0 million for the 2014 period. There was a 4.9% increase in same store property revenues as compared to the 2014 period, primarily attributable to a 4.5% increase in average rent per month and the acquisition of 14 additional units at our Lansbrook property during 2015, balanced by a 50 basis point decrease in average occupancy. Same stores expenses were $2.6 million and $2.8 million, respectively.

Property revenues and property expenses for our non-same store properties increased significantly due to the properties acquired during 2015. The results of operations for these properties have been included in our consolidated statements of operations from the date of acquisition.

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 same store and non-same store contributions to consolidated NOI, together with a reconciliation of NOI to net loss, as computed in accordance with GAAP for the periods presented (amounts in thousands):

		Year Ended December 31,
		2016				2015				2014
Net (loss) income attributable to common stockholders		$	(18,985	)		$	635			$	(5,172	)
Add pro-rata share:
Depreciation and amortization			26,963				12,369				7,357
Amortization of non-cash interest expense			790				326				241
Line of credit interest, net			—				—				191
Management fees			6,417				4,154				978
Acquisition and disposition costs			4,123				3,375				6,619
Loss on early extinguishment of debt			2,269				—				—
Corporate operating expenses			5,779				4,050				2,604
Management internalization process expense			63				—				—
Preferred dividends			13,567				1,153				—
Preferred stock accretion			880				—				—
Less pro-rata share:
Other income			26				93				112
Preferred returns and equity in income of unconsolidated real estate joint ventures			11,464				6,605				904
Interest income from related parties			17				—				—
Gain on sale of joint venture interest, net of fees			—				5,320				6,560
Gain on sale of real estate assets			6,704				2,640				—
Pro-rata share of properties' income			23,655				11,404				5,242
Add:
Noncontrolling interest pro-rata share of property income			4,500				3,609				5,219
Other income related to JV/MM entities			—				110				82
Total property income			28,155				15,123				10,543
Add:
Interest expense			19,009				11,429				8,620
Net operating income			47,164				26,552				19,163
Less:
Non-same store net operating income			28,311				18,480				11,796
Same store net operating income			18,853				8,072				7,367

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 maturing short-term debt.

We believe the properties underlying our real estate investments are performing well. We had a portfolio-wide debt service coverage ratio of 2.19x and occupancy of 94%, exclusive of our development properties, at December 31, 2016.

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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 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”). As of December 31, 2016, the Company has sold 21,482 shares of Series B Preferred Stock and 21,482 Warrants to purchase 429,640 shares of Class A common stock for net proceeds of approximately $19.3 million after commissions and fees.

On March 29, 2016, we, our Operating Partnership and our Manager entered into an At Market Issuance Sales Agreement (“Sales Agreement”) with FBR Capital Markets & Co. (“FBR”), and MLV & Co. LLC (“MLV”). Pursuant to the Sales Agreement, FBR and MLV will act as distribution agents with respect to the offering and sale of up to $100,000,000 in shares of Series A Preferred 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 MKT, or on any other existing trading market for Series A Preferred Stock or through a market maker (the “Series A ATM Offering”). We sold 146,460 shares of Series A Preferred Stock in the Series A ATM Offering through April 8, 2016. On April 8, 2016, we delivered notice to each of FBR and MLV, pursuant to the terms of the Sales Agreement, to suspend all sales under the Series A ATM Offering in connection with pursuing the April 2016 Preferred Stock Offering (defined below).

On April 25, 2016, we completed an underwritten offering (the “April 2016 Preferred Stock Offering”) of 2,300,000 shares of Series A Preferred Stock, liquidation preference $25.00 per share, inclusive of shares sold pursuant to the full exercise of the overallotment option by the underwriters. The shares were registered on our Form S-3 (File No. 333-208956) filed January 12, 2016 and declared effective by the SEC on January 29, 2016 (the “January 2016 Shelf Registration Statement”). The public offering price of $25.00 per share was announced on April 20, 2016. Net proceeds of the April 2016 Preferred Stock Offering were approximately $55.3 million after deducting underwriting discounts and commissions and offering costs.

On May 26, 2016, we completed an offering (the “May 2016 Preferred Stock Offering”) of 400,000 shares of Series A Preferred Stock. The shares were registered with the SEC pursuant to the January 2016 Shelf Registration Statement. The offering price of $25.00 per share was announced on May 26, 2016. Net proceeds of the May 2016 Preferred Stock Offering were approximately $9.5 million after deducting underwriting discounts and commissions and offering costs.

