UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 14, 2015
| Bluerock Residential Growth REIT, Inc. | |||||||||
| (Exact Name of Registrant as Specified in Its Charter) | |||||||||
| Maryland | 001-36369 | 26-3136483 | |||||||
| (State or other jurisdiction of incorporation or organization) |
(Commission File Number)
|
(I.R.S. Employer Identification No.) | |||||||
|
712 Fifth Avenue, 9th Floor New York, NY 10019 | |||||||||
| (Address of principal executive offices) | |||||||||
| (212) 843-1601 | |||||||||
| (Registrant’s telephone number, including area code) | |||||||||
| None | |||||||||
| (Former name or former address, if changed since last report) | |||||||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| ITEM 2.01 | COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS |
On January 14, 2015, 23Hundred, LLC, a Delaware limited liability company (“23Hundred”), in which we own a 46.9478% indirect equity interest, sold its 42.2287% tenant in common interest in that certain 266-Unit apartment community located in Nashville, Tennessee known as 23Hundred @ Berry Hill (the “Berry Hill Property”), BGF 23Hundred, LLC, a Delaware limited liability company sold its 22.9330% tenant in common interest in the Berry Hill Property and SH 23Hundred TIC, LLC, a Delaware limited liability company sold its 34.8383% tenant in common interest in the Berry Hill Property, each to 2300 Berry Hill General Partnership, an unaffiliated third party. The aggregate purchase price was $61.2 million, subject to certain prorations and adjustments typical in such real estate transactions. After deduction for payment of the existing mortgage indebtedness and payment of closing costs and fees, the sale of our interest in the Berry Hill Property generated net proceeds to us of approximately $7.32 million.
| ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS |
| (b) | Pro Forma Financial Information |
Bluerock Residential Growth REIT, Inc.
| Summary of Unaudited Pro Forma Financial Statement | 2 |
| Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2014 | 4 |
| Unaudited Pro Forma Consolidated Statement of Operations for the Nine Months Ended September 30, 2014 | 6 |
| Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2013 | 9 |
Statements in this Current Report on Form 8-K, including intentions, beliefs, expectations or projections relating to items such as the long-term performance of the Company’s portfolio are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based on current expectations and assumptions with respect to, among other things, future economic, competitive and market conditions and future business decisions that may prove incorrect or inaccurate. Important factors that could cause actual results to differ materially from those in the forward looking statements include the risks described under the heading “Risk Factors” in the Company’s Current Report on Form 8-K filed with the SEC on November 18, 2014 and its other filings with the SEC.
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
Unaudited Pro Forma Condensed Consolidated Financial Statements Information
The following unaudited pro forma condensed consolidated financial statements of Bluerock Residential Growth REIT, Inc. (together with its consolidated subsidiaries, the “Company,” “we,” “our” or “us”) should be read in conjunction with our historical audited consolidated financial statements as of and for the year ended December 31, 2013, and nine months ended September 30, 2014, and the related notes thereto.
The unaudited pro forma condensed consolidated balance sheet, as of September 30, 2014, and statement of operations for the year ended December 31, 2013 and nine months ended September 30, 2014 have been prepared to provide pro forma financial information with regard to each of the transactions described below. The unaudited pro forma financial information gives effect to:
| (1) | The purchase of a 95% indirect interest in ARIUM Grande Lakes, which the Company expects to consolidate on its balance sheet. |
| (2) | Represents the preferred investment in Alexan CityCentre Apartments, which the Company records under the equity method on its balance sheet. As of September 30, 2014, the Company had $1.68 million remaining to be funded based on its initial commitment to fund a preferred investment for $6.56 million and earns 15.00% annually. |
| (3) | Represents the preferred investment in Alexan Blaire House Apartments, which the Company expects to record under the equity method on its balance sheet. The Company has committed to funding $17.4 million, and the preferred investment will earn 15.00% annually. |
| (4) | The completion of the Company’s follow-on offering of 3,035,444 shares of Class A common stock on October 8, 2014, or the October 2014 follow-on offering. The following pro forma financials do not reflect the anticipated investment of these proceeds. |
| (5) | The completion of the Company’s follow-on offering of 4,600,000 shares of Class A common stock on January 20, 2015, or the January 2015 follow-on offering. The following pro forma financials do not reflect the anticipated investment of these proceeds. |
| (6) | The sale of the Company’s 12.50% indirect equity interest in the Hillsboro property, the Company’s 24.70% indirect equity interest in the Creekside property, the Company’s 25.00% indirect equity interest in the Estates at Perimeter property, the Company’s 60.00% indirect equity interest in the Grove at Waterford property and the Company’s 25.10% indirect equity interest in the Berry Hill property. The following pro forma financials do not reflect the net proceeds from the sale of Estates at Perimeter ($1.7 million), Grove at Waterford ($9.0 million) or Berry Hill ($7.3 million) assets or the anticipated reinvestment of those net proceeds. |
| (7) | The expected sale of the Company’s 100% direct interest in the North Park Towers property. The following pro forma financials do not reflect the anticipated net proceeds from the sale of this asset or the anticipated reinvestment of those net proceeds. |
The pro forma condensed consolidated balance sheet assumes that each of the transactions referred to above occurred on September 30, 2014. The pro forma consolidated statement of operations assume the transactions referred to above occurred on January 1, 2013. Our pro forma financial information is not necessarily indicative of what our actual financial position and results of operations would have been as of the date and for the periods indicated,nor does it purport to represent our future financial position or results of operations.
