ITEM 3.02
|
UNREGISTERED SALES OF EQUITY SECURITIES.
|
Securities for Services
Quarterly Reimbursement
On October 31, 2017,
Bluerock Residential Growth REIT, Inc. (the “Company”) entered into an Administrative Services Agreement (the “Administrative
Services Agreement”) with Bluerock Residential Holdings, L.P. (the “Operating Partnership”), Bluerock TRS Holdings,
LLC, a Delaware limited liability company and wholly-owned subsidiary of the Operating Partnership (the “OP Sub”),
and Bluerock REIT Operator, LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company (the “REIT
Operator,” and collectively with the Company, the Operating Partnership and the OP Sub, the “Company Parties,”
and each, a “Company Party”), and Bluerock Real Estate, L.L.C., a Delaware limited liability company (“BRRE”)
and its affiliate, Bluerock Real Estate Holdings, LLC, a Delaware limited liability company (“BREH,” and together with
BRRE, the “BRRE Entities”). Pursuant to the Administrative Services Agreement, the BRRE Entities provide the Company
with certain human resources, investor relations, marketing, legal and other administrative services (the “Services”)
to facilitate the transition of the Company’s management of its operations, and enable the Company to benefit from operational
efficiencies created by access to such Services, following the internalization of the Company’s management. Under the Administrative
Services Agreement, the BRRE Entities are each entitled to quarterly reimbursement by the Company Parties for all costs incurred
in performing the Services (each, a “Quarterly Reimbursement”), the calculation of which is reviewed by the Company’s
board of directors (the “Board”), and which is payable either in cash or in long-term incentive plan units of
the Operating Partnership (“LTIP Units”), at the election of the Board.
On August 2, 2019,
the BRRE Entities provided the Board with the calculation of the Quarterly Reimbursement for the three months ended June 30, 2019.
The Board, including its independent directors, having reviewed such calculation, authorized and approved payment of the Quarterly
Reimbursement for the three months ended June 30, 2019 entirely in LTIP Units.
The Board, including
its independent directors, further approved the issuance by the Operating Partnership to the BRRE Entities, on August 9, 2019 (five
business days following August 2, 2019) (the “Issuance Date”), of a number of LTIP Units equal to (i) the dollar amount
of the portion of the Quarterly Reimbursement payable in such LTIP Units (calculated by the BRRE Entities as $526,586), divided
by (ii) the volume weighted average price per share of the Company’s Class A common stock, $0.01 par value per share, on
the NYSE American on the twenty (20) trading days prior to the Issuance Date (the “Q2 Reimbursement LTIP Units”), in
payment of the Quarterly Reimbursement.
On the Issuance Date
of August 9, 2019, the BRRE Entities calculated, as set forth in the Administrative Services Agreement, that 44,639 Q2 Reimbursement
LTIP Units would be issued to the BRRE Entities in payment of the Quarterly Reimbursement, and the Operating Partnership issued
44,639 Q2 Reimbursement LTIP Units to the BRRE Entities in payment thereof.
The Board authorized
the Company, as the General Partner of the Operating Partnership, to cause the Operating Partnership to issue the Q2 Reimbursement
LTIP Units to the BRRE Entities in reliance upon exemptions from registration provided by Section 4(a)(2) of the Securities Act
of 1933 and Regulation D. Each of the BRRE Entities has a substantive, pre-existing relationship with the Company and is an “accredited
investor” as defined in Regulation D.
The Q2 Reimbursement
LTIP Units shall be fully vested upon issuance, and may convert to OP Units upon reaching capital account equivalency with the
OP Units held by the Company, and may then be settled in shares of the Company’s Class A common stock. The BRRE Entities
will be entitled to receive “distribution equivalents” with respect to the Q2 Reimbursement LTIP Units at the time
distributions are paid to the holders of the Company’s Class A common stock.
Board Compensation
On August 9, 2019,
the Company granted 2,929 LTIP Units to Mr. Kamal Jafarnia, a non-employee member of the Company’s board of directors, in
payment of the prorated equity portion of his annual retainer (the “Director Grant”). The LTIP Units issued as the
Director Grant were issued pursuant to the Third Amended 2014 Individuals Plan. The Director Grant is evidenced by an LTIP Unit
Award Agreement.
The issuance of LTIP
Units as the Director Grant was made in reliance upon exemptions from registration provided by Section 4(a)(2) of the Securities
Act of 1933 and Regulation D thereunder for transactions not involving any public offering. No general solicitation or
advertising occurred in connection with the issuance and sale of these securities. Such LTIP Units were fully vested
upon issuance, and may convert to OP Units upon reaching capital account equivalency with the OP Units held by the Company, and
may then be redeemed for cash or, at the option of the Company and after a one year holding period (including any period during
which the LTIP Units were held), settled in shares of the Company’s Class A Common Stock on a one-for-one basis. From
the date of grant, Mr. Jafarnia, as the holder of such LTIP Units, will be entitled to receive “distribution equivalents”
at the time distributions are paid to the holders of the Company’s Class A Common Stock.