UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 30, 2020


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

For the transition period from _______ to ______

Commission File Number 001-36369

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

(Exact name of registrant as specified in its charter)


Maryland		26-3136483
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1345 Avenue of the Americas, 32nd Floor, New York, NY		10105
(Address of principal executive offices)		(Zip Code)

(212) 843-1601

(Registrant’s telephone number, including area code)

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

Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common Stock, $0.01 par value per share	BRG	NYSE American
8.250% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share	BRG-PrA	NYSE American
7.625% Series C Cumulative Redeemable Preferred Stock, $0.01 par value per share	BRG-PrC	NYSE American
7.125% Series D Cumulative Preferred Stock, $0.01 par value per share	BRG-PrD	NYSE American

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

Title of each class

Series B Redeemable Preferred Stock, $0.01 par value per share

Warrants to Purchase Shares of Class A Common Stock, $0.01 par value per share

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 ⌧ No ◻

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

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


Large Accelerated Filer	◻	Accelerated Filer	⌧	Non-Accelerated Filer	◻
Smaller reporting company	☒	Emerging growth company	☐

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

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

Number of shares outstanding of the registrant’s

classes of common stock, as of November 3, 2020:

Class A Common Stock: 23,771,080 shares

Class C Common Stock: 76,603 shares

Table of Contents

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

FORM 10-Q

September 30, 2020


PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019	3

	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019	4

	Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019	5

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019	9

	Notes to Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	61

Item 4.	Controls and Procedures	62

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	63

Item 1A.	Risk Factors	63

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65

Item 3.	Defaults Upon Senior Securities	65

Item 4.	Mine Safety Disclosures	65

Item 5.	Other Information	65

Item 6.	Exhibits	66

SIGNATURES		67

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


	(Unaudited)
	September 30,		December 31,
	2020		2019
ASSETS
Net Real Estate Investments
Land	$	273,043	$	268,244
Buildings and improvements		1,807,386		1,752,738
Furniture, fixtures and equipment		73,797		67,904
Total Gross Real Estate Investments		2,154,226		2,088,886
Accumulated depreciation		(177,124)		(141,566)
Total Net Real Estate Investments		1,977,102		1,947,320
Cash and cash equivalents		91,836		31,683
Restricted cash		34,744		19,085
Notes and accrued interest receivable		202,649		193,781
Due from affiliates		314		2,969
Accounts receivable, prepaids and other assets		26,954		16,317
Preferred equity investments and investments in unconsolidated real estate joint ventures		108,098		126,444
In-place lease intangible assets, net		522		3,098
Total Assets	$	2,442,219	$	2,340,697

LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY
Mortgages payable	$	1,427,542	$	1,425,257
Revolving credit facilities		—		18,000
Mandatorily redeemable preferred stock		34,833		—
Accounts payable		1,596		1,488
Other accrued liabilities		36,664		27,499
Due to affiliates		602		790
Distributions payable		14,964		13,541
Total Liabilities		1,516,201		1,486,575
8.250% Series A Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 10,875,000 shares authorized; 5,558,392 and 5,721,460 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		102,656		140,355
6.000% Series B Redeemable Preferred Stock, liquidation preference $1,000 per share, 1,225,000 shares authorized; 516,100 and 536,695 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		469,538		480,921
7.625% Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized; 2,295,845 and 2,323,750 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		56,373		56,797
6.150% Series T Redeemable Preferred Stock, liquidation preference $25.00 per share, 32,000,000 shares authorized; 6,671,458 and 17,400 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		150,823		388
Equity
Stockholders’ Equity
Preferred stock, $0.01 par value, 197,900,000 shares authorized; no shares issued and outstanding		—		—
7.125% Series D Cumulative Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized; 2,774,338 and 2,850,602 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		66,867		68,705
Common stock - Class A, $0.01 par value, 747,509,582 shares authorized; 24,589,389 and 23,422,557 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		246		234
Common stock - Class C, $0.01 par value, 76,603 shares authorized; 76,603 shares issued and outstanding as of September 30, 2020 and December 31, 2019		1		1
Additional paid-in-capital		323,064		311,683
Distributions in excess of cumulative earnings		(283,537)		(253,132)
Total Stockholders’ Equity		106,641		127,491
Noncontrolling Interests
Operating Partnership units		13,531		19,331
Partially owned properties		26,456		28,839
Total Noncontrolling Interests		39,987		48,170
Total Equity		146,628		175,661
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY	$	2,442,219	$	2,340,697

See Notes to Consolidated Financial Statements

Table of Contents

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except share and per share amounts)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Revenues
Rental and other property revenues	$	48,666	$	47,422	$	146,713	$	139,575
Interest income from mezzanine loan and ground lease investments		5,923		6,125		17,149		17,874
Total revenues		54,589		53,547		163,862		157,449

Expenses
Property operating		19,571		19,377		57,441		56,847
Property management fees		1,231		1,256		3,719		3,707
General and administrative		5,901		6,259		17,575		16,933
Acquisition and pursuit costs		2,242		217		3,933		346
Weather-related losses, net		—		57		—		347
Depreciation and amortization		19,216		17,643		60,206		51,097
Total expenses		48,161		44,809		142,874		129,277
Operating income		6,428		8,738		20,988		28,172
Other income (expense)
Other income		60		—		119		—
Preferred returns on unconsolidated real estate joint ventures		2,963		2,316		8,213		7,097
Gain on sale of real estate investments		—		48,680		58,096		48,680
Gain on sale of non-depreciable real estate investments		—		—		—		679
Loss on extinguishment of debt and debt modification costs		—		(6,924)		(13,985)		(6,924)
Interest expense, net		(13,520)		(14,635)		(42,294)		(45,826)
Total other (expense) income		(10,497)		29,437		10,149		3,706
Net (loss) income		(4,069)		38,175		31,137		31,878
Preferred stock dividends		(15,003)		(11,887)		(42,787)		(33,291)
Preferred stock accretion		(4,451)		(2,717)		(11,978)		(6,920)
Net (loss) income attributable to noncontrolling interests
Operating Partnership units		(6,270)		6,191		(6,679)		(1,747)
Partially owned properties		(195)		220		1,512		(662)
Net (loss) income attributable to noncontrolling interests		(6,465)		6,411		(5,167)		(2,409)
Net (loss) income attributable to common stockholders	$	(17,058)	$	17,160	$	(18,461)	$	(5,924)

Net (loss) income per common share - Basic	$	(0.71)	$	0.76	$	(0.80)	$	(0.29)

Net (loss) income per common share – Diluted	$	(0.71)	$	0.75	$	(0.80)	$	(0.29)

Weighted average basic common shares outstanding		24,566,196		22,320,710		24,321,282		22,622,040
Weighted average diluted common shares outstanding		24,566,196		22,669,188		24,321,282		22,622,040

See Notes to Consolidated Financial Statements

Table of Contents

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands, except share and per share amounts)


	Class A Common Stock			Class C Common Stock			Series D Preferred Stock
										Additional				Net income
	Number of			Number of			Number of			Paid-		Cumulative		to Common		Noncontrolling
	Shares	Par Value		Shares	Par Value		Shares	Value		in Capital		Distributions		Stockholders		Interests		Total Equity
Balance, July 1, 2020	24,605,585	$	246	76,603	$	1	2,774,338	$	66,867	$	321,973	$	(302,485)	$	40,030	$	46,075	$	172,707
Issuance of Class A common stock, net	1,207		—	—		—	—		—		10		—		—		—		10
Repurchase of Class A common stock	(103,574)		(1)	—		—	—		—		(756)		—		—		—		(757)
Vesting of long-term incentive plan ("LTIP Units") for compensation	—		—	—		—	—		—		—		—		—		1,798		1,798
Vesting of restricted Class A common stock	—		—	—		—	—		—		129		—		—		—		129
Issuance of LTIP Units for expense and capitalized cost reimbursements	—		—	—		—	—		—		—		—		—		414		414
Issuance of LTIP Units for executive salaries	—		—	—		—	—		—		—		—		—		163		163
Common stock distributions declared	—		—	—		—	—		—		—		(4,024)		—		—		(4,024)
Series A Preferred Stock distributions declared	—		—	—		—	—		—		—		(2,866)		—		—		(2,866)
Series A Preferred Stock accretion	—		—	—		—	—		—		—		(243)		—		—		(243)
Company redemption of Series A Preferred Stock	—		—	—		—	—		—		—		(468)		—		—		(468)
Series B Preferred Stock distributions declared	—		—	—		—	—		—		—		(7,745)		—		—		(7,745)
Series B Preferred Stock accretion	—		—	—		—	—		—		—		(2,939)		—		—		(2,939)
Series C Preferred Stock distributions declared	—		—	—		—	—		—		—		(1,094)		—		—		(1,094)
Series C Preferred Stock accretion	—		—	—		—	—		—		—		(94)		—		—		(94)
Series D Preferred Stock distributions declared	—		—	—		—	—		—		—		(1,236)		—		—		(1,236)
Series T Preferred Stock distributions declared	—		—	—		—	—		—		—		(2,062)		—		—		(2,062)
Series T Preferred Stock accretion	—		—	—		—	—		—		—		(707)		—		—		(707)
Distributions to Operating Partnership noncontrolling interests	—		—	—		—	—		—		—		—		—		(1,675)		(1,675)
Distributions to partially owned noncontrolling interests	—		—	—		—	—		—		—		—		—		(294)		(294)
Holder redemption of Series B Preferred Stock and conversion into Class A common stock	81,037		1	—		—	—		—		637		—		—		—		638
Holder redemption of Series T Preferred Stock and conversion into Class A common stock	5,134		—	—		—	—		—		42		—		—		—		42
Contributions from noncontrolling interests	—		—	—		—	—		—		—		—		—		1,000		1,000
Adjustment for noncontrolling interest ownership in Operating Partnership	—		—	—		—	—		—		1,029		—		—		(1,029)		—
Net income (loss)	—		—	—		—	—		—		—		—		2,396		(6,465)		(4,069)
Balance, September 30, 2020	24,589,389	$	246	76,603	$	1	2,774,338	$	66,867	$	323,064	$	(325,963)	$	42,426	$	39,987	$	146,628

See Notes to Consolidated Financial Statements

Table of Contents

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands, except share and per share amounts)


	Class A Common Stock			Class C Common Stock			Series D Preferred Stock
										Additional				Net (loss) income
	Number of			Number of			Number of			Paid-		Cumulative		to Common		Noncontrolling
	Shares	Par Value		Shares	Par Value		Shares	Value		in Capital		Distributions		Stockholders		Interests		Total Equity
Balance, July 1, 2019	22,294,327	$	223	76,603	$	1	2,850,602	$	68,705	$	295,444	$	(220,890)	$	(28,098)	$	40,391	$	155,776
Issuance of Class A common stock, net	525		—	—		—	—		—		6		—		—		—		6
Issuance of Class A common stock due to Series B warrant exercises	24,913		—	—		—	—		—		264		—		—		—		264
Issuance of restricted Class A common stock	—		—	—		—	—		—		147		—		—		—		147
Issuance of LTIP Units for director compensation	—		—	—		—	—		—		—		—		—		35		35
Vesting of LTIP Units for compensation	—		—	—		—	—		—		—		—		—		1,341		1,341
Issuance of LTIP Units for expense reimbursements	—		—	—		—	—		—		—		—		—		528		528
Issuance of Series B warrants	—		—	—		—	—		—		1,116		—		—		—		1,116
Common stock distributions declared	—		—	—		—	—		—		—		(3,648)		—		—		(3,648)
Series A Preferred Stock distributions declared	—		—	—		—	—		—		—		(2,950)		—		—		(2,950)
Series A Preferred Stock accretion	—		—	—		—	—		—		—		(231)		—		—		(231)
Series B Preferred Stock distributions declared	—		—	—		—	—		—		—		(6,562)		—		—		(6,562)
Series B Preferred Stock accretion	—		—	—		—	—		—		—		(2,397)		—		—		(2,397)
Series C Preferred Stock distributions declared	—		—	—		—	—		—		—		(1,107)		—		—		(1,107)
Series C Preferred Stock accretion	—		—	—		—	—		—		—		(89)		—		—		(89)
Series D Preferred Stock distributions declared	—		—	—		—	—		—		—		(1,269)		—		—		(1,269)
Distributions to Operating Partnership noncontrolling interests	—		—	—		—	—		—		—		—		—		(1,437)		(1,437)
Distributions to partially owned noncontrolling interests	—		—	—		—	—		—		—		—		—		(2,732)		(2,732)
Redemption of Series B Preferred Stock and conversion into Class A common stock	62,295		1	—		—	—		—		797		—		—		—		798
Cash redemption of Series B Preferred Stock	—		—	—		—	—		—		7		—		—		—		7
Series B warrant exercise, net	—		—	—		—	—		—		(50)		—		—		—		(50)
Acquisition of noncontrolling interest	—		—	—		—	—		—		972		—		—		—		972
Adjustment for noncontrolling interest ownership in Operating Partnership	—		—	—		—	—		—		804		—		—		(804)		—
Net income	—		—	—		—	—		—		—		—		31,764		6,411		38,175
Balance, September 30, 2019	22,382,060	$	224	76,603	$	1	2,850,602	$	68,705	$	299,507	$	(239,143)	$	3,666	$	43,733	$	176,693

See Notes to Consolidated Financial Statements

Table of Contents

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands, except share and per share amounts)


	Class A Common Stock			Class C Common Stock			Series D Preferred Stock
										Additional				Net income
	Number of			Number of			Number of			Paid-		Cumulative		to Common		Noncontrolling
	Shares	Par Value		Shares	Par Value		Shares	Value		in Capital		Distributions		Stockholders		Interests		Total Equity

Balance, January 1, 2020	23,422,557	$	234	76,603	$	1	2,850,602	$	68,705	$	311,683	$	(259,254)	$	6,122	$	48,170	$	175,661
Issuance of Class A common stock, net	170,462		2	—		—	—		—		1,982		—		—		—		1,984
Issuance of Class A common stock due to Series B warrant exercise	11,172		—	—		—	—		—		121		—		—		—		121
Issuance of Class A common stock for executive salaries	25,174		—	—		—	—		—		147		—		—		—		147
Repurchase of Class A common stock	(1,131,867)		(11)	—		—	—		—		(12,353)		—		—		—		(12,364)
Repurchase of Series A, Series C and/or Series D Preferred Stock	—		—	—		—	(76,264)		(1,838)		511		—		—		—		(1,327)
Issuance of restricted Class A common stock, net of shares withheld for employee taxes	78,865		1	—		—	—		—		350		—		—		—		351
Issuance of LTIP Units for director compensation	—		—	—		—	—		—		—		—		—		343		343
Issuance of LTIP Units for executive bonuses	—		—	—		—	—		—		—		—		—		2,034		2,034
Issuance of LTIP Units for executive salaries	—		—	—		—	—		—		—		—		—		325		325
Vesting of LTIP Units for compensation	—		—	—		—	—		—		—		—		—		5,026		5,026
Issuance of LTIP Units for expense and capitalized cost reimbursements	—		—	—		—	—		—		—		—		—		1,357		1,357
Common stock distributions declared	—		—	—		—	—		—		—		(11,944)		—		—		(11,944)
Series A Preferred Stock distributions declared	—		—	—		—	—		—		—		(8,696)		—		—		(8,696)
Series A Preferred Stock accretion	—		—	—		—	—		—		—		(744)		—		—		(744)
Company redemption of Series A Preferred Stock	—		—	—		—	—		—		—		(468)		—		—		(468)
Series B Preferred Stock distributions declared	—		—	—		—	—		—		—		(23,359)		—		—		(23,359)
Series B Preferred Stock accretion	—		—	—		—	—		—		—		(9,166)		—		—		(9,166)
Series C Preferred Stock distributions declared	—		—	—		—	—		—		—		(3,304)		—		—		(3,304)
Series C Preferred Stock accretion	—		—	—		—	—		—		—		(274)		—		—		(274)
Series D Preferred Stock distributions declared	—		—	—		—	—		—		—		(3,750)		—		—		(3,750)
Series T Preferred Stock distributions declared	—		—	—		—	—		—		—		(3,678)		—		—		(3,678)
Series T Preferred Stock accretion	—		—	—		—	—		—		—		(1,326)		—		—		(1,326)
Distributions to Operating Partnership noncontrolling interests	—		—	—		—	—		—		—		—		—		(4,927)		(4,927)
Distributions to partially owned noncontrolling interests	—		—	—		—	—		—		—		—		—		(4,120)		(4,120)
Conversion of OP Units into Class A common stock	69,713		1	—		—	—		—		131		—		—		(132)		—
Holder redemption of Series B Preferred Stock and conversion into Class A common stock	596,179		6	—		—	—		—		4,377		—		—		—		4,383
Company redemption of Series B Preferred Stock and conversion into Class A common stock	1,334,501		13	—		—	—		—		15,779		—		—		—		15,792
Holder redemption of Series T Preferred Stock and conversion into Class A common stock	12,633		—	—		—	—		—		78		—		—		—		78
Cash redemption of Series B Preferred Stock	—		—	—		—	—		—		8		—		—		—		8
Contributions from noncontrolling interests	—		—	—		—	—		—		—		—		—		1,000		1,000
Series B warrant activity and exercise, net	—		—	—		—	—		—		(21)		—		—		—		(21)
Transfer of noncontrolling interest to controlling interest	—		—	—		—	—		—		—		—		—		(775)		(775)
Acquisition of noncontrolling interest	—		—	—		—	—		—		(2,876)		—		—		—		(2,876)
Adjustment for noncontrolling interest ownership in Operating Partnership	—		—	—		—	—		—		3,147		—		—		(3,147)		—
Net income (loss)	—		—	—		—	—		—		—		—		36,304		(5,167)		31,137
Balance, September 30, 2020	24,589,389	$	246	76,603	$	1	2,774,338	$	66,867	$	323,064	$	(325,963)	$	42,426	$	39,987	$	146,628

See Notes to Consolidated Financial Statements

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BLUEROCK RESIDENTIAL GROWTH REIT, INC.

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands, except share and per share amounts)


	Class A Common Stock			Class C Common Stock			Series D Preferred Stock
										Additional				Net (loss) income
	Number of			Number of			Number of			Paid-		Cumulative		to Common		Noncontrolling
	Shares	Par Value		Shares	Par Value		Shares	Value		in Capital		Distributions		Stockholders		Interests		Total Equity

Balance, January 1, 2019	23,322,211	$	233	76,603	$	1	2,850,602	$	68,705	$	307,938	$	(187,910)	$	(30,621)	$	56,597	$	214,943
Issuance of Class A common stock, net	1,970		—	—		—	—		—		21		—		—		—		21
Issuance of Class A common stock due to Series B warrant exercises	28,793		1	—		—	—		—		305		—		—		—		306
Repurchase of Class A common stock	(1,255,445)		(13)	—		—	—		—		(13,391)		—		—		—		(13,404)
Issuance of restricted Class A common stock	90,694		1	—		—	—		—		294		—		—		—		295
Issuance of LTIP Units for director compensation	—		—	—		—	—		—		—		—		—		282		282
Vesting of LTIP Units for compensation	—		—	—		—	—		—		—		—		—		3,951		3,951
Issuance of LTIP Units for expense reimbursements	—		—	—		—	—		—		—		—		—		1,327		1,327
Issuance of Series B warrants	—		—	—		—	—		—		2,981		—		—		—		2,981
Common stock distributions declared	—		—	—		—	—		—		—		(11,022)		—		—		(11,022)
Series A Preferred Stock distributions declared	—		—	—		—	—		—		—		(8,850)		—		—		(8,850)
Series A Preferred Stock accretion	—		—	—		—	—		—		—		(598)		—		—		(598)
Series B Preferred Stock distributions declared	—		—	—		—	—		—		—		(17,313)		—		—		(17,313)
Series B Preferred Stock accretion	—		—	—		—	—		—		—		(6,092)		—		—		(6,092)
Series C Preferred Stock distributions declared	—		—	—		—	—		—		—		(3,321)		—		—		(3,321)
Series C Preferred Stock accretion	—		—	—		—	—		—		—		(230)		—		—		(230)
Series D Preferred Stock distributions declared	—		—	—		—	—		—		—		(3,807)		—		—		(3,807)
Miscellaneous offering costs	—		—	—		—	—		—		(222)		—		—		—		(222)
Distributions to Operating Partnership noncontrolling interests	—		—	—		—	—		—		—		—		—		(4,288)		(4,288)
Distributions to partially owned noncontrolling interests	—		—	—		—	—		—		—		—		—		(3,458)		(3,458)
Redemption of OP Units	—		—	—		—	—		—		(15)		—		—		(10)		(25)
Redemption of Series B Preferred Stock and conversion into Class A common stock	193,837		2	—		—	—		—		2,319		—		—		—		2,321
Cash redemption of Series B Preferred Stock	—		—	—		—	—		—		13		—		—		—		13
Series B warrant exercise, net	—		—	—		—	—		—		(76)		—		—		—		(76)
Acquisition of noncontrolling interest	—		—	—		—	—		—		(6,529)		—		—		(2,390)		(8,919)
Adjustment for noncontrolling interest ownership in Operating Partnership	—		—	—		—	—		—		5,869		—		—		(5,869)		—
Net income (loss)	—		—	—		—	—		—		—		—		34,287		(2,409)		31,878
Balance, September 30, 2019	22,382,060	$	224	76,603	$	1	2,850,602	$	68,705	$	299,507	$	(239,143)	$	3,666	$	43,733	$	176,693

See Notes to Consolidated Financial Statements

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BLUEROCK RESIDENTIAL GROWTH REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)


