Bluerock Residential Growth REIT, Inc. - FORM 10-Q/A

Bluerock Residential Growth REIT, Inc. - FORM 10-Q/A - January 19, 2011

Attached files

Attached files

Bluerock Residential Growth REIT, Inc. Reports

file	filename
EX-32.1 - CERTIFICATION - Bluerock Residential Growth REIT, Inc.	ex321.htm
EX-31.1 - CERTIFICATION - Bluerock Residential Growth REIT, Inc.	ex311.htm
EX-31.2 - CERTIFICATION - Bluerock Residential Growth REIT, Inc.	ex312.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q/A

(Mark One)

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

For the quarterly period ended March 31, 2010

o 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 333-153135

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland (State or Other Jurisdiction of Incorporation or Organization)		26-3136483 (I.R.S. Employer Identification No.)
Heron Tower, 70 East 55th Street, New York, NY (Address of Principal Executive Offices)		10022 (Zip Code)
(212) 843-1601 (Registrant’s Telephone Number, Including Area Code)

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 x

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

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

Large Accelerated Filer ¨ Accelerated Filer ¨

Non-Accelerated Filer ¨ (Do not check if a smaller reporting company) Smaller reporting company x

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

As of May 7, 2010 the Registrant has issued 44,700 shares of common stock, all of which were held by an affiliate of the Registrant.

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

FORM 10-Q/A

March 31, 2010

INDEX

Explanatory note

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (restated) as of March 31, 2010 (unaudited) and December 31, 2009	2
	Condensed Consolidated Statements of Operations (restated) for the Three Months Ended March 31, 2010 (unaudited)	3
	Condensed Consolidated Statement of Stockholders’ Equity (restated) for the Year Ended December 31, 2009 and the Three Months Ended March 31, 2010 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows (restated) for the Three Months Ended March 31, 2010 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 4T.	Controls and Procedures	18
PART II	OTHER INFORMATION	19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
SIGNATURES		20

Explanatory Note

In conjunction with our engagement of a new registered public accounting firm on August 23, 2010, our management reviewed the accounting policies adopted under financial accounting guidance and evaluated our related agreements. Based on its review, our management determined that certain adjustments to our accounting methods regarding business combinations and investments in unconsolidated entities are necessary. Accordingly, this Amendment No. 1 is being filed to amend and restate Part I, Items 1, 2 and 4(T) of our Quarterly Report on Form 10-Q for the three months ended March 31, 2010, originally filed on May 17, 2010, which are affected by this change in accounting methods. In addition we are amending and restating Part II, Item 2 to provide additional information regarding the use of proceeds from sales of registered securities and unregistered sales of equity securities. Except as otherwise expressly noted herein, this Amendment does not reflect events occurring after the filing of our original Form 10-Q on May 17, 2010. Accordingly, this Amendment should be read in conjunction with our original Quarterly Report on Form 10-Q.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

CONSOLIDATED BALANCE SHEETS - RESTATED (1)



	March 31, 2010 (Unaudited)			December 31, 2009
ASSETS

Investments in unconsolidated real estate joint ventures	$	2,499,596		$	2,341,941
Cash and cash equivalents		136,863			186,863
Deferred financing, net		70,846			43,509
Other assets		31,359

TOTAL ASSETS	$	2,738,664		$	2,572,313

LIABILITIES AND STOCKHOLDERS' EQUITY

Notes payable	$	3,212,498		$	2,754,520
Accounts payable and accrued liabilities		64,449			15,320
Due to affiliates		181,757			18,281
Total liabilities		3,458,704			2,788,121

Stockholders' equity
Preferred stock, $0.01 par value, 250,000,000 shares
authorized; none issued and outstanding
Common stock, $0.01 par value, 749,999,000 shares authorized;
44,700 and 37,200 shares issued and outstanding as of		447			372
March 31,2010 and December 31, 2009, respectively
Nonvoting convertible stock, $0.01 par value per share;
1,000 shares authorized, issued and outstanding		10			10
Additional paid-in-capital, net of costs		195,781			222,731
Cumulative distributions and net losses		(916,278	)		(438,921	)

Total stockholders' equity		(720,040	)		(215,808	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,738,664		$	2,572,313

(1) Amounts have been restated, see footnote 1A for additional information
See Notes to Consolidated Financial Statements

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.
CONSOLIDATED STATEMENT OF OPERATIONS - RESTATED (1)
For the Three Months Ended March 31, 2010 (Unaudited)

Expenses
	Asset management fees to affiliates		$ 27,422
	Acquisition costs to affiliates		56,525
	General and administrative		74,221

		Total expenses	158,168

Other operating activities
	Equity in loss of unconsolidated joint ventures		(269,050)

Operating loss			(427,219)

Other income (expense)
	Interest income		87
	Interest expense		(50,225)
		Total other income (expense)	(50,138)

Net loss			$ (477,357)

Basic and diluted loss per share			$ (12.36)

Weighted average number of shares outstanding			38,617

(1) Amounts have been restated, see footnote 1A for additional information
See Notes to Consolidated Financial Statements

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - RESTATED (1)
For the Year Ended December 31, 2009 and the Three Months Ended March 31, 2010 (unaudited)

	Convertible Stock				Common Stock
	Number of Shares		Par Value		Number of Shares		Par Value		Additional Paid-in Capital			Net Loss			Total Stockholders' Equity
Balance, January 1, 2009		1,000	$	10		22,200	$	222	$	200,769		$	-		$	201,001
Issuance of restricted stock, net						15,000		150		36,100						36,250
Deferred offering costs										(14,138	)					(14,138	)
Net loss													(438,921	)		(438,921	)
Balance, December 31, 2009		1,000		10		37,200		372		222,731			(438,921	)		(215,808	)

Issuance of restricted stock, net						7,500		75		23,050						23,125
Deferred offering costs										(50,000	)					(50,000	)
Net loss													(477,357	)		(477,357	)

Balance, March 31, 2010		1,000	$	10		44,700	$	447	$	195,781		$	(916,278	)	$	(720,040	)

(1) Amounts have been restated, see footnote 1A for additional information

See Notes to Consolidated Financial Statements

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS - RESTATED (1)
For theThree Months Ended March 31, 2010


Cash flows from operating activities
Net loss				$ (477,357)
	Adjustments to reconcile net loss to net cash provided by operating activities:
		Equity in loss of unconsolidated joint ventures	269,050
		Distributions from unconsolidated real estate joint ventures	115,226
		Share based compensation charge attributable to
		director's stock compensation plan	23,125
		Increase in other assets	(31,359)
		Increase in due to affiliates	163,476
		Increase in accounts payable	49,129
Net cash flow from operations				111,291

Cash Flows from Investing Activities
	Investment in unconsolidated real estate joint venture		(541,931)
Net Cash Flows from Investing Activities				(541,931)

Cash Flows from Financing Activities
	Proceeds from notes payable		457,978
	Increase in deferred financing costs		(27,337)
	Payment of deferred offering costs		(50,000)

Net Cash Flows from Financing Activities				380,641

Net change in cash and cash equivalents				(50,000)

Cash and cash equivalents at beginning of year				186,863

Cash and cash equivalents at end of period				$ 136,863

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

1. ORGANIZATION AND NATURE OF BUSINESS

Bluerock Enhanced Multifamily Trust, Inc. (the “Company”) was incorporated on July 25, 2008 under the laws of the state of Maryland. If we meet the qualification requirements, we intend to elect to be treated as a real estate investment trust or REIT for Federal income tax purposes. We were incorporated to raise capital and acquire a diverse portfolio of residential real estate assets. Our day-to-day operations are managed by Bluerock Enhanced Multifamily Advisor, LLC, or our advisor, under an advisory agreement. The advisory agreement has a one-year term expiring October 14, 2011 and may be renewed for an unlimited number of successive one-year periods upon the mutual consent of our advisor and us. Our advisor is affiliated with us in that we and our advisor have common ownership and management. The use of the words “we,” “us” or “our” refers to Bluerock Enhanced Multifamily Trust, Inc. and its subsidiary Bluerock Enhanced Multifamily Holdings, L.P., or our operating partnership, except where the context otherwise requires.

On August 22, 2008, we filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer a maximum of $1,000,000,000 in shares of our common stock in our primary offering, at an offering price of $10.00 per share, with discounts available for certain categories of purchasers and up to $285,000,000 in shares pursuant to our distribution reinvestment plan at $9.50 per share (our “Initial Public Offering”). The SEC declared our registration statement effective on October 15, 2009 and we have retained Select Capital Corporation to serve as the dealer manager of the Initial Public Offering. The dealer manager is responsible for marketing our shares in the initial public offering. Until receipt and acceptance of subscriptions aggregating at least $2,500,000, all subscription proceeds will be placed in an interest-bearing escrow account with UMB Bank, N.A., as escrow agent. As of May 7, 2010, we have not yet satisfied the conditions of this escrow.