On July 19, 2016, we completed an underwritten offering (the “July 2016 Preferred Stock Offering”) of 2,300,000 shares of Series C Preferred Stock, liquidation preference $25.00 per share, inclusive of shares sold pursuant to the full exercise of the overallotment option by the underwriters. The shares were registered with the SEC pursuant to the January 2016 Shelf Registration Statement. The public offering price of $25.00 per share was announced on July 12, 2016. Net proceeds of the July 2016 Preferred Stock Offering were approximately $55.3 million after deducting underwriting discounts and commissions and offering costs.

On August 8, 2016, we, our Operating Partnership and our Manager entered into an At Market Issuance Sales Agreement (the “Class A Sales Agreement”) with 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 MKT, or on any other existing trading market for Class A common stock or through a market maker (the “Class A ATM Offering”). We have not commenced any sales through the Class A ATM Offering.

On September 14, 2016, we, our Operating Partnership and our Manager entered into an At Market Issuance Sales Agreement (the “Series C Sales Agreement”) with FBR. Pursuant to the Series C Sales Agreement, FBR will act as distribution agent with respect to the offering and sale of up to $36,000,000 in shares of Series C Preferred 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 MKT, or on any other existing trading market for Series C Preferred Stock or through a market maker (the “Series C ATM Offering”). Since September 14, 2016, we sold 23,750 shares of Series C Preferred Stock in the Series C ATM Offering through September 27, 2016. On September 27, 2016, we delivered notice to FBR, pursuant to the terms of the

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Series C Sales Agreement, to suspend all sales under the ATM Offering to pursue the October 2016 Preferred Stock Offering (defined below). As of December 31, 2016, we had sold 23,750 shares of Series C Preferred Stock in the Series C ATM Offering for net proceeds of approximately $0.6 million after commissions.

On October 13, 2016, we completed an underwritten offering (the “October 2016 Preferred Stock Offering”) of 2,700,000 shares of 7.125% Series D Preferred Stock, par value $0.01 per share, liquidation preference $25.00 per share. The shares were registered with the SEC pursuant to the January 2016 Shelf Registration Statement. The public offering price of $25.00 per share was announced on October 6, 2016. Net proceeds of the October 2016 Preferred Stock Offering were approximately $65.0 million after deducting underwriting discounts and commissions and estimated offering costs. On November 3, 2016, we closed on the sale of 150,602 shares of Series D preferred stock for net proceeds of approximately $3.7 million pursuant to the underwriters’ exercise of the overallotment option.

Together these offerings are referred to as the 2016 Follow-On Offerings. Subsequently, we completed an underwritten offering (the “January 2017 Common Stock Offering”) of 4,000,0000 shares of Class A common stock. 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 Common Stock Offering were approximately $49.8 million after deducting underwriting discounts and commissions and estimated offering costs. On January 24, 2017, we closed on the sale of 600,000 shares of Class A common stock for net proceeds of approximately $7.5 million pursuant to the underwriters’ exercise of the overallotment option.

Our total stockholders’ equity increased $34.5 million from $207.2 million as of December 31, 2015 to $241.7 million as of December 31, 2016. The increase in our total stockholders’ equity is primarily attributable to the 2016 Follow-On Offerings which increased our stockholders’ equity by $68.8 million, $8.8 million of equity compensation and partially offset by distributions declared of $37.9 million for the year ended December 31, 2016 and net loss attributable to common stockholders of $4.3 million.

In general, we believe our available cash balances, the proceeds from the Follow-On Offerings, 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 Follow-On Offerings, and the properties we expect to acquire with the remaining proceeds from our 2016 Follow-On Offerings and January 2017 Common Stock Offering, will have a significant 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, including our investments in development projects.

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

We may also selectively sell assets at appropriate times, which would be expected to generate cash sources for our liquidity needs.

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 as determined by our Manager. 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.

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We may seek to utilize credit facilities or loans from unaffiliated parties when possible.