	Nine Months Ended
	September 30,
	2020		2019
Cash flows from operating activities
Net income	$	31,137	$	31,878
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		62,882		53,806
Amortization of fair value adjustments		(277)		(285)
Preferred returns on unconsolidated real estate joint ventures		(8,213)		(7,097)
Gain on sale of real estate investments		(58,096)		(48,680)
Gain on sale of non-depreciable real estate investments		—		(679)
Fair value adjustment of interest rate caps		(75)		2,501
Loss on extinguishment of debt		13,985		6,924
Distributions of income and preferred returns from preferred equity investments and unconsolidated real estate joint ventures		10,295		6,201
Share-based compensation attributable to equity incentive plan		5,369		4,233
Share-based compensation attributable to executive salaries		472		—
Share-based compensation attributable to restricted stock grants		398		295
Share-based expense and capitalized cost reimbursements to BRE – LTIP Units		1,357		1,327
Changes in operating assets and liabilities:
Due from affiliates, net		2,466		771
Accounts receivable, prepaids and other assets		(11,964)		(2,568)
Notes and accrued interest receivable		68		(80)
Accounts payable and other accrued liabilities		12,127		2,633
Net cash provided by operating activities		61,931		51,180

Cash flows from investing activities:
Acquisitions of real estate investments		(144,703)		(306,115)
Capital expenditures		(12,253)		(15,859)
Investment in notes receivable		(37,936)		(16,097)
Repayments on notes receivable		29,000		—
Proceeds from sale of real estate investments		158,448		313,785
Proceeds from sale and redemption of unconsolidated real estate joint ventures		35,542		17,432
Purchase of interests from noncontrolling interests		(3,651)		(9,891)
Investment in unconsolidated real estate joint venture interests		(18,330)		(33,796)
Net cash provided by (used in) investing activities		6,117		(50,541)

Cash flows from financing activities:
Distributions to common stockholders		(11,748)		(11,203)
Distributions to noncontrolling interests		(8,462)		(7,459)
Distributions to preferred stockholders		(42,144)		(32,522)
Contributions from noncontrolling interests		1,000		—
Borrowings on mortgages payable		95,245		297,388
Repayments on mortgages payable including prepayment penalties		(137,263)		(254,684)
Proceeds from credit facilities		276,189		93,500
Repayments on credit facilities		(294,189)		(175,707)
Payments of deferred financing fees		(3,253)		(2,598)
Miscellaneous offering costs		—		(222)
Net proceeds from issuance of Class A common stock		1,984		21
Repurchase of Class A common stock		(12,364)		(13,404)
Shares withheld for employee taxes upon vesting of awards		(47)		—
Repurchase of Series A, Series C and/or Series D Preferred Stock		(6,103)		—
Net proceeds from issuance of 6.0% Series B Redeemable Preferred Stock		—		136,327
Retirement of 6.0% Series B Redeemable Preferred Stock		(290)		—
Net proceeds from issuance of Warrants associated with the Series B Redeemable Preferred Stock		—		2,981
Net proceeds from exercise of Warrants associated with the Series B Redeemable Preferred Stock		115		261
Net proceeds from issuance of 6.150% Series T Redeemable Preferred Stock		149,219		—
Retirement of 6.150% Series T Redeemable Preferred Stock		(32)		—
Payments to redeem 6.0% Series B Redeemable Preferred Stock		(93)		(207)
Payments to redeem Operating Partnership Units		—		(25)
Net cash provided by financing activities		7,764		32,447

Net increase in cash, cash equivalents and restricted cash	$	75,812	$	33,086
Cash, cash equivalents and restricted cash, beginning of year		50,768		52,244
Cash, cash equivalents and restricted cash, end of period	$	126,580	$	85,330

Supplemental disclosure of cash flow information
Cash paid for interest (net of interest capitalized)	$	40,173	$	41,414

Supplemental disclosure of non-cash investing and financing activities
Distributions payable - declared and unpaid	$	14,964	$	12,948
Mortgage assumed upon property acquisition	$	30,997	$	—
Capital expenditures held in accounts payable and other accrued liabilities	$	(568)	$	(1,016)

See Notes to Consolidated Financial Statements

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BLUEROCK RESIDENTIAL GROWTH REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Organization and Nature of Business

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

As of September 30, 2020, the Company held investments in fifty-seven real estate properties, consisting of thirty-five consolidated operating properties and twenty-two properties through preferred equity, mezzanine loan or ground lease investments. Of the property interests held through preferred equity, mezzanine loan or ground lease investments, five are under development, three are in lease-up and fourteen properties are stabilized. The fifty-seven properties contain an aggregate of 17,216 units, comprised of 11,844 consolidated operating units and 5,372 units through preferred equity, mezzanine loan or ground lease investments. As of September 30, 2020, the Company’s consolidated operating properties were approximately 95.1% occupied.

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.

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 the Operating Partnership’s wholly-owned subsidiaries, owns substantially all the property interests acquired and investments made on the Company’s behalf. As of September 30, 2020, limited partners other than the Company owned approximately 29.45% of the common units of the Operating Partnership (18.06% is held by holders of limited partnership interest in the Operating Partnership (“OP Units”) and 11.39% is held by holders of the Operating Partnership’s long-term incentive plan units (“LTIP Units”), including 5.60% which are not vested at September 30, 2020).

Because the Company is the sole general partner of the Operating Partnership and has unilateral control over its management and major operating decisions (even if additional limited partners are admitted to the Operating Partnership), the accounts of the Operating Partnership are consolidated in its consolidated financial statements.

The Company also consolidates entities in which it controls more than 50% of the voting equity and in which control does not rest with other investors. Investments in real estate joint ventures in which the Company has the ability to exercise significant influence, but does not have financial or operating control, are accounted for using the equity method of accounting. These entities are reflected on the Company’s consolidated financial statements as “Preferred equity investments and investments in unconsolidated real estate joint ventures.” All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. The Company will consider future investments for consolidation in accordance with the provisions required by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810: Consolidation.

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

Significant Risks and Uncertainties

At the present time, one of the most significant risks and uncertainties is the potential adverse effect of the current pandemic of the novel coronavirus (“COVID-19”). The Company’s tenants may experience financial difficulty due to the loss of their jobs and some have requested rent deferral or rent abatement during this pandemic. Experts have predicted that the outbreak will trigger, or has already triggered, a period of global economic slowdown or a global recession.

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The COVID-19 pandemic could have material and adverse effects on the Company’s financial condition, results of operations and cash flows in the near term due to, but not limited to, the following:

●

reduced economic activity may impact the employment of the Company’s tenants and their ability to pay their obligations to the Company, thus requesting modifications of such obligations, resulting in increases in uncollectible receivables and reductions in rental income;

●

the negative financial impact of the pandemic could impact the Company’s future compliance with financial covenants of its credit facilities and other debt agreements;

●

weaker economic conditions could require that the Company recognize impairment in value of its real estate assets due to a reduction in property income;

●

the Company’s inability to maintain occupancy or leasing rates, or increase these rates at stabilizing development properties, including due to possible reduced foot traffic and lease applications from prospective tenants at the Company’s properties as a result of shelter-in-place orders and similar government guidelines; and

●

concentration of the Company’s properties in markets that may be more severely affected by the COVID-19 pandemic due to its significant negative impact on certain key economic drivers in those markets, such as travel and entertainment.

The extent to which the COVID-19 pandemic impacts the Company’s operations and those of its tenants will depend on future developments, which are uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.

As of September 30, 2020, the Company collected 97% of rents from its multifamily properties, including payment plans of 1%, for the three months ended September 30, 2020. The Company provided rent deferral payment plans as a result of hardships these tenants are experiencing due to the COVID-19 impact. Although the Company expects to continue to receive tenant requests for rent deferrals in the coming months, the Company does not expect to waive its contractual rights under its lease agreements. Further, while occupancy remains strong at 95.1% and the Company has received full interest payments and preferred returns from its mezzanine loan and preferred investments as of September 30, 2020, in future periods, the Company may experience reduced levels of tenant retention, reduced foot traffic and lease applications from prospective tenants, and reduced or interrupted payments on its mezzanine loan and preferred investments as a result of the impact of COVID-19.

Summary of Significant Accounting Policies

Preferred Equity Investments and Investments in Unconsolidated Real Estate Joint Ventures

The Company first analyzes an investment to determine if it is a variable interest entity (“VIE”) in accordance with Topic ASC 810 and, if so, whether the Company is the primary beneficiary requiring consolidation. A VIE is an entity that has (i) insufficient equity to permit it to finance its activities without additional subordinated financial support or (ii) equity holders that lack the characteristics of a controlling financial interest. VIEs are consolidated by the primary beneficiary, which is the entity that has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that potentially could be significant to the entity. Variable interests in a VIE are contractual, ownership, or other financial interests in a VIE that change in value with changes in the fair value of the VIE’s net assets. The Company continuously re-assesses at each level of the investment whether the entity is (i) a VIE, and (ii) if the Company is the primary beneficiary of the VIE. If it was determined that an entity in which the Company holds an interest qualified as a VIE and the Company was the primary beneficiary, the entity would be consolidated.

If, after consideration of the VIE accounting literature, the Company has determined that an entity is not a VIE, the Company assesses the need for consolidation under all other provisions of ASC 810. These provisions provide for consolidation of majority-owned entities through a majority voting interest held by the Company providing control.

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

If it has been determined that the Company does not have control but does have the ability to exercise significant influence over the entity, the Company accounts for these unconsolidated investments under the equity method of accounting. The equity method of accounting requires these investments to be initially recorded at cost and subsequently increased (decreased) for the Company’s share of net income (loss), including eliminations for the Company’s share of intercompany transactions, and increased (decreased) for contributions (distributions). The Company’s share of the results of operations of these investments is reflected in the Company’s earnings or losses.

Financial Instrument Fair Value Disclosures

As of September 30, 2020 and December 31, 2019, the carrying values of cash and cash equivalents, accounts receivable, due to and due from affiliates, accounts payable, accrued liabilities, and distributions payable approximate their fair value based on their highly-liquid nature and/or short-term maturities. The carrying values of notes receivable approximate fair value because stated interest rate terms are consistent with interest rate terms on new deals with similar leverage and risk profiles.

Refer to Note 10 for further information regarding fair value measurements.

Lessor Accounting

The Company’s current portfolio is focused predominately on apartment properties whereby the Company generates rental revenue by leasing apartments to residents in its communities. As lease revenues for apartments fall under the scope of ASC Topic 842, such lease revenues are classified as operating leases with straight-line recognition over the terms of the relevant lease agreement and inclusion within rental revenue. Resident leases are generally for one-year or month-to-month terms and are renewable by mutual agreement between the Company and the resident. Non-lease components of the Company’s apartment leases are combined with the related lease component and accounted for as a single lease component under ASC Topic 842. The balances of net real estate investments and related depreciation on the Company’s consolidated financial statements relate to assets for which the Company is the lessor.

Lessee Accounting

The Company determines if an arrangement is a lease at inception. The Company is currently engaged in operating lease agreements that primarily relate to certain equipment leases. The Company determined that the lessee operating lease commitments have no material impact on its consolidated financial statements with the adoption of ASC Topic 842. The Company will continue to assess any modification of existing lease agreements and execution of any new lease agreements for the potential requirement of recording a right-of-use-asset or liability in the future.

Interim Financial Information

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with 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 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, 2019 has been derived from the audited financial statements at that date but does not include all the information and disclosures required by GAAP for complete financial statements. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in our audited consolidated financial statements for the year ended December 31, 2019 contained in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission ("SEC") on February 24, 2020.

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Use of Estimates

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

Other than the adoption of new accounting pronouncements as described below, there have been no significant changes to the Company's accounting policies since it filed its audited consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2019.

New Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update ("ASU”) No. 2016-13 "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). ASU 2016-13 requires more timely recognition of credit losses associated with financial assets. While previous GAAP included multiple credit impairment objectives for instruments, the previous objectives generally delayed recognition of the full amount of credit losses until the loss was probable of occurring. The amendments in ASU 2016-13, whose scope is asset-based and not restricted to financial institutions, eliminate the probable initial recognition threshold in current GAAP and, instead, reflect an entity's current estimate of all expected credit losses. The amendments in ASU 2016-13 broaden the information that the Company must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss that will be more useful to users of the financial statements. In November 2018, the FASB issued ASU No. 2018-19 "Codification Improvements to Topic 326, Financial Instruments-Credit Losses" (“ASU 2018-19”). ASU 2018-19 clarifies that operating lease receivables are excluded from the scope of ASU 2016-13 and instead, impairment of operating lease receivables is to be accounted for under ASC Topic 842. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted ASU 2016-13 as of January 1, 2020 and the adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

In April 2020, the FASB issued a Staff Question-and-Answer (“Q&A”) to clarify whether lease concessions related to the effects of COVID-19 require the application of the lease modification guidance under ASC Topic 842. The Q&A allows companies to not apply the lease modification guidance to rent concessions that result in deferred rent where the total cash flows required by the modified lease agreement are materially the same as the cash flows required under the original lease and the changes to the lease do not result in a substantial increase to the rights of the lessor or the obligations of the lessee. The Company adopted the guidance during the second quarter 2020 for eligible residential lease concessions. The lease concessions that met the criteria of the Q&A are treated as if they were part of the enforceable rights and obligations of the parties under the existing lease contract. The amount of rent concessions subject to the Q&A were not material and this adoption did not have a material impact on the Company's consolidated results of operations.

In August 2020, the FASB issued ASU No. 2020-06 “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). The guidance in ASU 2020-06 simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity. In addition, the amendments in the ASU 2020-06 also simplify the guidance in ASC Subtopic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, by removing certain criteria that must be satisfied in order to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded derivatives accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring use of the if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that may be settled in cash or other assets. The amendments in ASU 2020-06 are effective for the Company for fiscal years beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The guidance must be adopted as of the beginning of the fiscal year of adoption. The Company is currently evaluating the impact of this new guidance.

Note 3 – Sale of Real Estate Assets

Sale of Helios

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extinguishment of debt costs, closing costs and fees, the Company’s pro rata share of the net proceeds was $22.7 million, which included payment for its original investment of $19.2 million and its additional investment of approximately $3.5 million. The Company also received a $0.3 million profit share distribution recorded as a gain on sale on the consolidated statements of operations.

Sale of Whetstone Apartments

On January 24, 2020, the Company, through a subsidiary of its Operating Partnership, closed on the sale of Whetstone Apartments located in Durham, North Carolina for approximately $46.5 million, subject to certain prorations and adjustments typical in such real estate transactions. After deduction for the payoff of existing mortgage indebtedness encumbering the property in the amount of $25.4 million and the payment of early extinguishment of debt costs, closing costs and fees, the Company’s net proceeds were $19.6 million, which included payment for its original investment of $12.9 million, its accrued preferred return of $2.7 million and its additional investment of approximately $4.0 million.

Sale of Ashton Reserve

On April 14, 2020, the Company closed on the sale of the Ashton Reserve properties, located in Charlotte, North Carolina, pursuant to the terms and conditions of two separate purchase and sales agreements. The properties were sold for approximately $84.6 million, subject to certain prorations and adjustments typical in such real estate transactions. After deduction for the payoff of the existing mortgage indebtedness encumbering the properties in the amount of $45.4 million, the payment of early extinguishment of debt costs of $7.1 million and payment of closing costs and fees of $0.8 million, the sale of the properties generated net proceeds of approximately $31.2 million and a gain on sale of approximately $26.5 million.

Sale of Marquis at TPC

On April 17, 2020, the Company closed on the sale of Marquis at TPC, located in San Antonio, Texas. The property was sold for $22.5 million, subject to certain prorations and adjustments typical in such real estate transactions. After deduction for the payoff of the existing mortgage indebtedness encumbering the property in the amount of $16.3 million, the sale of the property generated net proceeds of approximately $5.9 million and a gain on sale of approximately $3.2 million, of which the Company’s pro rata share of the proceeds was approximately $5.3 million and pro rata share of the gain was approximately $2.8 million.

Sale of Enders Place at Baldwin Park

On April 21, 2020, the Company closed on the sale of Enders Place at Baldwin Park, located in Orlando, Florida. The property was sold for approximately $53.2 million, subject to certain prorations and adjustments typical in such real estate transactions. After deduction for the payoff of the existing mortgage indebtedness encumbering the property in the amount of $23.2 million, the payment of early extinguishment of debt costs of $2.2 million and payment of closing costs and fees of $0.9 million, the sale of the property generated net proceeds of approximately $26.1 million and a gain on sale of approximately $28.2 million, of which the Company’s pro rata share of the proceeds was approximately $24.0 million and pro rata share of the gain was approximately $26.0 million.

Note 4 – Investments in Real Estate

As of September 30, 2020, the Company held investments in thirty-five consolidated operating properties and twenty-two development properties through preferred equity, mezzanine loan or ground lease investments. The following tables provide summary information regarding the Company’s consolidated operating properties and preferred equity, mezzanine loan and ground lease investments, which are either consolidated or accounted for under the equity method of accounting.

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Consolidated Operating Properties


		Number of	Date Built /	Ownership
Multifamily Community Name	Location	Units	Renovated ⁽¹⁾	Interest
ARIUM Glenridge	Atlanta, GA	480	1990	90	%
ARIUM Grandewood	Orlando, FL	306	2005	100	%
ARIUM Hunter’s Creek	Orlando, FL	532	1999	100	%
ARIUM Metrowest	Orlando, FL	510	2001	100	%
ARIUM Westside	Atlanta, GA	336	2008	90	%
Ashford Belmar	Lakewood, CO	512	1988/1993	85	%
Avenue 25	Phoenix, AZ	254	2013	100	%
Cade Boca Raton	Boca Raton, FL	90	2019	81	%
Chattahoochee Ridge	Atlanta, GA	358	1996	90	%
Chevy Chase	Austin, TX	320	1971	92	%
Citrus Tower	Orlando, FL	336	2006	97	%
Denim	Scottsdale, AZ	645	1979	100	%
Element	Las Vegas, NV	200	1995	100	%
Falls at Forsyth	Cumming, GA	356	2019	100	%
Gulfshore Apartment Homes	Naples, FL	368	2016	100	%
James at South First	Austin, TX	250	2016	90	%
Marquis at The Cascades	Tyler, TX	582	2009	90	%
Navigator Villas	Pasco, WA	176	2013	90	%
Outlook at Greystone	Birmingham, AL	300	2007	100	%
Park & Kingston	Charlotte, NC	168	2015	100	%
Pine Lakes Preserve	Port St. Lucie, FL	320	2003	100	%
Plantation Park	Lake Jackson, TX	238	2016	80	%
Providence Trail	Mount Juliet, TN	334	2007	100	%
Roswell City Walk	Roswell, GA	320	2015	98	%
Sands Parc	Daytona Beach, FL	264	2017	100	%
The Brodie	Austin, TX	324	2001	100	%
The District at Scottsdale	Scottsdale, AZ	332	2018	100	%
The Links at Plum Creek	Castle Rock, CO	264	2000	88	%
The Mills	Greenville, SC	304	2013	100	%
The Preserve at Henderson Beach	Destin, FL	340	2009	100	%
The Reserve at Palmer Ranch	Sarasota, FL	320	2016	100	%
The Sanctuary	Las Vegas, NV	320	1988	100	%
Veranda at Centerfield	Houston, TX	400	1999	93	%
Villages of Cypress Creek	Houston, TX	384	2001	80	%
Wesley Village	Charlotte, NC	301	2010	100	%
Total		11,844

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

Depreciation expense was $18.2 million and $15.7 million, and $54.4 million and $47.3 million for the three and nine months ended September 30, 2020 and 2019, respectively.

Intangibles related to the Company’s consolidated investments in real estate consist of the value of in-place leases. Amortization expense related to the in-place leases was $1.0 million and $1.9 million, and $5.8 million and $3.8 million for the three and nine months ended September 30, 2020 and 2019, respectively.

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Preferred Equity, Mezzanine Loan and Ground Lease Investments


			Actual /	Actual /
		Actual /	Estimated	Estimated
		Planned	Initial	Construction
Multifamily Community Name	Location	Number of Units	Occupancy	Completion
Lease-up Investments
Motif	Fort Lauderdale, FL	385	1Q 2020	2Q 2020
The Conley, formerly North Creek Apartments	Leander, TX	259	2Q 2020	4Q 2020
Wayford at Concord, formerly Wayforth at Concord	Concord, NC	150	1Q 2020	3Q 2021
Total lease-up units		794

Development Investments
Riverside Apartments	Austin, TX	222	1Q 2021	2Q 2021
Zoey	Austin, TX	307	1Q 2022	2Q 2022
Reunion Apartments	Orlando, FL	280	1Q 2022	3Q 2022
The Park at Chapel Hill	Chapel Hill, NC	414	3Q 2021	4Q 2022
Avondale Hills	Decatur, GA	240	1Q 2023	1Q 2023
Total development units		1,463

Multifamily Community Name	Location	Number of Units
Operating Investments ⁽¹⁾
Alexan CityCentre	Houston, TX	340
Alexan Southside Place	Houston, TX	270
Arlo	Charlotte, NC	286
Belmont Crossing ⁽²⁾	Smyrna, GA	192
Domain at The One Forty	Garland, TX	299
Georgetown Crossing⁽²⁾	Savannah, GA	168
Mira Vista	Austin, TX	200
Novel Perimeter	Atlanta, GA	320
Park on the Square⁽²⁾	Pensacola, FL	240
Sierra Terrace ⁽²⁾	Atlanta, GA	135
Sierra Village⁽²⁾	Atlanta, GA	154
The Commons ⁽²⁾	Jacksonville, FL	328
Thornton Flats	Austin, TX	104
Vickers Historic Roswell	Roswell, GA	79
Total operating units		3,115
Total units		5,372

(1)	Stabilized operating properties in which the Company has a preferred equity investment or equity interest. Refer to Note 7 for further information.

(2)	Belmont Crossing, Georgetown Crossing, Park on the Square, Sierra Terrace, Sierra Village, and The Commons are collectively known as the Strategic Portfolio. Refer to Note 7 for further information.

Note 5 – Acquisition of Real Estate

The following describes the Company’s significant acquisition activity and related new financing during the nine months ended September 30, 2020 (dollars in thousands):


			Ownership		Purchase
Property	Location	Date	Interest		Price		Mortgage
Avenue 25	Phoenix, AZ	January 23, 2020	100	%	$	55,600	$	36,566	⁽¹⁾
Falls at Forsyth	Cumming, GA	March 6, 2020	100	%		82,500		—	⁽²⁾
Chevy Chase	Austin, TX	August 11, 2020	92	%		34,500		24,400

(1)	Mortgage balance includes a $29.7 million loan assumption and a $6.9 million supplemental loan secured by the Avenue 25 property.