We intend to use substantially all of the net proceeds from the Initial Public Offering to invest in a diverse portfolio of real estate and real estate-related assets. As of May 7, 2010, we own, through joint venture partnerships, three multifamily real estate properties discussed in detail in Note 4 (Investments in Real Estate) and Note 9 (Subsequent Events).

1A. RESTATEMENT

This amendment to our Quarterly Report on Form 10-Q filed on May 17, 2010 is filed to reflect restatements of our Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009 and our Consolidated Statement of Operations, Stockholders’ Equity and Statement of Cash Flows for the three months ended March 31, 2010, and the related notes thereto, as a result of management’s review of our accounting methods regarding business combinations and investments in unconsolidated joint ventures.

After consideration of the applicable financial accounting guidance and evaluation of the related agreements the following adjustments were identified:

We treated our property acquisitions of Springhouse Apartments in December 2009 and The Reserve at Creekside Village in March 2010, as a purchase of assets. As a result, we capitalized costs associated with such acquisition, which costs were then amortized. Under U.S. generally accepted accounting principles (“GAAP”) the acquisition of such properties should have been treated as a Business Combination. As a result, our acquisition-related costs should have been expensed in the fourth quarter of 2009 and the first quarter 2010 when the properties were acquired, rather than capitalized and expensed over subsequent quarters.

Based on the fact that we shared control of our joint ventures with affiliated entities, we consolidated our joint venture properties’ real estate assets, liabilities and operations on our balance sheet and income statement on a gross basis and reduced our non-ownership interest through the non-controlling interest line item on our financial statements. Under GAAP, notwithstanding shared control with affiliates, because the joint ventures are variable interest entities and we would not be considered the primary beneficiary of the joint ventures, our ownership interest should have been accounted for using the Equity Method of accounting.

The tables below present the impact of the restatement on our Consolidated Balance Sheets, Statement of Operations and Statement of Cash Flows:

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

1A. RESTATEMENT (Continued)

	Balance Sheet						Balance Sheet
	As of March 31, 2010						As of December 31, 2009
	As Originally Reported			Restated			As Originally Reported			Restated

ASSETS
Real Estate:
Land	$	7,966,000		$	-		$	5,616,000		$	-
Buildings and improvements		35,576,384			-			23,634,000			-
Total real estate, cost		43,542,384			-			29,250,000			-
Less accumulated depreciation and amortization		(631,748	)		-			(157,937	)		-
Total real estate, net		42,910,636			-			29,092,063			-
Investment in unconsolidated real estate joint venture		-			2,499,596			-			2,341,941
Cash and cash equivalents		1,260,174			136,863			666,714			186,863
Rents, other receivables and prepaid expenses		97,768			-			125,162			-
Deferred financing, net		1,478,738			70,846			1,102,802			43,509
Other assets		-			31,359			-			-

TOTAL ASSETS	$	45,747,317		$	2,738,664		$	30,986,741		$	2,572,313

LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage payable	$	35,943,829		$	-		$	23,400,000		$	-
Note payable		3,479,477			3,212,498			2,778,389			2,754,520
Accounts payable and accrued liabilities		464,113			64,449			219,882			15,320
Due to affiliates		-			181,757			-			18,281
Total liabilities		39,887,419			3,458,704			26,398,271			2,788,121

Minority interest		6,180,237			-			4,492,039			-

Shareholders' equity
Preferred stock, $0.01 par value, 250,000,000 shares
authorized; none issued and outstanding
Common stock, $0.01 par value, 749,999,000 shares
authorized; 37,200 shares issued and outstanding		447			447			372			372
Nonvoting convertible stock, $0.01 par value per share;
1,000 shares authorized, issued and outstanding		10			10			10			10
Additional paid-in-capital, net of costs		216,406			195,781			336,481			222,731
Cumulative net loss		(537,203	)		(916,278	)		(120,432	)		(438,921	)
Total shareholder' equity		(320,339	)		(720,040	)		96,431			(215,808	)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	45,747,317		$	2,738,664		$	30,986,741		$	2,572,313

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

1A. RESTATEMENT (Continued)

	Statement of Operations
	For the Three Months Ended March 31, 2010
	As Originally Reported			Restated
Revenues
Rental revenue	$	902,098		$	-
Tenant reimbursements and other income		51,162			-
Total Revenues		953,260			-

Expenses
Property operating expenses		283,492			-
Property taxes and insurance		114,413			-
Management fees to affiliates		67,033			27,422
Acquisition costs to affiliates		-			56,525
General and administrative		26,809			74,221
Depreciation and amortization		491,325			-
Total expenses		983,072			158,168

Other operating activities
Equity in loss of unconsolidated joint venture		-			(269,050	)

Operating loss		(29,812	)		(427,219	)

Other income (expense)
Interest income		-			87
Interest expense		(386,959	)		(50,225	)
Total other income(expense)		(386,959	)		(50,138	)

Loss before minority interest allocation		(416,771	)		(477,357	)

Loss allocated to minority interests		210,532			-

Net loss	$	(206,239	)	$	(477,357	)

Basic and diluted loss per share	$	(5.34	)	$	(12.36	)

Weighted average number of shares outstanding		38,617			38,617

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

1A. RESTATEMENT (Continued)

	Statement of Cash Flows
	For the Three Months Ended March 31, 2010
	As Originally Reported			Restated
Cash flows from operating activities
Net loss	$	(206,239	)	$	(477,357	)
Minority interest in net loss of consolidated entity		(210,532	)		-
Equity in (earnings) loss of unconsolidated joint ventures		-			269,050
Distributions from unconsolidated real estate joint ventures		-			115,226
Depreciation and amortization		491,325			-
Share based compensation charge attributable to
directors stock compensation plan		-			23,125
Decrease/(increase) in other assets		27,394			(31,359	)
Increase in deferred financing		(393,450	)
Increase in due to affiliates					163,476
Increase in accounts payable		244,231			49,129

Net cash flow from operations		(47,271	)		111,291

Cash Flows from Investing Activities
Purchase of real estate		(14,292,384	)		-
Investment in unconsolidated reat estate joint venture		-			(541,931	)
Net Cash Flows from Investing Activities		(14,292,384	)		(541,931	)

Cash Flows from Financing Activities
Proceeds from mortgages		12,543,829			-
Proceeds from notes payable		701,088			457,978
Minority interest contributions		1,688,198			-
Deferred financing costs					(27,337	)
Issuance of common stock, net		-			-
Payment of deferred offering costs		-			(50,000	)
Net Cash Flows from Financing Activities		14,933,115			380,641

Net change in cash and cash equivalents		593,460			(50,000	)

Cash and cash equivalents at beginning of year		666,714			186,863

Cash and cash equivalents at end of period	$	1,260,174		$	136,863

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

We operate as an umbrella partnership REIT structure in which our wholly owned subsidiary, Bluerock Enhanced Multifamily Holdings, L.P., a Delaware limited partnership, or wholly owned subsidiaries of our operating partnership, own’s substantially all of the property interests acquired on our behalf.

Effective September 15, 2009, the Financial Accounting Standards Board (“FASB”) issued its final Statement of Financial Accounting Standards – The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. This Statement made the FASB Accounting Standards Codification (the “ASC”) the single source of GAAP used by nongovernmental entities in the preparation of financial statements, except for rules and interpretive releases of the SEC under authority of federal securities laws. We have prepared our consolidated financial statements in conformity with the ASC using the plain English approach encouraged by the FASB in the FASB Accounting Standards Codification Notice to Constituents (v.3.0) release.

Because we are the sole general partner of our operating partnership and have unilateral control over its management and major operating decisions (even if additional limited partners are admitted to our operating partnership), the accounts of our operating partnership are consolidated in our consolidated financial statements. All significant intercompany accounts and transactions are eliminated in consolidation. We will consider future majority owned and controlled joint ventures for consolidation in accordance with the provisions required by the Consolidation Topic of the FASB ASC.

Interim Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP, have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2010, are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

The balance sheet at December 31, 2009, has been derived from the audited financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements. For further information refer to the financial statements and notes thereto included in our audited consolidated financial statements for the year ended December 31, 2009 contained in the Amended Annual Report on Form 10-K/A filed with the SEC on December 27, 2010.