The pro forma financial statements do not reflect the following:
| · | the operations of the Estates at Perimeter, Grove at Waterford, Berry Hill and North Park Towers properties in the statement of operations, as these assets have been sold, or are expected to be sold within the next twelve months; |
| · | the net proceeds from the sale of the Estates at Perimeter ($1.7 million) , Grove at Waterford ($9.0 million) or Berry Hill ($7.3 million) and the anticipated net proceeds from the sale of the North Park Towers property; and |
| · | the investment of net proceeds from the October 2014 follow-on offering or the January 2015 follow-on offering. |
| 2 |
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
Unaudited Pro Forma Condensed Consolidated Financial Statements Information
(Continued)
All completed acquisitions are accounted for using the acquisition method of accounting. The total consideration is allocated to the assets acquired or ultimately acquired and the liabilities assumed at their respective fair values on the date of acquisition. The fair value of these assets and liabilities is allocated in accordance with Accounting Standards Codification 805, Business Combinations (“ASC 805”).
These unaudited pro forma condensed consolidated financial statements are prepared for informational purposes only. In management’s opinion, all material adjustments necessary to reflect the effects of the transactions referred to above, including the October 2014 follow-on offering and the January 2015 follow-on offering, have been made. Our pro forma condensed consolidated financial statements are based on assumptions and estimates considered appropriate by the Company’s management. However, they are not necessarily indicative of what our consolidated financial condition or results of operations actually would have been assuming the transactions referred to above had occurred as of the dates indicated, nor do they purport to represent our consolidated financial position or results of operations for future periods.
| 3 |
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2014
| Pro Forma Adjustments for | ||||||||||||||||||||||||||||
| Bluerock
Residential Growth REIT, INC. Historical (a) | ARIUM
Grande Lakes (b) | Alexan CityCentre (c) | Alexan Blaire House (d) | Disposals
/ Held for Sale Items (e) | Other
Items (f) | Pro
Forma Total | ||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||
| Real Estate | ||||||||||||||||||||||||||||
| Land | $ | 41,425 | $ | 5,200 | $ | - | $ | - | $ | (8,800 | ) | $ | - | $ | 37,825 | |||||||||||||
| Building and improvements | 252,454 | 36,768 | - | - | (49,958 | ) | - | 239,264 | ||||||||||||||||||||
| Construction in progress | 229 | - | - | - | (14 | ) | - | 215 | ||||||||||||||||||||
| Furniture, fixtures and equipment | 8,282 | 467 | - | - | (2,716 | ) | - | 6,033 | ||||||||||||||||||||
| Total Gross Operating Real Estate Investments | 302,390 | 42,435 | - | - | (61,488 | ) | - | 283,337 | ||||||||||||||||||||
| Accumulated depreciation | (10,036 | ) | - | - | - | 1,069 | - | (8,967 | ) | |||||||||||||||||||
| Total Net Operating Real Estate | 292,354 | 42,435 | - | - | (60,419 | ) | - | 274,370 | ||||||||||||||||||||
| Operating real estate held for sale, net | 14,739 | - | - | - | (14,739 | ) | - | - | ||||||||||||||||||||
| Total Net Real Estate Investments | 307,093 | 42,435 | - | - | (75,158 | ) | - | 274,370 | ||||||||||||||||||||
| Cash and cash equivalents | 7,612 | (14,443 | ) | (1,682 | ) | (17,359 | ) | (1,429 | ) | 86,815 | 59,514 | |||||||||||||||||
| Restricted cash | 4,214 | - | - | - | (1,698 | ) | - | 2,516 | ||||||||||||||||||||
| Due from affiliates | 544 | - | - | - | - | - | 544 | |||||||||||||||||||||
| Accounts receivables, prepaids and other assets | 1,783 | - | - | - | (110 | ) | - | 1,673 | ||||||||||||||||||||
| Investments in unconsolidated real estate joint ventures | 12,876 | - | 1,682 | 17,359 | (1,143 | ) | - | 30,774 | ||||||||||||||||||||
| In-place lease value, net | 545 | 866 | - | - | (15 | ) | - | 1,396 | ||||||||||||||||||||