(2)	The Company funded $79.9 million of the purchase price with proceeds from its Amended Senior Credit Facility secured by the Falls at Forsyth property. Refer to Note 8 for further information about the Company's Amended Senior Credit Facility.

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Purchase Price Allocation

The real estate acquisitions above have been accounted for as asset acquisitions. The purchase prices were allocated to the acquired assets and assumed liabilities based on their estimated fair values at the dates of acquisition.

The following table summarizes the assets acquired and liabilities assumed at the acquisition date for acquisitions made during the nine months ended September 30, 2020 (amounts in thousands):


	Purchase
	Price
	Allocation
Land	$	18,046
Building		132,214
Building improvements		5,158
Land improvements		13,072
Furniture and fixtures		4,366
In-place leases		2,844
Total assets acquired	$	175,700
Mortgages assumed	$	29,705
Fair value adjustments		1,292
Total liabilities assumed	$	30,997

Acquisition of Additional Interest in The Brodie

On April 24, 2020, the Company purchased the non-controlling partner’s interest in The Brodie for $3.5 million, increasing the Company's interest in the property from 93% to 100%.

Note 6 – Notes and Interest Receivable

Following is a summary of the notes and accrued interest receivable due from mezzanine loan investments as of September 30, 2020 and December 31, 2019 (amounts in thousands):


	September 30,		December 31,
Property	2020		2019
Arlo	$	30,242	$	27,605
Domain at The One Forty		24,017		23,430
Motif		75,409		75,436
Novel Perimeter		22,980		20,867
Reunion Apartments		1,934		—
The Park at Chapel Hill		36,413		34,819
Vickers Historic Roswell		11,654		11,624
Total	$	202,649	$	193,781

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Following is a summary of the interest income from mezzanine loan and ground lease investments for the three and nine months ended September 30, 2020 and 2019 (amounts in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Property	2020		2019		2020		2019
Arlo	$	1,110	$	929	$	3,197	$	2,758
Cade Boca Raton		—		504		—		1,408
Domain at The One Forty		330		849		977		2,406
Motif		2,427		2,427		7,123		7,199
Novel Perimeter		845		779		2,411		2,312
Reunion Apartments		15		—		15		—
The Park at Chapel Hill		712		214		2,032		582
Vickers Historic Roswell		434		423		1,293		1,209
Zoey ⁽¹⁾		50		—		101		—
Total	$	5,923	$	6,125	$	17,149	$	17,874

(1)	Refer to Note 14 for further information about the Zoey Ground Lease.

The occupancy percentages of the Company’s mezzanine loan investment properties at September 30, 2020 and December 31, 2019 are as follows:


	September 30,		December 31,
Property	2020		2019
Arlo	93.4	%	82.2	%
Domain at The One Forty	93.0	%	85.6	%
Motif	43.4	%	—	⁽²⁾
Novel Perimeter	90.0	%	79.4	%
Reunion Apartments	—	⁽¹⁾	—
The Park at Chapel Hill	—	⁽¹⁾	—	⁽²⁾
Vickers Historic Roswell	94.9	%	74.7	%

(1)	The development had not commenced lease-up as of September 30, 2020.

(2)	The development had not commenced lease-up as of December 31, 2019.

Arlo Financing

On March 30, 2020, the Company, increased its mezzanine loan commitment to BR Morehead JV Member, LLC to $32.0 million, of which $29.9 million had been funded as of September 30, 2020. The loan matures on the earliest to occur of: (i) July 1, 2025, (ii) the date of sale or transfer of property, or (iii) such earlier date, by declaration of acceleration or otherwise, on which the final payment of principal becomes due. The loan can be prepaid without penalty.

On March 31, 2020, the Arlo property owner refinanced the construction loan and entered into a $43.0 million senior mortgage loan (“senior loan”) secured by the Arlo property and used the proceeds in part to pay off the outstanding principal balances, in full, of the previous construction loan of $33.6 million and mezzanine loan provided by an unaffiliated third party of $7.3 million. The Arlo property owner accounted for the refinancing as an extinguishment of debt. The senior loan matures on April 1, 2025 and bears interest at a floating basis of the greater of LIBOR plus 1.65% or 2.65%, with interest-only payments during the term of the senior loan. On or after April 1, 2022, the loan may be prepaid without prepayment fee or yield maintenance.

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Avondale Hills Mezzanine Financing

On September 30, 2020, the Company entered into an agreement to provide a mezzanine loan in an amount up to $11.7 million, none of which had been funded as of September 30, 2020, to an unaffiliated third party which is developing a 240-unit Class A apartment community located in Decatur, Georgia known as Avondale Hills. The loan matures on October 5, 2023 and contains two one-year extension options, subject to certain conditions and fees. The loan bears interest at a fixed rate of 12% per annum with monthly payments commencing upon completion of construction and in an amount equal to excess cash flow above the senior loan debt service from the preceding month.

Motif Mezzanine Financing

On March 31, 2020, the Company received a paydown of $8.0 million on the Motif Mezz Loan (formerly, the “Flagler Mezz Loan”), reducing the outstanding principal balance to $66.6 million. On May 8, 2020, at the borrower’s request, the Company amended the Motif Mezz Loan agreement to re-lend the $8.0 million to the Motif Mezz Loan borrower. The Company funded the full $8.0 million during the second quarter 2020 to the Motif Mezz Loan borrower, increasing the outstanding Motif Mezz Loan balance to $74.6 million as of September 30, 2020.

Novel Perimeter Mezzanine Financing

On May 5, 2020, the Company increased its mezzanine loan commitment to BR Perimeter JV Member, LLC to $23.8 million, of which $22.7 million had been funded as of September 30, 2020. In exchange for increasing its loan commitment, the Company received the right to exercise an option to purchase, at the greater of a 2.5 basis point discount to fair market value or 15% internal rate of return for Bluerock Special Opportunity + Income Fund III, LLC (“Fund III”), an affiliate of BRG Manager, LLC, the Company’s former Manager (the “former Manager”), up to a 100% common membership interest in BR Perimeter JV Member, LLC.

Reunion Apartments Mezzanine Financing

On July 1, 2020, the Company entered into an agreement to provide a mezzanine loan in an amount up to $10.0 million, of which $1.9 million had been funded as of September 30, 2020, to an unaffiliated third party which is developing a 280-unit Class A apartment community located in Orlando, Florida known as Reunion Apartments. The loan matures on December 30, 2023 and contains two one-year extension options, subject to certain conditions and fees. The loan bears interest at a fixed rate of 12% per annum with monthly payments commencing upon completion of construction and in an amount equal to excess cash flow above the senior loan debt service from the preceding month.

The Park at Chapel Hill Mezzanine Financing

On March 31, 2020, the Company received a paydown of $21.0 million on the Chapel Hill Mezz Loan, reducing the outstanding principal balance to $8.5 million. On May 9, 2020, at the borrower’s request, the Company amended the Chapel Hill Mezz Loan agreement to permit the Chapel Hill Mezz Loan borrower to re-borrow $2.0 million. The Company funded the full $2.0 million during the second quarter 2020 to the Chapel Hill Mezz Loan borrower, increasing the outstanding Chapel Hill Mezz Loan balance to $10.5 million. The senior loan of $5.0 million provided by the Company remains outstanding in full.

On August 18, 2020, the Company entered into an amended and restated mezzanine loan agreement (the "Amended Chapel Hill Mezz Loan") with the Chapel Hill Mezz Loan borrower. As part of the Amended Chapel Hill Mezz Loan, (i) the Company's maximum loan commitment was adjusted to $31.0 million, including all previously advanced amounts outstanding, from the previous commitment amount of $40.0 million, and (ii) the interest rate on the loan was increased to 11.75% per annum from the previous rate of 11% per annum, with 5.25% paid current and 6.5% accrued. As of September 30, 2020, all amounts had been funded under the Amended Chapel Hill Mezz Loan. As with the previous loan, the Amended Chapel Hill Mezz Loan matures on the earliest to occur of: (i) the latest to occur of (a) March 31, 2024 and (b) the applicable maturity date under any extension granted under any construction financing, or (ii) the date of sale or transfer of property, or (iii) such earlier date, by declaration of acceleration or otherwise, on which the final payment of principal becomes due. The Amended Chapel Hill Mezz Loan can be prepaid without penalty.

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Note 7 – Preferred Equity Investments and Investments in Unconsolidated Real Estate Joint Ventures

The carrying amount of the Company’s preferred equity investments and investments in unconsolidated real estate joint ventures as of September 30, 2020 and December 31, 2019 is summarized in the table below (amounts in thousands):


	September 30,		December 31,
Property	2020		2019

Alexan CityCentre	$	14,416	$	12,788
Alexan Southside Place		25,717		24,866
Helios		—		23,663
Leigh House		—		80
Mira Vista		5,250		5,250
Riverside Apartments		13,679		12,342
Strategic Portfolio ⁽¹⁾		22,105		10,183
The Conley, formerly North Creek Apartments		15,735		14,964
Thornton Flats		4,600		4,600
Wayford at Concord, formerly Wayforth at Concord		6,500		4,683
Whetstone Apartments		—		12,932
Other		96		93
Total	$	108,098	$	126,444

(1)	Belmont Crossing, Georgetown Crossing, Park on the Square, Sierra Terrace, Sierra Village, and The Commons are collectively known as the Strategic Portfolio.

As of September 30, 2020, the Company, through wholly-owned subsidiaries of the Operating Partnership, had outstanding equity investments in thirteen joint ventures, each of which was created to develop a multifamily property.

Eight of the thirteen equity investments, Alexan CityCentre, Alexan Southside Place, Mira Vista, Riverside Apartments, Strategic Portfolio, The Conley (formerly North Creek Apartments), Thornton Flats, and Wayford at Concord (formerly Wayforth at Concord), are preferred equity investments, generate a stated preferred return on outstanding capital contributions, and the Company is not allocated any of the income or loss in the joint ventures. The joint venture is the controlling member in an entity whose purpose is to develop or operate a multifamily property.

Five of the thirteen equity investments, Arlo, Domain at The One Forty, Motif, Novel Perimeter and Vickers Historic Roswell, represent a remaining 0.5% common interest in joint ventures where, in some cases, the Company had previously redeemed its preferred equity investment in the joint ventures and provided a mezzanine loan. Refer to Note 6 for further information.

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The preferred returns on the Company’s unconsolidated real estate joint ventures for the three and nine months ended September 30, 2020 and 2019 are summarized below (amounts in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Property	2020		2019		2020		2019
Alexan CityCentre	$	631	$	563	$	1,838	$	1,545
Alexan Southside Place		322		402		955		1,175
Helios ⁽¹⁾		26		339		(133)		1,005
Leigh House		2		73		2		1,155
Mira Vista		136		21		404		21
Riverside Apartments		434		258		1,263		562
Strategic Portfolio		593		—		1,434		—
The Conley		499		392		1,460		902
Thornton Flats		104		6		311		6
Wayford at Concord		216		26		623		26
Whetstone Apartments		—		236		56		700
Preferred returns on unconsolidated joint ventures	$	2,963	$	2,316	$	8,213	$	7,097

(1)	Of the net loss incurred at Helios for the nine months ended September 30, 2020, ($143) pertains to costs related to the sale of Helios.

The occupancy percentages of the Company’s unconsolidated real estate joint ventures at September 30, 2020 and December 31, 2019 are as follows:


	September 30,		December 31,
Property	2020		2019
Alexan CityCentre	94.1	%	90.9	%
Alexan Southside Place	95.2	%	95.2	%
Mira Vista	95.5	%	93.5	%
Riverside Apartments	—	⁽¹⁾	—	⁽²⁾
Strategic Portfolio
Belmont Crossing	95.8	%	89.6	%
Georgetown Crossing	89.3	%	—
Park on the Square	97.9	%	—
Sierra Terrace	91.1	%	97.0	%
Sierra Village	87.7	%	86.4	%
The Commons	93.9	%	—
The Conley	32.8	%	—	⁽²⁾
Thornton Flats	94.2	%	90.4	%
Wayford at Concord	56.7	%	—	⁽²⁾

(1)	The development had not commenced lease-up.

(2)	The development had not commenced lease-up at December 31, 2019.

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Summary combined financial information for the Company’s investments in unconsolidated real estate joint ventures as of September 30, 2020 and December 31, 2019 and for the three and nine months ended September 30, 2020 and 2019 is as follows (amounts in thousands):


	September 30,		December 31,
	2020		2019
Balance Sheets:
Real estate, net of depreciation	$	725,723	$	678,073
Other assets		36,841		51,212
Total assets	$	762,564	$	729,285

Mortgages payable	$	617,228	$	570,573
Other liabilities		35,825		36,129
Total liabilities	$	653,053	$	606,702
Members’ equity		109,511		122,583
Total liabilities and members’ equity	$	762,564	$	729,285


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Operating Statement:
Rental revenues	$	13,315	$	9,470	$	35,995	$	26,194
Operating expenses		(7,828)		(5,534)		(20,873)		(16,165)
Income before debt service and depreciation and amortization		5,487		3,936		15,122		10,029
Interest expense, net		(7,572)		(8,438)		(22,234)		(23,916)
Depreciation and amortization		(5,714)		(3,916)		(13,532)		(12,049)
Net operating loss		(7,799)		(8,418)		(20,644)		(25,936)
Gain on sale ⁽¹⁾		—		13,871		14,716		13,871
Net (loss) income	$	(7,799)	$	5,453	$	(5,928)	$	(12,065)

(1)	For the three and nine months ended September 30, 2019, represents the gain on sale of Leigh House. For the nine months ended September 30, 2020, represents the gain on sale of Helios and Whetstone, net.

Alexan Southside Place Interests

Alexan Southside Place is developed upon a tract of land ground leased from an unaffiliated third party by BR Bellaire BLVD, LLC (“BR Bellaire BLVD”) as tenant under an 85-year ground lease. BR Bellaire BLVD has a right-of-use asset and lease liability of $17.1 million as of September 30, 2020.

Strategic Portfolio Interests

On March 20, 2020, the Company made an $8.0 million preferred equity investment in a joint venture (the “Strategic JV”) with an unaffiliated third party for the following two stabilized properties: Georgetown Crossing, located in Savannah, Georgia, and Park on the Square, located in Pensacola, Florida. On May 8, 2020, the Company made an additional $3.9 million preferred equity investment in the Strategic JV for The Commons, a stabilized property located in Jacksonville, Florida. These three properties, together with Belmont Crossing, Sierra Terrace and Sierra Village, are collectively known as the Strategic Portfolio. The Company will earn a 7.5% current return and a 3.0% accrued return on its total preferred equity investment in the Strategic JV, for a total preferred return of 10.5%. The Strategic JV is required to redeem the Company’s preferred membership interest plus any accrued but unpaid preferred return in each property on the earlier date which is: (i) the sale of the property, (ii) the refinancing of the loan related to the property, or (iii) the maturity date of the property loan.

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Whetstone Apartments Interests

On January 22, 2020, through a subsidiary of its Operating Partnership, the Company entered into a membership interest purchase agreement to purchase 100% of the common membership interest in BR Whetstone Member, LLC from Fund III, an affiliate of the former Manager, for approximately $2.5 million. In conjunction with this transaction, BR Whetstone Member, LLC, along with BRG Avenue 25 TRS, LLC, a wholly-owned subsidiary of the Company’s Operating Partnership, entered into a membership purchase agreement to purchase the right to all the economic interest promote and the common membership interest of 7.5% held in the Whetstone Apartments joint venture from an unaffiliated member of the joint venture for approximately $1.9 million.

The Whetstone Apartments investment was sold on January 24, 2020. Please refer to Note 3 for further information.

Note 8 – Revolving credit facilities

The outstanding balances on the revolving credit facilities as of September 30, 2020 and December 31, 2019 are as follows (amounts in thousands):


	September 30,		December 31,
Revolving Credit Facilities	2020		2019
Amended Senior Credit Facility	$	—	$	18,000
Second Amended Junior Credit Facility		—		—
Total	$	—	$	18,000

Amended Senior Credit Facility

On March 6, 2020, the Company, through its Operating Partnership, entered into an amended and restated, in its entirety, Senior Credit Facility (the “Amended Senior Credit Facility”). The Amended Senior Credit Facility provides for a revolving loan with an initial commitment amount of $100 million, which commitment contains an accordion feature to a maximum total commitment of up to $350 million. Borrowings under the Amended Senior Credit Facility bear interest, at the Company’s option, at LIBOR plus 1.30% to 1.65% or the base rate plus 0.30% to 0.65%, depending on the Company’s leverage ratio. The Company pays an unused fee at an annual rate of 0.15% to 0.20% of the unused portion of the Amended Senior Credit Facility, depending on the borrowings outstanding. The Amended Senior Credit Facility matures on March 6, 2023 and contains two one-year extension options, subject to certain conditions. The Amended Senior Credit Facility contains certain financial and operating covenants, including a maximum leverage ratio, minimum liquidity, minimum debt service coverage ratio and minimum tangible net worth. At September 30, 2020, the Company was in compliance with all covenants under the Amended Senior Credit Facility. The Company has guaranteed the obligations under the Amended Senior Credit Facility and has pledged certain assets as collateral.

The Amended Senior Credit Facility provides the Company with the ability to issue up to $50 million in letters of credit. While the issuance of letters of credit does not increase the Company’s borrowings outstanding under the Amended Senior Credit Facility, it does reduce the availability of borrowings. At September 30, 2020, the Company had one outstanding letter of credit of $0.8 million.

Second Amended Junior Credit Facility

On November 6, 2019, the Company, through a subsidiary of its Operating Partnership, entered into a second amended and restated, in its entirety, Junior Credit Facility (the “Second Amended Junior Credit Facility”). The Second Amended Junior Credit Facility provides for a revolving loan with a maximum commitment amount of $72.5 million. Borrowings under the Second Amended Junior Credit Facility bear interest, at the Company’s option, at LIBOR plus 2.75% to 3.25% or the base rate plus 1.75% to 2.25%, depending on the Company’s leverage ratio. The Company pays an unused fee at an annual rate of 0.35% to 0.40% of the unused portion of the Second Amended Junior Credit Facility, depending on the borrowings outstanding. The Second Amended Junior Credit Facility matures on December 21, 2021 and contains certain financial and operating covenants, including a maximum leverage ratio, minimum liquidity, minimum debt service coverage ratio, minimum debt yield, minimum tangible net worth and minimum equity raise and collateral values. At September 30, 2020, the Company was in compliance with all covenants under the Second Amended Junior Credit Facility. The Company has guaranteed the obligations under the Second Amended Junior Credit Facility and has pledged certain assets as collateral.

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The availability of borrowings under the revolving credit facilities at September 30, 2020 is based on the collateral and compliance with various ratios related to those assets and was approximately $153.6 million.

Note 9 – Mortgages Payable

The following table summarizes certain information as of September 30, 2020 and December 31, 2019, with respect to the Company’s senior mortgage indebtedness (amounts in thousands):


	Outstanding Principal				As of September 30, 2020

	September 30,		December 31,				Interest-only
Property	2020		2019		Interest Rate		through date	Maturity Date

Fixed Rate:
ARIUM Grandewood ⁽¹⁾	$	19,664	$	19,713	4.35	%	⁽²⁾	July 1, 2025
ARIUM Hunter’s Creek		71,207		72,183	3.65	%	⁽²⁾	November 1, 2024
ARIUM Metrowest		64,559		64,559	4.43	%	May 2021	May 1, 2025
ARIUM Westside		52,150		52,150	3.68	%	August 2021	August 1, 2023
Ashford Belmar		100,675		100,675	4.53	%	December 2022	December 1, 2025
Ashton Reserve I		—		30,329
Avenue 25 ⁽³⁾		36,566		—	4.18	%	July 2022	July 1,2027
Chattahoochee Ridge		45,338		45,338	3.25	%	December 2022	December 5,2024
Citrus Tower		40,807		41,325	4.07	%	⁽²⁾	October 1, 2024
Denim		91,634		91,634	3.32	%	August 2024	August 1, 2029
Element		29,260		29,260	3.63	%	July 2022	July 1,2026
Enders Place at Baldwin Park		—		23,337
Gulfshore Apartment Homes		46,345		46,345	3.26	%	September 2022	September 1, 2029
James on South First		25,787		26,111	4.35	%	⁽²⁾	January 1, 2024
Navigator Villas ⁽⁴⁾		20,515		20,515	4.56	%	June 2021	June 1, 2028
Outlook at Greystone		22,105		22,105	4.30	%	June 2021	June 1, 2025
Park & Kingston		19,600		19,600	3.32	%	November 2024	November 1, 2026
Pine Lakes Preserve		—		26,950
Plantation Park		26,625		26,625	4.64	%	July 2024	July 1, 2028
Providence Trail		47,950		47,950	3.54	%	July 2021	July 1, 2026
Roswell City Walk		50,285		51,000	3.63	%	⁽²⁾	December 1, 2026
The Brodie		33,717		34,198	3.71	%	⁽²⁾	December 1, 2023
The Links at Plum Creek		39,740		40,000	4.31	%	⁽²⁾	October 1, 2025
The Mills		25,408		25,797	4.21	%	⁽²⁾	January 1, 2025
The Preserve at Henderson Beach		48,490		48,490	3.26	%	September 2028	September 1, 2029
The Reserve at Palmer Ranch		41,141		41,348	4.41	%	⁽²⁾	May 1, 2025
The Sanctuary		33,707		33,707	3.31	%	Interest-only	August 1, 2029
Villages of Cypress Creek		—		26,200
Wesley Village		39,609		40,111	4.25	%	⁽²⁾	April 1, 2024
Total Fixed Rate	$	1,072,884	$	1,147,555

Floating Rate ⁽⁵⁾:
ARIUM Glenridge	$	49,500	$	49,500	1.49	%	September 2021	September 1, 2025
ARIUM Grandewood ⁽¹⁾		19,615		19,672	1.56	%	⁽²⁾	July 1, 2025
Ashton Reserve II		—		15,213
Cade Boca Raton		23,500		23,500	2.50	%	June 2022	January 1, 2025
Chevy Chase		24,400		—	2.48	%	September 2022	September 1, 2027
Fannie Facility Advance		13,936		—	2.76	%	June 2022	June 1, 2027
Marquis at The Cascades I		31,822		32,284	1.77	%	⁽²⁾	June 1, 2024 ⁽⁶⁾
Marquis at The Cascades II		22,209		22,531	1.77	%	⁽²⁾	June 1, 2024 ⁽⁶⁾
Marquis at TPC		—		16,468
Pine Lakes Preserve		42,728		—	3.14	%	July 2025	July 1, 2030
The District at Scottsdale ⁽⁷⁾		76,065		82,200	1.85	%	⁽²⁾	June 11, 2021 ⁽⁸⁾
Veranda at Centerfield		26,100		26,100	1.41	%	July 2021	July 26, 2023 ⁽⁹⁾
Villages of Cypress Creek		33,520		—	2.71	%	July 2022	July 1, 2027
Total Floating Rate	$	363,395	$	287,468
Total Mortgages Payable	$	1,436,279	$	1,435,023
Fair value adjustments		2,265		1,815
Deferred financing costs, net		(11,002)		(11,581)
Total	$	1,427,542	$	1,425,257

(1)	ARIUM Grandewood has a fixed rate loan and a floating rate loan.

