Note 6 – Acquisition of Real Estate

The following describes the Company’s significant acquisition activity during the years ended December 31, 2015 and 2014:

Acquisition of North Park Towers

On April 3, 2014, the Company, through BRG North Park Towers, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company’s Operating Partnership, acquired all of North Park Towers’ (“NPT”) right, title and interest in a 100% fee simple interest in a 313-unit multifamily property located in Southfield, Michigan (the “NPT Property”), pursuant to a contribution agreement. As consideration for the 100% fee simple interest of NPT in the NPT Property, the Operating Partnership issued 282,759 units of limited partnership interest in the Operating Partnership “(OP Units”), with an approximate value of $4.1 million (net of assumed mortgages) to NPT, which subsequent to the one-year anniversary after their receipt by NPT will be redeemable for cash or exchangeable, at the Company’s option, for shares of the Company’s Class A common stock on a one-for-one basis, subject to certain adjustments. The acquisition was subject to certain prorations and adjustments typical in a real estate transaction and was based on the value of the equity interest of NPT in the NPT Property, which equity valuation was based on an independent third party appraisal.

As further consideration for the 100% fee simple interest of NPT in the NPT Property, on April 3, 2014, the Company and its Operating Partnership entered into a Joinder By and Agreement of New Indemnitor with U.S. Bank National Association, as trustee for the benefit of the holders of COMM 2014-CCRE14 Mortgage Trust Commercial Mortgage Pass-Through Certificates pursuant to which R. Ramin Kamfar, the Company’s Chairman of the Board and Chief Executive Officer, was released from his obligations under a Guaranty of Recourse Obligations Agreement dated as of December 24, 2013, and an Environmental Indemnity Agreement dated as of December 24, 2013, both of which are related to approximately $11.5 million of indebtedness encumbering the NPT Property, and the Company and its Operating Partnership serve as replacement guarantors and indemnitors.

In conjunction with the consummation of the contribution agreement and the purchase and sale of the NPT Property, Bluerock Property Management (“BPM”) received a disposition fee of approximately $0.5 million, which was paid in the form of 32,276 OP Units and which would have otherwise been paid to NPT. Additionally, the Former Advisor received an acquisition fee of approximately $0.4 million under the Advisory Agreement, which acquisition fee was paid in the form of 26,897 LTIP Units.

As discussed in Note 3, on October 16, 2015, the Company closed on the sale of the NPT Property.

Acquisition of Interest in Village Green of Ann Arbor

On April 2, 2014, the Company, through BRG Ann Arbor, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company’s Operating Partnership, acquired all of Bluerock Special Opportunity + Income Fund II, LLC’s “(Fund II”), right, title and interest in and to a 58.6084% limited liability company interest in BR VG Ann Arbor JV Member, LLC, a Delaware limited liability company, and all of Bluerock Special Opportunity + Income Fund III, LLC’s (“Fund III’), right, title and interest in and to a 38.6084% limited liability company interest in BR VG Ann Arbor JV Member, LLC, which is the owner and holder of a 50% limited liability company interest in Village Green of Ann Arbor Associates, LLC, a Michigan limited liability company (“VG Ann Arbor”), which in turn is the fee simple owner of a 520-unit multifamily property located in Ann Arbor, Michigan (the “Village Green Property”). The acquisition of the Fund II and the Fund III interests was made pursuant to a contribution agreement.

As consideration for Fund II’s interest, the Company issued 293,042 unregistered shares of its Class A common stock with an approximate value of $4.2 million to Fund II, and as consideration for Fund III’s interest, the Company issued 193,042 unregistered shares of its Class A common stock with an approximate value of $2.8 million to Fund III. The consideration paid was subject to certain prorations and adjustments typical in a real estate transaction and was based on the value of the indirect equity interest of Fund II and Fund III in the Village Green Property, which indirect equity valuation was based on an independent third party appraisal.

As further consideration for the Fund II and Fund III interests, on April 2, 2014, the Company entered into a Consent Agreement with Deutsche Bank Trust Company Americas, as Trustee for the Registered Holders of Wells Fargo Commercial Mortgage Securities Inc. Multifamily Mortgage Pass-Through Certificates, Series 2013-K26, VG Ann Arbor, Fund II, Fund III, BRG Ann Arbor, LLC, the Operating Partnership and Jonathan Holtzman, to release Fund II and Fund III from their obligations under a Guaranty entered into with the lender related to the loan which encumbers the Village Green Property.

In conjunction with the consummation of the contribution agreement and the purchase and sale of Fund II’s and Fund III’s interests, BR SOIF Manager II, LLC, and BR SOIF III Manager, LLC, received respective disposition fees of approximately $0.3 million and $0.2 under the management agreements for Fund II and Fund III, respectively, which disposition fees were paid in the form of 23,322 and 11,523 unregistered shares of the Company’s Class A common stock, which would otherwise have been issued to Fund II and Fund III, respectively. Additionally, the Former Advisor received an acquisition fee of approximately $0.7 million under the Advisory Agreement, which was paid in the form of 48,357 LTIP Units.