| Deferred financing costs, net | 2,131 | 349 | - | - | (108 | ) | - | 2,372 | ||||||||||||||||||||
| Non-real estate assets associated with operating real estate held-for-sale | 951 | - | - | - | (951 | ) | - | - | ||||||||||||||||||||
| Total Assets | $ | 337,749 | $ | 29,207 | $ | - | $ | - | $ | (80,612 | ) | $ | 86,815 | $ | 373,159 | |||||||||||||
| LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY | ||||||||||||||||||||||||||||
| Mortgage payable | $ | 215,315 | $ | 29,444 | $ | - | $ | - | $ | (43,121 | ) | $ | - | $ | 201,638 | |||||||||||||
| Mortgage payable associated with operating real estate held-for-sale | 11,500 | - | - | - | (11,500 | ) | - | - | ||||||||||||||||||||
| Accounts payable | 1,624 | - | - | - | (984 | ) | - | 640 | ||||||||||||||||||||
| Other accrued liabilities | 5,470 | - | - | - | (1,462 | ) | - | 4,008 | ||||||||||||||||||||
| Due to affiliates | 1,784 | - | - | - | (693 | ) | - | 1,091 | ||||||||||||||||||||
| Distributions payable | 596 | - | - | - | - | - | 596 | |||||||||||||||||||||
| Liabilities associated with operating real estate held-for-sale | 435 | - | - | - | (435 | ) | - | - | ||||||||||||||||||||
| Liabilities associated with discontinued operations | 364 | - | - | - | (364 | ) | - | - | ||||||||||||||||||||
| Total Liabilities | 237,088 | 29,444 | - | - | (58,559 | ) | - | 207,973 | ||||||||||||||||||||
| Commitments and contingencies | - | - | - | - | - | - | - | |||||||||||||||||||||
| Redeemable common stock | - | - | - | - | - | - | - | |||||||||||||||||||||
| Stockholders' Equity | ||||||||||||||||||||||||||||
| Preferred stock, $0.01 par value, 250,000,000 shares authorized; none | ||||||||||||||||||||||||||||
| issued and outstanding | - | - | - | - | - | - | - | |||||||||||||||||||||
| Class A common stock, $0.01 par value, 747,586,185 shares authorized; | - | - | - | - | - | - | ||||||||||||||||||||||
| 4,495,744 shares issued and outstanding, pro forma | 45 | - | - | - | - | 76 | 121 | |||||||||||||||||||||
| Class B-1 common stock, $0.01 par value, 804,605 shares authorized; | - | - | - | - | - | - | ||||||||||||||||||||||
| 353,630 shares issued and outstanding, pro forma | 4 | - | - | - | - | - | 4 | |||||||||||||||||||||
| Class B-2 common stock, $0.01 par value, 804,605 shares authorized; | - | - | - | - | - | - | ||||||||||||||||||||||
| 353,630 shares issued and outstanding, pro forma | 4 | - | - | - | - | - | 4 | |||||||||||||||||||||
| Class B-3 common stock, $0.01 par value, 804,605 shares authorized; | - | - | - | - | - | - | ||||||||||||||||||||||
| 353,629 shares issued and outstanding, pro forma | 4 | - | - | - | - | - | 4 | |||||||||||||||||||||
| Nonvoting convertible stock, $0.01 par value per share; 1,000 shares | - | - | - | - | - | - | ||||||||||||||||||||||
| authorized, no shares issued and outstanding | - | - | - | - | - | - | - | |||||||||||||||||||||
| Additional paid-in-capital, net of costs | 80,350 | - | - | - | - | 86,739 | 167,089 | |||||||||||||||||||||
| Cumulative distributions and net losses | (21,348 | ) | (947 | ) | - | - | (11,451 | ) | - | (33,746 | ) | |||||||||||||||||
| Total Stockholders' Equity | 59,059 | (947 | ) | - | - | (11,451 | ) | 86,815 | 133,476 | |||||||||||||||||||
| Noncontrolling Interests | ||||||||||||||||||||||||||||
| Operating Units | 3,112 | - | - | - | - | - | 3,112 | |||||||||||||||||||||
| Partially Owned Properties | 38,490 | 710 | - | - | (10,602 | ) | - | 28,598 | ||||||||||||||||||||
| Total Noncontrolling interests | 41,602 | 710 | - | - | (10,602 | ) | - | 31,710 | ||||||||||||||||||||
| Total Equity | 100,661 | (237 | ) | - | - | (22,053 | ) | 86,815 | 165,186 | |||||||||||||||||||
| TOTAL LIABILITIES AND EQUITY | $ | 337,749 | $ | 29,207 | $ | - | $ | - | $ | (80,612 | ) | $ | 86,815 | $ | 373,159 | |||||||||||||
See Notes to Unaudited Pro Forma Consolidated Balance Sheet
| 4 |
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2014
| (a) | Historical consolidated financial information derived from the Company’s quarterly report on Form 10-Q as of September 30, 2014. |