Joint Ventures

We analyze our investments in joint ventures to determine if the joint venture is a variable interest entity (a“VIE”) and would require consolidation. We (a) evaluate the sufficiency of the total equity at risk, (b) review the voting rights and decision-making authority of the equity investment holders as a group, and whether there are any guaranteed returns, protection against losses, or capping of residual returns within the group and (c) establish whether activities within the venture are on behalf of an investor with disproportionately few voting rights in making this VIE determination. We would consolidate a venture that is determined to be a VIE if we were the primary beneficiary. Beginning January 1, 2010, a new accounting standard became effective and changed the method by which the primary beneficiary of a VIE is determined to a primarily qualitative approach whereby the variable interest holder, if any, has the power to direct the VIE’s most significant activities is the primary beneficiary. To the extent that our joint ventures do not qualify as VIEs, we further assess the existence of a controlling financial interest under a voting interest model to determine whether the venture should be consolidated.

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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. At the property these estimates include such items as purchase price allocation of real estate acquisitions, impairment of long-lived assets, depreciation and amortization and allowance for doubtful accounts. Actual results could differ from those estimates.

Cash and Cash Equivalents

We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents may include cash and short-term investments. Short-term investments are stated at cost, which approximates fair value. There are no restrictions on the use of our cash as of March 31, 2010.

Deferred Financing Costs

Deferred financing fees are recorded at cost and are amortized to interest expense using a straight-line method that approximates the effective interest method over the life of the related debt. As of March 31, 2010 and December 31, 2009, our deferred financing costs were $70,846 and $43,509, respectively, net of amortization.

Stock-Based Compensation

We account for stock-based compensation in accordance with the provisions of the Stock Compensation Topic of the FASB ASC. This topic established a fair value based method of accounting for stock-based compensation and requires the fair value of stock-based compensation awards to amortize as an expense over the vesting period and requires any dividend equivalents earned to be treated as dividends for financial reporting purposes. Stock-based compensation awards are valued at the fair value on the date of grant and amortized as an expense over the vesting period. During the three months ended March 31, 2010, 2,500 shares of common stock were awarded to each of the three independent directors after their reelection to the board during the 2010 annual meeting of shareholders held March 15, 2010.

Distribution Policy

We intend to elect to be taxed as a REIT and to operate as a REIT beginning with our taxable year ending December 31, 2010. To maintain our qualification as a REIT, we intend to make distributions each taxable year equal to at least 90% of our REIT annual taxable income (excluding net capital gains and income from operations or sales through a taxable REIT subsidiary, or TRS). We expect to authorize and declare daily distributions that will be paid on a monthly basis.

Distributions to stockholders will be determined by our board of directors and will be dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements, and annual distribution requirements in order to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”) and other considerations as our board of directors may deem relevant.

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Related Party Transactions

Pursuant to the advisory agreement, we are obligated to pay our advisor specified fees upon the provision of certain services related to, the investment of funds in real estate and real estate-related investments, management of our investments and for other services (including, but not limited to, the disposition of investments). We are also obligated to reimburse our advisor for organization and offering costs incurred by our advisor on our behalf, and we are obligated to reimburse our advisor for acquisition and origination expenses and certain operating expenses incurred on our behalf or incurred in connection with providing services to the Company. The Company records all related party fees as incurred, subject to any limitations described in the advisory agreement.

Organization and Offering Costs

Our organization and offering costs (other than selling commissions and the dealer manager fee) are initially being paid by the advisor, the dealer manager or their affiliates on our behalf. These other organization and offering costs include all expenses to be paid by us in connection with our public offering, including but not limited to (i) legal, accounting, printing, mailing and filing fees; (ii) charges of the escrow holder and transfer agent; (iii) charges of the advisor for administrative services related to the issuance of shares in the offering; (iv) reimbursement of the dealer manager for amounts it may pay to reimburse the bona fide diligence expenses of broker-dealers; (v) reimbursement to the advisor for costs in connection with preparing supplemental sales materials; (vi) the cost of bona fide training and education meetings held by us (primarily the travel, meal and lodging costs of registered representatives of broker-dealers); (vii) reimbursement to the dealer manager for attendance and sponsorship fees and cost reimbursements for employees of the dealer manager to attend retail seminars conducted by broker-dealers; and (viii) in special cases, reimbursement to participating broker-dealers for technology costs associated with the offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of the shares in the offering and the ownership of the shares by such broker-dealers’ customers. Pursuant to the advisory agreement and the Dealer Manager Agreement, we are obligated to reimburse the advisor, the dealer manager or their affiliates, as applicable, for organization and offering costs paid by them on our behalf , provided that the advisor is obligated to reimburse us to the extent selling commissions, the dealer manager fee and other organization and offering costs incurred by us in the offering exceed 15% of gross offering proceeds

In the event the minimum number of shares of our common stock is not sold to the public, we will terminate the offering and will have no obligation to reimburse the advisor, the dealer manager or their affiliates for any organization and offering costs. As of March 31, 2010, the advisor has incurred on our behalf organization and offering costs of approximately $2.75 million. These costs are not recorded in our consolidated financial statements as of March 31, 2010 because such costs are not a liability of the Company until the minimum number of shares of the Company’s common stock is issued, and such costs will only become a liability to us to the extent selling commissions, the dealer manager fee and other organization and offering costs do not exceed 15% of the gross proceeds of the offering. When recorded by us, organization costs will be expensed , and offering costs, which include selling commissions and dealer manager fees, will be charged as a reduction to stockholders’ equity as such amounts are reimbursed to the advisor, the dealer manager or their affiliates from the gross proceeds of the offering.

Acquisition and Origination Fees

We pay the advisor an acquisition fee equal to 1.75% of the cost of investments acquired, including acquisition expenses and any debt attributable to such investments. With respect to investments in and originations of loans, we pay an origination fee equal to 1.75% of the amount funded by us to acquire or originate mortgage, mezzanine, bridge or other loans, including any expenses related to such investments and any debt we use to fund the acquisition or origination of these loans. We do not pay acquisition fees with respect to investments in loans. Fifty percent of the asset management fee will not be payable until stockholders have received distributions in an amount equal to at least a 6% per annum, cumulative non-compounded return on invested capital, at which time all amounts become due and payable.

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Asset Management Fee

With respect to investments in real estate, we pay the advisor a monthly asset management fee equal to one-twelfth of 1% of the amount paid or allocated to acquire the investment excluding acquisition fees and expenses related thereto and the amount of any debt associated with or used to acquire such investment. In the case of investments made through joint ventures, the asset management fee will be determined based on our proportionate share of the underlying investment. Fifty percent of the asset management fee will not be paid until stockholders have received distributions in an amount equal to at least a 6% per annum, cumulative non-compounded return on invested capital, at which time all amounts become due and payable.

Financing Fee

We pay the advisor a financing fee equal to 1% of the amount, under any loan or line of credit, made available to us.

Independent Director Compensation

We pay each of our independent directors an annual retainer of $25,000. In addition, the independent directors are paid for attending meetings as follows: (i) $2,500 for each board meeting attended, (ii) $2,000 for each committee meeting attended, (iii) $1,000 for each teleconference board meeting attended, and (iv) $1,000 for each teleconference committee meeting attended. All directors also receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at meetings of the board of directors. In addition 5,000 shares of restricted stock were granted upon election to the board and 2,500 shares of restricted stock will be granted annually upon re-election to the board. Director compensation is an operating expense to us that is subject to the operating expense reimbursement obligation of the advisor discussed in Note 8, “Related Party Transactions.”

Income Taxes

We intend to elect to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, and intend to operate as such commencing with the taxable year ending December 31, 2010. We expect to have little or no taxable income prior to electing REIT status. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, and federal income and excise taxes on our undistributed income. 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 income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to stockholders. However, we intend to organize and operate in such a manner as to qualify for treatment as a REIT.

Per Share Data

Loss per basic share of common stock is calculated by dividing net loss by the weighted-average number of shares of common stock outstanding during such period. Diluted loss per share of common stock equals basic loss per share of common stock as there were no potentially dilutive shares of common stock for the three months ended March 31, 2010.

As of March 31, 2010 and December 31, 2009 we had 1,000 shares of convertible stock issued and outstanding. The convertible stock is not included in the basic and dilutive loss per share calculation because the shares of convertible stock do not participate in earnings or losses and would currently not be convertible into any common shares, if converted.

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Reportable Segment

Our current business consists of investing in and operating multifamily communities. Substantially all of our consolidated net loss is from investments in real estate properties that we own through Co-Investment Ventures which we account for under the equity method of accounting. We internally evaluate operating performance on an individual property level and view our real estate assets as one industry segment, and, accordingly, our properties will be aggregated into one reportable segment.