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(2)	The loan requires monthly payments of principal and interest.

(3)	The principal balance includes a $29.7 million loan at a fixed rate of 4.02% and a $ 6.9 million supplemental loan at a fixed rate of 4.86%.

(4)	The principal balance includes a $14.8 million loan at a fixed rate of 4.31% and a $5.7 million supplemental loan at a fixed rate of 5.23%.

(5)	Other than The District at Scottsdale, all the Company’s floating rate loans bear interest at one-month LIBOR + margin. In September 2020, one-month LIBOR in effect was 0.16%. LIBOR rate is subject to a rate cap. Refer to Note 11 for further information.

(6)	The loan can be extended, subject to certain conditions, in connection with an election to convert to a fixed interest rate loan.

(7)	The loan bears interest at a floating rate of one or three-month LIBOR + margin at the Company's discretion. The loan is not subject to a rate cap.

(8)	The loan has two (2) three-month extension options subject to certain conditions.

(9)	The loan has two (2) one-year extension options subject to certain conditions.

Deferred financing costs

Costs incurred in obtaining long-term financing are amortized on a straight-line basis to interest expense over the terms of the related financing agreements, as applicable, which approximates the effective interest method.

Loss on Extinguishment of Debt and Modification Costs

Upon repayment of or in conjunction with a material change (i.e. a 10% or greater difference in the cash flows between instruments) in the terms of an underlying debt agreement, the Company writes-off any unamortized deferred financing costs and fair market value adjustments related to the original debt that was extinguished. Prepayment penalties incurred on the early repayment of debt and costs incurred in a debt modification that are not capitalized are also included in loss on extinguishment of debt and debt modification costs on the consolidated statements of operations.

Refinancing of Villages of Cypress Creek

On June 2, 2020, the Company, through an indirect subsidiary, entered into a $33.5 million floating rate loan, which is secured by Villages of Cypress Creek, and paid off the previous fixed rate loan of $26.2 million. The Company accounted for the refinancing as an extinguishment of debt and recorded a loss on extinguishment of debt of $0.9 million.

Refinancing of Pine Lakes Preserve

On June 24, 2020, the Company, through an indirect subsidiary, entered into a $42.7 million floating rate loan, which is secured by Pine Lakes Preserve, and paid off the previous fixed rate loan of $27.0 million. The Company accounted for the refinancing as an extinguishment of debt and recorded a loss on extinguishment of debt of $3.6 million.

Modification of The District at Scottsdale loan

On June 30, 2020, the Company, through an indirect subsidiary, exercised the loan extension option and entered into an amended loan agreement for The District at Scottsdale. As part of the amended loan agreement, the Company made a principal payment of $6.0 million and paid an extension fee of $0.2 million. Terms of the amended loan agreement include, but are not limited to (i) extension of the loan maturity date to June 11, 2021, (ii) the addition of two (2) three-month extension options, and (iii) the requirement of the Company to remit mandatory prepayments in an amount equal to excess cash flow from the preceding month. The prepayments commenced in July 2020 and are to be remitted monthly thereafter until the loan is paid in full. The Company accounted for the loan amendment as a loan modification.

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Master Credit Facility with Fannie Mae

On April 30, 2018, the Company, through certain subsidiaries of the Operating Partnership, entered into a Master Credit Facility Agreement (the “Fannie Facility”), which was issued through Fannie Mae’s Multifamily Delegated Underwriting and Servicing Program. The Fannie Facility includes certain restrictive covenants, including indebtedness, liens, investments, mergers and asset sales, and distributions. The Fannie Facility also contains events of default, including payment defaults, covenant defaults, bankruptcy events, and change of control events. Each note under the Fannie Facility is cross-defaulted and cross-collateralized and the Company has guaranteed the obligations under the Fannie Facility. As of September 30, 2020, the mortgage loans secured by ARIUM Grandewood, ARIUM Metrowest and Outlook at Greystone were issued under the Fannie Facility.

On May 27, 2020, the Company, through certain subsidiaries of the Operating Partnership, entered into a $13.9 million floating rate advance (the “Fannie Facility Advance”) originated under the Fannie Facility and collateralized by the properties issued under the Fannie Facility. The Fannie Facility Advance matures on June 1, 2027 and bears interest at LIBOR plus 2.60%, subject to an interest rate cap, with interest-only payments through June 2022 and then monthly payments based on thirty-year amortization. The Fannie Facility Advance may be prepaid without prepayment or yield maintenance beginning March 1, 2027.

The Company may request future fixed rate advances or floating rate advances under the Fannie Facility either by borrowing against the value of the mortgaged properties (based on the valuation methodology established in the Fannie Facility) or adding eligible properties to the collateral pool, subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. The proceeds of any future advances made under the Fannie Facility may be used, among other things, for general operating purposes and the acquisition and refinancing of additional properties to be identified in the future.

Debt maturities

As of September 30, 2020, contractual principal payments for the five subsequent years and thereafter are as follows (amounts in thousands):


Year	Total
2020 (October 1–December 31)	$	2,094
2021 ⁽¹⁾		86,579
2022		15,467
2023		127,745
2024		276,177
Thereafter		928,217
	$	1,436,279
Add: Unamortized fair value debt adjustment		2,265
Subtract: Deferred financing costs, net		(11,002)
Total	$	1,427,542

(1)	$76.1 million represents a loan in connection with The District at Scottsdale. The loan has a June 2021 maturity date and contains two (2) three-month extension options, subject to certain conditions.

The net book value of real estate assets providing collateral for these above borrowings, including the Amended Senior Credit Facility, Second Amended Junior Credit Facility and Fannie Facility, was $1,983.1 million as of September 30, 2020.

The mortgage loans encumbering the Company’s properties are generally nonrecourse, subject to certain exceptions for which the Company would be liable for any resulting losses incurred by the lender. These exceptions vary from loan to loan but generally include fraud or a material misrepresentation, misstatement or omission by the borrower, intentional or grossly negligent conduct by the borrower that harms the property or results in a loss to the lender, filing of a bankruptcy petition by the borrower, either directly or indirectly, and certain environmental liabilities. In addition, upon the occurrence of certain events, such as fraud or filing of a bankruptcy petition by the borrower, the Company or our joint ventures would be liable for the entire outstanding balance of the loan, all interest accrued thereon and certain other costs, including penalties and expenses. The mortgage loans generally have a period where a prepayment fee or yield maintenance would be required.

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Note 10 – Fair Value of Financial Instruments

Fair Value Measurements

For financial assets and liabilities recorded at fair value on a recurring or non-recurring basis, fair value is the price the Company would expect to receive to sell an asset, or pay to transfer a liability, in an orderly transaction with a market participant at the measurement date under current market conditions. In the absence of such data, fair value is estimated using internal information consistent with what market participants would use in a hypothetical transaction.

In determining fair value, observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions; preference is given to observable inputs. In accordance with accounting principles generally accepted in the Unites States of America ("GAAP") and as defined in ASC Topic 820 "Fair Value Measurement", these two types of inputs create the following fair value hierarchy:

●Level 1:Quoted prices for identical instruments in active markets

●Level 2:Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable

●Level 3:Significant inputs to the valuation model are unobservable

If the inputs used to measure the fair value fall within different levels of the hierarchy, the fair value is determined based upon the lowest level input that is significant to the fair value measurement. Whenever possible, the Company uses quoted market prices to determine fair value. In the absence of quoted market prices, the Company uses independent sources and data to determine fair value.

Financial Instrument Fair Value Disclosures

Derivative Financial Instruments

The estimated fair values of derivative financial instruments are valued using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and volatility. The fair value of interest rate caps is determined using the market-standard methodology of discounting the future expected cash receipts which would occur if floating interest rates rise above the strike rate of the caps. The floating interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. The inputs used in the valuation of interest rate caps fall within Level 2 of the fair value hierarchy.

As of September 30, 2020 and December 31, 2019, based on the discounted amount of future cash flows using rates currently available to the Company for similar liabilities, the fair value of the Company’s mortgages payable is estimated at $1,497.2 million and $1,436.2 million, respectively, compared to the carrying amounts, before adjustments for deferred financing costs, net, of $1,438.5 million and $1,436.8 million, respectively. The fair value of mortgages payable is estimated based on the Company’s current interest rates (Level 3 inputs of the fair value hierarchy) for similar types of borrowing arrangements.

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Note 11 – Derivative Financial Instruments

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash payments principally related to the Company’s borrowings.

The Company’s objectives in using interest rate derivative financial instruments are to add stability to interest expense and to manage the Company’s exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate caps as part of its interest rate risk management strategy. Interest rate caps involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

The Company has not designated any of the interest rate derivatives as hedges. Although these derivative financial instruments were not designated or did not qualify for hedge accounting, the Company believes the derivative financial instruments are effective economic hedges against increases in interest rates. The Company does not use derivative financial instruments for trading or speculative purposes.

As of September 30, 2020, the Company had interest rate caps which effectively limit the Company’s exposure to interest rate risk by providing a ceiling on the underlying floating interest rate for $287.3 million of the Company’s floating rate mortgage debt. The Company also has an interest rate cap of $50.0 million covering its credit facilities which had no borrowings outstanding as of September 30, 2020.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of September 30, 2020 and December 31, 2019 (amounts in thousands):


Derivatives not designated as hedging		Fair values of derivative
instruments under ASC 815‑20	Balance Sheet Location	instruments
		September 30,		December 31,
		2020		2019
Interest rate caps	Accounts receivable, prepaids and other assets	$	16	$	22

The table below presents the effect of Company’s derivative financial instruments as well as their classification on the consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019 (amounts in thousands):

The Effect of Derivative

Derivatives not designated as hedging

Location of Gain or (Loss)

Instruments on the Statements of

instruments under ASC 815‑20

Recognized in Income

Operations

Three Months Ended

Nine Months Ended

September 30,

2020

2019

2020

2019

Interest rate caps

Interest Expense

(106)

(136)

(75)

(2,501)

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Note 12 – Related Party Transactions

Administrative Services Agreement

In October 2017, the Company entered into an Administrative Services Agreement (the “Administrative Services Agreement”) with Bluerock Real Estate, LLC and its affiliate, Bluerock Real Estate Holdings, LLC (together “BRE”). Pursuant to the Administrative Services Agreement, BRE provides the Company with certain human resources, investor relations, marketing, legal and other administrative services (the “Services”). The Services are provided on an at-cost basis, generally allocated based on the use of such Services for the benefit of the Company’s business, and are invoiced on a quarterly basis. In addition, the Administrative Services Agreement permits certain employees of the Company to provide or cause to be provided services to BRE, on an at-cost basis, generally allocated based on the use of such services for the benefit of the business of BRE, and otherwise subject to the terms of the Services provided by BRE to the Company under the Administrative Services Agreement. Payment by the Company of invoices and other amounts payable under the Administrative Services Agreement will be made in cash or, in the sole discretion of the Company’s board of directors (the “Board”), generally in the form of fully-vested LTIP Units.

On August 4, 2020, the Company delivered written notice to BRE of the Company's intention to renew the Administrative Services Agreement for an additional one-year term, to expire on October 31, 2021 unless the Company renews. The Administrative Services Agreement will automatically terminate (i) upon termination by the Company of all Services, or (ii) in the event of non-renewal by the Company. Pursuant to the Administrative Services Agreement, BRE is responsible for the payment of all employee benefits and any other direct and indirect compensation for the employees of BRE (or their affiliates or permitted subcontractors) assigned to perform the Services, as well as such employees’ worker’s compensation insurance, employment taxes, and other applicable employer liabilities relating to such employees.

The Company and BRE entered into a Leasehold Cost-Sharing Agreement (the “Leasehold Cost-Sharing Agreement”) with respect to the lease for their New York headquarters (the”NY Lease”) to provide for the allocation and sharing between BRE and the Company of the costs thereunder, including costs associated with tenant improvements. The NY Lease permits the Company and certain of its respective subsidiaries and/or affiliates to share occupancy of the New York headquarters with BRE. Under the NY Lease, the Company, through its Operating Partnership, issued a $750,000 letter of credit under the Amended Senior Credit Facility as a security deposit, and BRE is obligated under the Leasehold Cost-Sharing Agreement to indemnify and hold the Company harmless from loss if there is a claim under such letter of credit. Payment by the Company of any amounts payable under the Leasehold Cost-Sharing Agreement to BRE will be made in cash or, in the sole discretion of the Board, generally in the form of fully-vested LTIP Units.

Recorded as part of general and administrative expenses, operating expenses paid by BRE on behalf of the Company of $0.7 million and $1.2 million, and $2.1 million and $2.8 million were expensed during the three and nine months ended September 30, 2020 and 2019, respectively. Operating expense reimbursements of $0.4 million for the second quarter 2020 were paid to BRE through the issuance of 55,675 LTIP Units on August 11, 2020.

Pursuant to the terms of the Administrative Services Agreement, the Company paid operating expenses on behalf of BRE of $0.4 million and $0.4 million, and $1.5 million and $1.2 million for the three and nine months ended September 30, 2020 and 2019, respectively. Operating expense reimbursements for the second quarter 2020 were paid to the Company in cash during the third quarter.

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Pursuant to the terms of the Administrative Services Agreement and the Leasehold Cost-Sharing Agreement, summarized below are the net related party amounts payable to BRE as of September 30, 2020 and December 31, 2019 (amounts in thousands):


	September 30,		December 31,
	2020		2019
Amounts Payable to BRE under the Administrative Services Agreement, net
Operating and direct expense reimbursements	$	330	$	281
Offering expense reimbursements		81		183
Total expense reimbursement amounts payable to BRE, net	$	411	$	464

Amounts Payable to BRE under the Leasehold Cost-Sharing Agreement
Operating and direct expense reimbursements	$	191	$	186
Capital improvement cost reimbursements		—		40
Total expense and cost reimbursement amounts payable to BRE	$	191	$	226
Total	$	602	$	690

As of September 30, 2020 and December 31, 2019, the Company had zero and $0.1 million, respectively, in payables due to related parties other than BRE.

As of September 30, 2020 and December 31, 2019, the Company had $0.3 million and $3.0 million, respectively, in receivables due from related parties other than BRE, primarily for accrued preferred returns on unconsolidated real estate investments for the most recent month.

Selling Commissions and Dealer Manager Fees

In conjunction with the offering of the Series T Preferred Stock and the previous offering of the Series B Preferred Stock, the Company engaged a related party as dealer manager, and pays up to 10% of the gross offering proceeds from the offering as selling commissions and dealer manager fees. The dealer manager re-allows the substantial majority of the selling commissions and dealer manager fees to participating broker-dealers and incurs costs in excess of the 10%, which costs are borne by the dealer manager without reimbursement by the Company. For the nine months ended September 30, 2020, the Company has incurred $11.6 million in selling commissions and discounts and $5.0 million in dealer manager fees and discounts related to its Series T Preferred Offering. For the nine months ended September 30, 2019, the Company had incurred $11.0 million in selling commissions and discounts and $4.7 million in dealer manager fees and discounts related to its previous Series B Preferred Offering. In addition, BRE was reimbursed for offering costs of $0.7 million in conjunction with the Series T Preferred Offering during the nine months ended September 30, 2020 and reimbursed $0.8 million in conjunction with the previous Series B Preferred Offering during the nine months ended September 30, 2019. The selling commissions, dealer manager fees, discounts and reimbursements for offering costs were recorded as a reduction to the proceeds of the offering.

Notes and Interest Receivable

The Company provides mezzanine loans, in some cases, to related parties in conjunction with the developments of multifamily communities. Please refer to Notes 6 and 7 and the Company’s Form 10-K for the year ended December 31, 2019 for further information.

Preferred Equity Investments and Investments in Unconsolidated Real Estate Joint Ventures

The Company invests, in some cases, with related parties in various joint ventures in which the Company owns either preferred or common interests. Please refer to Note 7 and the Company’s Form 10-K for the year ended December 31, 2019 for further information.

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Note 13 – Stockholders’ Equity and Redeemable Preferred Stock

Net (Loss) Income Per Common Share

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

The Company considers the requirements of the two-class method when preparing earnings per share. The Company has two classes of common stock outstanding: Class A common stock, $0.01 par value per share, and Class C common stock, $0.01 par value per share. Earnings per share is not affected by the two-class method because the Company’s Class A and C common stock participate in dividends on a one-for-one basis.

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Net (loss) income attributable to common stockholders	$	(17,058)	$	17,160	$	(18,461)	$	(5,924)
Dividends on restricted stock and LTIP Units expected to vest		(342)		(250)		(1,008)		(735)
Basic net (loss) income attributable to common stockholders	$	(17,400)	$	16,910	$	(19,469)	$	(6,659)

Weighted average common shares outstanding ⁽¹⁾		24,566,196		22,320,710		24,321,282		22,622,040
Potential dilutive shares ⁽²⁾		—		348,478		—		—
Weighted average common shares outstanding and potential dilutive shares ⁽¹⁾		24,566,196		22,669,188		24,321,282		22,622,040

Net (loss) income per common share, basic	$	(0.71)	$	0.76	$	(0.80)	$	(0.29)
Net (loss) income per common share, diluted	$	(0.71)	$	0.75	$	(0.80)	$	(0.29)

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 OP 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 OP Units would have no net impact on the determination of diluted earnings per share.

(1)	Amounts relate to shares of the Company’s Class A and Class C common stock outstanding.

(2)

For the three and nine months ended September 30, 2020, potential vesting of restricted stock to employees for 67,036 shares and 57,102 shares of Class A common stock, respectively, are excluded from the diluted shares calculation as the effect is antidilutive. For the three months ended September 30, 2019, the following are included in the diluted shares calculation: a) warrants outstanding from issuances in conjunction with the Company's Series B Preferred Stock offerings that are potentially exercisable for 320,037 shares of Class A common stock, and b) potential vesting of restricted stock to employees for 28,441 shares of Class A common stock. For the nine months ended September 30, 2019, the following are excluded from the diluted shares calculation as the effect is antidilutive: a) warrants outstanding from issuances in conjunction with the Company's Series B Preferred Stock offerings that are potentially exercisable for 113,985 shares of Class A common stock, and b) potential vesting of restricted stock to employees for 17,954 shares of Class A common stock.

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Series B Redeemable Preferred Stock Offering

On December 20, 2019, the Company made the final issuance of Series B Preferred Stock pursuant to the Series B Preferred Offering, and on February 11, 2020, the Board formally approved the termination of the Series B Preferred Offering. As of December 31, 2019, the Company sold 549,154 shares of Series B Preferred Stock and 549,154 Warrants to purchase 10,983,080 shares of Class A common stock for net proceeds of approximately $494.2 million after commissions, dealer manager fees and discounts.

During the nine months ended September 30, 2020, the Company, at the request of holders, redeemed 4,383 Series B Preferred shares through the issuance of 596,179 Class A common shares and redeemed 101 Series B Preferred shares for $0.09 million in cash. In November 2019, the Company began initiating redemptions of Series B Preferred Stock, and during the first quarter 2020, redemptions initiated by the Company resulted in 15,807 shares of Series B Preferred Stock redeemed through the issuance of 1,334,501 Class A common shares. The Company has not initiated redemptions of its Series B Preferred Stock after the first quarter 2020.

As of September 30, 2020, the Company had 536,127 outstanding warrants from the Series B Preferred Offering. The Warrants are exercisable by the holder at an exercise price of 120% of the market price per share of Class A Common Stock on the date of issuance of such Warrant, with a minimum exercise price of $10.00 per share. The market price per share of our Class A common stock was determined using the volume weighted average price per share of our Class A common stock for the 20 trading days prior to the date of issuance of such Warrant, subject to the minimum exercise price of $10.00 per share (subject to adjustment). One Warrant is exercisable by the holder to purchase 20 shares of Class A common stock. The warrants are exercisable one year following the date of issuance and expire four years following the date of issuance. As of September 30, 2020, a total of 3,748 Warrants had been exercised into 48,663 shares of Class A Common stock. The outstanding Warrants have exercise prices ranging from $10.00 to $15.99 per share.

Series T Redeemable Preferred Stock Offering

During the nine months ended September 30, 2020, the Company issued 6,657,190 shares of Series T Preferred Stock under a continuous registered offering with net proceeds of approximately $149.8 million after commissions, dealer manager fees and discounts of approximately $16.6 million. During the life of the Series T Preferred Stock Offering, the Company has issued a total of 6,674,590 shares of Series T Preferred Stock for net proceeds of approximately $150.2 million after commissions, dealer manager fees and discounts. During the nine months ended September 30, 2020, the Company, at the request of holders, redeemed 3,112 Series T Preferred shares through the issuance of 12,633 Class A common shares and redeemed 20 Series T Preferred shares in cash.