Acquisition of Additional Interest in Springhouse at Newport News

On April 2, 2014, the Company acquired through BEMT Springhouse, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company’s Operating Partnership, all of Bluerock Special Opportunity + Income Fund, LLC's (“Fund I”), right, title and interest in and to a 49% limited liability company interest in BR Springhouse Managing Member, LLC, a Delaware limited liability company, which is the owner and holder of a 75% limited liability company interest in BR Hawthorne Springhouse JV, LLC, a Delaware limited liability company, which is the sole owner and holder of 100% of the limited liability company interests in BR Springhouse, LLC, a Delaware limited liability company, which in turn is the fee simple owner of a 432-unit multifamily property located in Newport News, Virginia (the “Springhouse Property”), in which the Company previously owned a 38.25% indirect equity interest. The acquisition of the Springhouse Interest was made pursuant to a contribution agreement.

The Company purchased the interest from Fund I for approximately $3.5 million in cash. The consideration was subject to certain prorations and adjustments typical in a real estate transaction and was based on the value of the indirect equity interest of Fund I in the Springhouse Property, which indirect equity valuation was based on an independent third party appraisal.

As further consideration for Fund I’s interest, on April 2, 2014, the Company entered into an Indemnity Agreement with James G. Babb, III and R. Ramin Kamfar, pursuant to which, subject to certain exceptions, the Company agreed to indemnify and hold Mr. Babb and Mr. Kamfar (“collectively, the Guarantors”), harmless from and against any loss, claim, liability or cost incurred by the Guarantors, or either of them, pursuant to the terms of certain Guaranties provided by the Guarantors in conjunction with the loan encumbering the Springhouse Property in the original principal amount of $23.4 million, and the terms of a Backstop Agreement pursuant to which the Guarantors and other guarantors of the loan agreed to allocate amongst themselves liability which they might incur in conjunction with the loan and to which the other guarantors are a party.

In conjunction with the consummation of the contribution agreement and the purchase and sale of Fund I’s interest, Bluerock received a disposition fee of approximately $0.4 million under the management agreement for Fund I, which disposition fee was paid in cash and deducted from the consideration paid to Fund I. Additionally, the Former Advisor received an acquisition fee of approximately $0.3 million under the Advisory Agreement, which acquisition fee was paid in the form of 20,593 LTIP Units.

Acquisition of Interest in Grove at Waterford

On April 2, 2014, the Company, through BRG Waterford, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company’s Operating Partnership, acquired all of Fund I’s right, title and interest in and to a 10% limited liability company interest, in BR Waterford JV Member, LLC, a Delaware limited liability company, and all of Fund II’s right, title and interest in and to a 90% limited liability company interest, in BR Waterford JV Member, LLC, which is the owner and holder of a 60% limited liability company interest in Bell BR Waterford Crossing JV, LLC, a Delaware limited liability company, which in turn is the fee simple owner of a 252-unit multifamily property located in Hendersonville, Tennessee (the “Waterford Property”). The acquisition of the Fund I and Fund II interests was made pursuant to a contribution agreement.

As consideration for Fund I’s interest, the Company paid approximately $600,000 in cash to Fund I, and as consideration for the Fund II’s interest, the Company issued 361,241 unregistered shares of its Class A common stock with an approximate value of $5.2 million to Fund II. The consideration was subject to certain prorations and adjustments typical in a real estate transaction and was based on the value of the indirect equity interest of Fund I and Fund II in the Waterford Property, which indirect equity valuation was based on an independent third party appraisal.

As further consideration, the Company entered into an Assumption and Release Agreement related to approximately $20.1 million of indebtedness encumbering the Waterford Property which provides for the assumption by the Company of the obligations of Fund I and Fund II under the terms of a Guaranty of Non-Recourse Obligations Agreement dated April 4, 2012, related to the loan that encumbers the Waterford Property.

In conjunction with the consummation of the contribution agreement and the purchase and sale of the Fund I and Fund II interests, the Manager of Fund II, BR SOIF II Manager, LLC (the “Fund II Manager”), received a disposition fee of approximately $0.3 million under the management agreement for Fund II, which was paid in the form of 22,196 unregistered shares of the Company’s Class A common stock that would otherwise have been issued to Fund II. Further, Bluerock received a disposition fee of approximately $0.05 million under the management agreement for Fund I, which disposition fee was paid in cash and deducted from the amount payable by the Company to Fund I. Additionally, the Former Advisor received an acquisition fee of approximately $0.5 million under the Advisory Agreement, which acquisition fee was paid in the form of 30,828 LTIP Units.