Recently Issued Accounting Standards Updates

In June 2009, the FASB issued an amendment to the authoritative guidance on the consolidation of variable interest entities. This guidance eliminates exceptions to consolidating qualifying special-purpose entities, contains new criteria for determining the primary beneficiary, and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a variable interest entity. This guidance also contains a new requirement that any term, transaction, or arrangement that does not have a substantive effect on an entity’s status as a variable interest entity, a company’s power over a variable interest entity, or a company’s obligation to absorb losses or its rights to receive benefits of an entity must be disregarded in evaluating whether an entity is a variable interest entity. This guidance was applicable to us beginning January 1, 2010. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In January 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash (“ASU No. 2010-01”). This ASU clarifies that when the stock portion of a distribution allows stockholders to elect to receive cash or stock with a potential limitation on the total amount of cash that all stockholders can elect to receive in the aggregate, the distribution would be considered a share issuance as opposed to a stock dividend and the share issuance would be reflected in earnings per share prospectively. ASU No. 2010-01 is effective for interim and annual periods ending on or after December 15, 2009 and should be applied on a retrospective basis. The adoption of ASU No. 2010-01 did not have an impact on our consolidated financial statements.

In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurement (“ASU No. 2010-06”). ASU No. 2010-06 requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 fair value measurements, including a description of the reasons for the transfers. Further, this ASU requires additional disclosures about purchases, sales, issuances and settlements relating to the activity in Level 3 fair value measurements. ASU No. 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements relating to the activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The adoption of ASU No. 2010-06 did not have a material impact on our consolidated financial statements.

3. RECENT ACQUISITIONS OF REAL ESTATE

During the three months ended March 31, 2010, we acquired an equity interest in the following property:

Property Name/ Location of Property	Acquisition Date	Land and Land Improvements	In Place Lease Intangible Asset	Building and Improvements	Total Purchase Price
The Reserve at Creekside Chattanooga, TN	03/31/2010	$1,679,0000	$370, 000	$12,201,000	$14,250,000

(1)	Total purchase price excludes acquisition fees and closing costs.

We invested $542,000 to acquire a 33.33% equity interest in BR Creekside Managing Member, LLC (the “Creekside Managing Member JV Entity”) through a wholly owned subsidiary of our operating partnership, BEMT Creekside, LLC (“BEMT Creekside”). BEMT Co-Investor and BEMT Co-Investor II each invested $542,000 to acquire the remaining 66.66% interest in the Creekside Managing Member JV Entity. BEMT Creekside, BEMT Co-Investor and BEMT Co-Investor II are co-managers of the Creekside

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

3. RECENT ACQUISITIONS OF REAL ESTATE - (Continued)

Managing Member JV Entity. Under the terms of the operating agreement for the Creekside Managing Member JV Entity, certain major decisions regarding the investments of the Creekside Managing Member JV Entity require the unanimous approval of the Company (through BEMT Creekside), BEMT Co-Investor and BEMT Co-Investor II. If the Company, BEMT Co-Investor and BEMT Co-Investor II are not able to agree on a major decision or at any time after March 31, 2013, any party may initiate a buy-sell proceeding. Additionally, any time after March 31, 2013, any party may initiate a proceeding to force the sale of the Creekside Managing Member JV Entity’s interest in the Creekside JV Entity (defined below) to a third party, or, in the instance of the non-initiating parties’ rejection of a sale, cause the non-initiating parties to purchase the initiating party’s interest in the Creekside Managing Member JV Entity.

The Creekside Managing Member JV Entity contributed $1.483 million of equity capital to acquire a 68% equity interest in BR Hawthorne Creekside JV, LLC (the “Creekside JV Entity”) and acts as the manager of the Creekside JV Entity. Hawthorne Springhouse, LLC (“Hawthorne”), an unaffiliated entity, invested $698,022 to acquire the remaining 32% interest in the Creekside JV Entity. The Creekside JV Entity is the sole owner of BR Creekside, LLC, a special-purpose entity that holds title to the Creekside Property (“BR Creekside”). Under the terms of the operating agreement of the Creekside JV Entity, major decisions with respect to the joint venture or the Creekside Property are made by the majority vote of an appointed management committee, which is controlled by the Creekside Managing Member JV Entity. However, any decision with respect to the sale or refinancing of the Creekside Property requires the unanimous approval of the Creekside Managing Member JV Entity and Hawthorne. Further, to the extent that the Creekside Managing Member JV Entity and Hawthorne are not able to agree on a major decision or at any time after March 31, 2013, either party may initiate a buy-sell proceeding. Additionally, any time after March 31, 2013, either party may initiate a proceeding to force the sale of the Creekside Property to a third party, or, in the instance of the non-initiating party’s rejection of a sale, cause the non-initiating party to purchase the initiating party’s interest in the Creekside JV Entity.

As a result of the structure described above, we, BEMT Co-Investor and BEMT Co-Investor II each hold a 22.67% indirect equity interest in the Creekside Property (68% in the aggregate), and Hawthorne holds the remaining 32% indirect equity interest. We, BEMT Co-Investor, BEMT Co-Investor II and Hawthorne will each receive current distributions from the operating cash flow generated by the Creekside Property in proportion to these respective percentage equity interests.

4. INVESTMENTS IN REAL ESTATE

As of March 31, 2010, our portfolio consists of two properties acquired through unconsolidated joint ventures. The following table provides summary information regarding our investments.

Multifamily Community Name/Location		Approx. Rentable Square Footage	Number of Units	Date Acquired	Property Acquisition Cost(1)	Joint Venture Equity Investment Information		Approx. Annualized Base Rent
Multifamily Community Name/Location		Approx. Rentable Square Footage	Number of Units	Date Acquired	Property Acquisition Cost(1)	Amount of Our Investment	Our Ownership Interest in Property Owner	Approx. Annualized Base Rent	Average Annual Effective Rent Per Unit	Approx. % Leased
Springhouse at Newport News/Newport News, Virginia	310,826		432	12/03/2009	$29.25 million	$2.05 million	37.5%	$4,153,000	$9,450	89%
The Reserve at Creekside Village/Chattanooga, Tennessee	211,632		192	03/31/2010	$14.25 million	$452,000	22.67%	$2,079,000	$9,831	97%

(1)	Contract purchase price excludes acquisition fees and closing costs.

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

5. EQUITY METHOD INVESTMENTS

We accounted for the acquisitions of our interests in properties through managing member LLCs in accordance with the provisions of the Consolidation Topic of the FASB ASC. Following is a summary of our ownership interest by property as of September 30, 2010.

Property	Managing Member LLC interest	Joint Venture interest	Indirect Equity Interest in Property
Springhouse	50.00%	75%	37.5.%
Creekside	33.33%	68%	22.67%

We analyzed our interest in the managing member LLC to determine (a) if the LLC is a VIE, and (b) if so, if we are the primary beneficiary.

Our contribution into the managing member LLC was funded through a loan from an affiliate who is another investor in the managing member LLC, thus our equity investment is not at risk. Since unanimous approval is required by all members to direct the activities that most significantly impact the managing member LLC’s economic performance, the holder of the equity investment at risk lacks that power and thus we concluded that the managing member LLC entities are VIE’s. We are not the primary beneficiary because we do not have the power to direct the activities that most significantly impact the economic performance of the managing member LLC and would not be considered to be the investor that is most closely associated with the entity among the related party investors. As a result, our investments are reflected as investments in unconsolidated joint ventures under the equity method of accounting

The carrying amount of our investments in unconsolidated joint ventures was $2.5 million and $2.34 million as of March 31, 2010 and December 31, 2009, respectively. Summary unaudited financial information for the operating properties as of March 31, 2010 and for the three months ended March 31, 2010 is as follows.

Balance Sheet Data:
Real Estate, net of depreciation	$	42,733,000
Other assets		1,329,000
Total assets	$	44,062,000

Mortgage payable	$	35,944,000
Other current liabilities		642,000
Total liabilities	$	36,586,000
Stockholders’ equity		7,476,000
Total liabilities and stockholders’ equity	$	44,062,000
Results of operations (1)
Rental revenues	$	943,300
Operating expenses		452,700
Net operating income		490,600
Acquisition fees		(183,500	)
Depreciation and amortization		(640,000	)
Mortgage Interest		(331,100	)
Net loss	$	(664,000	)

(1)	Creekside was acquired as of March 31, 2010. As a result there were no rental revenues or operating expenses recorded for the period.

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

5. EQUITY METHOD INVESTMENTS – (Continued)

As discussed above, the investments in Springhouse and Creekside are considered VIEs and we are not the primary beneficiary. These investments are accounted for as equity method investments and are included in the caption Investments in unconsolidated real estate joint ventures on the consolidated balance sheet. The risks and rewards associated with our interest in these entities are based primarily on our ownership percentage. Our maximum exposure to loss is equal to our investment balance which is approximately $2.5 million as of March 31, 2010.