The Company has a dividend reinvestment plan that allows for participating stockholders to have their Series T Preferred Stock dividend distributions automatically reinvested in additional shares of Series T Preferred Stock at a price of $25.00 per share. The Company plans to issue shares of Series T Preferred Stock to cover shares required for investment.

At-the-Market Offerings

In September 2019, the Company and its Operating Partnership entered into an At Market Issuance Sales Agreement with respect to the offering and sale of up to $100,000,000 in shares of Class A common stock in “at the market offerings” as defined in Rule 415 under the Securities Act, including without limitation sales made directly on or through the NYSE American, or on any other existing trading market for Class A common stock or through a market maker (the “Class A Common Stock ATM Offering”). During the first quarter 2020, the Company issued 166,873 shares through the Class A Common Stock ATM Offering at a weighted average price of $12.10 per share with net proceeds of $2.0 million. The Company has not issued any shares through the Class A Common Stock ATM Offering after the first quarter 2020. During the life of the Class A Common Stock ATM Offering, the Company has issued a total of 621,110 shares at a weighted average price of $12.01 per share with net proceeds of $7.3 million.

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Stock Repurchase Plans

In December 2019, the Board authorized stock repurchase plans for the repurchase of up to an aggregate of $50 million of the Company’s outstanding shares of Class A common stock. On May 9, 2020, the Board authorized the modification of the stock repurchase plans to provide for the repurchase, from time to time, of up to an aggregate of $50.0 million in shares of its Class A common stock, 8.250% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share (“Series A Preferred Stock”), 7.625% Series C Cumulative Redeemable Preferred Stock, $0.01 par value per share (“Series C Preferred Stock”), and/or 7.125% Series D Cumulative Preferred Stock, $0.01 par value per share (“Series D Preferred Stock”). The repurchase plans will be conducted in accordance with Rules 10b5-1 and 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The repurchase plans will terminate upon the earliest to occur of certain specified events as set forth therein. The extent to which the Company repurchases shares of its Class A common stock, Series A Preferred Stock, Series C Preferred Stock, and/or Series D Preferred Stock under the repurchase plans, and the timing of any such repurchases, will depend on a variety of factors including general business and market conditions and other corporate considerations. Stock repurchases under the repurchase plans may be made in the open market or through privately negotiated transactions, subject to certain price limitations and other conditions established under the plans. Open market repurchases will be structured to occur in conformity with the method, timing, price and volume requirements of Rule 10b-18 of the Exchange Act.

During the third quarter 2020, the Company repurchased 103,574 shares of Class A common stock under the repurchase plans. During the nine months ended September 30, 2020, the Company repurchased shares under the repurchase plans as follows: 1,131,867 shares of Class A common stock, 163,068 shares of Series A Preferred Stock, 27,905 shares of Series C Preferred Stock and 76,264 shares of Series D Preferred Stock for a total purchase price of approximately $18.5 million. During the life of the repurchase plans, the total purchase price of shares repurchased by the Company is approximately $19.1 million, and as of September 30, 2020, the value of shares that may yet be purchased under the repurchase plans is $30.9 million.

Partial Redemption of 8.250% Series A Cumulative Redeemable Preferred Stock

On September 21, 2020, the Company issued a notice of partial redemption to announce its election to redeem, in cash, 1,393,294 shares of its Series A Preferred Stock on October 21, 2020 at a redemption price of $25.00 per share, plus accrued and unpaid dividends up to, and including, the date of redemption. The Company had previously announced that it would pay a cash dividend on the Series A Preferred Stock on October 5, 2020 for the period from July 1, 2020 to September 30, 2020 to each holder of record on September 25, 2020, which dividend payment will be separate and distinct from the payment of the total redemption price. As the notice of partial redemption created an unconditional obligation of the Company to redeem the 1,393,294 shares of Series A Preferred Stock, these shares became mandatorily redeemable and required reclassification from mezzanine equity to a liability on the Company's consolidated balance sheet as of September 30, 2020.

Operating Partnership and Long-Term Incentive Plan Units

As of September 30, 2020, limited partners other than the Company owned approximately 29.45% of the common units of the Operating Partnership (6,314,754 OP Units, or 18.06%, is held by OP Unit holders, and 3,983,578 LTIP Units, or 11.39%, is held by LTIP Unit holders, including 5.60% which are not vested at September 30, 2020). Subject to certain restrictions set forth in the Operating Partnership’s Partnership Agreement, OP Units are exchangeable for Class A common stock on a one-for-one basis, or, at the Company’s election, redeemable for cash. LTIP Units may be convertible into OP Units under certain conditions and then may be settled in shares of the Company’s Class A common stock, or, at the Company’s election, cash.

Equity Incentive Plans

LTIP Unit Grants

On January 1, 2020, the Company granted certain equity grants of LTIP Units to various executive officers under the Incentive Plans pursuant to the executive officers’ employment or service agreements as time-based LTIP Units and performance-based LTIP Units. All such LTIP Unit grants require continuous employment for vesting. The time-based LTIP Units were comprised of an aggregate of 247,138 LTIP Units that vest over approximately three years. The performance-based LTIP Units were comprised of an aggregate of 494,279 LTIP Units, which are subject to a three-year performance period and will thereafter vest upon successful achievement of performance-based conditions.

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In addition, on January 1, 2020, the Company granted 7,126 LTIP Units under the Incentive Plans to each independent member of the Board in payment of the equity portion of their respective annual retainers. Such LTIP Units were fully vested upon issuance and the Company recognized expense of $0.3 million immediately based on the fair value at the date of grant.

On April 15, 2020, the Company granted an aggregate of 348,117 LTIP Units to various executive officers under the Incentive Plans pursuant to the executive officers’ employment or service agreements in lieu of cash payment of annual incentive bonuses for the fiscal year ended December 31, 2019. Such LTIP Units will vest on the first anniversary of the date of grant.

In addition, on April 15, 2020, the Company granted 46,075 LTIP Units to an employee under the Incentive Plans. Such LTIP Units will vest in three equal installments on each anniversary of the date of grant.

On May 22, 2020 and August 11, 2020, the Company granted an aggregate of 27,111 LTIP Units and 21,889 LTIP Units, respectively, to two executive officers under the Incentive Plans in lieu of cash payment of an agreed upon portion of each such executive officer’s base salary, with the remaining portion payable in cash, for the second and third quarter 2020, respectively. Such LTIP Units will vest on the first anniversary of the date of grant.

On September 8, 2020, the Company's stockholders approved the amendment and restatement of each of the Third Amended 2014 Individuals Plan (the "Fourth Amended 2014 Individuals Plan") and the Third Amended 2014 Entities Plan (the "Fourth Amended 2014 Entities Plan", and together with the Fourth Amended 2014 Individuals Plan, the "Fourth Amended 2014 Incentive Plans"). The Fourth Amended 2014 Incentive Plans allow for the issuance of up to 3,000,000 additional shares of Class A common stock, and thus provide for the issuance of an aggregate of up to 6,800,000 shares of Class A common stock. The Fourth 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.

The Company recognizes compensation expense ratably over the requisite service periods for time-based LTIP Units based on the fair value at the date of grant; thus, the Company recognized compensation expense of approximately $1.0 million and $0.9 million, and $2.9 million and $2.7 million, during the three and nine months ended September 30, 2020 and 2019, respectively. The Company recognizes compensation expense based on the fair value at the date of grant and the probability of achievement of performance criteria over the performance period for performance-based LTIP Units; thus, the Company recognized approximately $0.8 million and $0.4 million, and $2.1 million and $1.2 million, during the three and nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, there was $8.8 million of total unrecognized compensation cost related to unvested LTIP Units granted under the Incentive Plans. The remaining cost is expected to be recognized over a period of 2.0 years.

Restricted Stock Grants

On April 1, 2019 and 2020, the Company provided restricted stock grants (“RSGs”) to employees under the Incentive Plans. Such RSGs will vest in three equal installments on each anniversary of the date of grant. In 2019, the RSGs were comprised of 90,694 shares of Class A common stock with a fair value of $10.65 per RSG and a total fair value of $1.0 million. In 2020, the RSGs were comprised of 89,054 shares of Class A common stock with a fair value of $4.80 per RSG and a total fair value of $0.4 million. The Company recognized compensation expense of approximately $0.1 million and $0.1 million, and $0.3 million and $0.2 million, during the three and nine months ended September 30, 2020 and 2019, respectively. The remaining compensation expense of $0.6 million is expected to be recognized over the remaining 2.1 years.

On April 15, 2020, the Company granted an aggregate of 25,174 shares of Class A common stock to two executive officers in lieu of cash payment of an agreed upon portion of each such executive officer’s base salary, with the remaining portion having been paid in cash, for the period from January 1, 2020 through March 31, 2020. Such shares of Class A common stock will vest on the first anniversary of the date of grant.

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Distributions


	Payable to stockholders
Declaration Date	of record as of	Amount		Date Paid or Payable
Class A Common Stock
December 6, 2019	December 24, 2019	$	0.162500	January 3, 2020
March 13, 2020	March 25, 2020	$	0.162500	April 3, 2020
May 9, 2020	June 25, 2020	$	0.162500	July 2, 2020
September 11, 2020	September 25, 2020	$	0.162500	October 5, 2020
Class C Common Stock
December 6, 2019	December 24, 2019	$	0.162500	January 3, 2020
March 13, 2020	March 25, 2020	$	0.162500	April 3, 2020
May 9, 2020	June 25, 2020	$	0.162500	July 2, 2020
September 11, 2020	September 25, 2020	$	0.162500	October 5, 2020
Series A Preferred Stock
December 6, 2019	December 24, 2019	$	0.515625	January 3, 2020
March 13, 2020	March 25, 2020	$	0.515625	April 3, 2020
May 9, 2020	June 25, 2020	$	0.515625	July 2, 2020
September 11, 2020	September 25, 2020	$	0.515625	October 5, 2020
Series B Preferred Stock
October 31, 2019	December 24, 2019	$	5.00	January 3, 2020
January 13, 2020	January 24, 2020	$	5.00	February 5, 2020
January 13, 2020	February 25, 2020	$	5.00	March 5, 2020
January 13, 2020	March 25, 2020	$	5.00	April 3, 2020
April 14, 2020	April 24, 2020	$	5.00	May 5, 2020
May 9, 2020	May 22, 2020	$	5.00	June 5, 2020
May 9, 2020	June 25, 2020	$	5.00	July 2, 2020
July 10, 2020	July 24, 2020	$	5.00	August 5, 2020
July 10, 2020	August 25, 2020	$	5.00	September 4, 2020
July 10, 2020	September 25, 2020	$	5.00	October 5, 2020
Series C Preferred Stock
December 6, 2019	December 24, 2019	$	0.4765625	January 3, 2020
March 13, 2020	March 25, 2020	$	0.4765625	April 3, 2020
May 9, 2020	June 25, 2020	$	0.4765625	July 2, 2020
September 11, 2020	September 25, 2020	$	0.4765625	October 5, 2020
Series D Preferred Stock
December 6, 2019	December 24, 2019	$	0.4453125	January 3, 2020
March 13, 2020	March 25, 2020	$	0.4453125	April 3, 2020
May 9, 2020	June 25, 2020	$	0.4453125	July 2, 2020
September 11, 2020	September 25, 2020	$	0.4453125	October 5, 2020
Series T Preferred Stock⁽¹⁾
December 20, 2019	December 24, 2019	$	0.128125	January 3, 2020
January 13, 2020	January 24, 2020	$	0.128125	February 5, 2020
January 13, 2020	February 25, 2020	$	0.128125	March 5, 2020
January 13, 2020	March 25, 2020	$	0.128125	April 3, 2020
April 14, 2020	April 24, 2020	$	0.128125	May 5, 2020
May 9, 2020	May 22, 2020	$	0.128125	June 5, 2020
May 9, 2020	June 25, 2020	$	0.128125	July 2, 2020
July 10, 2020	July 24, 2020	$	0.128125	August 5, 2020
July 10, 2020	August 25, 2020	$	0.128125	September 4, 2020
July 10, 2020	September 25, 2020	$	0.128125	October 5, 2020

(1)	Shares of newly issued Series T Preferred Stock that are held only a portion of the applicable monthly dividend period will receive a prorated dividend based on the actual number of days in the applicable dividend period during which each such share of Series T Preferred Stock was outstanding.

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

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

Distributions declared and paid for the nine months ended September 30, 2020 were as follows (amounts in thousands):


	Distributions
2020	Declared		Paid
First Quarter
Class A Common Stock	$	3,901	$	3,816
Class C Common Stock		12		12
Series A Preferred Stock		2,950		2,950
Series B Preferred Stock		7,848		7,867
Series C Preferred Stock		1,107		1,107
Series D Preferred Stock		1,269		1,269
Series T Preferred Stock		373		130
OP Units		1,037		1,037
LTIP Units		554		347
Total first quarter 2020	$	19,051	$	18,535
Second Quarter
Class A Common Stock	$	3,995	$	3,902
Class C Common Stock		12		12
Series A Preferred Stock		2,880		2,950
Series B Preferred Stock		7,766		7,779
Series C Preferred Stock		1,103		1,107
Series D Preferred Stock		1,245		1,269
Series T Preferred Stock		1,243		1,000
OP Units		1,026		1,038
LTIP Units		635		407
Total second quarter 2020	$	19,905	$	19,464
Third Quarter
Class A Common Stock	$	4,012	$	3,994
Class C Common Stock		12		12
Series A Preferred Stock		2,866		2,880
Series B Preferred Stock		7,745		7,751
Series C Preferred Stock		1,094		1,102
Series D Preferred Stock		1,236		1,245
Series T Preferred Stock		2,062		1,738
OP Units		1,026		1,027
LTIP Units		649		487
Total third quarter 2020	$	20,702	$	20,236
Total	$	59,658	$	58,235

Note 14 – Commitments and Contingencies

On March 4, 2020, the Company acquired land for $3.1 million and simultaneously structured and entered into a ground lease (the “Zoey Ground Lease”) as part of the ground lease tenant’s development of a multi-family property in Austin, Texas. The Company committed to provide the ground lease tenant a $20.4 million leasehold improvement allowance with funding subject to certain conditions. As of September 30, 2020, the project is under development and $3.6 million of the leasehold improvement allowance had been funded.

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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.

Note 15 – Subsequent Events

Declaration of Dividends


	Payable to stockholders
Declaration Date	of record as of	Amount		Paid / Payable Date
Series B Preferred Stock
October 9, 2020	October 23, 2020	$	5.00	November 5, 2020
October 9, 2020	November 25, 2020	$	5.00	December 4, 2020
October 9, 2020	December 24, 2020	$	5.00	January 5, 2021
Series T Preferred Stock ⁽¹⁾
October 9, 2020	October 23, 2020	$	0.128125	November 5, 2020
October 9, 2020	November 25, 2020	$	0.128125	December 4, 2020
October 9, 2020	December 24, 2020	$	0.128125	January 5, 2021

(1)	Shares of newly issued Series T Preferred Stock that are held only a portion of the applicable monthly dividend period will receive a prorated dividend based on the actual number of days in the applicable dividend period during which each such share of Series T Preferred Stock was outstanding.

Distributions Paid

The following distributions were declared and/or paid to the Company’s stockholders, as well as holders of OP and LTIP Units, subsequent to September 30, 2020 (amounts in thousands):

Distributions

Total

Shares

Declaration Date

Record Date

Date Paid

per Share

Distribution

Class A Common Stock

September 11, 2020

September 25, 2020

October 5, 2020

0.162500

4,012

Class C Common Stock

September 11, 2020

September 25, 2020

October 5, 2020

0.162500

Series A Preferred Stock

September 11, 2020

September 25, 2020

October 5, 2020

0.515625

2,866

Series B Preferred Stock

July 10, 2020

September 25, 2020

October 5, 2020

5.000000

2,581

Series C Preferred Stock

September 11, 2020

September 25, 2020

October 5, 2020

0.4765625

1,094

Series D Preferred Stock

September 11, 2020

September 25, 2020

October 5, 2020

0.4453125

1,236

Series T Preferred Stock

July 10, 2020

September 25, 2020

October 5, 2020

0.128125

810

OP Units

September 11, 2020

September 25, 2020

October 5, 2020

0.162500

1,026

LTIP Units

September 11, 2020

September 25, 2020

October 5, 2020

0.162500

500

Series B Preferred Stock

October 9, 2020

October 23, 2020

November 5, 2020

5.000000

2,577

Series T Preferred Stock

October 9, 2020

October 23, 2020

November 5, 2020

0.128125

930

Total

17,644

Water's Edge Interests

On October 1, 2020, the Company made a $3.3 million preferred equity investment in the Strategic JV with an unaffiliated party for Water's Edge, a stabilized property located in Pensacola, Florida and the seventh property in the Strategic Portfolio. The Company will earn a 7.5% current return and a 3.0% accrued return for a total preferred return of 10.5%. The Strategic JV is required to redeem the Company's preferred membership interest plus any accrued but unpaid preferred return on the earlier date which is: (i) the sale of the property, (ii) the refinancing of the loan related to the property, or (iii) the maturity date of the property loan.

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Partial Redemption of 8.250% Series A Cumulative Redeemable Preferred Stock

On October 21, 2020, the Company redeemed 1,393,294 shares of its Series A Preferred Stock, representing approximately 25% of the total outstanding shares of Series A Preferred Stock. The shares were redeemed at a redemption price of $25.00 per share, plus accrued and unpaid dividends up to, and including, the date of redemption in an amount equal to $0.120313 per share, for a total payment of $25.120313 per share, in cash.

Sale of Cade Boca Raton

On October 26, 2020, the Company closed on the sale of Cade Boca Raton, located in Boca Raton, Florida. The property was sold for approximately $37.8 million, subject to certain prorations and adjustments typical in such real estate transactions. After deduction for the payoff of the existing mortgage indebtedness encumbering the property in the amount of $23.5 million, the payment of early extinguishment of debt costs of $0.2 million and payment of closing costs and fees of $0.6 million, the sale of the property generated net proceeds of approximately $13.0 million, of which the Company’s pro rata share of the proceeds was approximately $10.2 million.

Stock Repurchase Plans

On October 29, 2020, the Board authorized new stock repurchase plans for the repurchase, from time to time, of up to an aggregate of $75 million in shares of the Company’s Class A common stock, Series A Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock to be conducted in accordance with the Rules 10b5-1 and 10b-18 of the Exchange Act. The repurchase plans will become effective upon the occurrence of, and will terminate upon the earliest to occur of, certain specified events as set forth therein. The extent to which the Company repurchases shares of its Class A common stock, Series A Preferred Stock, Series C Preferred Stock, and/or Series D Preferred Stock under the repurchase plans, and the timing of any such purchases, depends on a variety of factors including general business and market conditions and other corporate considerations. Repurchases under the repurchase plans may be made in the open market or through privately negotiated transactions, subject to certain price limitations and other conditions established thereunder. Open market repurchases will be structured to occur within the method, timing, price and volume requirements of Rule 10b-18 of the Exchange Act.

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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 former external manager, BRG Manager, LLC, a Delaware limited liability company, as our “former Manager.” Both Bluerock and our former Manager are affiliated with the Company.

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.

Currently, one of the most significant factors, however, is the potential adverse effect of the current pandemic of the novel coronavirus (“COVID-19”) on the financial condition, results of operations, cash flows and performance of the Company and its tenants of our properties, business partners within our network and service providers, as well as the real estate market and the global economy and financial markets. The extent to which COVID-19 impacts the Company and its tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact (including governmental actions that may vary by jurisdiction, such as mandated business closing; “stay-at-home” orders; limits on group activity; and actions to protect residential tenants from eviction), and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, you should interpret many of the risks identified in this Quarterly Report on Form 10-Q, as well as the risks set forth below, as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19.

Additional factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:

●

the factors included in this Quarterly Report on Form 10-Q, including those set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

●

use of proceeds of the Company’s securities offerings;

●

the competitive environment in which we operate;

●

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

●

risks associated with geographic concentration of our investments;

●

decreased rental rates or increasing vacancy rates;

●

our ability to lease units in newly acquired, newly constructed or newly renovated apartment properties;

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●

potential defaults on or non-renewal of leases by tenants;

●

creditworthiness of tenants;

●

our ability to obtain financing for and complete acquisitions under contract at the contemplated terms, or at all;

●

development and acquisition risks, including rising and unanticipated costs, delays in timing, abandonment of opportunities, and failure of such acquisitions and developments to perform in accordance with projections;

●

the timing of acquisitions and dispositions;

●

the performance of our network of leading regional apartment owner/operators with which we invest, including through controlling positions in joint ventures;

●

potential natural disasters such as hurricanes, tornadoes and floods;

●

national, international, regional and local economic conditions;

●

Board determination as to timing and payment of dividends, and our ability to pay future distributions at the dividend rates we have paid historically;

●

the general level of interest rates;

●

potential changes in the law or governmental regulations that affect us and interpretations of those laws and regulations, including changes in real estate and zoning or tax laws, and potential increases in real property tax rates;

●

financing risks, including the risks that our cash flows from operations may be insufficient to meet required payments of principal and interest and we may be unable to refinance our existing debt upon maturity or obtain new financing on attractive terms or at all;

●

lack of or insufficient amounts of insurance;

●

our ability to maintain our qualification as a REIT;

●

litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and

●

possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us or a subsidiary owned by us or acquired by us.

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 this Quarterly Report on Form 10-Q, in Item 1A of our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 24, 2020, and subsequent filings by us with the SEC, or (“Risk Factors”).

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Overview

We were incorporated as a Maryland corporation on July 25, 2008. Our objective is to maximize long-term stockholder value by acquiring and developing well-located institutional-quality apartment properties in knowledge economy growth markets across the United States. We seek to maximize returns through investments where we believe we can drive substantial growth in our core funds from operations and net asset value primarily through our Value-Add and Invest-to-Own investment strategies.

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 September 30, 2020, our portfolio consisted of investments held in fifty-seven real estate properties, consisting of thirty-five consolidated operating properties and twenty-two properties through preferred equity, mezzanine loan or ground lease investments. Of the property interests held through preferred equity, mezzanine loan or ground lease investments, five are under development, three are in lease-up and fourteen properties are stabilized. The fifty-seven properties contain an aggregate of 17,216 units, comprised of 11,844 consolidated operating units and 5,372 units through preferred equity, mezzanine loan or ground lease investments. As of September 30, 2020, our consolidated operating properties were approximately 95.1% 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.

COVID-19

We continue to monitor the impact of the COVID-19 pandemic on all aspects of our business and apartment communities, including how it will impact our tenants and business partners. While we collected 97% of rents from our multifamily properties, including 1% of payment plans, for the three months ended September 30, 2020, going forward we cannot predict the impact that the COVID-19 pandemic will have on our financial condition, results of operations and cash flows due to numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others. The outbreak of COVID-19 across the globe, including the United States, has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and, as cases of COVID-19 have continued to be identified in additional countries, many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. Certain states and cities, including where we own communities, have developments and where our Company has places of business located, have also reacted by instituting quarantines, restrictions on travel, “stay-at-home” orders, restrictions on types of business that may continue to operate, and/or restrictions on the types of construction projects that may continue. We cannot predict if additional states and cities will implement similar restrictions or when restrictions currently in place will expire. As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly, including industries in which our tenants are employed. Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spending as well as other unanticipated consequences remain unknown. We also are unable to predict the impact that COVID-19 will have on our tenants, business partners within our network, and our service providers; and therefore, any material effect on these parties could adversely impact us.

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As of September 30, 2020, we collected 97% of rents from our multifamily properties, including payment plans of 1%, for the three months ended September 30, 2020. As of October 31, 2020, we collected 97% of October rents from our multifamily properties, including payment plans of 0.5%. We provided rent deferral payment plans as a result of hardships these tenants are experiencing due to the impact of COVID-19. Although we expect to continue to receive tenant requests for rent deferrals in the coming months, we do not expect to waive our contractual rights under our lease agreements. Further, while occupancy remains strong at 95.1% and 95.4% as of September 30, 2020 and October 31, 2020, respectively, and we have received full interest payments and preferred returns from our mezzanine loan and preferred investments as of September 30, 2020, in future periods, we may experience reduced levels of tenant retention, reduced foot traffic and lease applications from prospective tenants, and reduced or interrupted payments on our mezzanine loan and preferred investments as a result of the impact of COVID-19.

The impact of the COVID-19 pandemic on our rental revenue for the fourth quarter 2020 and thereafter cannot be determined at present. The situation surrounding the COVID-19 pandemic remains uncertain, and we are actively managing our response in collaboration with business partners in our network and service providers and assessing potential impacts to our financial position and operating results, as well as potential adverse developments in our business. For further information regarding the impact of COVID-19 on the Company, see Part II, Item 1A titled “Risk Factors.” While we expect COVID-19 to adversely impact our tenants in the short term, we believe the knowledge economy renter by choice targeted by our Class A affordable rent strategy should be less impacted by COVID-19 related job loss, which should provide a downside buffer in the interim and allow us to reaccelerate rent growth more quickly once more economic certainty exists around the COVID-19 pandemic.

Since the beginning of the COVID-19 pandemic, we have taken actions to prioritize the health and well-being of our tenants and our employees, while maintaining our high standard of service. As of November 3, 2020, all our properties are open and are complying with federal, state and local government orders. In keeping with such orders, we have implemented, and will continue to implement, operational changes, including the adoption of social distancing practices, additional use of PPE equipment and a virtual leasing/virtual office philosophy. Our property offices are now open to the public and to residents by appointment and with strict social distancing protocols in place. Work orders are now being completed, also with strict safety protocols in place including PPE equipment and a safety questionnaire of each resident at time of request. Generally, the outdoor amenity areas at our communities, including pools, pet parks, and outdoor social areas, have re-opened with strict social distancing protocols, limited capacity and cleaning protocols implemented. Our properties continue the cleaning protocols for the sanitization of all community common areas (including handrails, doors and elevators).

In response to shelter-in-place orders, our corporate offices have also transitioned to a remote work environment. There can be no assurances that the continuation of such remote work arrangements for an extended period of time will not strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, or impair our ability to manage our business.

Other Significant Developments

During the nine months ended September 30, 2020, we acquired three operating multifamily properties in which we have full or majority ownership, representing an aggregate of 930 units, for an aggregate purchase price of $172.6 million. These properties are located in Phoenix, Arizona, Cumming, Georgia and Austin, Texas. We also purchased a parcel of land in Austin, Texas and simultaneously entered into a ground lease with an unaffiliated ground lease tenant and have funded $3.6 million of the leasehold improvement allowance.

We increased our investment in the Strategic Portfolio joint venture through increased preferred equity investments of approximately $11.9 million representing an aggregate of 736 units. These properties are located in Savannah, Georgia, Pensacola, Florida and Jacksonville, Florida. We also increased our preferred equity investments in Alexan CityCentre, Alexan Southside Place, Riverside Apartments, The Conley (formerly North Creek Apartments) and Wayford at Concord (formerly Wayforth at Concord) by approximately $6.4 million.

We entered into mezzanine loan agreements with Reunion Apartments and Avondale Hills, located in Orlando, Florida and Decatur, Georgia, respectively, and have provided loan funding of $1.9 million. We received loan repayments of $29.0 million from and re-lent $10.0 million to Motif and The Park at Chapel Hill. We entered into an amended and restated loan agreement with The Park at Chapel Hill and provided $20.5 million of loan funding under the restated agreement. We also provided increased loan funding to Arlo, Domain at The One Forty, Novel Perimeter and Vickers Historic Roswell of approximately $5.5 million.

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We sold four operating properties and, together with an unaffiliated joint venture partner, sold an asset underlying an unconsolidated joint venture for an aggregate sale price of approximately $272.4 million.

Acquisition of Real Estate


			Ownership		Purchase
Property	Location	Date	Interest		Price		Mortgage
Avenue 25	Phoenix, AZ	January 23, 2020	100	%	$	55,600	$	36,566	⁽¹⁾
Falls at Forsyth	Cumming, GA	March 6, 2020	100	%		82,500		—	⁽²⁾
Chevy Chase	Austin, TX	August 11, 2020	92	%		34,500		24,400

(1)	Mortgage balance includes a $29.7 million loan assumption and a $6.9 million supplemental loan secured by the Avenue 25 property.

(2)	We funded $79.9 million of the purchase price with proceeds from our Amended Senior Credit Facility secured by the Falls at Forsyth property. Refer to Note 8 “Revolving Credit Facilities” of our consolidated financial statements for further information about our Amended Secured Credit Facility.

Sale of Helios

On January 8, 2020, the underlying asset of an unconsolidated joint venture located in Atlanta, Georgia known as Helios was sold for approximately $65.6 million, subject to certain prorations and adjustments typical in such real estate transactions. After deduction for the payoff of existing mortgage indebtedness encumbering the property in the amount of $39.5 million and the payment of early extinguishment of debt costs, closing costs and fees, our pro rata share of the net proceeds was $22.7 million, which included payment for our original investment of $19.2 million and our additional investment of approximately $3.5 million. We also received a $0.3 million profit share distribution recorded as a gain on sale on the consolidated statements of operations.

Sale of Whetstone Apartments

On January 24, 2020, through a subsidiary of our Operating Partnership, we closed on the sale of Whetstone Apartments located in Durham, North Carolina for approximately $46.5 million, subject to certain prorations and adjustments typical in such real estate transactions. After deduction for the payoff of existing mortgage indebtedness encumbering the property in the amount of $25.4 million and the payment of early extinguishment of debt costs, closing costs and fees, our net proceeds were $19.6 million, which included payment for our original investment of $12.9 million, our accrued preferred return of $2.7 million and our additional investment of approximately $4.0 million.

Zoey Ground Lease

On March 4, 2020, we acquired land for $3.1 million and simultaneously structured and entered into a ground lease (the “Zoey Ground Lease”) as part of the ground lease tenant’s development of a multi-family property in Austin, Texas. We committed to provide the ground lease tenant a $20.4 million leasehold improvement allowance with funding subject to certain conditions. As of September 30, 2020, the project is under development and $3.6 million of the leasehold improvement allowance had been funded.

Strategic Portfolio Investment

On March 20, 2020, we made an $8.0 million preferred equity investment in a joint venture (the “Strategic JV”) with an unaffiliated third party for the following two stabilized properties: Georgetown Crossing, located in Savannah, Georgia, and Park on the Square, located in Pensacola, Florida. On May 8, 2020, we made an additional $3.9 million preferred equity investment in the Strategic JV for The Commons, a stabilized property located in Jacksonville, Florida. These three properties, together with Belmont Crossing, Sierra Terrace and Sierra Village, are collectively known as the Strategic Portfolio.

Motif Mezzanine Financing

On March 31, 2020, we received a paydown of $8.0 million on the Motif Mezz Loan (formerly, the “Flagler Mezz Loan”), reducing the outstanding principal balance to $66.6 million. On May 8, 2020, at the borrower’s request, we amended the Motif Mezz Loan

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agreement to re-lend the $8.0 million to the Motif Mezz Loan borrower. We funded the full $8.0 million to the Motif Mezz Loan borrower, increasing the outstanding Motif Mezz Loan principal balance to $74.6 million as of September 30, 2020.

The Park at Chapel Hill Mezzanine Financing

On March 31, 2020, we received a paydown of $21.0 million on the Chapel Hill Mezz Loan, reducing the outstanding principal balance to $8.5 million. On May 9, 2020, at the borrower’s request, we amended the Chapel Hill Mezz Loan agreement to permit the Chapel Hill Mezz Loan borrower to re-borrow $2.0 million. We funded the full $2.0 million to the Chapel Hill Mezz Loan borrower, increasing the outstanding Chapel Hill Mezz Loan principal balance to $10.5 million. On August 18, 2020, we entered into an amended and restated mezzanine loan agreement (the "Amended Chapel Hill Mezz Loan") with the Chapel Hill Mezz Loan borrower to provide a loan in the maximum amount of $31.0 million, including all previously advanced amounts outstanding. As of September 30, 2020 , all amounts had been funded under the Amended Chapel Hill Mezz Loan.

Sale of Ashton Reserve

On April 14, 2020, we closed on the sale of the Ashton Reserve properties located in Charlotte, North Carolina for approximately $84.6 million, subject to certain prorations and adjustments typical in such real estate transactions. After deduction for the payoff of the existing mortgage indebtedness encumbering the properties in the amount of $45.4 million, the payment of early extinguishment of debt costs of $7.1 million and payment of closing costs and fees of $0.8 million, the sale of the properties generated net proceeds of approximately $31.2 million and a gain on sale of approximately $26.5 million.

Sale of Marquis at TPC

On April 17, 2020, we closed on the sale of Marquis at TPC located in San Antonio, Texas for $22.5 million, subject to certain prorations and adjustments typical in such real estate transactions. After deduction for the payoff the existing mortgage indebtedness encumbering the property in the amount of $16.3 million, the sale of the property generated net proceeds of approximately $5.9 million and a gain on sale of approximately $3.2 million, of which our pro rata share of the proceeds was approximately $5.3 million and pro rata share of the gain was approximately $2.8 million.

Sale of Enders Place at Baldwin Park

On April 21, 2020, we closed on the sale of Enders Place at Baldwin Park located in Orlando, Florida for $53.2 million, subject to certain prorations and adjustments typical in such real estate transactions. After deduction for the payoff of the existing mortgage indebtedness encumbering the property in the amount of $23.2 million, the payment of early extinguishment of debt costs of $2.2 million and payment of closing costs and fees of $0.9 million, the sale of the property generated net proceeds of approximately $26.1 million and a gain on sale of approximately $28.2 million, of which our pro rata share of the proceeds was approximately $24.0 million and pro rata share of the gain was approximately $26.0 million.

Acquisition of Additional Interest in The Brodie

On April 24, 2020, we purchased the non-controlling partner’s interest in The Brodie for $3.5 million, increasing our interest in the property from 93% to 100%.

Reunion Apartments Mezzanine Financing

On July 1, 2020, we entered into an agreement to provide a mezzanine loan in an amount up to $10.0 million, of which $1.9 million had been funded as of September 30, 2020, to an unaffiliated third party which is developing a 280-unit Class A apartment community located in Orlando, Florida known as Reunion Apartments.

Avondale Hills Mezzanine Financing

On September 30, 2020, we entered into an agreement to provide a mezzanine loan in an amount up to $11.7 million, none of which had been funded as of September 30, 2020, to an unaffiliated third party which is developing a 240-unit Class A apartment community located in Decatur, Georgia known as Avondale Hills.

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Series T Preferred Stock Continuous Offering

We issued 6,657,190 shares of Series T Preferred Stock under a continuous registered offering with net proceeds of approximately $149.8 million after commissions, dealer manager fees and discounts of approximately $16.6 million during the nine months ended September 30, 2020.

Notice of Partial Redemption of Series A Preferred Stock

On September 21, 2020, we issued a notice of partial redemption to announce our election to redeem 1,393,294 shares of Series A Preferred Stock on October 21, 2020. The Series A Preferred Stock was redeemed for $25.00 per share, plus accrued and unpaid dividends up to, and including, the date of redemption in an amount equal to $0.120313 per share, for a total payment of $25.120313 per share, in cash.

Our total stockholders’ equity decreased $20.9 million from $127.5 million as of December 31, 2019 to $106.6 million as of September 30, 2020. The decrease in our total stockholders’ equity is primarily attributable to dividends declared of $54.7 million, repurchase of Class A common stock of $12.4 million and preferred stock accretion of $11.5 million, offset by the issuance of Class A common stock for redemptions of Series B Preferred shares of $20.2 million and net income of $36.3 million during the nine months ended September 30, 2020.

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Results of Operations

The following is a summary of our stabilized consolidated operating real estate investments as of September 30, 2020:


			Date Built	Ownership		Average
Multifamily Community Name	Location	Number of units	/Renovated ⁽¹⁾	Interest		Rent ⁽²⁾			% Occupied⁽³⁾
ARIUM Glenridge	Atlanta, GA	480	1990	90	%	$	1,283		93.1	%
ARIUM Grandewood	Orlando, FL	306	2005	100	%		1,411		95.4	%
ARIUM Hunter’s Creek	Orlando, FL	532	1999	100	%		1,426		92.7	%
ARIUM Metrowest	Orlando, FL	510	2001	100	%		1,437		93.7	%
ARIUM Westside	Atlanta, GA	336	2008	90	%		1,485		92.9	%
Ashford Belmar	Lakewood, CO	512	1988/1993	85	%		1,670		94.5	%
Avenue 25	Phoenix, AZ	254	2013	100	%		1,222		94.5	%
Cade Boca Raton	Boca Raton, FL	90	2019	81	%		2,710		90.0	%
Chattahoochee Ridge	Atlanta, GA	358	1996	90	%		1,363		96.4	%
Chevy Chase	Austin, TX	320	1971	92	%		928		98.8	%
Citrus Tower	Orlando, FL	336	2006	97	%		1,363		96.7	%
Denim	Scottsdale, AZ	645	1979	100	%		1,229		95.2	%
Element	Las Vegas, NV	200	1995	100	%		1,265		97.5	%
Falls at Forsyth	Cumming, GA	356	2019	100	%		1,339		96.3	%
Gulfshore Apartment Homes	Naples, FL	368	2016	100	%		1,295		92.9	%
James on South First	Austin, TX	250	2016	90	%		1,324		95.2	%
Marquis at The Cascades	Tyler, TX	582	2009	90	%		1,203		95.5	%
Navigator Villas	Pasco, WA	176	2013	90	%		1,115		94.9	%
Outlook at Greystone	Birmingham, AL	300	2007	100	%		1,060		96.0	%
Park & Kingston	Charlotte, NC	168	2015	100	%		1,313		94.0	%
Pine Lakes Preserve	Port St. Lucie, FL	320	2003	100	%		1,359		95.9	%
Plantation Park	Lake Jackson, TX	238	2016	80	%		1,291		92.0	%
Providence Trail	Mount Juliet, TN	334	2007	100	%		1,257		94.6	%
Roswell City Walk	Roswell, GA	320	2015	98	%		1,558		96.6	%
Sands Parc	Daytona Beach, FL	264	2017	100	%		1,337		96.2	%
The Brodie	Austin, TX	324	2001	100	%		1,333		94.8	%
The District at Scottsdale	Scottsdale, AZ	332	2018	100	%		1,545		89.8	%
The Links at Plum Creek	Castle Rock, CO	264	2000	88	%		1,443		96.6	%
The Mills	Greenville, SC	304	2013	100	%		1,050		96.4	%
The Preserve at Henderson Beach	Destin, FL	340	2009	100	%		1,473		96.5	%
The Reserve at Palmer Ranch	Sarasota, FL	320	2016	100	%		1,341		94.4	%
The Sanctuary	Las Vegas, NV	320	1988	100	%		1,087		94.4	%
Veranda at Centerfield	Houston, TX	400	1999	93	%		1,005		97.8	%
Villages of Cypress Creek	Houston, TX	384	2001	80	%		1,169		94.3	%
Wesley Village	Charlotte, NC	301	2010	100	%		1,365		94.7	%
Total/Average		11,844				$	1,319	⁽⁴⁾	95.1	%	⁽⁴⁾

(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 the three months ended September 30, 2020. Total concessions for the three months ended September 30, 2020 amounted to approximately $0.4 million.

(3)Percent occupied is calculated as (i) the number of units occupied as of September 30, 2020 divided by (ii) total number of units, expressed as a percentage.

(4)Excludes The District at Scottsdale which is in lease-up.

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The following is a summary of our preferred equity, mezzanine loan and ground lease investments as of September 30, 2020:


			Total Actual/				Actual/
			Estimated				Estimated			Actual/	Pro
			Construction					Construction	Actual/ Estimated	Estimated	Forma
		Actual/ Planned	Cost		Cost to Date		Cost Per		Initial	Construction	Average
Multifamily Community Name	Location	Number of Units	(in millions)		(in millions)		Unit		Occupancy	Completion	Rent ⁽¹⁾
Lease-up Investments
Motif	Fort Lauderdale, FL	385	$	135.4	$	132.9	$	351,688	1Q20	2Q20	$	2,352
The Conley, formerly North Creek Apartments	Leander, TX	259		44.0		36.1		169,884	2Q20	4Q20		1,358
Wayford at Concord, formerly Wayforth at Concord	Concord, NC	150		33.5		26.4		223,333	1Q20	3Q21		1,707
Total lease-up units		794

Development Investments
Riverside Apartments	Austin, TX	222		37.9		24.3		170,721	1Q21	2Q21		1,408
Zoey	Austin, TX	307		59.5		17.2		193,811	1Q22	2Q22		1,762
Reunion Apartments	Orlando, FL	280		47.6		9.0		170,000	1Q22	3Q22		1,366
The Park at Chapel Hill	Chapel Hill, NC	414		99.2		20.1		239,614	3Q21	4Q22		1,599
Avondale Hills	Decatur, GA	240		50.7		8.6		211,250	1Q23	1Q23		1,538
Total development units		1,463

Multifamily Community Name	Location	Number of Units									Average Rent ⁽¹⁾
Operating Investments ⁽²⁾
Alexan CityCentre	Houston, TX	340										1,648
Alexan Southside Place	Houston, TX	270										1,641
Arlo	Charlotte, NC	286										1,507
Belmont Crossing	Smyrna, GA	192										814
Domain at The One Forty	Garland, TX	299										1,321
Georgetown Crossing	Savannah, GA	168										988
Mira Vista	Austin, TX	200										1,060
Novel Perimeter	Atlanta, GA	320										1,749
Park on the Square	Pensacola, FL	240										1,099
Sierra Terrace	Atlanta, GA	135										1,225
Sierra Village	Atlanta, GA	154										1,178
The Commons	Jacksonville, FL	328										879
Thornton Flats	Austin, TX	104										1,527
Vickers Historic Roswell	Roswell, GA	79										3,176
Total operating units		3,115
Total		5,372									$	1,488

(1)	For lease-up and development investments, represents the average pro forma effective monthly rent per occupied unit for all expected occupied units upon stabilization. For operating investments, represents the average effective monthly rent per occupied unit.

(2)	Stabilized operating properties in which we have a preferred equity investment or equity interest. See Note 7 “Preferred Equity Investments and Investments in Unconsolidated Real Estate Joint Ventures” in our consolidated financial statements for further information.

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

Revenue

Rental and other property revenues increased $1.3 million, or 3%, to $48.7 million for the three months ended September 30, 2020 as compared to $47.4 million for the same prior year period. This increase was due to a $8.3 million increase from the acquisition of three properties in 2020 and the full period impact of six properties acquired in 2019 and a $0.2 million increase from same store properties, partially offset by a $7.2 million decrease from the sale of three properties in 2020 and the full period impact of six properties sold in 2019.

Interest income from mezzanine loan and ground lease investments decreased $0.2 million, or 3%, to $5.9 million for the three months ended September 30, 2020 as compared to $6.1 million for the same prior year period primarily due to the consolidation of Cade Boca Raton and a decreased interest rate at Domain at The One Forty, partially offset by increases in the average balance of mezzanine loans outstanding.

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Expenses

Property operating expenses increased $0.2 million, or 1%, to $19.6 million for the three months ended September 30, 2020 as compared to $19.4 million for the same prior year period. This increase was due to a $3.3 million increase from the acquisition of three properties in 2020 and the full period impact of six properties acquired in 2019 and a $0.5 million increase from same store properties, partially offset by a $3.6 million decrease from the sale of three properties in 2020 and the full period impact of six properties sold in 2019. Property NOI margins increased to 59.8% of total revenues for the three months ended September 30, 2020 from 59.1% in the prior year quarter. Property NOI margins are computed as total rental and other property revenues less property operating expenses, divided by total rental and other property revenues.

Property management fees expense decreased $0.03 million, or 2%, to $1.23 million for the three months ended September 30, 2020 as compared to $1.26 million in the same prior year period. This decrease was due to a $0.22 million decrease from the sale of three properties in 2020 and the full period impact of six properties sold in 2019 and a $0.01 million decrease from same store properties, partially offset by a $0.20 million increase from the acquisition of three properties in 2020 and the full period impact of six properties acquired in 2019.

General and administrative expenses decreased $0.4 million, or 6%, to $5.9 million for the three months ended September 30, 2020 as compared to $6.3 million for the same prior year period.

Acquisition and pursuit costs amounted to $2.2 million for the three months ended September 30, 2020 as compared to $0.2 million for the same prior year period. Acquisition and pursuit costs incurred in the three months ended September 30, 2020 were primarily related to the write-off of pre-acquisition costs from one abandoned deal due to the uncertainty from COVID-19. Abandoned pursuit costs can vary greatly, and the costs incurred in any given period may be significantly different in future periods.

Depreciation and amortization expenses were $19.2 million for the three months ended September 30, 2020 as compared to $17.6 million for the same prior year period. This increase was due to a $3.4 million increase from the acquisition of three properties in 2020 and the full period impact of six properties acquired in 2019, partially offset a $1.6 million decrease from the sale of three properties in 2020 and the full impact of six properties sold in 2019 and a $0.2 million decrease from same store properties.

Other Income and Expense

Other income and expense amounted to expense of $10.5 million for the three months ended September 30, 2020 compared to income of $29.4 million for the same prior year period. This was primarily due to a net gain on sale of $48.7 million for the sale of six properties during the three months ended September 30, 2019, partially offset by a $1.1 million net decrease in interest expense during the three months ended September 30, 2020 and a $6.9 million loss on early extinguishment of debt for property sales and mortgage refinances during the three months ended September 30, 2019.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Revenue

Rental and other property revenues increased $7.1 million, or 5%, to $146.7 million for the nine months ended September 30, 2020 as compared to $139.6 million for the same prior year period. This increase was due to a $31.0 million increase from the acquisition of three properties in 2020 and the full period impact of eight properties acquired in 2019 and a $1.2 million increase from same store properties, partially offset by a $25.1 million decrease from the sale of three properties in 2020 and the full impact of six properties sold in 2019.

Interest income from related parties and ground leases decreased $0.7 million, or 4%, to $17.1 million for the nine months ended September 30, 2020 as compared to $17.9 million for the same prior year period primarily due to the consolidation of Cade Boca Raton and a decreased interest rate at Domain at The One Forty, partially offset by increases in the average balance of mezzanine loans outstanding.

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Expenses

Property operating expenses increased $0.6 million, or 1%, to $57.4 million for the nine months ended September 30, 2020 as compared to $56.8 million for the same prior year period. This increase was due to a $11.4 million increase from the acquisition of three properties in 2020 and the full period impact of eight properties acquired in 2019 and a $1.0 million increase from same store properties, partially offset by a $11.8 million decrease from sale of three properties in 2020 and the full impact of six properties sold in 2019. Property NOI margins increased to 60.8% of total revenues for the nine months ended September 30, 2020 from 59.3% in the prior year quarter. Property NOI margins are computed as total rental and other property revenues less property operating expenses, divided by total rental and other property revenues.

Property management fees expense remained relatively flat at $3.7 million for the nine months ended September 30, 2020 as compared to the same prior year period. This was due to a $0.7 million increase from the acquisition of three properties in 2020 and the full period impact of eight properties acquired in 2019, offset by a $0.7 million decrease from the sale of three properties in 2020 and the full impact of six properties sold in 2019.

General and administrative expenses increased $0.7 million, or 4%, to $17.6 million for the nine months ended September 30, 2020 as compared to $16.9 million for the same prior year period.

Acquisition and pursuit costs amounted to $3.9 million for the nine months ended September 30, 2020 as compared to $0.3 million for the same prior year period. Acquisition and pursuit costs incurred in the nine months ended September 30, 2020 were primarily related to the write-off of pre-acquisition costs from abandoned deals due to the uncertainty from COVID-19, of which $3.3 million of the total costs related to two abandoned deals. Abandoned pursuit costs can vary greatly, and the costs incurred in any given period may be significantly different in future periods.

Depreciation and amortization expenses were $60.2 million for the nine months ended September 30, 2020 as compared to $51.1 million for the same prior year period. This increase was due to a $17.0 million increase from the acquisition of three properties in 2020 and the full period impact of eight properties acquired in 2019 and a $0.2 million increase from same store properties, offset by a $8.1 million decrease from the sale of three properties in 2020 and the full impact of six properties sold in 2019.

Other Income and Expense

Other income and expense amounted to income of $10.1 million for the nine months ended September 30, 2020 compared to income of $3.7 million for the same prior year period. This was primarily due to a $58.1 million net gain on sale due to the sale of three properties during the nine months ended September 30, 2020, a $3.5 million net decrease in interest expense, and a $6.9 million loss on early extinguishment of debt for property sales and mortgages refinances during the nine months ended September 30, 2019. This was partially offset by a $48.7 million net gain on sale due to the sale of six properties during the nine months ended September 30, 2019 and a $14.0 million loss on early extinguishment of debt for property sales and mortgage refinances during the nine months ended September 30, 2020.

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 90.0% physical occupancy.

For comparison of our three months ended September 30, 2020 and 2019, the same store properties included properties owned at July 1, 2019. Our same store properties for the three months ended September 30, 2020 and 2019 consisted of 26 properties, representing 8,993 units.

For comparison of our nine months ended September 30, 2020 and 2019, the same store properties included properties owned at January 1, 2019. Our same store properties for the nine months ended September 30, 2020 and 2019 consisted of 24 properties, representing 8,459 units.

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The following table presents the same store and non-same store results from operations for the three and nine months ended September 30, 2020 and 2019 (dollars in thousands):


	Three Months Ended
	September 30,				Change
	2020		2019		$		%
Property Revenues
Same Store	$	37,943	$	37,710	$	233	0.6	%
Non-Same Store		10,723		9,712		1,011	10.4	%
Total property revenues		48,666		47,422		1,244	2.6	%

Property Expenses
Same Store		15,726		15,204		522	3.4	%
Non-Same Store		3,845		4,173		(328)	(7.9)	%
Total property expenses		19,571		19,377		194	1.0	%

Same Store NOI		22,217		22,506		(289)	(1.3)	%
Non-Same Store NOI		6,878		5,539		1,339	24.2	%
Total NOI⁽¹⁾	$	29,095	$	28,045	$	1,050	3.7	%


	Nine Months Ended
	September 30,				Change
	2020		2019		$		%
Property Revenues
Same Store	$	106,703	$	105,529	$	1,174	1.1	%
Non-Same Store		40,010		34,046		5,964	17.5	%
Total property revenues		146,713		139,575		7,138	5.1	%

Property Expenses
Same Store		42,714		41,759		955	2.3	%
Non-Same Store		14,727		15,088		(361)	(2.4)	%
Total property expenses		57,441		56,847		594	1.0	%

Same Store NOI		63,989		63,770		219	0.3	%
Non-Same Store NOI		25,283		18,958		6,325	33.4	%
Total NOI⁽¹⁾	$	89,272	$	82,728	$	6,544	7.9	%

(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 September 30, 2020 Compared to Three Months Ended September 30, 2019

Same store NOI for the three months ended September 30, 2020 decreased 1.3%, or $0.3 million, compared to the 2019 period. Same store property revenues increased 0.6%, or $0.2 million, as compared to the 2019 period, primarily attributable to a 110 basis point increase in occupancy and a 0.4% increase in average rental rates as fourteen of our twenty-six same store properties recognized rental rate increases during the period. This increase in revenue was partially offset by a $0.2 million increase in bad debt expense and $0.1 million less in ancillary income, such as termination fees and late fees, due to the impact of COVID-19.

Same store expenses for the three months ended September 30, 2020 increased 3.4%, or $0.5 million, compared to the 2019 period. The expense increase was primarily due to non-controllable expenses; insurance expenses increased $0.25 million due to industrywide multifamily price increases and real estate taxes increased $0.25 million from prior year due to municipality tax increases.

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Property revenues and property expenses for our non-same store properties increased due to our investment activity: the acquisition of three properties in 2020 and the full period impact of six properties acquired in 2019, partially offset by the sale of three properties in 2020 and the full period impact of six properties sold in 2019. The results of operations for acquired properties have been included in our consolidated statements of operations from the date of acquisition and the results of operations for disposed properties have been excluded from the consolidated statements of operations since the date of disposition.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Same store NOI for the nine months ended September 30, 2020 increased 0.3%, or $0.2 million, compared to the 2019 period. Same store property revenues increased 1.1% as compared to the 2019 period, primarily attributable to a 60 basis point increase in occupancy and a 1.6% increase in average rental rates as nineteen of our twenty-four same store properties recognized rental rate increases during the period. The increases were partially offset by a $0.75 million increase in bad debt expense and $0.3 million less ancillary income, such as termination fees and late fees, due to the impact of COVID-19.

Same store expenses for the nine months ended September 30, 2020 increased 2.3%, or $0.95 million, compared to the 2019 period. The expense increase was primarily due to non-controllable expenses; real estate taxes increased $0.8 million from prior year due to municipality tax increases, insurance expenses increased $0.55 million due to industrywide multifamily price increases, and payroll increased $0.2 million. The increases were partially offset by a $0.3 million decrease in discretionary seasonal maintenance due to COVID-19, a $0.15 million decrease in utilities, and a $0.1 million decrease in turnover.

Property revenues and property expenses for our non-same store properties increased due to our investment activity: the acquisition of three properties in 2020 and the full period impact of eight properties acquired in 2019, partially offset by the sale of three properties in 2020 and the full period impact of six properties sold in 2019. The results of operations for acquired properties have been included in our consolidated statements of operations from the date of acquisition and the results of operations for disposed properties have been excluded from the consolidated statements of operations since the date of disposition.

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. NOI also is a computation made by analysts and investors to measure a real estate company’s operating performance.

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; NOI allows us to evaluate the operating performance of our properties because it measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance and captures trends in rental housing and property operating expenses.

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Net (loss) income attributable to common stockholders	$	(17,058)	$	17,160	$	(18,461)	$	(5,924)
Add back: Net (loss) income attributable to Operating Partnership Units		(6,270)		6,191		(6,679)		(1,747)
Net (loss) income attributable to common stockholders and unit holders		(23,328)		23,351		(25,140)		(7,671)
Add common stockholders and Operating Partnership Units pro-rata share of:
Depreciation and amortization		18,309		16,755		57,353		48,187
Non-real estate depreciation and amortization		122		157		364		327
Non-cash interest expense		731		787		2,323		2,348
Unrealized loss on derivatives		98		131		67		2,418
Loss on extinguishment of debt and debt modification costs		—		6,864		13,590		6,864
Property management fees		1,173		1,193		3,540		3,511
Acquisition and pursuit costs		2,242		217		3,933		346
Corporate operating expenses		5,817		6,187		17,279		16,716
Weather-related losses, net		—		57		—		305
Preferred dividends		15,003		11,887		42,787		33,291
Preferred stock accretion		4,451		2,717		11,978		6,920
Less common stockholders and Operating Partnership Units pro-rata share of:
Non-recurring income, net		52		—		49		—
Preferred returns on unconsolidated real estate joint ventures		2,935		2,316		8,343		7,097
Interest income from mezzanine loan and ground lease investments		5,923		6,125		17,149		17,874
Gain on sale of real estate investments		—		48,172		55,360		48,172
Gain on sale of non-depreciable real estate investments		—		—		—		679
Pro-rata share of properties’ income		15,708		13,690		47,173		39,740
Add:
Noncontrolling interest pro-rata share of partially owned property income		725		668		2,278		2,086
Total property income		16,433		14,358		49,451		41,826
Add:
Interest expense		12,662		13,687		39,821		40,902
Net operating income		29,095		28,045		89,272		82,728
Less:
Non-same store net operating income		6,878		5,539		25,283		18,958
Same store net operating income	$	22,217	$	22,506	$	63,989	$	63,770

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, both short- and long-term. Our primary short-term liquidity requirements historically have related 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, (d) ongoing commitments to repay borrowings, including our credit facilities and our maturing short-term debt, (e) the partial redemption of our Series A Preferred Stock, and (f) Class A common stock, Series A Preferred Stock, Series C Preferred Stock and Series D Preferred Stock repurchases under our stock repurchase plans.

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Our ability to access capital on favorable terms as well as to use cash from operations to continue to meet our short-term liquidity needs could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic and other risks detailed in Part II, Item 1A titled “Risk Factors” and in the other reports we have filed with the SEC.

We believe we currently have a stable financial condition; as of September 30, 2020, we collected 97% of rents from our multifamily properties, including payment plans of 1%, for the three months ended September 30, 2020. As of October 31, 2020, we collected 97% of October rents from our multifamily properties, including payment plans of 0.5%. We provided rent deferral payment plans as a result of hardships these tenants are experiencing due to the COVID-19 impact. Although we expect to continue to receive tenant requests for rent deferrals in the coming months, we do not expect to waive our contractual rights under our lease agreements. Further, while occupancy remains strong at 95.1% and 95.4% as of September 30, 2020 and October 31, 2020, respectively, in future periods, we may experience reduced levels of tenant retention as well as reduced foot traffic and lease applications from prospective tenants as a result of COVID-19 impact.

Due to the uncertainties presented by COVID-19 discussed above, however, as of October 31, 2020, we have instituted the following actions to increase liquidity:

●sold three properties producing $60.5 million of net proceeds;

●refinanced three loans netting $7.3 million in proceeds while reducing cost of capital by 40 basis points;

●closed on a Fannie Facility advance for $13.8 million in net proceeds;

●continued to raise capital through our Series T Preferred Offering; and

●elected to not proceed on certain potential property acquisitions.

We have approximately $23.4 million of cash and $145.6 million of capacity on our credit facilities as of October 31, 2020. At September 30, 2020, we were in compliance with all covenants under our credit facilities. We continue to communicate with our key lenders and believe access to capacity under our credit facilities will remain available for the uses set forth in their terms.

As we did in 2019 and to date in 2020, we expect to maintain a proactive capital allocation process and selectively sell assets at appropriate cap rates, which would be expected to generate cash sources for both our short-term and long-term liquidity needs. Due to the uncertainty surrounding the COVID-19 impact, we had temporarily suspended interior renovations at several properties as part of assuming a more conservative posture; however, we expect to restart the program at these properties as we gain more visibility on the economic recovery nationally and within our specific markets.

In general, we believe our available cash balances, the proceeds from our continuous Series T Preferred Offering, the Amended Senior and Second Amended Junior Credit Facilities, the Fannie Facility, other financing arrangements and cash flows from operations will be sufficient to fund our liquidity requirements with respect to our existing portfolio for the next 12 months. We expect that properties added to our portfolio with the proceeds from our continuous Series T Preferred Offering and credit facilities will have a positive impact on our future results of operations. In general, we expect that our results related to our portfolio will improve in future periods as a result of anticipated future investments in and acquisitions of real estate. However, there can be no assurance that the worldwide economic disruptions arising from the COVID-19 pandemic will not cause conditions in the lending, capital and other financial markets to deteriorate, nor that our future revenues or access to capital and other sources of funding will not become constrained, which could reduce the amount of liquidity and credit available for use in acquiring and further diversifying our portfolio of multifamily assets. We cannot provide any assurances that we will be able to add properties to our portfolio at the anticipated pace, or at all.

Only $2.1 million, or 0.1%, of our mortgage debt is maturing through the remainder of 2020.

We anticipate approximately $80-90 million of investment activity during the fourth quarter of 2020 inclusive of additional investments into our existing preferred and mezzanine loan investments.

At the current time, we do not anticipate the need to establish any material contingency reserves related to the COVID-19 pandemic but will be assessing along with our network of business partners the possible need for such contingencies, whether at the corporate or property level.

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As equity capital market conditions permit, we may supplement our capital for short-term liquidity needs with proceeds of our Class A ATM Offering and potential offerings of common and preferred stock through underwritten offerings, as well as issuance of units of limited partnership interest in our Operating Partnership, or OP Units. Given the significant decrease in the trading price of our Class A common stock and REIT equities generally associated with the COVID-19 pandemic and our otherwise stable financial condition and liquidity position, we do not currently view these offerings as a likely source of capital to meet short-term liquidity needs.

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

We intend to finance our long-term liquidity requirements with net proceeds of additional issuances of common and preferred stock, including our Class A ATM Offering, our continuous Series T Preferred Offering, our credit facilities, as well as future borrowings. Our success in meeting these requirements will therefore depend upon our ability to access capital. Further, our ability to access equity capital is dependent upon, among other things, general market conditions for REITs and the capital markets generally, market perceptions about us and our asset class, and current trading prices of our securities, all of which may continue to be adversely impacted by COVID-19 pandemic.

We may also meet our long-term liquidity needs through borrowings from a number of sources, either at the corporate or project level. We believe the Amended Senior and Second Amended Junior Credit Facilities, as well as the Fannie Facility, will continue to enable us to deploy our capital more efficiently and provide capital structure flexibility as we grow our asset base. We expect the combination of these facilities to provide us flexibility by allowing us, among other things, to use borrowings under our Amended Senior and Second Amended Junior Credit Facilities to acquire properties pending placement of permanent mortgage indebtedness, including under the Fannie Facility. In addition to restrictive covenants, these credit facilities contain material financial covenants. At September 30, 2020, we were in compliance with all covenants under our credit facilities. We will continue to monitor the debt markets, including Fannie Mae and Freddie Mac, and as market conditions permit, access borrowings that are advantageous to us.

We intend to continue to use prudent amounts of leverage in making our investments, which we define as having total indebtedness of approximately 65% of the fair market value of the properties in which we have invested. For purposes of calculating our leverage, we assume full consolidation of all 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 to maintain our REIT qualification and Investment Company Act exemption.

We expect to maintain distributions paid to our Series A Preferred Stock, our Series B Preferred Stock, our Series C Preferred Stock, our Series D Preferred Stock and our Series T Preferred Stock in accordance with the terms of those securities which require monthly or quarterly dividends depending on the series. While our policy is generally to pay distributions from cash flow from operations, our distributions through September 30, 2020 have been paid from cash flow from operations, proceeds from our continuous preferred stock offerings, including our Series T Preferred Stock, proceeds from underwritten securities offerings, and sales of assets and may in the future be paid from additional sources, such as from borrowings.

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We have notes receivable in conjunction with properties that are in various stages of development, in lease-up and operating. To date, these investments have been structured as mezzanine loans, and in the future, we may also provide mortgage financing to these types of projects. The notes receivable provide a stated return and required repayment based on a fixed maturity date, generally in relation to the property’s construction loan or mortgage loan maturity. If the property does not repay the notes receivable upon maturity, our income, FFO, CFFO and cash flows could be reduced below the stated returns currently being recognized if the property does not produce sufficient cash flow to pay its operating expenses and debt service, or to refinance its debt obligations. In addition, we have, in certain cases, an option to purchase up to 100% of the common interest which holds an interest in the entity that owns the property. If we were to convert into common ownership, our income, FFO, CFFO and cash flows would be reflective of our pro rata share of the property’s results, which could be a reduction from what our notes receivable currently generate.

We also have preferred membership interests in properties that are in various stages of development, in lease-up and operating. Our preferred equity investments are structured to provide a current preferred return, and in some cases an accrued return, during all phases. Each joint venture in which we own a preferred membership interest is required to redeem our preferred membership interests, plus any accrued but unpaid preferred return, based on a fixed maturity date, generally in relation to the property’s construction loan or mortgage loan maturity. Upon redemption of the preferred membership interests, our income, FFO, CFFO and cash flows could be reduced below the preferred returns currently being recognized. Alternatively, if the joint ventures do not redeem our preferred membership interest when required, our income, FFO, CFFO and cash flows could be reduced if the property does not produce sufficient cash flow to pays its operating expenses, debt service and preferred return obligations. As we evaluate our capital position and capital allocation strategy, we may consider alternative means of financing the loan and preferred equity investment activities at the subsidiary level.

Off-Balance Sheet Arrangements

As of September 30, 2020, we have off-balance sheet arrangements that may have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures. As of September 30, 2020, we own interests in thirteen joint ventures that are accounted for under the equity method as we exercise significant influence over, but do not control, the investee.

Cash Flows from Operating Activities

As of September 30, 2020, we owned indirect equity interests in fifty-seven real estate properties, consisting of thirty-five consolidated operating properties and twenty-two through preferred equity, mezzanine loan or ground lease investments. During the nine months ended September 30, 2020, net cash provided by operating activities was $61.9 million after net income of $31.1 million was adjusted for the following:

●distributions and preferred returns from unconsolidated joint ventures of $10.3 million;

●an increase in accounts payable and other accrued liabilities of $12.1 million;

●non-cash items of $17.8 million;

●an increase in due from affiliates of $2.5 million; and

●a decrease in notes and accrued interest receivable of $0.1 million; offset by

●an increase in accounts receivable, prepaids and other assets of $12.0 million.

Cash Flows from Investing Activities

During the nine months ended September 30, 2020, net cash provided by investing activities was $6.1 million, primarily due to the following:

●$194.0 million of proceeds from the sale and redemption of unconsolidated real estate joint ventures; and

●$29.0 million of repayments on notes receivable, partially offset by:

●$144.7 million used in acquiring consolidated real estate investments;

●$56.3 million used in acquiring additional investments in unconsolidated joint ventures and notes receivable;

●$12.3 million used on capital expenditures; and

●$3.7 million used in purchase of interests from noncontrolling interests.

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Cash Flows from Financing Activities

During the nine months ended September 30, 2020, net cash provided by financing activities was $7.8 million, primarily due to the following:

●net proceeds of $149.2 million from issuance of units of Series T Preferred Stock;

●net proceeds of $2.0 million from issuance of Class A common stock;

●net proceeds of $0.1 million from exercise of warrants;

●net borrowings of $95.2 million on mortgages payable;

●net proceeds of $276.2 million from borrowings on revolving credit facilities; and

●contributions of $1.0 million from noncontrolling interests;

●partially offset by $294.2 million in repayments on revolving credit facilities;

●$137.3 million of repayments of our mortgages payable;

●$3.3 million increase in deferred financing costs;

●$42.1 million paid in cash distributions to preferred stockholders;

●$11.7 million paid in cash distributions to common stockholders;

●$0.4 million paid for redemption and retirement of Series B Preferred Stock;

●$8.5 million in distributions paid to our noncontrolling interests;

●$12.4 million paid for the repurchase of Class A common stock; and

●$6.1 million paid for the repurchase of Series A, Series C and/or Series D Preferred Stock.