| (b) | The purchase of 95% indirect interest in ARIUM Grande Lakes, which the Company expects to consolidate on its balance sheet. |
| (c) | Represents the preferred investment in Alexan CityCentre Apartments, which the Company records under the equity method on its balance sheet. As of September 30, 2014, the Company had $1.68 million remaining to be funded based on its initial commitment to fund a preferred investment for $6.56 million and earns 15.00% annually. |
| (d) | Represents the preferred investment in Alexan Blaire House Apartments, which the Company expects to record under the equity method on its balance sheet. The Company has committed to funding $17.4 million, and the preferred investment will earn 15.00% annually. |
| (e) | Reflects the sale of the Company’s 12.50% indirect equity interest in the Hillsboro property and the Company’s 25.00% indirect equity interest in the Estates at Perimeter property which were accounted for under the equity method and the sale of the Company’s 24.70% indirect equity interest in the Creekside property, the Company’s 60.00% indirect equity interest in the Grove at Waterford property and the Company’s 25.10% indirect equity interest in the Berry Hill property, to non-affiliated buyers, which were included in the Company’s historical consolidated balance sheet. Additionally reflects the expected sale of the Company’s 100.00% direct equity interest in the North Park Towers property, to non-affiliated buyers, which was included in the Company’s historical consolidated balance sheet. The pro forma financials do not reflect the net proceeds from the sale of these the Estates at Perimeter ($1.7 million), Grove at Waterford ($9.0 million) or Berry Hill ($7.3 million) and the anticipated net proceeds from the sale of the North Park Towers asset and the subsequent reinvestment. |
| (f) | Other items have been adjusted to reflect: |
| · | the $36.12 million in gross proceeds from the October 2014 follow-on offering adjusted for $2.17 million in underwriting discounts and fees and $0.83 million in offering costs. |
| · | the $57.50 million in gross proceeds from the January 2015 follow-on offering adjusted for $3.16 million in underwriting discounts and fees and $0.65 million in offering costs. |
| 5 |
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014
| Pro Forma Adjustments for | ||||||||||||||||||||||||||||||||||||||||||||
| Bluerock
Residential Growth REIT, INC. Historical (a) | Village
Green of Ann Arbor (b) | Villas
at Oak Crest (c) | Lansbrook Village (d) | ARIUM
Grande Lakes (e) | UCF Orlando (f) | Alexan CityCentre (g) | Alexan Blaire House (h) | Discontinued Operations (i) | Other
items (i) | Pro
Forma Total | ||||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||||||||
| Net rental income | $ | 19,754 | $ | 1,472 | $ | - | $ | 2,962 | $ | 2,892 | $ | - | $ | - | $ | - | $ | (5,169 | ) | $ | - | $ | 21,911 | |||||||||||||||||||||
| Other | 793 | 121 | - | 156 | 189 | - | - | - | (223 | ) | - | 1,036 | ||||||||||||||||||||||||||||||||
| Total revenues | 20,547 | 1,593 | - | 3,118 | 3,081 | - | - | - | (5,392 | ) | - | 22,947 | ||||||||||||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||||||||||||||
| Property operating expenses | 9,008 | 608 | - | 1,442 | 1,188 | - | - | - | (2,747 | ) | - | 9,499 | ||||||||||||||||||||||||||||||||
| General and administrative expenses | 2,048 | - | - | - | - | - | - | - | (1 | ) | - | 2,047 | ||||||||||||||||||||||||||||||||
| Asset management fees | 548 | - | - | - | - | - | - | - | (24 | ) | - | 524 | ||||||||||||||||||||||||||||||||
| Acquisition costs | 3,528 | - | - | - | - | - | - | - | (1,105 | ) | - | 2,423 | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | 9,864 | (1,307 | )(k) | - | (204 | )(k) | 329 | (k) | - | - | - | (2,798 | ) | - | 5,884 | |||||||||||||||||||||||||||||
| Total expenses | 24,996 | (699 | ) | - | 1,238 | 1,517 | - | - | - | (6,675 | ) | - | 20,377 | |||||||||||||||||||||||||||||||