6. NOTES PAYABLE

Note Payable

In connection with our investment in the Springhouse joint venture, on December 3, 2009, BEMT Springhouse LLC, a wholly owned subsidiary of our operating partnership (“BEMT Springhouse”), entered into a loan agreement with Bluerock Special Opportunity + Income Fund (BEMT Co-Investor) pursuant to which BEMT Springhouse borrowed $2.8 million (the “BEMT Co-Investor Loan”). The BEMT Co-Investor Loan initially had a six-month term, maturing June 3, 2010, which was subsequently extended to December 3, 2010 and again to June 3, 2011. A partial repayment in the amount of $1.1 million was made on June 23, 2010. It bears interest compounding monthly at a rate of 30-day LIBOR + 5.00%, subject to a minimum rate of 7.00%, annualized. As of March 1, 2010, the interest rate on the BEMT Co-Investor Loan was 7.00%. Interest on the loan will be paid on a current basis from cash flow distributed to us from BR Springhouse Managing Member, LLC (the “Springhouse Managing Member JV Entity”). The BEMT Co-Investor Loan is secured by a pledge of our indirect membership interest in BEMT Springhouse and a pledge of BEMT Springhouse’s membership interest in the Springhouse Managing Member JV Entity.

In connection with our investment in the Creekside joint venture, on March 31, 2010, BEMT Creekside LLC, a wholly owned subsidiary of our operating partnership (“BEMT Creekside”) entered into a loan agreement with Bluerock Special Opportunity + Income Fund II, LLC (“BEMT Co-Investor II”) pursuant to which it was authorized to borrow up to $1.1 million (the “BEMT Co-Investor II Creekside Loan”), with respect to which BEMT Co-Investor II has advanced $457,000 in connection with closing. The BEMT Co-Investor II Creekside Loan had a six-month term, maturing September 30, 2010, and could be prepaid without penalty. It bore interest compounding monthly at a rate of 30-day LIBOR + 5.00%, subject to a minimum rate of 7.00%, annualized. As of March 1, 2010, the interest rate on the BEMT Co-Investor II Creekside Loan was 7.00%. The BEMT Co-Investor II Creekside Loan was secured by a pledge of our membership interest in BEMT Creekside and a pledge of BEMT Creekside’s membership interest in the Creekside Managing Member JV Entity. The loan plus accrued interest was paid in full on September 28, 2010.

We expect to repay the Springhouse note upon maturity with the proceeds to be raised from the Initial Public Offering. If we are unable to repay the principal amount upon maturity, we will seek to extend the loan or refinance. If we cannot repay or refinance the note, then we will lose our interest in the Springhouse joint venture.

7. FAIR VALUE DISCLOSURE

As of March 31, 2010, we believe the carrying values of cash and cash equivalents and receivables and payables from affiliates approximate their fair values based on their highly-liquid nature and/or short-term maturities, including prepayment options. As of March 31, 2010 and December 31, 2009, we had no significant assets or liabilities measured at fair value on a recurring or nonrecurring basis. We estimate fair values for financial instruments based on interest rates with similar terms and remaining maturities that management believes we could obtain.

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

8. RELATED PARTY TRANSACTIONS

In connection with our investment in the Springhouse and Creekside properties, we entered into loan agreements with BEMT Co-Investor and BEMT Co-Investor II, the terms of which are described above in Note 6 (Notes Payable).

As of March 31, 2010, approximately $2.75 of organizational and offering costs have been incurred on our behalf. These costs are not recorded in its consolidated financial statements because such costs are not our liability until the subscriptions for the minimum number of shares are received and accepted by us. Once we sell the minimum number of shares such costs will only become a liability to

us to the extent selling commissions, the dealer manager fee and other organization and offering costs do not exceed 15% of the gross proceeds of the offering. When recorded by us, organizational and offering costs will be expensed as incurred, and third-party offering costs will be deferred and charged to shareholders’ equity as such amounts are reimbursed to the advisor or its affiliates from the gross proceeds of the offering.

The advisor performs its duties and responsibilities as our fiduciary under an advisory agreement. The advisory agreement has a one-year term expiring October 14, 2011, and may be renewed for an unlimited number of successive one-year periods upon the mutual consent of our advisor and us. The advisor conducts our operations and manages our portfolio of real estate and real estate-related investments under the terms of the advisory agreement. Certain of our affiliates will receive fees and compensation in connection with the Initial Public Offering, and the acquisition, management and sale of our real estate investments

Certain of our affiliates will receive fees and compensation in connection with the Initial Public Offering, and the acquisition, management and sale of our real estate investments

We pay our advisor a monthly asset management fee for the services it provides pursuant to the advisory agreement. The asset management fee equals one-twelfth of 1.0% of the higher of the cost or the value of each asset, where (A) cost equals the amount actually paid, excluding acquisition fees and expenses, to purchase each asset it acquires, including any debt attributable to the asset (including any debt encumbering the asset after acquisition), provided that, with respect to any properties we develop, construct or improve, cost will include the amount expended by us for the development, construction or improvement, and (B) the value of an asset is the value established by the most recent independent valuation report, if available, without reduction for depreciation, bad debts or other non-cash reserves; provided, however, that 50% of the advisor’s asset management fee will not be payable until stockholders have received distributions in an amount equal to at least a 6.0% per annum cumulative, non-compounded return on invested capital, at which time all such amounts will become immediately due and payable. For these purposes, “invested capital” means the original issue price paid for the shares of our common stock reduced by prior distributions identified as special distributions from the sale of our asset. The asset management fee will be based only on the portion of the cost or value attributable to our investment in an asset if we do not own all of an asset.

The advisor will receive 1.75% of the purchase price of a property or investment for its services in connection with the investigation, selection, sourcing, due diligence and acquisition of that property or investment. The purchase price of a property or investment will equal the amount paid or allocated to the purchase, development, construction or improvement of a property, inclusive of expenses related thereto, and the amount of debt associated with such real property or investment. The purchase price allocable for joint venture investments will equal the product of (1) the purchase price of the underlying property and (2) our ownership percentage in the joint venture. We will pay the advisor an origination fee in lieu of an acquisition fee for services in connection with the investigation, selection, sourcing, due diligence, and acquisition of mortgage, subordinated, bridge or other loans of 1.75% of the principal amount of the borrower’s loan obligation or of the purchase price of any loan we purchase including third- party expenses.

The advisor will also receive a financing fee equal to 1% of the amount, under any loan or line of credit, made available to us. The advisor may re-allow some or all of this fee to reimburse third parties with whom it may subcontract to procure such financing for us. In addition, to the extent the advisor provides a substantial amount of services in connection with the disposition of one or more of our properties or investments (except for securities that are traded on a national securities exchange), the advisor will receive fees equal to the lesser of (A) 1.5% of the sales price of each property or other investment sold or (B) 50% of the selling commission that would have been paid to a third-party broker in connection with such a disposition. In no event may disposition fees paid to the advisor or its affiliates and unaffiliated third parties exceed in the aggregate 6% of the contract sales price. In addition to the fees payable to the advisor, we will reimburse the advisor for all reasonable and incurred expenses in connection with services provided to us, subject to the limitation that we will not reimburse any amount that would cause our total operating expenses at the end of four preceding fiscal quarters to exceed the greater of 2% of our average invested assets or 25% of our net income determined (1) without reductions for any

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

8. RELATED PARTY TRANSACTIONS (Continued)

additions to reserves for depreciation, bad debts or other similar non-cash reserves and (2) excluding any gain from the sale of our assets for the period unless a majority of our independent directors has determined such expenses were justified based on unusual and non-recurring factors. If such excess expenses are not approved by a majority of our independent directors, our advisor must reimburse us at the end of the four fiscal quarters the amount by which the aggregate expenses during the period paid or incurred by us exceed the limitations provided above. We will not reimburse the advisor for personnel costs in connection with services for which the advisor receives acquisition, origination or disposition fees. As of March 31, 2010 approximately $615,000 of operating expenses have been incurred on our behalf. Due to the limitations discussed above we have recorded approximately $51,000 of that amount that could be reimbursed to our advisor

We have issued 1,000 shares of convertible stock, par value $0.01 per share to our advisor. The convertible stock will convert to shares of common stock if and when: (A) we have made total distributions on the then outstanding shares of our common stock equal to the original issue price of those shares plus an 8% cumulative, non-compounded, annual return on the original issue price of those shares or (B) subject to specified conditions, we list our common stock for trading on a national securities exchange. A “listing” will be deemed to have occurred on the effective date of any merger of the Company in which the consideration received by the holders of our common stock is the securities of another issuer that are listed on a national securities exchange. Upon conversion, each share of convertible stock will convert into a number of shares of common stock equal to 1/1000 of the quotient of (A) 15% of the excess of (1) our “enterprise value” (as defined in our charter) plus the aggregate value of distributions paid to date on the outstanding shares of our common stock over the (2) aggregate purchase price paid by the stockholders for those shares plus an 8% cumulative, non-compounded, annual return on the original issue price of those shares, divided by (B) our enterprise value divided by the number of outstanding shares of common stock, in each case calculated as of the date of the conversion. In the event an event triggering the conversion occurs after the advisory agreement with the advisor is not renewed or terminates (other than because of a material breach by the advisor), the number of shares of common stock the advisor will receive upon conversion will be prorated to account for the period of time the advisory agreement was in force.