All amounts paid in either OP Units or LTIP Units for the acquisitions described above, were determined to have a value of $14.50 per unit, which was based on the IPO issuance price.

See Footnote 3 regarding the subsequent sale.

Acquisition of Interest in Lansbrook Village

On May 23, 2014, Fund II sold a 32.67% limited liability company interest in BR Lansbrook JV Member, LLC to BRG Lansbrook, LLC, a wholly-owned subsidiary of the Company’s Operating Partnership, for a purchase price of approximately $5.4 million in cash, and Fund III sold a 52.67% limited liability company interest in BR Lansbrook JV Member, LLC to BRG Lansbrook, LLC for a purchase price of approximately $8.8 million in cash. Approximately $1.4 million of this cash was used to pay acquisition and other closing costs. BR Lansbrook JV Member, LLC is the owner and holder of a 90% limited liability company interest in BR Carroll Lansbrook JV, LLC which, as of December 31, 2015, owned 602 condominium units being operated as an apartment community within a 774-unit condominium property known as Lansbrook Village located in Palm Harbor, Florida. As further consideration for the Lansbrook acquisition, the Company was required to provide certain non-recourse carve-out guarantees (and related hazardous materials indemnity agreements) related to approximately $42.0 million of indebtedness encumbering Lansbrook Village through a joinder to the loan agreement. The purchase price paid for the acquired interest was based on the amounts capitalized by Fund II and Fund III in Lansbrook Village plus an 8% annualized return for the period they held their respective interests in BR Lansbrook JV Member, LLC. The approximate dollar value attributed to Mr. Kamfar, as a result of his indirect ownership of Bluerock, was $0.2 million. Both Fund II and Fund III will continue to each own a 7.33% limited liability interest in BR Lansbrook JV Member, LLC. Since the original purchase in May 2014, the Company has acquired 29 additional units for $2.6 million.

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

Acquisition of Additional Interest in Enders Property

As of June 30, 2014, the Company held a 48.4% indirect equity interest in the Enders property through a joint venture.

On September 10, 2014, through the Enders property joint venture, the Company acquired an additional 41.1% indirect interest in the Enders property in exchange for approximately $4.4 million in cash and approximately $8.0 million in additional financing proceeds, such that the Company currently holds an indirect 89.5% interest therein.

Acquisition of Interest in ARIUM Grandewood, formerly referred to as ARIUM Grande Lakes

On November 4, 2014, the Company, through BRG Grande Lakes, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company’s Operating Partnership, acquired a ninety five percent (95.0%) limited liability company interest in BR Carroll Grande Lakes JV, LLC, which is the owner and holder of a 100% limited liability company interest in BR Carroll Arium Grande Lakes Owner, LLC, a Delaware limited liability company which concurrently acquired a 306-unit Class A apartment community located in Orlando, Florida known as Venue Apartments, which is being rebranded as ARIUM Grande Lakes, for $14.4 million in cash and approximately $29.4 million in additional financing proceeds. Approximately $1.2 million of this cash was used to pay acquisition and other closing costs.

Acquisition of Interest in Park & Kingston

On March 16, 2015, the Company, through a wholly-owned subsidiary of its Operating Partnership, completed an investment of $6.3 million in a multi-tiered joint venture along with Fund III to acquire 153 newly-constructed units (the “Phase I Units”) in a Class AA apartment community in Charlotte, North Carolina known as the Park & Kingston Apartments (“Park & Kingston”). The Company’s indirect ownership interest in Park & Kingston was 46.95%. The purchase price for the Phase I Units of $27.85 million was funded, in part, with a $15.25 million senior mortgage loan secured by the Park & Kingston property and improvements.

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

At the time of the acquisition of Park & Kingston the Company had the ability to acquire 15 units under development at Park & Kingston (the “Phase II Units”). On November 30, 2015, the Company acquired 100% of the Phase II Units for a purchase price of approximately $2.9 million, plus customary prorations.

Acquisition of Interest in Fox Hill

On March 26, 2015, the Company, through subsidiaries of its Operating Partnership, completed an investment of $10.2 million in a multi-tiered joint venture along with Fund III, and three unaffiliated investors (collectively, the “Third Parties”), to acquire a 288-unit apartment community located in Austin, Texas known as the Fox Hill Apartments (“Fox Hill”). The Company’s indirect ownership in Fox Hill was 85.27%. The purchase price of $38.15 million was funded, in part, with a $26.71 million senior mortgage loan secured by the Fox Hill property and improvements.