Capital Expenditures

The following table summarizes our total capital expenditures for the nine months ended September 30, 2020 and 2019 (amounts in thousands):


	Nine Months Ended
	September 30,
	2020		2019
Redevelopment/renovations	$	6,461	$	9,470
Routine capital expenditures		2,962		3,004
Normally recurring capital expenditures		2,262		2,369
Total capital expenditures	$	11,685	$	14,843

Redevelopment and renovation costs are non-recurring capital expenditures for significant projects that are revenue enhancing through unit or common area upgrades, such as clubhouse renovations and kitchen remodels. Routine capital expenditures are necessary non-revenue generating improvements that extend the useful life of the property and that are less frequent in nature, such as roof repairs and asphalt resurfacing. Normally recurring capital expenditures are necessary non-revenue generating improvements that occur on a regular ongoing basis, such as carpet and appliances.

Funds from Operations and Core Funds from Operations Attributable to Common Stockholders and Unit Holders

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

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

CFFO makes certain adjustments to FFO, removing the effect of items that do not reflect ongoing property operations such as acquisition expenses, non-cash interest expense, unrealized gains or losses on derivatives, losses on extinguishment of debt and debt modification costs (includes prepayment penalties incurred and the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt), one-time weather-related costs, gains or losses on sales of non-depreciable real estate property, shareholder activism, stock compensation expense and preferred stock accretion. Commencing January 1, 2020, we did not deduct the accrued portion of the preferred income on our preferred equity investments from FFO to determine CFFO as the income is deemed fully collectible. The accrued portion of the preferred income totaled $0.4 million and $1.2 million for the three and nine months ended September 30, 2020, respectively. We believe that CFFO is helpful to investors as a supplemental performance measure because it excludes the effects of certain items which can create significant earnings volatility, but which do not directly relate to our core recurring property operations. As a result, we believe that CFFO can help facilitate comparisons of operating performance between periods and provides a more meaningful predictor of future earnings potential.

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

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

We have acquired six operating properties, made eight investments through mezzanine loans, preferred equity interests or ground lease investments, and sold five operating properties subsequent to September 30, 2019. The results presented in the table below are not directly comparable and should not be considered an indication of our future operating performance.

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The table below presents our calculation of FFO and CFFO for the three and nine months ended September 30, 2020 and 2019 (in thousands, except per share amounts):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Net (loss) income attributable to common stockholders	$	(17,058)	$	17,160	$	(18,461)	$	(5,924)
Add back: Net (loss) income attributable to Operating Partnership Units		(6,270)		6,191		(6,679)		(1,747)
Net (loss) income attributable to common stockholders and unit holders		(23,328)		23,351		(25,140)		(7,671)
Common stockholders and Operating Partnership Units pro-rata share of:
Real estate depreciation and amortization⁽¹⁾		18,309		16,755		57,353		48,187
Gain on sale of real estate investments		—		(48,172)		(55,360)		(48,172)
FFO Attributable to Common Stockholders and Unit Holders		(5,019)		(8,066)		(23,147)		(7,656)
Common stockholders and Operating Partnership Units pro-rata share of:
Acquisition and pursuit costs		2,242		217		3,933		346
Non-cash interest expense		731		787		2,323		2,348
Unrealized loss on derivatives		98		131		67		2,418
Loss on extinguishment of debt and debt modification costs		—		6,864		13,590		6,864
Weather-related losses, net		—		57		—		305
Non-real estate depreciation and amortization		122		157		364		327
Gain on sale of non-depreciable real estate investments		—		—		—		(679)
Shareholder activism		—		—		—		393
Non-recurring income, net		(52)		—		(49)		—
Non-cash preferred returns on unconsolidated real estate joint ventures		—		(340)		—		(938)
Non-cash equity compensation		2,850		3,290		8,589		8,109
Preferred stock accretion		4,451		2,717		11,978		6,920
CFFO Attributable to Common Stockholders and Unit Holders	$	5,423	$	5,814	$	17,648	$	18,757

Per Share and Unit Information:
FFO Attributable to Common Stockholders and Unit Holders – diluted	$	(0.15)	$	(0.26)	$	(0.70)	$	(0.25)
CFFO Attributable to Common Stockholders and Unit Holders – diluted	$	0.16	$	0.19	$	0.53	$	0.61

Weighted average common shares and units outstanding –diluted		33,688,877		30,847,869		33,187,360		30,734,110

(1)

The real estate depreciation and amortization amount includes our share of consolidated real estate-related depreciation and amortization of intangibles, less amounts attributable to noncontrolling interests for partially owned properties, and our similar estimated share of unconsolidated depreciation and amortization, which is included in earnings of our unconsolidated real estate joint venture investments.

Operating cash flow, FFO and CFFO may also be used to fund all or a portion of certain capitalizable items that are excluded from FFO and CFFO.

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

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Contractual Obligations

The following table summarizes our contractual obligations as of September 30, 2020 which consisted of mortgage notes secured by our properties. At September 30, 2020, our estimated future required payments on these obligations were as follows (amounts in thousands):


			Remainder of
	Total		2020		2021–2022		2023–2024		Thereafter
Mortgages Payable (Principal)	$	1,436,279	$	2,094	$	102,046	$	403,922	$	928,217
Estimated Interest Payments on Mortgages Payable and Revolving Credit Facilities		270,060		12,622		96,827		86,610		74,001
Total	$	1,706,339	$	14,716	$	198,873	$	490,532	$	1,002,218

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

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Distributions


	Payable to
	stockholders			Date
Declaration Date	of record as of	Amount		Paid or Payable
Class A Common Stock
December 6, 2019	December 24, 2019	$	0.162500	January 3, 2020
March 13, 2020	March 25, 2020	$	0.162500	April 3, 2020
May 9, 2020	June 25, 2020	$	0.162500	July 2, 2020
September 11, 2020	September 25, 2020	$	0.162500	October 5, 2020
Class C Common Stock
December 6, 2019	December 24, 2019	$	0.162500	January 3, 2020
March 13, 2020	March 25,2020	$	0.162500	April 3, 2020
May 9, 2020	June 25,2020	$	0.162500	July 2, 2020
September 11, 2020	September 25, 2020	$	0.162500	October 5, 2020
Series A Preferred Stock
December 6, 2019	December 24, 2019	$	0.515625	January 3, 2020
March 13, 2020	March 25, 2020	$	0.515625	April 3, 2020
May 9, 2020	June 25, 2020	$	0.515625	July 2, 2020
September 11, 2020	September 25, 2020	$	0.515625	October 5, 2020
Series B Preferred Stock
October 31, 2019	December 24, 2019	$	5.00	January 3, 2020
January 13, 2020	January 24, 2020	$	5.00	February 5, 2020
January 13, 2020	February 25, 2020	$	5.00	March 5, 2020
January 13, 2020	March 25, 2020	$	5.00	April 3, 2020
April 14, 2020	April 24, 2020	$	5.00	May 5, 2020
May 9, 2020	May 22, 2020	$	5.00	June 5, 2020
May 9, 2020	June 25, 2020	$	5.00	July 2, 2020
July 10, 2020	July 24, 2020	$	5.00	August 5, 2020
July 10, 2020	August 25, 2020	$	5.00	September 4, 2020
July 10, 2020	September 25, 2020	$	5.00	October 5, 2020
Series C Preferred Stock
December 6, 2019	December 24, 2019	$	0.4765625	January 3, 2020
March 13, 2020	March 25, 2020	$	0.4765625	April 3, 2020
May 9, 2020	June 25, 2020	$	0.4765625	July 2, 2020
September 11, 2020	September 25, 2020	$	0.4765625	October 5, 2020
Series D Preferred Stock
December 6, 2019	December 24, 2019	$	0.4453125	January 3, 2020
March 13, 2020	March 25, 2020	$	0.4453125	April 3, 2020
May 9, 2020	June 25, 2020	$	0.4453125	July 2, 2020
September 11, 2020	September 25, 2020	$	0.4453125	October 5, 2020
Series T Preferred Stock⁽¹⁾
December 20, 2019	December 24, 2019	$	0.128125	January 3, 2020
January 13, 2020	January 24, 2020	$	0.128125	February 5, 2020
January 13, 2020	February 25, 2020	$	0.128125	March 5, 2020
January 13, 2020	March 25, 2020	$	0.128125	April 3, 2020
April 14, 2020	April 24, 2020	$	0.128125	May 5, 2020
May 9, 2020	May 22, 2020	$	0.128125	June 5, 2020
May 9, 2020	June 25, 2020	$	0.128125	July 2, 2020
July 10, 2020	July 24, 2020	$	0.128125	August 5, 2020
July 10, 2020	August 25, 2020	$	0.128125	September 4, 2020
July 10, 2020	September 25, 2020	$	0.128125	October 5, 2020

(1)	Shares of newly issued Series T Preferred Stock that are held only a portion of the applicable monthly dividend period will receive a prorated dividend based on the actual number of days in the applicable dividend period during which each such share of Series T Preferred Stock was outstanding.

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A portion of each dividend may constitute a return of capital for tax purposes. There is no assurance that we will continue to declare dividends or at this rate. Holders of OP Units and LTIP Units are entitled to receive “distribution equivalents” at the same time as dividends are paid to holders of our Class A common stock.

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

Distributions paid were funded from cash provided by operating activities except with respect to an immaterial amount for the nine months ended September 30, 2019 which was funded from sales of real estate, borrowings, and/or proceeds from our equity offerings.


	Nine Months Ended
	September 30,
	2020		2019

	(in thousands)
Cash provided by operating activities	$	61,931	$	51,180

Cash distributions to preferred shareholders	$	(42,144)	$	(32,522)
Cash distributions to common shareholders		(11,748)		(11,203)
Cash distributions to noncontrolling interests, excluding $2.7 million and $2.3 million from sale of real estate investments in 2020 and 2019, respectively		(5,784)		(5,136)
Total distributions		(59,676)		(48,861)

Excess (shortfall)	$	2,255	$	2,319

Proceeds from sale of real estate investments, net of noncontrolling distributions of $2.7 million and $2.3 million in 2020 and 2019, respectively	$	60,520	$	95,881
Proceeds from sale and redemption of unconsolidated real estate joint ventures	$	35,542	$	—

Significant Accounting Policies and Critical Accounting Estimates

Our significant accounting policies and critical accounting estimates are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019 and Note 2 “Basis of Presentation and Summary of Significant Accounting Policies” of our interim Consolidated Financial Statements.

Subsequent Events

Other than the items disclosed in Note 15 “Subsequent Events” to our interim Consolidated Financial Statements for the period ended September 30, 2020, no material events have occurred that required recognition or disclosure in these financial statements. Refer to Note 15 of our interim Consolidated Financial Statements for discussion.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

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Our interest rate risk is monitored using a variety of techniques. The table below presents the principal payments (in thousands) and the weighted average interest rates on outstanding debt, by year of expected maturity, to evaluate the expected cash flows and sensitivity to interest rate changes. Fair value adjustments and unamortized deferred financing costs, net, of approximately $(8.7) million are excluded:


	2020			2021			2022			2023			2024			Thereafter			Total


Mortgages Payable (Principal)	$	2,094		$	86,579		$	15,467		$	127,745		$	276,177		$	928,217		$	1,436,279
Weighted Average Interest Rate		3.63	%		2.06	%		3.44	%		3.20	%		3.43	%		3.59	%		3.43	%

The fair value of mortgages payable is estimated at $1,497.2 million as of September 30, 2020.

The table above incorporates those exposures that exist as of September 30, 2020; it does not consider those exposures or positions which could arise after that date. As a result, our ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period and interest rates.

As of September 30, 2020, we had ten interest rate caps, which are not accounted for as hedges, that we primarily use as part of our interest rate risk management strategy. Our interest rate caps effectively limit our exposure to interest rate risk by providing a ceiling on the underlying floating interest rates of our floating rate debt.

As of September 30, 2020, a 100-basis point increase or decrease in interest rates on the portion of our debt bearing interest at floating rates would result in an increase in interest expense of approximately $908,000 or decrease in interest expense of $908,000, respectively, for the quarter ended September 30, 2020.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, including our Chief Executive Officer and Chief Financial Officer, evaluated, as of September 30, 2020, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2020 to provide reasonable assurance that information required to be disclosed by us in this report filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

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

Changes in Internal Control over Financial Reporting

There has been no change in internal control over financial reporting that occurred during the three months ended September 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

Other than the following, there have been no material changes to our potential risks and uncertainties presented in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the twelve months ended December 31, 2019 filed with the SEC on February 24, 2020.

Your interests could be diluted by the incurrence of additional debt, the issuance of additional shares of preferred stock, including additional shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock (together the “Preferred Stock”) and by other transactions.

As of September 30, 2020, our total indebtedness was approximately $1.4 billion, and we may incur significant additional debt in the future. The Preferred Stock is subordinate to all our existing and future debt and liabilities and those of our subsidiaries. Our future debt may include restrictions on our ability to pay dividends to preferred stockholders in the event of a default under the debt facilities or under other circumstances. Our charter currently authorizes the issuance of up to 250,000,000 shares of preferred stock in one or more classes or series, and as of September 30, 2020, the number of preferred shares outstanding was as follows: 5,558,392 shares of Series A Preferred Stock, 516,100 shares of Series B Preferred Stock, 2,295,845 shares of Series C Preferred Stock, 2,774,338 shares of Series D Preferred Stock and 6,671,458 shares of Series T Preferred Stock. The issuance of additional preferred stock on parity with or senior to the Preferred Stock would dilute the interests of the holders of shares of Preferred Stock, and any issuance of preferred stock senior to the Preferred Stock or of additional indebtedness could affect our ability to pay dividends on, redeem or pay the liquidation preference on the Preferred Stock. We may issue preferred stock on parity with the Preferred Stock without the consent of the holders of the Preferred Stock. Other than the Asset Coverage Ratio, our letter agreement with Cetera Financial Group, Inc. pertaining to our Series B Preferred Stock that requires us to maintain a preferred dividend coverage ratio, the articles supplementary establishing our Series T Preferred Stock that requires us to maintain a preferred dividend coverage ratio, and the right of holders to cause us to redeem the Series A Preferred Stock and Series C Preferred Stock upon a Change of Control/Delisting, none of the provisions relating to the Preferred Stock relate to or limit our indebtedness or afford the holders of shares of Preferred Stock protection in the event of a highly leveraged or other transaction, including a merger or the sale, lease or conveyance of all or substantially all our assets or business, that might adversely affect the holders of shares of Preferred Stock.

The current pandemic of the novel coronavirus, or COVID-19, or the future outbreak of other highly infectious or contagious diseases, could materially and adversely impact or disrupt our financial condition, results of operations, cash flows and performance.

Since its discovery in December 2019, a new strain of coronavirus (“COVID-19”) has spread from China to many other countries, including the United States. The outbreak has been declared to be a pandemic by the World Health Organization, and the Health and Human Services Secretary has declared a public health emergency in the United States in response to the outbreak. Considerable uncertainty still surrounds the COVID-19 virus and its potential effects, and the extent of and effectiveness of any responses taken on a national and local level. However, measures taken to limit the impact of COVID-19, including social distancing and other restrictions on travel, congregation and business operations have already resulted in significant negative economic impacts. The long-term impact of COVID-19 on the United States and world economies remains uncertain, but is likely to result in a world-wide economic downturn, the duration and scope of which cannot currently be predicted.

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Our operating results depend, in large part, on revenues derived from leasing space in our properties to residential tenants and the ability of tenants to generate sufficient income to pay their rents in a timely manner. The market and economic challenges created by the COVID-19 pandemic, and measures implemented to prevent its spread, may adversely affect our returns and profitability and, as a result, our ability to make distributions to our stockholders or to realize appreciation in the value of our properties. The spread of the COVID-19 virus could result in further increases in unemployment, and tenants that experience deteriorating financial conditions as a result of the pandemic may be unwilling or unable to pay rent in full on a timely basis. In some cases, we may have to restructure tenants’ rent obligations, and may not be able to do so on terms as favorable to us as those currently in place. Numerous state, local, federal and industry-initiated efforts may also affect our ability to collect rent or enforce remedies for the failure to pay rent. In the event of tenant nonpayment, default or bankruptcy, we may incur costs in protecting our investment and re-leasing our property, and have limited ability to renew existing leases or sign new leases at projected rents. Our properties may also incur significant costs or losses related to shelter-in-place orders, quarantines, infection or other related factors. The federal government has announced various forms of aid, both to individual Americans and to the market sectors negatively affected by COVID-19. However, there can be no certainty that such aid will be available to our tenants or to us in any amount, or in amounts sufficient to mitigate the material reduction in revenue we may experience. Until such time as the virus is contained or eradicated and commerce and employment return to more customary levels, we may experience material reductions in our operating revenue.

Additionally, as a result of an extended economic downturn, the real estate market may be unable to attract the same level of capital investment that it attracts at the time of our purchases or there may be a reduction in the number of companies seeking to acquire properties, which may result in the value of our properties not appreciating, or decreasing significantly below the amount for which we acquired them.

In light of the severe economic, market and other disruptions worldwide being caused by the COVID-19 pandemic, there can be no assurance that conditions in the bank lending, capital and other financial markets will not deteriorate as a result of the pandemic, or that our access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings, renewals or refinancings. A constriction on lending by financial institutions could reduce the number of properties we can acquire, our cash flow from operations and our ability to make distributions to our stockholders. If we are unable to refinance maturing indebtedness with respect to a particular property and are unable to pay the same, then the lender may foreclose on such property. Financial and real estate market disruptions could also adversely affect the availability of financing from Freddie Mac and Fannie Mae, which could decrease the amount of available liquidity and credit for use in acquiring and further diversifying our portfolio of multifamily assets.

The global impact of the COVID-19 pandemic continues to evolve rapidly, and the extent of its effect on our operational and financial performance will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, and the direct and indirect economic effects of the pandemic and related containment measures, among others. However, the COVID-19 pandemic presents material uncertainty and risk with respect to our performance, financial condition, results of operations, cash flows and performance. Moreover, many of the risk factors set forth in the 2019 Form 10-K should be interpreted as heightened risks as a result of the impact of the COVID-19 pandemic. In addition, if in the future there is an outbreak of another highly infectious or contagious disease, the Company and our properties may be subject to similar risks as posed by COVID-19.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

In May 2020, the Board authorized the modification of our stock repurchase plans to permit the repurchase of up to an aggregate of $50.0 million in outstanding shares of our Class A common stock, Series A Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock. The repurchase plans will be conducted in accordance with Rules 10b5-1 and 10b-18 of Exchange Act. The repurchase plans will terminate upon the earliest to occur of certain specified events as set forth therein. The extent to which we repurchase shares of our Class A common stock, Series A Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock, and the timing of any such purchases, will depend on a variety of factors including general business and market conditions and other corporate considerations. Share repurchases under the repurchase plans may be made in the open market or through privately negotiated transactions, subject to certain price limitations and other conditions established under the plans. Open market repurchases will be structured to occur in conformity with the method, timing, price and volume requirements of Rule 10b-18 of the Exchange Act. During the three months ended September 30, 2020, we purchased 103,574 shares of Class A common stock for a total purchase price of $0.8 million. We made no repurchases of any series of our preferred stock during the third quarter 2020.

The following table is a summary of our repurchase activity during the quarter ended September 30, 2020:


				Total Number of	Maximum Dollar
				Shares	Value of
				Purchased	Shares that
				as Part of	May Yet
		Weighted		the Publicly	Be Purchased
	Total Number of	Average Price		Announced	Under the
Period	Shares Purchased ⁽¹⁾	Per Share		Plans	Plans
Class A Common Stock
July 1, 2020 - July 31, 2020	—	$	—	—	$	31,609,458
August 1, 2020 - August 31, 2020	—		—	—		31,609,458
September 1, 2020 - September 30, 2020	103,574		7.30	103,574		30,853,055
Total Class A Common Stock	103,574	$	7.30	103,574

(1)

Includes shares repurchased by the Company pursuant to the modified stock repurchase plans approved by the Board on May 9, 2020 and publicly announced in our Quarterly Report on Form 10-Q for the period ended March 31, 2020 as filed with the SEC on May 11, 2020, for up to an aggregate of $50.0 million in shares of our Class A common stock, Series A Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock. Purchases may be made thereunder until the earliest to occur of certain specified events as set forth therein.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits



10.1			Notice of Renewal, dated August 4, 2020, of Administrative Services Agreement dated October 31, 2017, by and among Bluerock Real Estate, L.L.C., Bluerock Real Estate Holdings, LLC, Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., Bluerock TRS Holdings, LLC and Bluerock REIT Operator, LLC, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed August 10, 2020.

10.2			Bluerock Residential Growth REIT, Inc. Fourth Amended and Restated 2014 Equity Incentive Plan for Individuals, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 11, 2020

10.3			Bluerock Residential Growth REIT, Inc. Fourth Amended and Restated 2014 Equity Incentive Plan for Entities, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed September 11, 2020

31.1			Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2			Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1			Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.

99.1			Press Release dated August 10, 2020, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed August 10, 2020

99.2			Supplemental Financial Information, incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed August 10, 2020

101.1			The following information from the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2020, formatted in iXBRL (inline eXtensible Business Reporting Language): (i) Balance Sheets; (ii) Statements of Operations; (iii) Statement of Stockholders’ Equity; (iv) Statements of Cash Flows; (v) notes to consolidated financial statements.

104			Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		BLUEROCK RESIDENTIAL GROWTH REIT, INC.

DATE:	November 5, 2020		/s/ R. Ramin Kamfar
			R. Ramin Kamfar
			Chief Executive Officer
			(Principal Executive Officer)


DATE:	November 5, 2020	/s/ Christopher J. Vohs
		Christopher J. Vohs
		Chief Financial Officer and Treasurer
		(Principal Financial Officer, Principal Accounting Officer)