We pay Bluerock REIT Property Management, LLC, a wholly owned subsidiary of the advisor, a property management fee equal to 4% of the monthly gross income from any properties it manages. Alternatively, we may contract property management services for certain properties directly to non-affiliated third parties, in which event we will pay the advisor an oversight fee equal to 1% of monthly gross revenues of such properties.

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

Some of the material conflicts that the advisor or its affiliates face are: 1) the determination of whether an investment opportunity should be recommended to us or another Bluerock-sponsored program or Bluerock-advised investor; 2) the allocation of the time of key executive officers, directors, and other real estate professionals among the Company, other Bluerock-sponsored programs and Bluerock-advised investors, and the activities in which they are involved; 3) the fees received by the advisor and its affiliates in connection with transactions involving the purchase, origination, management and sale of investments regardless of the quality of the asset acquired or the service provided us; and 4) the fees received by the advisor and its affiliates in connection with our public offering of equity securities.

Pursuant to the terms of the advisory agreement, summarized below are the related-party costs incurred by us for the three months ended March 31, 2010, and any related amounts payable as of March 31, 2010:

	Incurred	Payable as of
	Three Months Ended March 31, 2010	March 31, 2010
Asset Management Fees	$27,422	$36,563
Acquisitions Fees	56,525	56,525
Financing Fees	28,433	28,433
Operating Expense Reimbursement	51,096	60,236
	$163,476	$181,757

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

9. STOCKHOLDERS’ EQUITY

Common Stock

We are offering and selling to the public up to 100,000,000 shares of our $.01 par value common stock for $10.00 per share, with discounts available for certain categories of purchasers. We are also offering up to 30,000,000 shares of our $.01 par value common stock to be issued pursuant to our distribution reinvestment plan at $9.50 per share.

Convertible Stock

We have issued to our advisor 1,000 shares of our convertible stock for an aggregate purchase price of $1,000. Upon certain conditions, the convertible stock will convert to shares of common stock with a value equal to 15% of the excess of (i) our enterprise value (as defined in our charter) plus the aggregate value of distributions paid to stockholders over (ii) the aggregate purchase price paid by stockholders for our shares plus a 8% cumulative, non-compounded, annual return on the original issue price paid for those outstanding shares.

Share Repurchase Plan

Our board of directors has approved a share repurchase plan. The share repurchase plan allows for share repurchases by us when certain criteria are met.


	Stock-based Compensation for Independent Directors

Our independent directors received an automatic grant of 5,000 shares of restricted stock on the effective date of the Initial Public Offering and will receive an automatic grant of 2,500 shares of restricted stock when such directors are reelected at each annual meeting of our stockholders thereafter. Each person who thereafter is elected or appointed as an independent director will receive an automatic grant of 5,000 shares of restricted stock on the date such person is first elected as an independent director and an automatic grant of 2,500 shares of restricted stock when such director is reelected at each annual meeting of our stockholders thereafter. To the extent allowed by applicable law, the independent directors will not be required to pay any purchase price for these grants of restricted stock. The restricted stock will vest 20% at the time of the grant and 20% on each anniversary thereafter over four years from the date of the grant. All restricted stock may receive distributions, whether vested or unvested. The value of the restricted stock to be granted is not determinable until the date of grant. As of March 31, 2010, 7,500 shares of restricted stock has been granted to each of the three independent directors.

A summary of the status of our non-vested shares as of March 31, 2010, and changes during the three months ended March 31, 2010, is presented below:

				Weighted
				average
				grant-date
Nonvested shares		Shares		fair value
Balance at January 1, 2010		11,375	$	113,750
	Granted	7,500		75,000
	Vested	(2,313)		(23,125)
	Forfeited	—		—
Balance at March 31, 2010		16,562	$	165,625

At March 31, 2010, there was $165,625 of total unrecognized compensation cost related to unvested stock options granted under the Plan. That cost is expected to be recognized over a period of four years. The total fair value of shares vested during the three months ended March 31, 2010 was $23,125.

We currently use authorized and unissued shares to satisfy share award exercises.

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

10. ECONOMIC DEPENDENCY

We are dependent on the advisor for certain services that are essential to us, including the identification, evaluation, negotiation, purchase and disposition of properties and other investments; management of the daily operations of our real estate portfolio; and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, we will be required to obtain such services from other sources.

11. SUBSEQUENT EVENTS

On April 9, 2010, through a wholly owned subsidiary of our operating partnership, we invested $1.5 million in a joint venture to acquire a 16.25% indirect equity interest in 258-unit class A multifamily community located in Chapel Hill, North Carolina for approximately $37 million, plus closing costs.

On May 20, 2010 we had raised the initial minimum offering amount of $2,500,000 sufficient to break escrow, and all investors to date had been admitted as stockholders.

On September 1, 2010, through a wholly owned subsidiary of our operating partnership, we invested $1.9 million in a joint venture to acquire a 25% equity interest in a 240-unit multifamily community known as St. Andrews Apartments located in Augusta, Georgia for approximately $24.95 million, plus closing costs.

On September 30, 2010, through a wholly owned subsidiary of our operating partnership, we invested $1.3 million in a joint to acquire a 12.5% equity interest in a 201 unit multifamily community known as The Gardens at Hillsboro Village located in Nashville, Tennessee for approximately $31.6 million, plus closing costs.

Status of the Offering

On November 17, 2010 we suspended our offering while we restated our audited financial statements for the year ended December 31, 2009 and our unaudited financial statements for the periods ended March 31, 2010 and June 30, 2010. We expect to recommence this offering at such time as the post-effective amendment filed with the SEC on January 19, 2011 has been declared effective by the SEC.

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

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 Enhanced Multifamily Trust, Inc., and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Bluerock Enhanced Multifamily Trust, Inc., a Maryland corporation, and, as required by context, Bluerock Enhanced Multifamily Holdings, L.P. , a Delaware limited partnership, which we refer to as our “operating partnership,” and to their subsidiaries.

Forward-Looking Statements

Certain statements included in this quarterly report on Form 10-Q/A are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Bluerock Enhanced Multifamily Trust, Inc., and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

The following are some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:

·	We are a newly-formed entity and our limited operating history makes our future performance difficult to predict.

·	Our officers and non-independent directors have substantial conflicts of interest because they also are officers and owners of our advisor and its affiliates, including our sponsors.

During the early stages of our operations until the proceeds of our public offering are invested in real estate and real estate-related investments, we expect to fund distributions from the un-invested proceeds of our public offering and borrowings. Thereafter, we may pay distributions from un-invested proceeds of our public offering, borrowings and the sale of assets to the extent distributions exceed our earnings or cash flows from operations.

·	We will rely on our advisor, an affiliate of our officers and non-independent directors, to manage our business and select and manage investments. Our advisor is a newly-formed entity. The success of our business will depend on the success of our advisor in performing these duties.

·	To the extent we sell substantially less than the maximum number of shares in our public offering, we may not have sufficient funds, after the payment of offering and related expenses, to acquire a diverse portfolio of properties.

·	We may fail to qualify as a REIT for federal income tax purposes. We would then be subject to corporate level taxation and we would not be required to pay any distributions to our stockholders.

All forward-looking statements should be read in light of the factors identified in the “Risk Factors” section of our Registration Statement on Form S-11 (File No. 333-153135) filed with the SEC, as the same may be amended and supplemented from time to time.

Overview

We are a recently formed Maryland corporation that intends to qualify as a REIT beginning with the taxable year ended December 31, 2010.

Subscription proceeds may be released to us after the minimum offering is achieved and will be applied to investment in properties and the payment or reimbursement of selling commissions and other fees and expenses. We will experience a relative increase in liquidity as we receive additional subscriptions for shares and a relative decrease in liquidity as we spend net offering proceeds in connection with the acquisition, development and operation of our assets.

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

We intend to make reserve allocations as necessary to aid our objective of preserving capital for our investors by supporting the maintenance and viability of properties we acquire. If reserves and any other available income become insufficient to cover our operating expenses and liabilities, it may be necessary to obtain additional funds by borrowing, refinancing properties or liquidating our investment in one or more properties. There is no assurance that such funds will be available or, if available, that the terms will be acceptable to us.