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

Acquisition of Interest in Ashton Reserve, comprised of Ashton I and II

On August 19, 2015, the Company, through subsidiaries of its Operating Partnership, completed an investment of $13.5 million to acquire a 100% fee simple interest in a 322-unit apartment community located in Charlotte, North Carolina known as the Ashton Reserve at Northlake Phase I (“Ashton I”). The purchase price of $44.75 million was funded, in part, with the assumption of a $31.9 million senior mortgage loan secured by the Ashton I property and improvements.

In addition, on December 14, 2015, the Company, through a subsidiary of our Operating Partnership, acquired an additional 151-unit apartment community adjacent to Ashton I, known as Ashton Reserve at Northlake Phase II, (“Ashton II”). The purchase price of approximately $21.8 million was funded, in part, with a $15.3 million senior mortgage loan secured by the Ashton II property and improvements.

Acquisition of ARIUM Palms at World Gateway, formerly known as Century Palms at World Gateway

On August 20, 2015, the Company, through subsidiaries of its Operating Partnership, completed an investment of $13.0 million in a multi-tiered joint venture along with an unaffiliated investor, to acquire a 252-unit apartment community located in Orlando, Florida known as the ARIUM Palms at World Gateway Apartments (“ARIUM Palms”). The Company’s indirect ownership in ARIUM Palms was 95.0%. The purchase price of $37.0 million was funded, in part, with a $25.0 million senior mortgage loan secured by the ARIUM Palms property and improvements.

Acquisition of Sorrel and Sovereign Apartments

On October 29, 2015, the Company, through subsidiaries of its Operating Partnership, completed investments of approximately $17.7 million and approximately $15.2 million in a multi-tiered joint venture along with an affiliate of Carroll Organization, to acquire (i) a 352-unit Class A apartment community located in Frisco, Texas known as the Sorrel Apartments (“Sorrel”) and (ii) a 322-unit Class A apartment community located in Fort Worth, Texas known as The Sovereign Apartments (“Sovereign”), respectively. The Company’s indirect ownership interest in the joint venture that owns Sorrel and Sovereign is 95.0%. Sorrel’s purchase price of approximately $55.3 million was funded, in part, with a $38.7 million senior mortgage loan secured by Sorrel property and improvements. Sovereign’s purchase price of approximately $44.4 million was funded, in part, with a $28.9 million senior mortgage loan secured by the Sovereign property and improvements.

Purchase Price Allocation

The acquisitions of Park & Kingston, Fox Hill, Ashton Reserve, ARIUM Palms, Sorrel and Sovereign have been accounted for as business combinations. The purchase prices were allocated to the acquired assets and assumed liabilities based on their estimated fair values at the dates of acquisition. The preliminary measurements of fair value reflected below are subject to change. The Company expects to finalize the purchase price allocations as soon as practical, but no later than one year from each property’s respective acquisition date.

The following table summarizes the assets acquired and liabilities assumed at the acquisition date. The amounts listed below reflect provisional amounts that will be updated as information becomes available for acquisitions made during the year ended December 31, 2015 (amounts in thousands):

	Purchase Price Allocation
Land	$	26,980
Building		207,842
Building improvements		11,638
Land improvements		12,593
Furniture and fixtures		8,740
In-place leases		5,389
Total assets acquired	$	273,182
Mortgages assumed	$	31,900
Fair value adjustments		1,042
Total liabilities acquired	$	32,942

In connection with the acquisition of Ashton I, the Company assumed mortgage debt with a fair value of approximately $32.9 million.

The pro-forma information presented below represents the change in consolidated revenue and earnings as if the Company's significant acquisitions of Village Green of Ann Arbor, Lansbrook Village, ARIUM Grandewood, Park & Kingston, Fox Hill, Ashton Reserve, ARIUM Palms, Sorrel and Sovereign, collectively (the "Recent Acquisitions"), had occurred on January 1, 2014. Certain expenses such as property management fees and other costs not directly related to the future operations of the Recent Acquisitions have been excluded. (amounts in thousands, except per share amounts)

	For the Year Ended December 31,						For the Year Ended December 31,
	2015						2014
	As Reported		Pro-Forma Adjustments		Pro-Forma		As Reported		Pro-Forma Adjustments		Pro-Forma

Revenues	$	44,255	$	6,757	$	51,012	$	30,363	$	18,026	$	48,389
Net income (loss)	$	7,643	$	(8,048)	$	(405)	$	(6,558)	$	(4,415)	$	(10,973)
Net income (loss) attributable to BRG	$	635	$	(7,887)	$	(7,252)	$	(5,172)	$	(4,274)	$	(9,446)

Earnings per share, basic and diluted ⁽¹⁾	$	0.04			$	(0.42)	$	(0.96)			$	(1.76)

⁽¹⁾

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

Aggregate property level revenues and net loss for the Recent Acquisitions, since the properties’ respective acquisition dates, that are reflected in the Company’s 2015 consolidated statement of operations amounted to $28.2 million and $4.1 million, respectively.