| Operating (loss) income | (4,449 | ) | 2,292 | - | 1,880 | 1,564 | - | - | - | 1,283 | - | 2,570 | ||||||||||||||||||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||||||||||||||||||
| Other income | 185 | - | - | - | - | - | - | - | (52 | ) | - | 133 | ||||||||||||||||||||||||||||||||
| Equity in earnings (loss) of unconsolidated joint ventures | 492 | - | 107 | - | - | 316 | 557 | 1,953 | (4 | ) | - | 3,421 | ||||||||||||||||||||||||||||||||
| Interest expense | (5,551 | ) | (460 | )(l) | - | (800 | )(m) | (403 | )(n) | - | - | - | 1,053 | (268 | ) | (6,429 | ) | |||||||||||||||||||||||||||
| Total other (expense) income | (4,874 | ) | (460 | ) | 107 | (800 | ) | (403 | ) | 316 | 557 | 1,953 | 997 | (268 | ) | (2,875 | ) | |||||||||||||||||||||||||||
| Net income (loss) from continuing operations | (9,323 | ) | 1,832 | 107 | 1,080 | 1,161 | 316 | 557 | 1,953 | 2,280 | (268 | ) | (305 | ) | ||||||||||||||||||||||||||||||
| ` | ||||||||||||||||||||||||||||||||||||||||||||
| Discontinued operations | ||||||||||||||||||||||||||||||||||||||||||||
| (Loss) income on operations of rental property | (4 | ) | - | - | - | - | - | - | - | 4 | - | - | ||||||||||||||||||||||||||||||||
| Loss on early extinguishment of debt | (879 | ) | - | - | - | - | - | - | - | 880 | - | 1 | ||||||||||||||||||||||||||||||||
| Gain on sale of joint venture interests | 1,006 | - | - | - | - | - | - | - | (1,006 | ) | - | - | ||||||||||||||||||||||||||||||||
| Gain (loss) from discontinued operations | 123 | - | - | - | - | - | - | - | (122 | ) | - | 1 | ||||||||||||||||||||||||||||||||
| Net (loss) income | (9,200 | ) | 1,832 | 107 | 1,080 | 1,161 | 316 | 557 | 1,953 | 2,158 | (268 | ) | (304 | ) | ||||||||||||||||||||||||||||||
| Net (loss) income attributable to Noncontrolling Interest | ||||||||||||||||||||||||||||||||||||||||||||
| Operating Units | (321 | ) | - | - | - | - | - | - | - | - | 314 | (7 | ) | |||||||||||||||||||||||||||||||
| Partially Owned Properties | (1,150 | ) | 942 | (o) | - | 180 | (o) | 58 | (o) | - | - | - | 75 | (69 | ) | 36 | ||||||||||||||||||||||||||||
| Net (loss) income attributable to Noncontrolling Interest | (1,471 | ) | 942 | - | 180 | 58 | - | - | - | 75 | 245 | 29 | ||||||||||||||||||||||||||||||||
| Net (loss) income attributable to common shareholders | $ | (7,729 | ) | $ | 890 | (p) | $ | 107 | $ | 900 | (p) | $ | 1,103 | (p) | $ | 316 | $ | 557 | $ | 1,953 | $ | 2,083 | $ | (513 | ) | $ | (333 | ) | ||||||||||||||||
| Earnings (loss) per common share - continuing operations | ||||||||||||||||||||||||||||||||||||||||||||
| Basic Income (Loss) Per Common Share | $ | (1.87 | ) | $ | (0.02 | ) | ||||||||||||||||||||||||||||||||||||||
| Diluted Income (Loss) Per Common Share | $ | (1.87 | ) | $ | (0.02 | ) | ||||||||||||||||||||||||||||||||||||||
| Earnings (loss) per common share - discontinued operations | ||||||||||||||||||||||||||||||||||||||||||||
| Basic Income (Loss) Per Common Share | $ | 0.03 | $ | - | ||||||||||||||||||||||||||||||||||||||||
| Diluted Income (Loss) Per Common Share | $ | 0.03 | $ | - | ||||||||||||||||||||||||||||||||||||||||
| Weighted Average Basic Common Shares Outstanding | 4,269,378 | 13,517,655 | ||||||||||||||||||||||||||||||||||||||||||
| Weighted Average Diluted Common Shares Outstanding | 4,269,378 | 13,517,655 | ||||||||||||||||||||||||||||||||||||||||||
See Notes to Unaudited Pro Forma Consolidated Statement of Operations
| 6 |
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014
| (a) | Historical consolidated financial information derived from the Company’s quarterly report on Form 10-Q for the nine months ended September 30, 2014. |
| (b) | Represents adjustments to historical operations of the Company to give effect to the purchase of the Village Green of Ann Arbor Property as if these assets had been acquired on January 1, 2013. Adjustments were derived directly from the property’s actual results of operations, including pro forma adjustments for the nine months ended September 30, 2014. Pro forma adjustments to historical included: decreasing depreciation and amortization $1.72 million and increasing interest expense $0.04 million. |