We intend to make an election to be taxed as a REIT under Section 856(c) of the Internal Revenue Code. In order 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.

Results of Operations

Three months ended March 31, 2010

Our results of operations as of March 31, 2010 are not indicative of those expected in future periods as we were in our organizational and development stage and had not commenced business operations until the purchase of our first asset on December 3, 2009. As of March 31, 2010 we had not yet broken escrow with respect to the Initial Public Offering. Through related party loan transactions, as of March 31, 2010, we had acquired ownership interests in two joint ventures as detailed in the above Note 4 (Investments in Real Estate.) In general, we expect that our income and expenses related to our portfolio will increase in future periods as a result of anticipated future acquisitions of real estate and real estate-related investments.

The SEC declared the registration statement for our best efforts initial public offering effective on October 15, 2009, and we retained Select Capital Corporation to serve as our dealer manager for the offering. Our management is not aware of any material trends or uncertainties, favorable or unfavorable, other than national economic conditions affecting our targeted portfolio, the apartment housing industry and real estate generally, which may be reasonably anticipated to have a material impact on either capital resources or the revenues or incomes to be derived from the operation of our assets.

Management fees to affiliates were approximately $27,000 and represent the asset management fee due, but unpaid, to the advisor.

Acquisition costs to affiliates were approximately $56,000 as a result of the Creekside purchase.

General and administrative expenses were approximately $74,000 and include allowable operating expenses up to the 2% of average invested assets threshold.

Interest expense was approximately $50,000 and was related to the affiliate loans for the joint venture investments.

Equity in loss of unconsolidated joint venture was approximately $269,000 and represents our ownership share of net loss from our real estate investments as detailed in Note 5 (Equity Method Investments).

Our organization and offering costs are initially being paid by our advisor, the dealer manager and their affiliates on our behalf. These organization and offering costs include all expenses (other than selling commissions and the dealer manager fee) to be paid by us in connection with our initial public offering, including but not limited to (i) legal, accounting, printing, mailing and filing fees; (ii) charges of the escrow holder; (iii) reimbursement of the dealer manager for amounts it may pay to reimburse the bona fide diligence expenses of broker-dealers; (iv) reimbursement to the advisor for the salaries of its employees and other costs in connection with preparing supplemental sales materials; (v) the cost of educational conferences held by us (including the travel, meal and lodging costs of registered representatives of broker-dealers); and (vi) reimbursement to the dealer manager for travel, meals, lodging and attendance fees incurred by employees of the dealer manager to attend retail seminars conducted by broker-dealers. Our advisor and its affiliates have incurred on our behalf organization and offering costs of approximately $2.75 million through March 31, 2010. These costs are not recorded in our consolidated financial statements because such costs are not a liability to us until we sell the minimum number of shares, and once we sell the minimum number of shares such costs will only become a liability to us to the extent selling commissions, the dealer manager fee and other organization and offering costs do not exceed 15% of the gross proceeds of the offering.

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

Liquidity and Capital Resources

We are offering a maximum of $1,000,000,000 in shares and a minimum of $2,500,000 in shares of our common stock in our primary offering, at an offering price of $10.00 per share, with discounts available for certain categories of purchasers. We also are offering up to $285,000,000 in shares pursuant to our distribution reinvestment plan at $9.50 per share. We commenced our offering on October 15, 2009 and as of May 7, 2010 we had not yet reached the minimum offering amount and broken escrow in our public offering.

Our principal demands for cash will be for acquisition costs, including the purchase price of any properties, loans or securities we acquire, and construction and development costs and the payment of our operating and administrative expenses, continuing debt service obligations and distributions to our stockholders. Generally, we will fund our acquisitions from the net proceeds of our public offering. We intend to acquire our assets with cash and mortgage or other debt, but we may acquire assets free and clear of permanent mortgage or other indebtedness by paying the entire purchase price for the asset in cash or in units of limited partnership interest in our operating partnership. Due to the delay between the sale of our shares and our acquisitions, there may be a delay in the benefits to our stockholders, if any, of returns generated from our investments.

We generally expect to meet our short-term liquidity requirements, such as our operating and administrative expenses, continuing debt service obligations and the payment of distributions, through net cash provided by operations and net proceeds raised in our public offering. Operating cash flow is expected to increase as additional investments are added to our portfolio; however our public offering is currently suspended until we have included revised financial statements in a post-effective amendment that has been declared effective by the SEC and we have not raised proceeds in our public offering since November 17, 2010. To the extent cash on hand is not sufficient to meet our short-term liquidity requirements, we expect to utilize credit facilities obtained from affiliates or unaffiliated third parties.

In addition, our policy is generally to pay distributions from cash flow from operations. However, some or all of our distributions to date have been paid from proceeds from our public offering and may in the future be paid from additional sources, such as from borrowings, advances from our advisor, and our advisor’s deferral of its fees and expense reimbursements. We expect to meet our long-term liquidity requirements, such as scheduled debt maturities and repayment of short-term financing of future property acquisitions, through long-term secured and unsecured borrowings.

Potential future sources of capital include secured or unsecured financings from banks or other lenders, establishing additional lines of credit, proceeds from the sale of properties and undistributed cash flow.

Our charter prohibits us from incurring debt that would cause our borrowings to exceed 75% of the cost of our assets unless a majority of our independent directors approves the borrowing. Our charter also requires that we disclose the justification for any borrowings in excess of the 75% leverage guideline in the next quarterly report. Our independent directors approved the borrowing of up to approximately $4.6 million to purchase the Springhouse and Creekside properties resulting in a leverage ratio in excess of the 75% guideline. The independent directors determined that the excess leverage was justified for the following reasons:

• the loans enabled us to purchase the property and earn rental income more quickly;

• the property acquisitions are likely to increase the net offering proceeds from our initial public offering, thereby improving our ability to meet our goal of acquiring a diversified portfolio of properties to generate current income for investors and preserve investor capital;

• the loans are non-recourse to us;

• the prospectus for our initial public offering disclosed the likelihood that we would exceed the charter’s leverage guidelines during the early stages of the offering.

Distributions

We have not paid any distributions as of March 31, 2010. We expect to make regular cash distributions to our stockholders, typically on a monthly basis. Our board of directors will determine the amount of distributions to be distributed 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. Especially during the early stages of our operations, we may declare distributions in excess of cash from operations.

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

Funds From Operations and Modified Funds from Operations

One of our objectives is to provide cash distributions to our stockholders from funds from operations. Funds from operations is not equivalent to our net operating income or loss as determined under GAAP. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a measure known as Funds From Operations, or FFO, which it believes more accurately reflects the operating performance of a REIT.

We consider FFO to be an appropriate supplemental measure of a REIT’s 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. The use of FFO is recommended by the REIT industry as a supplemental performance measure. We define FFO, a non-GAAP measure, consistent with the NAREIT’s definition, as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joints ventures will be calculated to reflect FFO on the same basis. Presentation of this information is intended to assist the reader in comparing the operating performance of different REITs, although it should be noted that not all REITs calculate FFO the same way, so comparisons with other REITs may not be meaningful. Furthermore, FFO is not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income as an indication of our performance.

In addition to FFO, we use modified funds from operations ("Modified Funds from Operations" or "MFFO") which does not include acquisition expenses to further evaluate our operating performance. We believe that MFFO with this adjustment, like those already included in FFO, is helpful as a measure of operating performance because it excludes costs that management considers more reflective of investing activities or non-operating valuation changes. As explained below, management's evaluation of our operating performance excludes the items considered in the calculation based on the following economic considerations:

Acquisition expense. In evaluating investments in real estate, including both business combinations and investments accounted for under the equity method of accounting, management's investment models and analysis differentiate costs to acquire the investment from the operations derived from the investment. Acquisition costs related to business combinations are to be expensed. We believe by excluding expensed acquisition costs, MFFO provides useful supplemental information that is comparable for each type of our real estate investments and is consistent with management's analysis of the investing and operating performance of our properties. Acquisition expenses include those incurred with the Advisor or third parties. The following table presents our calculation of FFO and MFFO for the three months ended March 31, 2010:

Net loss	$	(477,357	)
Add:
Pro rata share of unconsolidated JV depreciation and amortization (1)		239,842

FFO	$	(237,515	)
Add:
Pro rata share of unconsolidated JV acquisition costs (1)		89,104
Acquisition costs per income statement		56,525
MFFO	$	(91,886	)
(1) This represents our share of depreciation and amortization expense and acquisitions costs at the properties that we account for under the equity method of accounting.

Operating cash flow, FFO and MFFO may also be used to fund all or a portion of certain capitalizable items that are excluded from FFO and MFFO, such as tenant improvements, building improvements and deferred leasing costs.

Critical Accounting Policies

Below is a discussion of the accounting policies that management believes are critical. We consider these policies critical because they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

amounts could be reported in our consolidated financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.

Accounting for Joint Ventures

We analyze our investments in joint ventures to determine if the joint venture is a variable interest entity (a “VIE”) and would require consolidation. We (a) evaluate the sufficiency of the total equity at risk, (b) review the voting rights and decision-making authority of the equity investment holders as a group, and whether there are any guaranteed returns, protection against losses, or capping of residual returns within the group and (c) establish whether activities within the venture are on behalf of an investor with disproportionately few voting rights in making this VIE determination. We would consolidate a venture that is determined to be a VIE if we were the primary beneficiary. Beginning January 1, 2010, a new accounting standard became effective and changed the method by which the primary beneficiary of a VIE is determined to a primarily qualitative approach whereby the variable interest holder, if any, that has the power to direct the VIE’s most significant activities is the primary beneficiary. To the extent that our joint ventures do not qualify as VIEs, we further assess the existence of a controlling financial interest under a voting interest model to determine whether the venture should be consolidated.

Under the equity method of accounting, our investments in the joint ventures are included on our balance sheet; however, the assets and liabilities of the joint ventures for which we use the equity method are not included on our balance sheet.

Principles of Consolidation

The consolidated financial statements include our accounts and the accounts of our majority-owned or controlled subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. Investments in entities that are VIE’s and where we are not the primary beneficiary, do not control through majority voting interest or where the other owner has substantial participating rights are not consolidated and are reflected as investments in unconsolidated joint ventures under the equity method of accounting.

Off Balance Sheet Arrangements

Investments in Unconsolidated Joint Ventures

We have a 37.5% equity interest and a 22.67% equity interest in unconsolidated joint ventures that own and operate rental properties. Our unconsolidated subsidiaries are primarily engaged in the management and operation of multifamily real estate properties. The equity method of accounting (see Critical Accounting Policies) is used for these investments in which we have the ability to exercise significant influence, but not control, over operating and financial policies. As a result, the assets and liabilities of these joint ventures are not included on our balance sheet. Total assets of our unconsolidated subsidiaries were $44.0 million as of March 31, 2010.

Subsequent Events

On April 9, 2010, through a wholly owned subsidiary, we completed an investment in a joint venture along with BEMT Co-Investor, BEMT Co-Investor II, both of which are affiliates of our sponsor, and Bell Partners, Inc. (“Bell”), an unaffiliated entity, to acquire a 258-unit multifamily community known as The Apartments at Meadowmont (the “Meadowmont Property”), located in Chapel Hill, North Carolina from Meadowmont Apartments Associates, LLC, an unaffiliated entity. BEMT Meadowmont, LLC (“BEMT Meadowmont”), a wholly owned subsidiary of our operating partnership will have a 25% indirect equity interest in the Meadowmont property. Our equity capital investment in BEMT Meadowmont will be funded by an up to $2.6 million related party loan from BEMT Co-Investor II. The related party loan will have a six-month term with an interest rate of 30-day LIBOR plus 5.00% subject to a 7% floor. The aggregate purchase price for the Meadowmont property is approximately $37 million, plus closing costs funded with approximately $9.65 million of gross equity from the joint venture entity and a $28.5 million senior mortgage loan made to the joint venture by CW Capital LLC to be subsequently sold to the Federal Home Loan Mortgage Corporation. The loan has a ten year term with a 5.5% interest rate.

Status of the Offering

BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 (unaudited)

Item 4T. 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 March 31, 2010, 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 not effective as of March 31, 2010 due to material weakness in financial reporting discussed below, to provide reasonable assurance that information required to be disclosed by us in reports 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.

Material Weakness in Disclosure Controls and Procedures

On August 23, 2010, we retained a new independent registered public accounting firm to replace our prior independent registered public accounting firm. In conjunction with the change in accounting firms, our management reviewed our accounting policies. Based on our review, and in consultation with both the prior and current independent registered public accounting firms, our management determined that certain adjustments to our accounting methods regarding business combinations and investments in unconsolidated entities are necessary.

On November 11, 2010, our audit committee met and, in consultation with and upon management’s recommendation, determined that the financial statements included in our previously issued Annual Report on Form 10-K for the year ended December 31, 2009 and our Quarterly Reports on Form 10-Q for the periods ended March 31, 2010 and June 30, 2010 should no longer be relied upon because of the adjustments to the Company's accounting policies discussed above. We are restating our unaudited interim financial statements for the three months ended March 31, 2010 in this Quarterly Report on Form 10-Q/A and are currently preparing amended Quarterly Reports on Form 10-Q/A to restate the unaudited interim financial statements for the period ended June 30, 2010 as well as amended Current Reports on Form 8-K/A to restate the proforma financial information filed on February 18, 2010, June 16, 2010 and June 25, 2010. In addition we are restating our audited financial statements for the year ended December 31, 2009 in our Annual Report on Form 10-K/A.

In connection with the above determination, our management has identified a material weakness in disclosure controls and procedures. We had not maintained a sufficient complement of personnel with the extensive familiarity with accounting literature necessary to identify, research and analyze certain issues to ensure the proper selection, application and implementation GAAP.

Remediation Plan for Material Weaknesses and Changes in Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. We have implemented remedial measures to address the above weakness and will continue to review and implement further measures if and as necessary on a going-forward basis. As an additional measure, we have hired a third-party consultant to test our internal controls and our compliance with Sarbanes Oxley.

Management has actively worked to strengthen our accounting and finance team to correct the internal control deficiency identified. During 2010 those efforts have included the hiring of four additional members for our financial management and accounting teams, including two senior financial management personnel; both of whom are Certified Public Accountants with substantial large accounting firm experience and two accounting staff personnel, both of whom have large accounting firm experience, and one of whom is a Certified Public Accountant. We will continue to monitor and assess the adequacy of our accounting team and organization, both in terms of size, U.S. GAAP and systems expertise. At this time, based on the size of our organization and the expertise level of our current accounting and finance team, we believe we have taken the steps necessary to correct the weakness in our disclosure controls and procedures noted above.

PART II. OTHER INFORMATION

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

Use of Proceeds

On October 15, 2009, our Registration Statement on Form S-11 (File No. 333-153135), covering a public offering of up to 130 million shares of common stock, was declared effective under the Securities Act of 1933. We commenced our initial public offering on October 15, 2009, upon retaining Select Capital Corporation as the dealer manager for our offering. We are offering 100 million shares of common stock in our primary offering at an aggregate offering price of up to $1 billion, or $10 per share with discount available to certain categories of purchasers. The 30 million shares offered under our distribution reinvestment plan are initially being offered at an aggregate offering price of $285 million, or $9.50 per share. We expect to sell the shares registered in our primary offering over a two-year period. Under rules promulgated by the SEC, in some instances we may extend the primary offering beyond that date. We may sell shares under the distribution reinvestment plan beyond the termination of the primary offering until we have sold all shares under the plan.

We may not sell any shares in our offering until we have raised gross offering proceeds of $2.5 million from persons who are not affiliated with us or the Advisor. As of March 31, 2010, we had not yet reached the minimum offering amount and accordingly had not sold any shares in our public offering. In addition, our organization and offering costs are initially being paid by the Advisor on our behalf and will not become a liability to us until we reach the minimum offering and break escrow in our public offering.

Unregistered Sales of Equity Securities

On March 15, 2010, each of our non-employee directors received an automatic grant of 2,500 shares of restricted common stock upon their reelection to the board of directors at our annual meeting. All such shares were issued pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933.

Share Repurchase Plan

We have adopted a share repurchase program that may enable stockholders to sell their shares to us in limited circumstances. The prices at which we will initially repurchase shares are as follows:

·	The lower of $9.25 or the price paid to acquire the shares from us for stockholders who have held their shares for at least one year;

·	The lower of $9.50 or the price paid to acquire the shares from us for stockholders who have held their shares for at least two years;

·	The lower of $9.75 or the price paid to acquire the shares from us for stockholders who have held their shares for at least three years; and

·	The lower of $10.00 or the price paid to acquire the shares from us for stockholders who have held their shares for at least four years.

As of March 31, 2010, we had not repurchased any shares under our share redemption program because we had not yet sold any shares in our public offering.

Item 6. Exhibits

Ex. Description

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

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

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

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 ENHANCED MULTIFAMILY TRUST, INC.

DATE: January 19, 2011 /s/ R. Ramin Kamfar

Chief Executive Officer and Chairman of the Board

(Principal Executive Officer)

/s/ Jerold E. Novack

DATE: January 19, 2011 Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

(1) Amounts have been restated, see footnote 1A for additional information

See Notes to Consolidated Financial Statements