If we are unable to obtain financing on favorable terms or at all, we may have 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. The board of directors will review the distribution rate quarterly, and there can be no assurance that the current distribution level will be maintained. In addition, we expect to maintain a distribution paid on a monthly basis to all of our Class A common stockholders at a quarterly rate of $0.29 per share. To the extent we continue to pay distributions at this rate, we expect to substantially use cash flows from operations to fund distribution payments. The board of directors will review the distribution rate quarterly, and there can be no assurance that the current distribution level will be maintained. While our policy is generally to pay distributions from cash flows from operations, our distributions through December 31, 2016 have been paid from proceeds from our continuous registered offerings, proceeds from the IPO and Follow-On Offerings, sales of assets, and cash flows from operations and may in the future be paid from additional sources, such as from borrowings.

We have announced that we have begun the process of internalizing the external management functions that are currently provided to us by our Manager. The board of directors appointed a special committee (the “Special Committee”), comprised solely of independent directors of our board of directors to pursue the internalization. The Special Committee has engaged independent legal and financial advisors to assist the Special Committee in connection with the internalization transaction. The Compensation Committee of our board of directors has also engaged an independent compensation consulting firm to provide a market-based compensation study with respect to key REIT executives and directors of internalized REITs. As of February 16, 2017, preliminary negotiations have begun with respect to the internalization, but no definitive agreements have been entered into. We currently anticipate consummating the internalization transaction at the beginning of the third quarter of 2017, although we are providing no assurances that the internalization transaction will be completed on the timeframe we currently anticipate or at all. If we internalize management, we expect the structure of our corporate level general and administrative expenses will change substantially, which may include changes to the nature and amount of these costs. However, estimates cannot be provided at this time. For risks associated with our internalization, see the section entitled “Risk Factors”.

The initial term of the Management Agreement expires on April 2, 2017 (the third anniversary of the closing of the IPO), and will be automatically renewed for a one-year term on each anniversary date thereafter unless previously terminated in accordance with the terms of the Management Agreement. In connection with our internalization discussion, we expect the Management Agreement will be renewed for another year pending the anticipated internalization. Following the initial term of the Management Agreement, the Management Agreement may be terminated annually upon the affirmative vote of at least two-thirds of the Company’s independent directors, based upon (1) unsatisfactory performance that is materially detrimental to the Company, or (2) the Company’s determination that the fees payable to the Manager are not fair, subject to the Manager’s right to prevent such termination due to unfair fees by accepting a reduction of the fees agreed to by at least two-thirds of the Company’s independent directors. The Company must provide 180 days’ prior notice of any such termination. Unless terminated for cause, as further described in the Management Agreement, the Manager will be paid a termination fee equal to three times the sum of the base management fee and incentive fee earned, in each case, by the Manager during the 12-month period immediately preceding such termination, calculated as of the end of the most recently completed fiscal quarter before the date of termination. The Company may also terminate the Management Agreement for cause at any time, including during the initial term, without the payment of any termination fee, with 30 days’ prior written notice from the Board.

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During the initial three-year term of the Management Agreement, the Company may not terminate the Management Agreement except as described above or in the instance that the Board elects to internalize the Company’s management, in which case the Company will be obligated under the Management Agreement to pay the Manager consideration equal to three times the sum of the base management fee and incentive fee earned, in each case, by the Manager during the 12-month period immediately preceding the effective date of the internalization, calculated as of the end of the most recently completed fiscal quarter before the effective date of the internalization.

The Manager may also terminate the Management Agreement if it becomes required to register as an investment company under the Investment Company Act, with such termination deemed to occur immediately before such event, in which case the Company would not be required to pay a termination fee. In addition, if the Company defaults in the performance of any material term of the Management Agreement and the default continues for a period of 30 days after written notice to the Company, the Manager may terminate the Management Agreement upon 60 days’ written notice. If the Management Agreement is terminated by the Manager upon a breach by the Company, the Company is required to pay the Manager the termination fee described above.

Cash Flows

Year ended December 31, 2016 as compared to the year ended December 31, 2015

As of December 31, 2016, we owned indirect equity interests in thirty-one real estate properties, (twenty-one operating properties and ten development properties), twenty-two of which are consolidated for reporting purposes. During the year ended December 31, 2016, net cash provided by operating activities was $34.4 million. After the net loss of $3.0 million was adjusted for $20.5 million of non-cash items, net cash provided by operating activities consisted of the following: