Bluerock Residential Growth REIT, Inc. - Quarter Report: 2016 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2016

OR

For the transition period from _______ to ______

Commission File Number 000-54946

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)

(212) 843-1601

(Registrant’s Telephone Number, Including Area Code)

None

(Former name, former address or former fiscal year, if changed since last report)

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

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

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

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

Number of shares outstanding of the registrant’s

classes of common stock, as of May 4, 2016:

Class A Common Stock: 19,564,752 shares

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

FORM 10-Q

March 31, 2016

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

See Notes to Consolidated Financial Statements 

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except share and per share amounts)

See Notes to Consolidated Financial Statements

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

FOR THE THREE MONTHS ENDED MARCH 31, 2016

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands, except share and per share amounts)

See Notes to Consolidated Financial Statements

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands, except share and per share amounts)

See Notes to Consolidated Financial Statements

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Organization and Nature of Business

Bluerock Residential Growth REIT, Inc. (the “Company”) was incorporated as a Maryland corporation on July 25, 2008. The Company’s objective is to maximize long-term stockholder value by acquiring well-located institutional-quality apartment properties in demographically attractive growth markets across the United States. The Company seeks to maximize returns through investments where it believes it can drive substantial growth in its funds from operations and net asset value through one or more of its Core-Plus, Value-Add, Opportunistic and Invest-to-Own investment strategies.

The Company has elected to be treated, and currently qualifies, as a real estate investment trust (“REIT”), for federal income tax purposes. As a REIT, the Company generally is not subject to corporate-level income taxes. To maintain its REIT status, the Company is required, among other requirements, to distribute annually at least 90% of its “REIT taxable income,” as defined by the Internal Revenue Code of 1986, as amended (the “Code”), to the Company’s stockholders. If the Company fails to qualify as a REIT in any taxable year, it would be subject to federal income tax on its taxable income at regular corporate tax rates.

The Company raised capital in a continuous registered offering, carried out in a manner consistent with offerings of non-listed REITs, from its inception until September 9, 2013, when it terminated the continuous registered offering in connection with the Company’s Board of Directors (the “Board’s”) consideration of strategic alternatives to maximize value to its stockholders. The Company subsequently determined to register shares of newly authorized Class A common stock that were to be offered in a firmly underwritten public offering (the “IPO”), by filing a registration statement on Form S-11 (File No. 333-192610) with the SEC, on November 27, 2013. On March 28, 2014, the SEC declared the registration statement effective and the Company announced the pricing of the IPO of 3,448,276 shares of Class A common stock at a public offering price of $14.50 per share for total gross proceeds of $50.0 million. The net proceeds of the IPO, which closed on April 2, 2014, were approximately $44.0 million after deducting underwriting discounts and commissions and offering costs.

In connection with the IPO, shares of the Company’s Class A common stock were listed on the NYSE MKT for trading under the symbol “BRG.” Pursuant to the second articles of amendment and restatement to its charter filed on March 26, 2014 (the “Second Charter Amendment”), each share of its common stock outstanding immediately prior to the listing, including shares sold in its continuous registered offering, was changed into one-third of a share of each of Class B-1 common stock, Class B-2 common stock and Class B-3 common stock. Following the filing of the Second Charter Amendment, the Company effected a 2.264881-to-1 reverse stock split of its outstanding shares of Class B-1 common stock, Class B-2 common stock and Class B-3 common stock, and on March 31, 2014, the Company effected an additional 1.0045878-to-1 reverse stock split of its outstanding shares of Class B-1 common stock, Class B-2 common stock and Class B-3 common stock.

Substantially concurrently with the completion of the IPO, the Company completed a series of related contribution transactions pursuant to which it acquired indirect equity interests in four apartment properties, and a 100% fee simple interest in a fifth apartment property for an aggregate asset value of $152.3 million (inclusive of Villas at Oak Crest, which is accounted for under the equity method, and Springhouse, in which the Company already owned an interest and which has been reported as consolidated prior to the IPO).

The Company subsequently determined to register additional shares of its Class A common stock to be offered in a firmly underwritten public offering, (the “October 2014 Follow-On Offering”), by filing a registration statement on Form S-11 (File No. 333-198770) with the SEC on September 16, 2014. On October 2, 2014, the SEC declared the Registration Statement effective and the Company announced the pricing of the October 2014 Follow-On Offering at a public offering price of $11.90 per share. The Company completed the October 2014 Follow-On Offering of 3,035,444 shares of Class A common stock, inclusive of shares sold pursuant to the full exercise of the overallotment option by the underwriters, on October 8, 2014. Net proceeds of the October 2014 Follow-On Offering were approximately $32.9 million after deducting underwriting discounts and commissions and offering costs.

On January 20, 2015, the Company completed an underwritten shelf takedown offering (the “January 2015 Follow-On Offering”) of 4,600,000 shares of Class A common stock, par value $0.01 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 a 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”). The public offering price of $12.50 per share was announced on January 14, 2015. Net proceeds of the January 2015 Follow-On Offering were approximately $53.7 million after deducting underwriting discounts and commissions and offering costs.

On May 22, 2015, the Company completed an underwritten shelf takedown offering (the “May 2015 Follow-On Offering”) of 6,348,000 shares of Class A common stock, par value $0.01 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 December 2014 Shelf Registration Statement. The public offering price of $13.00 per share was announced on May 19, 2015. Net proceeds of the May 2015 Follow-On Offering were approximately $77.6 million after deducting underwriting discounts and commissions and offering costs.

On October 21, 2015, the Company completed an underwritten shelf takedown offering (the “October 2015 Preferred Stock Offering”) of 2,875,000 shares of 8.250% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share, 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 December 2014 Shelf Registration Statement. The public offering price of $25.00 per share was announced on October 16, 2015. Net proceeds of the October 2015 Preferred Stock Offering were approximately $69.2 million after deducting underwriting discounts and commissions and estimated offering costs.

On December 17, 2015, the Company filed a prospectus supplement to the December 2014 Shelf Registration Statement offering a maximum of 150,000 Units (the “Original Units”) consisting of 150,000 shares of Series B redeemable preferred stock (the “Original Series B Preferred Stock”) and warrants (the “Original Warrants”) to purchase 3,000,000 shares of Class A common stock (liquidation preference $1,000 per share of Original Series B Preferred Stock). As of December 31, 2015, no Original Units had been sold.

On February 22, 2016, the Company’s board of directors authorized the termination of the offering of the Original Series B Preferred Stock in order to revise certain terms thereof, and the reclassification of the Original Series B Preferred Stock. On February 23, 2016, the Company terminated the offering of the Original Series B Preferred Stock, and on February 24, 2016, the Company filed a new prospectus supplement to the December 2014 Shelf Registration Statement offering a maximum of 150,000 Units (the “Units”) consisting of 150,000 shares of the reclassified Series B redeemable preferred stock (the “Series B Preferred Stock”) and warrants (the “Warrants”) to purchase 3,000,000 shares of Class A common stock (liquidation preference $1,000 per share of Series B Preferred Stock). As of March 31, 2016, the Company was continuing to organize its sales activities and no Units had been sold.

On March 29, 2016, the Company filed a prospectus supplement to the registration statement on Form S-3 (File No. 333-208956) filed with the SEC on January 12, 2016 and declared effective on January 29, 2016 (the “January 2016 Shelf Registration Statement”) 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 (collectively, the “March 2016 ATM Offering”). As of March 31, 2016, the Company was continuing to organize its sales activities and no shares of Series A Preferred Stock had been sold in the March 2016 ATM Offering.

As of March 31, 2016, the Company's portfolio consisted of interests in twenty-four properties (seventeen operating properties and seven development properties). The Company’s twenty-four properties contain an aggregate of 7,709 units, comprised of 5,660 operating units and 2,049 units under development. As of March 31, 2016, these properties, exclusive of development properties, and Whetstone, Sorrel and EOS, the lease-up properties, were approximately 95% occupied.

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The Company operates as an umbrella partnership REIT in which Bluerock Residential Holdings, L.P. (its “Operating Partnership”), or its wholly-owned subsidiaries, owns substantially all of the property interests acquired on the Company’s behalf. As of March 31, 2016, limited partners other than the Company owned approximately 6.53% of the Operating Partnership (1.46% is held by holders of limited partnership interest in the Operating Partnership (“OP Units”) and 5.07% is held by holders of the Operating Partnership’s long-term incentive plan units (“LTIP Units”)). Bluerock Real Estate, L.L.C., a Delaware limited liability company, is referred to as Bluerock (“Bluerock”), and the Company’s external manager, BRG Manager, LLC, a Delaware limited liability company, is referred to as its Manager (“Manager”). Both Bluerock and the Manager are related parties with respect to the Company, but are not within the Company’s control and are not consolidated in the Company’s financial statements.

Because the Company is the sole general partner of its Operating Partnership and has unilateral control over its management and major operating decisions (even if additional limited partners are admitted to the Operating Partnership), the accounts of the Operating Partnership are consolidated in its consolidated financial statements. The Company consolidates entities in which it controls more than 50% of the voting equity and in which control does not rest with other investors. Investments in real estate joint ventures over which the Company has the ability to exercise significant influence, but for which it does not have financial or operating control, are accounted for using the equity method of accounting. These entities are reflected on the Company’s consolidated financial statements as “Investments in unconsolidated real estate joint ventures.” All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.  The Company will consider future joint ventures for consolidation in accordance with the provisions required by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810: Consolidation.

Certain amounts in prior year financial statement presentation have been reclassified to conform to the current period presentation. 

Interim Financial Information

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting, and the instructions to Form 10-Q and Article 10-1 of Regulation S-X.  Accordingly, the financial statements for interim reporting do not include all of the information and notes or disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included.  Operating results for interim periods should not be considered indicative of the operating results for a full year.

The balance sheet at December 31, 2015 has been derived from the audited financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements.  For further information, refer to the financial statements and notes thereto included in our audited consolidated financial statements for the year ended December 31, 2015 contained in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on February 24, 2016. 

Summary of Significant Accounting Policies

There have been no significant changes to the Company’s accounting policies since it filed its audited consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2015.

Use of Estimates

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

New Accounting Pronouncements  

In March 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU-2016-09”). The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to impact net income, earnings per share, and the statement of cash flows. ASU No. 2016-09 is effective for annual reporting periods (including interim periods with those periods) beginning after December 15, 2016. Early adoption is permitted. The Company is still in the process of determining the impact that the implementation of ASU 2016-09 will have on the Company’s financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). Under ASU 2016-02, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company is in the process of evaluating the future impact of ASU 2016-02 on our consolidated financial position, results of operations and cash flows.

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). The amendments in ASU 2015-03 require that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of that liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in ASU 2015-03. The amendments in ASU 2015-03 became effective for public business entities in the first annual period beginning after December 15, 2015. Beginning in its fiscal year ending December 31, 2016, the Company adopted ASU 2015-03, and retrospectively applied the guidance to its Mortgages Payable for all periods presented Unamortized deferred financing costs, net, of $5.0 million and $3.5 million are included in Mortgages Payable as of March 31, 2016, and December 31, 2015, respectively (previously included as Deferred financing costs, net on the Company’s Consolidated Balance Sheets). The adoption of ASU 2015-03 did not have a material impact on the Company’s financial position or results of operations.

In February 2015, the FASB issued Accounting Standards Update No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis” (“ASU 2015-02”). ASU 2015-02 eliminates specific consolidation guidance for limited partnerships and revises other aspects of consolidation analysis, including how kick-out rights, fee arrangements and related parties are assessed. ASU 2015-02 is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. The adoption of ASU 2015-02 did not have a material impact on the Company’s financial position or results of operations.

In January 2015, the FASB issued Accounting Standards Update No. 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items” (“ASU 2015-01”), which eliminates the concept of extraordinary items and require items that are either unusual in nature or infrequently occurring to be reported as a separate component of income from continuing operations or disclosed in the notes to the financial statements. ASU 2015-01 is effective for periods beginning after December 15, 2015, with early adoption permitted. ASU 2015-01 did not have a material impact on the Company's financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern” (“ASU 2014-15”), which requires an entity's management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued. ASU 2014-15 is effective for periods beginning after December 15, 2016. ASU 2014-15 is not expected to have a material impact on the Company's financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). The updated standard is a new comprehensive revenue recognition model that requires revenue to be recognized in a manner that depicts the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. In July 2015, the FASB voted to approve the deferral of the effective date of ASU 2014-09 by one year. Therefore, ASU 2014-09 will become effective for the Company in the first quarter of the fiscal year ending December 31, 2018. Early adoption is permitted, but not earlier than the first quarter of the fiscal year ending December 31, 2017. The ASU allows for either full retrospective or modified retrospective adoption. The Company has not selected a transition method, and is currently evaluating the effect that ASU 2014-09 will have on the consolidated financial statements and related disclosures.

Note 3 – Sale of Unconsolidated Real Estate Joint Ventures

Sale of Joint Venture Equity Interests

On January 14, 2015, the Company, along with the other two holders of tenant-in-common interests in Berry Hill, sold their respective interests to 2300 Berry Hill General Partnership, an unaffiliated third party. The aggregate purchase price was $61.2 million, subject to certain prorations and adjustments typical in such real estate transactions. After deduction for payment of the existing mortgage indebtedness and payment of closing costs and fees, the sale of the Company’s interest in Berry Hill generated net proceeds of approximately $7.3 million to the Company and a consolidated gain on sale of $11.3 million, of which the Company’s pro rata share of gain is $5.3 million before disposition expenses of $0.1 million, which was included in the Company’s statement of operations for the three months ended March 31, 2015.

Sale of North Park Towers

On October 16, 2015, the Company closed on the sale of the North Park Towers property, located in Southfield, Michigan. The 100% owned property was sold for approximately $18.2 million, subject to certain prorations and adjustments typical in such real estate transactions. After deduction for payment of the existing mortgage indebtedness encumbering the North Park Towers property in the amount of $11.5 million and payment of closing costs and fees, the sale of the property generated net proceeds for the Company of approximately $6.6 million and a gain on sale of $2.7 million, net of disposition expenses of $0.3 million.

Note 4 – Investments in Real Estate

As of March 31, 2016, the Company was invested in seventeen operating real estate properties and seven 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   

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

⁽²⁾ Represents the average effective monthly rent per occupied unit for all occupied units for the three months ended March 31, 2016. The average rent for Whetstone, Sorrel and EOS, which are still in lease-up, is pro forma based on underwriting. Total concessions for the three months ended March 31, 2016 amounted to approximately $430,000.

⁽³⁾ Percent occupied is calculated as (i) the number of units occupied as of March 31, 2016, divided by (ii) total number of units, expressed as a percentage, excluding Whetstone, Sorrel and EOS, which are still in lease-up.

⁽⁴⁾ Whetstone and EOS are currently preferred equity investments providing a stated investment return and both properties are in lease-up and actual average rents were $1,268 and $1,107, respectively, net of upfront lease-up concessions.

⁽⁵⁾ Sorrel is in lease-up and actual average rents were $1,206, net of upfront lease-up concessions.

Depreciation expense was $5.1 million and $2.3 million for the three months ended March 31, 2016 and 2015, respectively.

Intangibles related to the Company’s consolidated investments in real estate consist of the value of in-place leases. In-place leases are amortized over the remaining term of the in-place leases, which is approximately six months. Amortization expense related to the in-place leases was $2.4 million and $0.5 million for the three months ended March 31, 2016 and 2015, respectively.

Development Properties

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

Note 5 – Acquisition of Real Estate

The following describes the Company’s significant acquisition activity during the three months ended March 31, 2016:

Acquisition of Summer Wind and Citation Club Apartments

On January 5, 2016, the Company, through subsidiaries of its Operating Partnership, completed investments of approximately $15.9 million and approximately $13.6 million in a multi-tiered joint venture along with an affiliate of Carroll Organization, to acquire (i) a 368-unit apartment community located in Naples, Florida to be known as ARIUM Gulfshore, formerly known as the Summer Wind Apartments (“ARIUM Gulfshore”) and (ii) a 320-unit apartment community located in Sarasota, Florida to be known as ARIUM at Palmer Ranch, formerly known as Citation Club Apartments (“ARIUM at Palmer Ranch”), respectively. The Company’s indirect ownership interest in the joint venture that owns ARIUM Gulfshore and ARIUM at Palmer Ranch is 95.0%. ARIUM Gulfshore’s purchase price of approximately $47.0 million was funded, in part, with a $32.6 million senior mortgage loan secured by ARIUM Gulfshore property and improvements. ARIUM at Palmer Ranch’s purchase price of approximately $39.3 million was funded, in part, with a $26.9 million senior mortgage loan secured by the ARIUM at Palmer Ranch property and improvements.

Acquisition of The Preserve at Henderson Beach

On March 15, 2016, the Company, through subsidiaries of its Operating Partnership, completed an investment of approximately $17.2 million to acquire in fee simple a 340-unit apartment community located in Destin, Florida, known as Alexan Henderson Beach to be rebranded as The Preserve at Henderson Beach (“Henderson Beach”).  The purchase price for Henderson Beach was approximately $53.7 million and included the assumption of the current first priority loan secured by Henderson Beach, which had a principal balance as of the closing date of approximately $37.5 million.

Preliminary Purchase Price Allocations

The acquisitions of ARIUM Gulfshore, ARIUM at Palmer Ranch and The Preserve at Henderson Beach have been accounted for as business combinations. The purchase prices were allocated to the acquired assets and assumed liabilities based on their estimated fair values at the dates of acquisition. The preliminary measurements of fair value reflected below are subject to change. The Company expects to finalize the purchase price allocations as soon as practical, but no later than one year from each property’s respective acquisition date.

The following table summarizes the assets acquired and liabilities assumed at the acquisition date. The amounts listed below reflect provisional amounts that will be updated as information becomes available (amounts in thousands): 

In connection with the acquisition of The Preserve at Henderson Beach, the Company assumed mortgage debt with a fair value of approximately $39.1 million.

The pro-forma information presented below represents the change in consolidated revenue and earnings as if the Company's significant acquisitions of Park & Kingston, Fox Hill, Ashton Reserve, ARIUM Palms, Sorrel, Sovereign, ARIUM Gulfshore, ARIUM at Palmer Ranch and The Preserve at Henderson Beach (collectively, the "Recent Acquisitions"), had occurred on January 1, 2015 (amounts in thousands, except per share amounts).

⁽¹⁾ Pro-forma (loss) earnings per share, both basic and diluted, are calculated based on the net (loss) income attributable to BRG.

Aggregate property level revenues and net loss for the Recent Acquisitions, since the properties’ respective acquisition dates, that are reflected in the Company’s consolidated statement of operations for the three months ended March 31, 2016 amounted to $8.3 million and $3.2 million, respectively.

Note 6 – Investments in Unconsolidated Real Estate Joint Ventures

Following is a summary of the Company’s ownership interests in the investments reported under the equity method of accounting. The carrying amount of the Company’s investments in unconsolidated real estate joint ventures as of March 31, 2016 and December 31, 2015 is summarized in the table below (amounts in thousands):

As of March 31, 2016, the Company had outstanding preferred equity investments in nine multi-tiered joint ventures, each of which were created to develop a multifamily property. In each case, a wholly-owned subsidiary of the Operating Partnership made a preferred investment in a joint venture, except Flagler Village, which is a common interest. The common interests in these joint ventures, as well as preferred interests in some cases, are owned by affiliates of the Manager. In each case, the Company’s investment in the joint venture generates a preferred return of 15% on its outstanding capital contributions and the Company is not allocated any of the income or loss in the joint ventures. The joint venture then becomes the controlling member in an entity whose purpose is to develop a multifamily property. Each joint venture is required to redeem the Company’s preferred membership interests plus any accrued but unpaid preferred return on the earlier of the date which is six months following the maturity of the related development’s construction loan, or any earlier acceleration or due date. Additionally, the Company has the right, in its sole discretion, to convert its preferred membership interest in each joint venture into a common membership interest for a period of six months from the date upon which 70% of the units in the related development have been leased.

The following provides additional information regarding the Company’s preferred equity investments as of March 31, 2016:

The equity in income of the Company’s unconsolidated real estate joint ventures for the three months ended March 31, 2016 and 2015 is summarized below (amounts in thousands):

Summary combined financial information for the Company’s investments in unconsolidated real estate joint ventures as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015, is as follows:

Acquisition of Alexan Southside Place (formerly referred to as Alexan Blaire House) Interests

On January 12, 2015, through BRG Southside, LLC, a wholly-owned subsidiary of its Operating Partnership, the Company made a convertible preferred equity investment in a multi-tiered joint venture, along with Bluerock Special Opportunity + Income Fund II, LLC, (“Fund II”) and Bluerock Special Opportunity + Income Fund III, LLC (“Fund III”), which are affiliates of the Manager, and an affiliate of Trammell Crow Residential, to develop an approximately 269-unit Class A apartment community located in Houston, Texas, to be known as Alexan Southside Place. Alexan Southside Place will be developed upon a tract of land ground leased from Prokop Industries BH, L.P., a Texas limited partnership, by BR Bellaire BLVD, LLC, as tenant under an 85-year ground lease. The Company has made a capital commitment of $17.3 million to acquire 100% of the preferred equity interests in BRG Southside, LLC, all of which has been funded as of March 31, 2016.

Alexan Southside Place Construction Financing

On April 7, 2015, the Company, through BR Bellaire BLVD, LLC, an indirect subsidiary, entered into a $31.8 million construction loan with Bank of America, NA which is secured by the leasehold interest in the Alexan Southside Place property. The loan matures on April 7, 2019, and contains a one-year extension option, subject to certain conditions including a debt service coverage, loan to value ratio and payment of an extension fee. The loan bears interest on a floating basis on the amount drawn based on the base rate plus 1.25% or LIBOR plus 2.25%. Regular monthly payments are interest-only during the initial term, with payments during the extension period based on a thirty year amortization. The loan can be prepaid without penalty.

Acquisition of Whetstone Interests

On May 20, 2015, through BRG Whetstone Durham, LLC, a wholly-owned subsidiary of its Operating Partnership, the Company made a convertible preferred equity investment in a multi-tiered joint venture, along with Fund III and an affiliate of TriBridge Residential, LLC, to acquire a 204-unit Class A apartment community located in Durham, North Carolina, to be known as Whetstone Apartments. The Company has made a capital commitment of $12.2 million to acquire 100% of the preferred equity interests in BRG Whetstone Durham, LLC, all of which has been funded as of March 31, 2016. The acquisition of Whetstone Apartments was partially funded by a bridge loan of approximately $25.2 million secured by the Whetstone Apartment property. The loan matures May 18, 2016 and bears interest on a floating basis based on LIBOR plus 2.0%. The loan can be prepaid without penalty. The Company provided certain standard scope non-recourse carveout guaranties in conjunction with the loan. The Whetstone bridge loan is in the process of being extended on a short-term basis in order to facilitate the placing of permanent financing upon stabilization.

Acquisition of Cheshire Bridge Interests

On May 29, 2015, through BRG Cheshire, LLC, a wholly-owned subsidiary of its Operating Partnership, the Company made a convertible preferred equity investment in a multi-tiered joint venture, along with Fund III and an affiliate of Catalyst Development Partners II, to develop a 285-unit Class A apartment community located in Atlanta, Georgia, to be known as Cheshire Bridge Apartments. The Company has made a capital commitment of $16.4 million to acquire 100% of the preferred equity interests in BRG Cheshire, LLC, all of which has been funded as of March 31, 2016.

Cheshire Bridge Construction Financing

On December 16, 2015, the Company, through CB Owner, LLC, an indirect subsidiary, entered into a $38.1 million construction loan with The PrivateBank and Trust Company which is secured by the fee simple interest in the Cheshire property. The loan matures on December 16, 2018, and contains two one-year extension options, subject to certain conditions including a debt service coverage, loan to value ratio and payment of an extension fee. The loan bears interest on a floating basis on the amount drawn based on one-month LIBOR plus 2.50%. Regular monthly payments are interest-only during the initial term, with payments during the extension period based on a thirty year amortization. The loan can be prepaid without penalty.

Acquisition of Domain Phase 1 Interest

On November 20, 2015, through a wholly-owned subsidiary of the Operating Partnership, BRG Domain Phase 1, LLC, the Company made a convertible preferred equity investment in a multi-tiered joint venture along with Fund II, an affiliate of the Manager, and an affiliate of ArchCo Residential, to develop an approximately 301-unit, class A, apartment community located in Garland, Texas. The property will be developed upon a tract of approximately 10 acres of land. The Company has made a capital commitment of $18.6 million to acquire 100% of the preferred equity interests in BR Member Domain Phase I, LLC, of which $3.7 million has been funded at March 31, 2016.

Acquisition of Flagler Village Interest

On December 18, 2015, through a wholly-owned subsidiary of the Operating Partnership, BRG Flagler Village, LLC, the Company made an investment in a multi-tiered joint venture along with Fund II, an affiliate of the Manager, and an affiliate of ArchCo Residential, to develop an approximately 326-unit, class A, apartment community located in Ft. Lauderdale, Florida. The Company has made a capital commitment of $41.5 million to acquire interests in BR Flagler Village, LLC, of which $8.2 million has been funded at March 31, 2016.

Acquisition of Lake Boone Trail

On December 18, 2015, through a wholly-owned subsidiary of the Operating Partnership, BRG Lake Boone, LLC, the Company made a convertible preferred equity investment in a multi-tiered joint venture along with Fund II, an affiliate of the Manager, and an affiliate of Tribridge Residential, LLC, to develop an approximately 245-unit, class A, apartment community located in Raleigh, North Carolina. The Company has made a capital commitment of $16.8 million to acquire 100% of the preferred equity interests in BR Lake Boone, LLC, of which $9.9 million has been funded at March 31, 2016.

Acquisition of West Morehead interest

On January 6, 2016, through a wholly-owned subsidiary of the Operating Partnership, BRG Morehead NC, LLC, the Company made a convertible preferred equity investment in a multi-tiered joint venture along with Fund II, an affiliate of the Manager, and an affiliate of ArchCo Residential, to develop an approximately 283-unit Class A apartment community located in Charlotte, North Carolina to be known as West Morehead.  The Company has made a capital commitment of approximately $19 million to acquire 100% of the preferred equity interests in BR Morehead JV Member, LLC, of which $3.5 million has been funded at March 31, 2016.

Note 7 – Mortgages Payable

The following table summarizes certain information as of March 31, 2016 and December 31, 2015, with respect to the Company’s indebtedness (amounts in thousands):

⁽¹⁾ ARIUM at Palmer Ranch loan bears interest at a floating rate of 2.17% plus one-month LIBOR. At March 31, 2016, the interest rate was 2.61%.

⁽²⁾ ARIUM Grandewood Loan bears interest at a floating rate of 1.67% plus one month LIBOR. At March 31, 2016, the interest rate was 2.11%.

⁽³⁾ ARIUM Gulfshore loan bears interest at a floating rate of 2.17% plus one month LIBOR. At March 31, 2016, the interest rate was 2.61%.

⁽⁴⁾ ARIUM Palms loan bears interest at a floating rate of 2.22% plus one month LIBOR. At March 31, 2016, the interest rate was 2.66%.

⁽⁵⁾ Ashton Reserve II loan bears interest at a floating rate of 2.62% plus one-month LIBOR. At March 31, 2016, the interest rate was 3.06%.

⁽⁶⁾ The principal includes a $17.1 million loan at a 3.97% interest rate and an $8.0 million supplemental loan at a 5.01% interest rate.

⁽⁷⁾ The principal balance includes the initial advance of $42.0 million at a fixed rate of 4.45% and an additional advance of $1.6 million that bears interest at a floating rate of three month LIBOR plus 3.00%, as of March 31, 2016, the additional advance had an interest rate of 3.63%.

⁽⁸⁾ Sorrel loan bears interest at a floating rate of 2.29% plus one-month LIBOR. At March 31, 2016, the interest rate was 2.73%.

Deferred financing costs

Costs incurred in obtaining long-term financing, included in Mortgages Payable in the accompanying Consolidated Balance Sheets, are amortized on a straight-line basis, which approximates the effective interest method, over the terms of the related debt agreements, as applicable.

ARIUM Gulfshore Mortgage Payable

On January 5, 2016, the Company, through an indirect subsidiary (the “ARIUM Gulfshore Borrower”), entered into an approximately $32.6 million loan with Jones Long LaSalle Multifamily, LLC, on behalf of Freddie Mac, which is secured by ARIUM Gulfshore. The loan matures February 1, 2023 and bears interest on a floating basis based on LIBOR plus 2.17%, with interest only payments until maturity. After January 5, 2017 the loan may be prepaid with a 1% prepayment fee through October 31, 2022, and thereafter at par. The loan is nonrecourse to the Company and the ARIUM Gulfshore Borrower with recourse carve-outs for certain deeds, acts or failures to act on the part of the Company and the ARIUM Gulfshore Borrower, or any of its officers, members, managers or employees.

ARIUM at Palmer Ranch Mortgage Payable

On January 5, 2016, the Company, through an indirect subsidiary (the “ARIUM at Palmer Ranch Borrower”), entered into an approximately $26.9 million loan with Jones Long LaSalle Multifamily, LLC, on behalf of Freddie Mac, which is secured by ARIUM at Palmer Ranch. The loan matures February 1, 2023 and bears interest on a floating basis based on LIBOR plus 2.17%, with interest only payments until maturity. After January 5, 2017 the loan may be prepaid with a 1% prepayment fee through October 31, 2022, and thereafter at par. The loan is nonrecourse to the Company and the ARIUM at Palmer Ranch Borrower with recourse carve-outs for certain deeds, acts or failures to act on the part of the Company and the ARIUM at Palmer Ranch Borrower, or any of its officers, members, managers or employees.

The Preserve at Henderson Beach Mortgage Payable

On March 15, 2016, the Company, through an indirect subsidiary (the “Henderson Beach Borrower”), assumed an approximately $37.5 million loan with Western-Southern Life Assurance Company, which is secured by Henderson Beach. The loan matures January 5, 2023 and bears interest at a fixed rate of 4.65%, with fixed monthly payments based on 30-year amortization. The loan may be prepaid with the greater of 1% prepayment fee or yield maintenance. The loan is nonrecourse to the Company and the Henderson Beach Borrower with recourse carve-outs for certain deeds, acts or failures to act on the part of the Company and the Henderson Beach Borrower, or any of its officers, members, managers or employees.

As of March 31, 2016, contractual principal payments for the five subsequent years and thereafter are as follows (amounts in thousands):

The net book value of real estate assets providing collateral for these above borrowings were $665.8 million and $530.6 million at March 31, 2016 and December 31, 2015, respectively.

Note 8 – Fair Value of Financial Instruments

As of March 31, 2015 and December 31, 2015, the Company believes the carrying value of cash and cash equivalents, accounts receivable, due to and from affiliates, accounts payable, accrued liabilities, and distributions payable approximate their fair value based on their highly-liquid nature and/or short-term maturities.  As of March 31, 2016 and December 31, 2015, the approximate fair value of mortgages payable were $492.8 million and $387.1 million, respectively, compared to the carrying value, before adjustments for deferred financing costs, net, of $481.7 million and $383.6 million, respectively.  The fair value of mortgages payable is estimated based on the Company’s current interest rates (Level 3 inputs, as defined in ASC Topic 820, “Fair Value Measurement”) for similar types of borrowing arrangements.

Note 9 – Related Party Transactions

In connection with the Company’s acquisition of an interest in the Villas at Oak Crest, the Company assumed a receivable of $0.3 million from Fund II related to accrued interest on Fund II’s investment in the Villas at Oak Crest prior to the contribution of their interest to the Company, and as of December 31, 2014, the Company had a corresponding payable to Fund II for this amount. The payable to Fund II of $0.3 million was paid off in September 2015 in conjunction with the sale of the Villas at Oak Crest.

In May 2015, the Company invested an additional $6.5 million, plus customary prorations, in equity in Park & Kingston, increasing the Company’s indirect ownership interest in the property from 46.95% to approximately 96.0%. The additional interests were purchased from Fund III, an affiliate of our Manager, based on the original purchase price on a pro rata basis, plus customary prorations.

In May 2015, the Company invested an additional $1.1 million, plus customary prorations, in equity in Fox Hill, increasing the Company’s indirect ownership interest in the property from 85.27% to approximately 94.62%. The additional interests were purchased from Fund III, an affiliate of our Manager, based on the original purchase price on a pro rata basis, plus customary prorations.

In December 2015, the Company invested an additional $3.7 million, plus customary prorations, in equity in Lansbrook, increasing the Company’s indirect ownership interest in the property from 76.8% to approximately 90.00%. The additional interests were purchased from Fund II and Fund III, affiliates of our Manager, based on an appraisal value, plus customary prorations.

In December 2015, in conjunction with the sale of Villas at Oak Crest, two former joint venture partners, who were related to the Company’s Chief Executive Officer, converted their ownership in Villas at Oak Crest into 22,809 Operating Partnership Units.

Substantially concurrently with the completion of the IPO, the Company completed a series of related contribution transactions pursuant to which it acquired indirect equity interests in four apartment properties, and a 100% fee simple interest in a fifth apartment property for an aggregate asset value of $152.3 million (inclusive of the Villas at Oak Crest, which was accounted for under the equity method, and Springhouse, in which the Company already owned an interest and which had been reported as consolidated for the periods presented). As holders of shares of the Company’s Class A common stock issued in the contribution transactions in connection with the IPO, Fund II and Fund III and their respective managers have certain registration rights covering the resale of their shares of Class A common stock. In addition, BR-NPT Springing Entity, LLC (“NPT”) and Bluerock Property Management, LLC, the property manager of North Park Towers (“BPM”), as holders of OP Units issued in the contribution transactions, and the Manager and the former advisor, as holders of LTIP Units, have certain registration rights covering the resale of shares of the Class A common stock issued or issuable, at the Company’s option, in exchange for OP Units, including OP Units into which LTIP Units may be converted. Fund II, Fund III and their respective managers have agreed not to require the Company to file a registration statement with respect to the resale of their shares of Class A common stock until January 4, 2016. In addition, NPT and BPM, and the Manager and the Former Advisor, agreed not to require the Company to file a registration statement with respect to the resale of their shares of the Class A common stock issued or issuable, at the Company’s option, in exchange for OP Units, including OP Units into which LTIP Units may be converted, until January 4, 2016.

The Company entered into a management agreement (the “Management Agreement”), with the Manager, on April 2, 2014. The terms and conditions of the Management Agreement, which became effective as of April 2, 2014, are described below.

Management Agreement

The Management Agreement requires the Manager to manage the Company’s business affairs in conformity with the investment guidelines and other policies that are approved and monitored by the Company’s board of directors. The Manager acts under the supervision and direction of the Board. Specifically, the Manager is responsible for (1) the selection, purchase and sale of the Company’s investment portfolio, (2) the Company’s financing activities, and (3) providing the Company with advisory and management services. The Manager provides the Company with a management team, including a chief executive officer, president, chief accounting officer and chief operating officer, along with appropriate support personnel. None of the officers or employees of the Manager are dedicated exclusively to the Company.

The Company pays the Manager a base management fee in an amount equal to the sum of: (A) 0.25% of the Company’s stockholders’ existing and contributed equity prior to the IPO and in connection with our contribution transactions, per annum, calculated quarterly based on the Company’s stockholders’ existing and contributed equity for the most recently completed calendar quarter and payable in quarterly installments in arrears, and (B) 1.5% of the equity per annum of the Company’s stockholders who purchase shares of the Company’s stock, calculated quarterly based on their equity for the most recently completed calendar quarter and payable in quarterly installments in arrears. The base management fee is payable independent of the performance of the Company’s investments. The Company amended the Management Agreement to provide that the base management fee can be payable in cash or LTIP Units, at the election of the Board. The number of LTIP Units issued for the base management fee or incentive fee will be based on the fees earned divided by the 5-day trailing average Class A common stock price prior to issuance. The base management fee expense for the Manager was $0.5 million and $3.3 million for the three months ended March 31, 2015 and year ended December 31, 2015, respectively. Base management fees of $0.7 million were expensed during the three months ended June 30, 2015, which were paid through the issuance of 59,077 LTIP Units on August 13, 2015. Base management fees of $0.9 million were expensed during the three months ended September 30, 2015, which were paid through the issuance of 77,497 LTIP Units on November 18, 2015. Base management fees of $1.1 million were expensed during the three months ended December 31, 2015, which were paid through the issuance of 115,304 LTIP Units on February 29, 2016. Base management fees of $1.2 million were expensed during the three months ended March 31, 2016, which will be paid through the issuance of approximately 111,620 LTIP Units assuming the $10.88 common stock price at March 31, 2016.

The Company also pays the Manager an incentive fee with respect to each calendar quarter in arrears. The incentive fee is equal to the difference between (1) the product of (x) 20% and (y) the difference between (i) the Company’s adjusted funds from operations (“AFFO”), for the previous 12-month period, and (ii) the product of (A) the weighted average of the issue price of equity securities issued in the IPO and in future offerings and transactions, multiplied by the weighted average number of all shares of the Company’s Class A common stock outstanding on a fully-diluted basis (including any restricted stock units, any restricted shares of Class A common stock, LTIP Units, and other shares of common stock underlying awards granted under the Incentive Plans and OP Units) in the previous 12-month period, exclusive of equity securities issued prior to the IPO or in the contribution transactions, and (B) 8%, and (2) the sum of any incentive fee paid to the Manager with respect to the first three calendar quarters of such previous 12-month period; provided, however, that no incentive fee is payable with respect to any calendar quarter unless AFFO is greater than zero for the four most recently completed calendar quarters, or the number of completed calendar quarters since the closing date of the IPO, whichever is less. For purposes of calculating the incentive fee during the first 12 months after completion of the IPO, AFFO will be determined by annualizing the applicable period following completion of the IPO. One half of each quarterly installment of the incentive fee will be payable in LTIP Units, calculated pursuant to the formula above. The remainder of the incentive fee will be payable in cash or in LTIP Units, at the election of the Board, in each case calculated pursuant to the formula above. Incentive fees of $0.15 million were expensed during the three months ended December 31, 2014, which resulted in the issuance of 10,896 LTIP Units on February 18, 2015. Incentive fees to the Manager of $0.9 million were expensed during the three months ended March 31, 2015, which resulted in the issuance of 67,837 LTIP Units on May 14, 2015. No incentive fees to the Manager were earned or expensed during the nine months ended December 31, 2015. No incentive fees were earned or expensed during the three months ended March 31, 2016.

Management fee expense of $0.1 million and $0.4 million was recorded as part of general and administrative expenses for the three months ended March 31, 2016 and 2015, respectively, and $0.9 million was recorded for the year ended December 31, 2015 related to the 179,562 LTIP Units granted in connection with the IPO. The expense recognized during 2016 and 2015 was based on a price of $10.88 and $11.85 per LTIP Unit, which represents the closing share price for the Company’s Class A common stock on March 31, 2016 and December 31, 2015, respectively. These LTIP Units vest over a three year period that began in April 2014, and 59,854 LTIP Units vested on April 30, 2015.

On July 2, 2015, the Company issued a grant of LTIP Units under the Amended 2014 Incentive Plans to the Company’s external manager, BRG Manager, LLC. The equity grant consisted of 283,390 LTIP Units. The LTIP Units will vest ratably over a three year period that began in July 2015, subject to certain terms and conditions. The LTIP Units may be convertible into OP Units under certain conditions and then may be settled in shares of the Company’s Class A common stock. The LTIP Units provide for the payment of distribution equivalents at the same time distributions are paid to holders of the Company’s Class A common stock. LTIP expense of $0.4 million for the three months ended March 31, 2016 and $1.0 million was recorded as part of general and administrative expenses for the year ended December 31, 2015, respectively, related to these LTIP Units. The expense recognized during 2016 and 2015 was based on a price of $10.88 and $11.85 per LTIP Unit, respectively, which represents the closing share price for the Company’s Class A common stock on March 31, 2016 and December 31, 2015, respectively.

The Company is also required to reimburse the Manager for certain expenses and pay all operating expenses, except those specifically required to be borne by the Manager under the Management Agreement. The Manager waived all reimbursements through the six months ended June 30, 2015. Reimbursements of $0.3 million were expensed during the six months ended December 31, 2015 and are recorded as part of general and administrative expenses. Reimbursements of $0.1 million were expensed during the three months ended March 31, 2016 and are recorded as part of general and administrative expenses.

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. 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 at any time, including during the initial term, without the payment of any termination fee, for cause with 30 days’ prior written notice from the Board.

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 following circumstance: At the earlier of (i) April 2, 2017 (three years following the completion of the IPO), and (ii) the date on which the value of the Company’s stockholders’ equity exceeds $250.0 million, the Board may, but is not obligated to, internalize the Company’s management. The Manager may 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.

The Manager may retain, at its sole cost and expense, the services of such persons and firms as the Manager deems necessary in connection with our management and operations (including accountants, legal counsel and other professional service providers), provided that such expenses are in amounts no greater than those that would be payable to third-party professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s-length basis.

Prior and Terminated Advisory Agreement

Prior to the entry by the Company into the Management Agreement upon the completion of the IPO and the concurrent termination of the Advisory Agreement, the Former Advisor performed essentially the same duties and responsibilities as the Company’s new Manager. The Advisory Agreement had a one-year term expiring October 14, 2014, and was renewable for an unlimited number of successive one-year periods upon the mutual consent of the Company and its Advisor.

The Former Advisor was entitled to the payment of certain fees in compensation for advisory and general management services rendered thereunder for periods prior to the Company’s initial public offering on April 2, 2014, and reimbursements for certain costs and expenses incurred in connection with the provision thereof, in an aggregate amount of $1.18 million. Effective on September 4, 2015, the Former Advisor and Manager entered into an Assignment Agreement pursuant to which the Former Advisor assigned its right to payment of the obligation due to the Former Advisor to the Manager. The Manager agreed to receive the payment entirely in LTIP Units of the Operating Partnership. The obligation was paid by the number of LTIP Units equal to (i) the dollar amount of the obligation payable in such LTIP Units (calculated as $1.18 million), divided by (ii) the average of the closing prices of the Company’s Class A Common Stock, $0.01 par value per share, on the NYSE MKT on the five business days prior to the issuance date. The payment was made through the issuance of 108,119 LTIP Units by the Operating Partnership to the Manager on the September 14, 2015. The LTIP Units were fully vested upon issuance, and may convert to OP Units upon reaching capital account equivalency with the OP Units held by the Company, and may then be settled in shares of the Company’s Class A common stock. The Manager will be entitled to receive “distribution equivalents” with respect to the LTIP Units at the same time distributions are paid to the holders of the Company’s Class A common stock.

All of the Company’s executive officers, and some of its directors, are also executive officers, managers and/or holders of a direct or indirect controlling interest in the Manager and other Bluerock-affiliated entities.  As a result, they owe fiduciary duties to each of these entities, their members, limited partners and investors, which fiduciary duties may from time to time conflict with the fiduciary duties that they owe to the Company and its stockholders.

 Some of the material conflicts that the Manager or its affiliates face are: 1) the determination of whether an investment opportunity should be recommended to us or another Bluerock-sponsored program or Bluerock-advised investor; 2) the allocation of the time of key executive officers, directors, and other real estate professionals among the Company, other Bluerock-sponsored programs and Bluerock-advised investors, and the activities in which they are involved; and 3) the fees received by the Manager and its affiliates.

Pursuant to the terms of the Management Agreement, summarized below are the related party amounts payable to our Manager, as of March 31, 2016 and December 31, 2015 (in thousands):

As of March 31, 2016 and December 31, 2015, the Company had no amounts and $0.1 million, respectively, in payables due to related parties other than the Manager.

As of March 31, 2016 and December 31, 2015, the Company had $0.9 million and $0.9 million, respectively, in receivables due from related parties other than the Manager.

Bluerock Property Management, LLC

The Company incurred $0.05 million in property management fees to Bluerock Property Management, LLC, an affiliate of Bluerock, on behalf of the North Park Towers property during the three months ended March 31, 2015. No property management fees were payable in 2016 due to the sale of North Park Towers in October 2015.

Note 10 – Stockholders’ Equity

Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders, less dividends on restricted stock expected to vest plus gains on redemptions on common stock, by the weighted average number of common shares outstanding for the period.  Diluted net income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the sum of the weighted average number of common shares outstanding and any potential dilutive shares for the period.  Net income (loss) attributable to common stockholders is computed by adjusting net income (loss) for the non-forfeitable dividends paid on non-vested restricted stock.

The Company considers the requirements of the two-class method when preparing earnings per share. Earnings per share is not affected by the two-class method because the Company’s Class A, B-1, B-2 and B-3 common stock and LTIP Units participate in dividends on a one-for-one basis.

The following table reconciles the components of basic and diluted net (loss) income per common share (amounts in thousands, except share and per share amounts):

 The number of shares and per share amounts for the prior period have been retroactively restated to reflect the two reverse stock splits of the Class B common stock discussed below.

The effect of the conversion of OP Units is not reflected in the computation of basic and diluted earnings per share, as they are exchangeable for Class A Common Stock on a one-for-one basis. The income allocable to such units is allocated on this same basis and reflected as noncontrolling interests in the accompanying consolidated financial statements. As such, the assumed conversion of these units would have no net impact on the determination of diluted earnings per share.

Class B Common Stock

The Company raised capital in a continuous registered offering, carried out in a manner consistent with offerings of non-listed REITs, from its inception until September 9, 2013, when it terminated the continuous registered offering in connection with the Board’s consideration of strategic alternatives to maximize value to the Company’s stockholders. Through September 9, 2013, the Company had raised an aggregate of $22.6 million in gross proceeds through its continuous registered offering, including its distribution reinvestment plan.

On January 23, 2014, the Company's stockholders approved the second articles of amendment and restatement to the Company’s charter (the “Second Charter Amendment”), which provided, among other things, for the designation of a new share class of Class A common stock, and for the change of each existing outstanding share of the Company’s common stock into:

This transaction was effective upon filing the Second Charter Amendment with the State Department of Assessments and Taxation of the State of Maryland on March 26, 2014. Immediately following the filing of the Second Charter Amendment, the Company effectuated a 2.264881 to 1 reverse stock split of its outstanding shares of Class B-1 common stock, Class B-2 common stock and Class B-3 common stock, and on March 31, 2014, the Company effected an additional 1.0045878 to 1 reverse stock split of its outstanding shares of Class B-1 common stock, Class B-2 common stock and Class B-3 common stock.

The Company refers to Class B-1 common stock, Class B-2 common stock and Class B-3 common stock collectively as “Class B” common stock. The Company listed its Class A common stock on the NYSE MKT on March 28, 2014. The Class B common stock is identical to the Class A common stock, except that (i) the Company does not intend to list the Class B common stock on a national securities exchange, and (ii) shares of the Class B common stock convert automatically into shares of Class A common stock at specified times, as follows:

On March 23, 2015, 353,630 shares of Class B-1 common stock converted into Class A common stock in accordance with the above, and no Class B-1 common stock remains outstanding. On September 19, 2015, 353,630 shares of Class B-2 common stock converted into Class A common stock in accordance with the above, and no Class B-2 common stock remains outstanding. On March 17, 2016, 353,629 shares of Class B-3 common stock converted into Class A common stock in accordance with the above, and no Class B-3 common stock remains outstanding.

Follow-On Equity Offerings

On January 20, 2015, the Company completed the January 2015 Follow-On Offering of 4,600,000 shares of its Class A common stock, par value $0.01 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 December 2014 Shelf Registration Statement. The public offering price of $12.50 per share was announced on January 14, 2015. Net proceeds of the January 2015 Follow-On Offering were approximately $53.7 million after deducting underwriting discounts and commissions and estimated offering expenses.

On May 22, 2015, the Company completed the May 2015 Follow-On Offering of 6,348,000 shares of Class A common stock, par value $0.01 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 December 2014 Shelf Registration Statement. The public offering price of $13.00 per share was announced on May 19, 2015. Net proceeds of the May 2015 Follow-On Offering were approximately $77.6 million after deducting underwriting discounts and commissions and offering costs.

October 2015 offering of 8.250% Series A Cumulative Redeemable Preferred Stock

On October 21, 2015, the Company completed an underwritten offering of 2,875,000 shares of 8.250% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share, liquidation preference $25.00 per share (the “Series A Preferred Stock”), inclusive of shares sold pursuant to the full exercise of the overallotment option by the underwriters (the “October 2015 Preferred Stock Offering”). The shares were registered with the SEC pursuant to the December 2014 Shelf Registration Statement. The public offering price of $25.00 per share was announced on October 16, 2015. Net proceeds of the October 2015 Preferred Stock Offering were approximately $69.2 million after deducting underwriting discounts and commissions and estimated offering costs.

The Series A Preferred Stock ranks senior to common stock and on parity with the Series B Preferred Stock. The Series A Preferred Stock is entitled to priority cumulative dividends to be paid quarterly, in arrears, when, as and if authorized by the board of directors. Commencing October 21, 2022, the annual dividend rate will increase by 2.0% annually, if not redeemed by the holder or not previously redeemed by the Company. Holders may, at their option, elect to have the Company redeem their shares at a redemption price of $25.00 per share, plus an amount equal to accrued but unpaid dividends, payable by the Company at its option in cash or shares of Class A common stock. The Company may not redeem the Series A Preferred Stock before October 21, 2020, except in limited circumstances related to its qualification as a REIT, complying with an asset coverage ratio or upon a change in control. After October 21, 2020, the Company can redeem for a redemption price of $25.00 per share plus any accrued and unpaid dividends.

At the date of issuance, the carrying amount of the Series A Preferred Stock was less than the redemption value. As a result of the Company’s determination that redemption is probable, the carrying value will be increased by periodic accretions so that the carrying value will equal the redemption amount at the earliest redemption date. Such accretion is recorded as a preferred stock dividend on the Statement of Stockholders’ Equity.

Termination of Original Series B Preferred Stock Offering, Reclassification of Original Series B Preferred Stock, and Filing of New Prospectus Supplement for Offering of Reclassified Series B Preferred Stock

On December 17, 2015, the Company filed a prospectus supplement to the December 2014 Shelf Registration Statement offering a maximum of 150,000 Units (the “Original Units”) consisting of 150,000 shares of Series B redeemable preferred stock (the “Original Series B Preferred Stock”) and warrants (the “Original Warrants”) to purchase 3,000,000 shares of Class A common stock (liquidation preference $1,000 per share of Original Series B Preferred Stock). As of December 31, 2015, no Original Units had been sold.

On February 22, 2016, the Company’s board of directors authorized the termination of the offering of the Original Series B Preferred Stock in order to revise certain terms thereof, and the reclassification of the Original Series B Preferred Stock. On February 23, 2016, the Company terminated the offering of the Original Series B Preferred Stock, and on February 24, 2016, the Company filed a new prospectus supplement to the December 2014 Shelf Registration Statement offering a maximum of 150,000 Units (the “Units”) consisting of 150,000 shares of the reclassified Series B redeemable preferred stock (the “Series B Preferred Stock”) and warrants (the “Warrants”) to purchase 3,000,000 shares of Class A common stock (liquidation preference $1,000 per share of Series B Preferred Stock) (the “Series B Preferred Offering”).

The Series B Preferred Stock ranks senior to common stock and on parity with the Series A Preferred Stock. The Series B Preferred Stock is entitled to priority cumulative dividends to be paid monthly, in arrears, when, as and if authorized by the board of directors. Holders may, at their option, elect to have the Company redeem their shares through the first year from issuance subject to a 13% redemption fee. After year one, the redemption fee decreases to 10%, after year three it decreases to 5%, after year four it decrease to 3%, and after year five there is no redemption fee. Any redeemed shares are entitled to any accrued but unpaid dividends at the time of the redemption, payable by the Company at its option in cash or shares of Class A common stock. The Company may redeem the Series B Preferred Stock beginning two years from the original issuance for the liquidation preference per share plus any accrued and unpaid dividends in either cash or shares of Class A common stock, based on the volume weighted average price for the Class A common shares for the 20 trading days prior to the redemption.

At-the-Market Offering of Series A Cumulative Redeemable Preferred Stock

On March 29, 2016, the Company, its Operating Partnership and its Manager entered into an At Market Issuance Sales Agreement (the “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 “ATM Offering”).

Shelf Registration Statements

On January 12, 2016, the Company filed, and on January 29, 2016, the SEC declared effective, a shelf registration statement that expires in January 2019 (the “January 2016 Shelf Registration Statement”). The securities covered by the January 2016 Shelf Registration Statement cannot exceed $1,000,000,000 in the aggregate and include common stock, preferred stock, depositary shares representing preferred stock, debt securities, warrants to purchase stock or debt securities and units. The Company may periodically offer one or more of these securities in amounts, prices and on terms to be announced when and if these securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering.

On January 13, 2016, the Company filed, and on January 29, 2016, the SEC declared effective, a resale shelf registration statement that expires in January 2019 (the “Resale Registration Statement”). The Resale Registration Statement provides that selling stockholders named therein may offer for sale up to 2,262,621 shares of Class A common stock currently held or issuable in exchange for units of limited partnership in the Operating Partnership, tendered for redemption by the selling stockholders. The Company will not receive any proceeds from the sale of these securities.

Operating Partnership and Long-Term Incentive Plan Units

On April 2, 2014, concurrently with the completion of the IPO, the Company entered into the Second Amended and Restated Agreement of Limited Partnership of its Operating Partnership, Bluerock Residential Holdings, L.P. Pursuant to the amendment, the Company is the sole general partner of the Operating Partnership and may not be removed as general partner by the limited partners with or without cause. The limited partners of the Operating Partnership are Bluerock REIT Holdings, LLC, BR-NPT Springing Entity, LLC (“NPT”), Bluerock Property Management, LLC (“BPM”), our Manager, and Bluerock Multifamily Advisor, LLC (the “Former Advisor”), all of which are affiliates of Bluerock.

Prior to the completion of the IPO, the Company owned, directly and indirectly, 100% of the limited partnership units in the Operating Partnership. Effective as of the completion of the IPO, limited partners other than the Company owned approximately 9.87% of the Operating Partnership (282,759 OP Units, or 4.59%, were held by OP Unit holders, and 325,578 LTIP Units, or 5.28%, were held by LTIP Unit holders.) As of March 31, 2016, limited partners other than the Company owned approximately 6.53% of the Operating Partnership (305,568 OP Units, or 1.46%, is held by OP Unit holders, and 1,061,836 LTIP Units, or 5.07%, is held by LTIP Unit holders.)

The Partnership Agreement, as amended, provides, among other things, that the Operating Partnership initially has two classes of limited partnership interests, which are units of limited partnership interest (“OP Units”), and the Operating Partnership’s long-term incentive plan units (“LTIP Units”). In calculating the percentage interests of the partners in the Operating Partnership, LTIP Units are treated as OP Units. In general, LTIP Units will receive the same per-unit distributions as the OP Units. Initially, each LTIP Unit will have a capital account balance of zero and, therefore, will not have full parity with OP Units with respect to any liquidating distributions. However, the Partnership Agreement Amendment provides that “book gain,” or economic appreciation, in the Company’s assets realized by the Operating Partnership as a result of the actual sale of all or substantially all of the Operating Partnership’s assets, or the revaluation of the Operating Partnership’s assets as provided by applicable U.S. Department of Treasury regulations, will be allocated first to the holders of LTIP Units until their capital account per unit is equal to the average capital account per-unit of the Company’s OP Unit holders in the Operating Partnership. The Company expects that the Operating Partnership will issue OP Units to limited partners, and the Company, in exchange for capital contributions of cash or property, and will issue LTIP Units pursuant to the Company’s Amended and Restated 2014 Equity Incentive Plan for Individuals and Amended and Restated 2014 Equity Incentive Plan for Entities (collectively, the “Amended 2014 Incentive Plans”), to persons who provide services to the Company, including the Company’s officers, directors and employees.

Pursuant to the Partnership Agreement, as amended, any holders of OP Units, other than the Company or its subsidiaries, will receive redemption rights which, subject to certain restrictions and limitations, will enable them to cause the Operating Partnership to redeem their OP Units in exchange for cash or, at the Company’s option, shares of the Company’s Class A common stock, on a one-for-one basis. The Company has agreed to file, not earlier than one year after the closing of the IPO, one or more registration statements registering the issuance or resale of shares of its Class A common stock issuable upon redemption of the OP Units issued upon conversion of LTIP Units, which include those issued to the Manager and the Former Advisor. Subject to certain exceptions, the Operating Partnership will pay all expenses in connection with the exercise of registration rights under the Partnership Agreement. The Resale Shelf Registration Statement covers all such OP Units and LTIP Units issued prior to January 18, 2016.

Equity Incentive Plans

Prior to the Company’s IPO on April 2, 2014, the Company’s independent directors received an automatic grant of 5,000 shares of restricted stock on the initial effective date of the continuous registered offering and received an automatic grant of 2,500 shares of restricted stock when such directors were re-elected at each annual meeting of the Company’s stockholders thereafter through the 2013 annual meeting held on August 5, 2013. The restricted stock vested 20% at the time of the grant and 20% on each anniversary thereafter over four years from the date of the grant. All shares of restricted stock granted to the independent directors receive distributions, whether vested or unvested. The value of the restricted stock granted was determined at the date of grant. Commencing with the Company’s IPO, the Company’s independent directors no longer receive automatic grants upon appointment or reelection at each annual meeting of the Company’s stockholders.

On March 24, 2015, in accordance with the Company’s 2014 Equity Incentive Plan for Individuals (the “2014 Individuals Plan”), the Board authorized and each of the Company’s independent directors received two grants of 2,500 restricted shares of the Company’s Class A common stock. The first grant of 2,500 restricted shares related to services rendered in 2014 (each, a “2014 Restricted Stock Award”), while the second grant of 2,500 restricted shares relates to services rendered or to be rendered in 2015 (each, a “2015 Restricted Stock Award”). The vesting schedule for each 2014 Restricted Stock Award was as follows: (i) 834 shares as of March 24, 2015, (ii) 833 shares on March 24, 2016, and (iii) 833 shares on March 24, 2017. The vesting schedule for each 2015 Restricted Stock Award was as follows: (i) 834 shares as of March 24, 2016, (ii) 833 shares on March 24, 2017, and (iii) 833 shares on March 24, 2018.  The stock awards were made pursuant to certain stock award agreements by and between the Company and each independent director, each dated effective as of March 24, 2015 (collectively, the “2014-2015 Stock Award Agreements”).

On February 22, 2016, the board reviewed peer REIT compensation practices for independent directors, and found that equity awards for peer REITs generally vest either on the grant date, or after one year. In order to normalize compensation practices with peer REITs, on February 22, 2016, the board approved the amendment of each of the 2014-2015 Stock Award Agreements, effective as of March 24, 2016, such that the Stock Awards that did not vest on the grant date of March 24, 2015 vested on the one-year anniversary of such grant date. As a result, (i) 1,666 shares of the 2014 Stock Award to each independent director, and (ii) all 2,500 shares of the 2015 Stock Award to each independent director, became vested and nonforfeitable on March 24, 2016. The expense for the accelerated vesting was approximately $0.1 million which was recorded in the three months ended March 31, 2016.

On May 28, 2015, the Company’s stockholders approved the amendment and restatement of the 2014 Individuals Plan (the “Amended 2014 Individuals Plan”), and the Company’s 2014 Entities Plan (the “Amended 2014 Entities Plan” and together with the Amended 2014 Individuals Plan, the “Amended 2014 Incentive Plans”). The Amended 2014 Incentive Plans allow for the issuance of up to 475,000 shares of Class A common stock. The Amended 2014 Incentive Plans provide for the grant of options to purchase shares of the Company’s common stock, stock awards, stock appreciation rights, performance units, incentive awards and other equity-based awards.

A summary of the status of the Company’s non-vested shares as of March 31, 2016 is as follows (amounts in thousands, except share amounts): 

⁽¹⁾ The number of shares and per share amounts for the prior period have been retroactively restated to reflect the two reverse stock splits of the Class B common stock discussed above.

At March 31, 2016, there was $0.03 million of total unrecognized compensation cost related to unvested restricted stocks granted under the independent director compensation plan. The original cost is expected to be recognized over a period of 1.3 years.

Equity Incentive Plans - LTIP Grants

On July 2, 2015, the Company issued a grant of LTIP Units under the Amended 2014 Incentive Plans to the Company’s external manager, BRG Manager, LLC. The equity grant consisted of 283,390 LTIP Units. The LTIP Units will vest ratably over a three year period that began in July 2015, subject to certain terms and conditions. The LTIP Units may be convertible into OP Units under certain conditions and then may be settled in shares of the Company’s Class A common stock. The LTIP Units provide for the payment of distribution equivalents at the same time distributions are paid to holders of the Company’s Class A common stock. LTIP expense of $0.4 million was recorded as part of general and administrative expenses for the three months ended March 31, 2016 related to these LTIP Units. The expense recognized during 2016 was based on a price of $10.88 per LTIP Unit, which represents the closing share price for the Company’s Class A common stock on March 31, 2016.

Distributions

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

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

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

Distributions declared and paid for the three months ended March 31, 2016 were as follows (amounts in thousands):

Note 11 – Commitments and Contingencies

The Company is subject to various legal actions and claims arising in the ordinary course of business. Although the outcome of any legal matter cannot be predicted with certainty, management does not believe that any of these legal proceedings or matters will have a material adverse effect on the consolidated financial position or results of operations or liquidity of the Company.

On March 15, 2016, the Company, through its Operating Partnership and several affiliated unconsolidated co-borrowers that are accounted for on the equity method of accounting, entered into an approximately $14.9 million secured credit facility (“Credit Facility”) with KeyBank as lender. The proceeds of the Credit Facility may be used for payment (or reimbursement) of acquisition costs, fees and expenses of the mortgaged properties and to fund interest advances. Draws under the Credit Facility are secured by properties owned by unconsolidated real estate joint ventures in Garland, Texas, Charlotte, North Carolina and Fort Lauderdale, Florida. At the closing of the loan, an initial advance of approximately $10.4 million was made directly to the affiliated property entities and the liability was recorded by the unconsolidated entities and prior advances were repaid to the Operating Partnership. Principal amounts may be repaid at any time without penalty, and amounts repaid may not be re-borrowed. The borrowings under the Credit Facility are at a rate equal to LIBOR plus 3.75% or the base rate plus 2.75%, at the company’s option. Our Operating Partnership’s obligations with respect to the Credit Facility are guaranteed by us, pursuant to the terms of a limited recourse guaranty dated as of March 15, 2016. The outstanding credit facility balance at March 31, 2016, was $10.4 million.

Note 12 – Economic Dependency

The Company is dependent on its Manager, an affiliate of Bluerock, to provide external management services for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase and disposition of properties and other investments; management of the daily operations of its real estate portfolio; and other general and administrative responsibilities. In the event that the Manager or its affiliates are unable to provide the respective services, the Company will be required to obtain such services from other sources.

Note 13 – Subsequent Events

Declaration of Dividends

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

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

Distributions Paid

The following distributions were paid to the Company's holders of Class A common stock, Series A Preferred Stock, as well as holders of OP and LTIP Units subsequent to March 31, 2016 (amounts in thousands):

At-the-Market Series A Cumulative Redeemable Preferred Stock Offering

Since March 31, 2016, the Company has sold 146,460 shares of Series A Preferred Stock in the ATM Offering through April 8, 2016. On April 8, 2016, the Company delivered notice to each of FBR and MLV, pursuant to the terms of the Sales Agreement, to suspend all sales under the ATM Offering. Such sales efforts may resume in June 2016, following the restricted period related to the April 2016 Preferred Stock Offering.

April 2016 Offering of 8.250% Series A Cumulative Redeemable Preferred Stock

On April 25, 2016, the Company completed an underwritten offering of 2,300,000 shares of 8.250% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share, liquidation preference $25.00 per share, inclusive of shares sold pursuant to the full exercise of the overallotment option by the underwriters (the “April 2016 Preferred Stock Offering”). The shares were registered with the SEC pursuant to a registration statement on Form S-3 (File No. 333-208956) filed with the SEC on January 12, 2016 and declared effective on January 29, 2016. 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 estimated offering costs.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Forward-Looking Statements

Statements included in this Quarterly Report on Form 10-Q 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 the Private Securities Litigation Reform Act of 1995. 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.

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:

Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this report. All forward-looking statements are made as of the date of this report and the risk that actual results will differ materially from the expectations expressed in this report will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this report, whether as a result of new information, future events, changed circumstances or any other reason. The forward-looking statements should be read in light of the risk factors set forth in Item 1A of our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 24, 2016, and subsequent filings by us with the SEC.

Overview

We were incorporated as a Maryland corporation on July 25, 2008. Our objective is to maximize long-term stockholder value by acquiring well-located institutional-quality apartment properties in demographically attractive growth markets across the United States. We seek to maximize returns through investments where we believe we can drive substantial growth in our funds from operations, adjusted 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 externally managed by our Manager, an affiliate of Bluerock. We conduct our operations through Bluerock Residential Holdings, L.P., our operating partnership (the “Operating Partnership”), of which we are the sole general partner. The consolidated financial statements include our accounts and those of the Operating Partnership and its subsidiaries.

As of March 31, 2016, our portfolio consisted of interests in twenty-four properties (seventeen operating properties and seven development properties). The twenty-four properties contain an aggregate of 7,709 units, comprised of 5,660 operating units and 2,049 units under development. As of March 31, 2016, these properties, exclusive of our development properties, and Whetstone and EOS, the lease-up properties, were approximately 95% occupied.

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

Our Recent Equity Offerings

We completed our initial firmly underwritten public offering (the “IPO”) on April 12, 2014.

In connection with the IPO, shares of our Class A common stock were listed on the NYSE MKT for trading under the symbol “BRG.” Pursuant to the second articles of amendment and restatement to our charter filed on March 26, 2014 (the “Second Charter Amendment”), each share of our common stock outstanding immediately prior to the listing was changed into one-third of a share of each of Class B-1 common stock, Class B-2 common stock and Class B-3 common stock. Following the filing of the Second Charter Amendment, we effected a 2.264881-to-1 reverse stock split of our outstanding shares of Class B-1 common stock, Class B-2 common stock and Class B-3 common stock, and on March 31, 2014, we effected an additional 1.0045878-to-1 reverse stock split of our outstanding shares of Class B-1 common stock, Class B-2 common stock and Class B-3 common stock.

During 2015, we continued to raise equity capital to finance our investment activities.

On January 20, 2015, we completed an underwritten shelf takedown offering (the “January 2015 Follow-On Offering”) of 4,600,000 shares of Class A common stock, 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 December 2014 Shelf Registration Statement. Net proceeds of the January 2015 Follow-On Offering were approximately $53.7 million after deducting underwriting discounts and commissions and offering costs.

On May 22, 2015, we completed an underwritten shelf takedown offering (the “May 2015 Follow-On Offering”) of 6,348,000 shares of Class A common stock, par value $0.01 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 December 2014 Shelf Registration Statement. The public offering price of $13.00 per share was announced on May 19, 2015. Net proceeds of the May 2015 Follow-On Offering were approximately $77.6 million after deducting underwriting discounts and commissions and offering costs.

On October 21, 2015, we completed an underwritten shelf takedown offering (the “October 2015 Preferred Stock Offering”) of 2,875,000 shares of 8.250% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share, 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 December 2014 Shelf Registration Statement. The public offering price of $25.00 per share was announced on October 16, 2015. Net proceeds of the October 2015 Preferred Stock Offering were approximately $69.2 million after deducting underwriting discounts and commissions and estimated offering costs.

On February 24, 2016, we filed a prospectus supplement to the December 2014 Shelf Registration Statement offering a maximum of 150,000 Units (the “Units”) consisting of 150,000 shares of the reclassified Series B redeemable preferred stock (the “Series B Preferred Stock”) and warrants (the “Warrants”) to purchase 3,000,000 shares of Class A common stock (liquidation preference $1,000 per share of Series B Preferred Stock).

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 “ATM Offering”).

Subsequent to quarter end, we sold 146,460 shares of Series A Preferred Stock in the 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 ATM Offering. Such sales efforts may resume in June 2016, following the restricted period related to the April 2016 Preferred Stock Offering.

Subsequent to quarter end, on April 25, 2016, we completed an underwritten offering of 2,300,000 shares of 8.250% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share, liquidation preference $25.00 per share, inclusive of shares sold pursuant to the full exercise of the overallotment option by the underwriters (the “April 2016 Preferred Stock Offering”). 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 April 20, 2016. Net proceeds of the April 2016 Preferred Stock Offering were approximately $55.3 million after deducting underwriting discounts and commissions and estimated offering costs.

Our total stockholders’ equity decreased $8.2 million from $207.2 million as of December 31, 2015 to $199.0 million as of March 31, 2016. The decrease in our total stockholders’ equity is primarily attributable to our net loss of $2.6 million and dividends declared of $7.4 million, offset by equity compensation of $1.7 million during the three months ended March 31, 2016.

 Other Significant Developments

During the three months ended March 31, 2016, we made one convertible preferred investment and acquired three stabilized properties as discussed below.

Acquisition of Summer Wind and Citation Club Apartments

On January 5, 2016, we, through subsidiaries of our Operating Partnership, completed investments of approximately $15.9 million and approximately $13.6 million in a multi-tiered joint venture along with an affiliate of Carroll Organization, to acquire (i) a 368-unit apartment community located in Naples, Florida to be known as ARIUM Gulfshore, formerly known as the Summer Wind Apartments (“ARIUM Gulfshore”) and (ii) a 320-unit apartment community located in Sarasota, Florida to be known as ARIUM at Palmer Ranch, formerly known as Citation Club Apartments (“ARIUM at Palmer Ranch”), respectively. The Company’s indirect ownership interest in the joint venture that owns ARIUM Gulfshore and ARIUM at Palmer Ranch is 95.0%. ARIUM Gulfshore’s purchase price of approximately $47.0 million was funded, in part, with a $32.6 million senior mortgage loan secured by ARIUM Gulfshore property and improvements. ARIUM at Palmer Ranch’s purchase price of approximately $39.3 million was funded, in part, with a $26.9 million senior mortgage loan secured by the ARIUM at Palmer Ranch property and improvements.

Acquisition of West Morehead interest

On January 6, 2016, we, through a wholly-owned subsidiary of the Operating Partnership, BRG Morehead NC, LLC, made a convertible preferred equity investment in a multi-tiered joint venture along with Fund II, an affiliate of the Manager, and an affiliate of ArchCo Residential, to develop an approximately 283-unit Class A apartment community located in Charlotte, North Carolina to be known as West Morehead.  We have made a capital commitment of approximately $19 million to acquire 100% of the preferred equity interests in BR Morehead JV Member, LLC, of which $3.5 million has been funded at March 31, 2016.

Acquisition of The Preserve at Henderson Beach

 On March 15, 2016, we, through subsidiaries of our Operating Partnership, completed an investment of approximately $17.2 million to acquire in fee simple a 340-unit apartment community located in Destin, Florida, known as Alexan Henderson Beach to be rebranded as The Preserve at Henderson Beach (“Henderson Beach”).  The purchase price for Henderson Beach was approximately $53.7 million and included the assumption of the current first priority loan secured by Henderson Beach, which had a principal balance as of the closing date of approximately $37.5 million.

Results of Operations

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

⁽¹⁾  Includes an additional 36 units acquired since the original acquisition in May 2014, of which 7 units were acquired in the three months ended March 31, 2016.

The following is a summary of our development properties as of March 31, 2016:

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

Revenue

Net rental income increased $7.3 million, or 85%, to $15.9 million for the three months ended March 31, 2016 as compared to $8.6 million for the same prior year period. This increase was primarily due to the acquisition of various interests in seven properties subsequent to March 31, 2015, Ashton Reserve, ARIUM Grandewood, Sorrel, Sovereign, Park & Kingston II, ARIUM Gulfshore, ARIUM at Palmer Ranch, and the impact of acquiring Park & Kingston and Fox Hill during the latter part of the three months ended March 31, 2015, offset by the sale of Berry Hill in January 2015.

Other property revenue increased $0.3 million, or 75%, to $0.7 million for the three months ended March 31, 2016 as compared to $0.4 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 $2.7 million, or 70%, to $6.6 million for the three months ended March 31, 2016 as compared to $3.9 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 60.4% of total revenues for the three months ended March 31, 2016 from 57.2% in the prior year quarter. Property NOI margins are computed as total revenues less property operating expenses, divided by total revenues.

 General and administrative expenses amounted to $1.3 million for the three months ended March 31, 2016 as compared to $0.9 million for the same prior year period. Excluding non-cash equity compensation expense of $0.6 million and $0.5 million for the three months ended March 31, 2016 and 2015, respectively, general and administrative expenses were $0.6 million, or 3.9% of revenues for the three months ended March 31, 2016 as compared to $0.5 million, or 5.1% of revenues, for the same prior year period.

Management fees decreased to $1.2 million for the three months ended March 31, 2016 as compared to $1.5 million for the same prior year period. Base management fees of $1.2 million and $0.5 million were expensed in the three months ended March 31, 2016 and 2015, respectively. Incentive management fees of $0.9 million were expensed in the three months ended March 31, 2015 and were paid in 67,837 LTIP Units. There was no incentive management fee expensed in the three months ended March 31, 2016. Base management fees increased primarily due to an increase in equity as a result of the Follow-On Offerings. Base management fees of $1.2 million for the quarter ended March 31, 2016 will be paid in LTIP Units in lieu of cash.

Acquisition costs increased to $1.2 million for the three months ended March 31, 2016 as compared to $0.4 million for the same prior year period. The costs were primarily due to the acquisition of ARIUM Gulfshore, ARIUM at Palmer Ranch, and The Preserve at Henderson Beach during the three months ended March 31, 2016, while the costs during the prior year quarter were primarily due to the acquisition of Park & Kingston and Fox Hill.

Depreciation and amortization expenses was $7.5 million for the three months ended March 31, 2016 as compared to $2.8 million for the same prior year period. The increase is related to the acquisition of the properties mentioned above.

Other Income and Expense

Other income and expenses amounted to an expense of $1.5 million for the three months ended March 31, 2016 as compared to other income of $9.8 million for the same prior year period. This was primarily due to an increase of $2.0 million in income from unconsolidated joint venture interests due to an additional four investments, offset by a decrease in equity in gain on sale of our unconsolidated 23Hundred@Berry Hill joint venture of $11.3 million, and an increase in interest expense, net, of $1.9 million, as the result of the increase in mortgages payable resulting from the acquisition of interests in the properties mentioned above.

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 three months ended March 31, 2016 and 2015, the same store properties included properties owned at January 1, 2015. Our same store properties for the three months ended March 31, 2016 and 2015 were Springhouse at Newport News, 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, Park & Kingston, Fox Hill, Ashton Reserve, ARIUM Palms, Sovereign, Sorrel, ARIUM Gulfshore, ARIUM at Palmer Ranch, and The Preserve at Henderson Beach.

23Hundred@Berry Hill was accounted for under the equity method during the three months March 31, 2015, but is reflected in our table of net operating income as if it was consolidated. For the three months ended March 31, 2015, the components of non-same store property revenues, property expenses and net operating income represented by this property were $0.1 million, zero and $0.1 million, respectively. 23Hundred@Berry Hill financial information can be found at Note 3, "Sale of Unconsolidated Real Estate Joint Ventures." Berry Hill was sold on January 14, 2015.

The following table presents the same store and non-same store results from operations for the three months ended March 31, 2016 and 2015:

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

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

Same store NOI for the three months ended March 31, 2016 increased by 10.1% to $5.2 million from $4.8 million for the 2015 period. There was a 5.4% increase in same store property revenues as compared to the 2015 period, primarily attributable to a 4.6% increase in average rental rates, a 46 basis point increase in average occupancy and 14 additional units at our Lansbrook Village property. Same store expenses decreased 1.6% as a result of lower utility expense from a milder winter.

Property revenues and property expenses for our non-same store properties increased significantly due to the properties acquired during 2016 and 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 (“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.

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) income attributable to common stockholders, as computed in accordance with GAAP for the periods presented (amounts in thousands):

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements. Our primary short-term liquidity requirements relate to (a) our operating expenses and other general business needs, (b) distributions to our stockholders, (c) committed investments and capital requirements to fund development and renovations at existing properties, and (d) ongoing commitments to repay maturing short-term debt.

The Company believes the properties underlying its real estate investments are performing well. The Company had a portfolio-wide debt service coverage ratio of 2.03x and occupancy of 95%, exclusive of its development properties, at March 31, 2016. In the recent past, we have met our short-term liquidity requirements through revenues on our multifamily investments and the proceeds of our equity offerings.

In January 2015, we completed an underwritten shelf takedown offering (the “January 2015 Follow-On Offering”) of 4,600,000 shares of Class A common stock, inclusive of shares sold pursuant to the full exercise of the overallotment option by the underwriters, on January 20, 2015. Net proceeds of the January 2015 Follow-On Offering were approximately $53.7 million after deducting underwriting discounts and commissions and offering costs.

On May 22, 2015, we completed an underwritten shelf takedown offering (the “May 2015 Follow-On Offering”) of 6,348,000 shares of Class A common stock, par value $0.01 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 December 2014 Shelf Registration Statement. The public offering price of $13.00 per share was announced on May 19, 2015. Net proceeds of the May 2015 Follow-On Offering were approximately $77.6 million after deducting underwriting discounts and commissions and offering costs.

On October 21, 2015, we completed an underwritten shelf takedown offering (the “October 2015 Preferred Stock Offering”) of 2,875,000 shares of 8.250% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share, 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 December 2014 Shelf Registration Statement. The public offering price of $25.00 per share was announced on October 16, 2015. Net proceeds of the October 2015 Preferred Stock Offering were approximately $69.2 million after deducting underwriting discounts and commissions and estimated offering costs.

On February 24, 2016, we filed a prospectus supplement to the December 2014 Shelf Registration Statement offering a maximum of 150,000 Units (the “Units”) consisting of 150,000 shares of the reclassified Series B redeemable preferred stock (the “Series B Preferred Stock”) and warrants (the “Warrants”) to purchase 3,000,000 shares of Class A common stock (liquidation preference $1,000 per share of Series B Preferred Stock).

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.

Subsequent to quarter end, we sold 146,460 shares of Series A Preferred Stock in the 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 ATM Offering. Such sales efforts may resume in June 2016, following the restricted period related to the April 2016 Preferred Stock Offering.

Subsequent to quarter end, on April 25, 2016, we completed an underwritten offering of 2,300,000 shares of 8.250% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share, liquidation preference $25.00 per share, inclusive of shares sold pursuant to the full exercise of the overallotment option by the underwriters (the “April 2016 Preferred Stock Offering”). The shares were registered with the SEC pursuant to a registration statement on Form S-3 (File No. 333-208956) filed with the SEC on January 12, 2016 and declared effective on January 29, 2016. 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 estimated offering costs.

The net proceeds of our IPO and our follow-on common and preferred stock offerings (collectively the “Follow-On Offerings”), provided us with the ability to grow our asset base quickly and better service our general and administrative expenses. At the same time, the Management Agreement with our Manager provides an overall lower relative fee structure than our previous Advisory Agreement with our Former Advisor, which we believe has reduced our corporate general and administrative expenses as a percentage of our revenues.

In general, we believe our cash flows from operations, available cash balances, the use of equity offerings, including the ATM Offering, the April 2016 Preferred Stock Offering, the Series B Preferred Offering and other future financing arrangements will be sufficient to fund our liquidity requirements with respect to our existing portfolio for the next 12 months.

Our primary long-term liquidity requirements relate to (a) costs to acquire additional multifamily investments; (b) repayment of long-term debt; (c) capital expenditures; and (d) cash redemption requirements related to our Series A Preferred Stock.

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

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

We may also meet our long-term liquidity needs through borrowings from a number of sources, either at the corporate or project level. We will continue to monitor the debt markets, including Fannie Mae and Freddie Mac, and as market conditions permit, access borrowings that are advantageous to us.

We intend to continue to use prudent amounts of leverage in making our investments, which we define as having total indebtedness of approximately 65% of the fair market value of the properties in which we have invested 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.

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

In prior quarters, including the six months ended June 30, 2015, our Manager waived current year reimbursable operating expenses to support our continued operations. Operating expense reimbursements of $0.1 million were expensed during the three months ended September 30, 2015, were reimbursed in cash and are recorded as part of general and administrative expenses. Operating expense reimbursements of $0.1 million were expensed during the three months ended December 31, 2015, which were paid through the issuance of 14,138 LTIP Units on February 29, 2016. Operating expense reimbursements of $0.1 million were expensed during the three months ended March 31, 2016, were reimbursed in cash and are recorded as part of general and administrative expenses.

For the remainder of 2016, the Company expects 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 the Company continues to pay distributions at this rate, the Company expects to substantially use cash flows from operations to fund distribution payments. The Board 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 flow from operations, our distributions through March 31, 2016 have been paid from proceeds from our continuous registered public offering, proceeds from the IPO and Follow-On Offerings and sales of assets, and may in the future be paid from additional sources, such as from borrowings.