| (c) | Represents the purchase of the Villas at Oak Crest Property as if these assets had been acquired on January 1, 2013 and recorded under the equity method. Per the joint venture agreement, the interests the Company acquired earn a total 15.0% preferred return. Therefore, in accordance with the joint venture agreement the pro forma was adjusted for the $0.10 million of equity in earnings from unconsolidated joint ventures, for the nine months ended September 30, 2014. |
| (d) | Represents adjustments to historical operations of the Company to give effect to the purchase of the Lansbrook Village Property as if these assets had been acquired on January 1, 2013. Adjustments were derived directly from the property’s actual results of operations, including pro forma adjustments for the nine months ended September 30, 2014. Pro forma adjustments to historical included: increasing depreciation and amortization $0.20 million and increasing interest expense $0.47 million. |
| (e) | Represents adjustments to historical operations of the Company to give effect to the purchase of the ARIUM Grande Lakes Property as if these assets had been acquired on January 1, 2013. Adjustments were derived directly from the property’s actual results of operations, including pro forma adjustments for the nine months ended September 30, 2014. Pro forma adjustments to historical included: decreasing depreciation and amortization $0.20 million and decreasing interest expense $0.40 million. |
| (f) | Represents the preferred investment in the UCF Orlando Property as if this investment had been acquired on January 1, 2013 and recorded under the equity method. Per the joint venture agreement, the interests the Company is acquiring earns a total 15.0% preferred return. Therefore, in accordance with the joint venture agreement the pro forma was adjusted for the $0.32 million of equity in earnings from unconsolidated joint ventures, for the nine months ended September 30, 2014. |
| (g) | Represents the preferred investment in the Alexan CityCentre Property as if this investment had been acquired on January 1, 2013 and recorded under the equity method. Per the joint venture agreement, the interests the Company is acquiring earns a total 15.0% preferred return. Therefore, in accordance with the joint venture agreement the pro forma was adjusted for the $0.56 million of equity in earnings from unconsolidated joint ventures, for the nine months ended September 30, 2014. |
| (h) | Represents the preferred investment in the Alexan Blaire House Property as if this investment had been acquired on January 1, 2013 and recorded under the equity method. Per the joint venture agreement, the interests the Company is acquiring earns a total 15.0% preferred return. Therefore, in accordance with the joint venture agreement the pro forma was adjusted for the $1.95 million of equity in earnings from unconsolidated joint ventures, for the nine months ended September 30, 2014. |
| (i) | Reflects the sale of the Company’s 12.50% indirect equity interest in the Hillsboro property and the Company’s 25.00% indirect equity interest in the Estates at Augusta property that were accounted for under the equity method and the sale of the Company’s 24.70% indirect equity interests in the Creekside property, the Company’s 60.00% indirect equity interest in the Grove at Waterford property and the Company’s 25.10% indirect equity interest in the Berry Hill property, to non-affiliated buyers, which were included in the Company’s historical consolidated statement of operations. Additionally reflects the expected sale of the Company’s 100.00% direct equity interest in the North Park Towers property to non-affiliated buyers, which was included in the Company’s historical consolidated statement of operations. |
| (j) | Other items has been adjusted to reflect: |
| · | the Company’s purchase of an additional 41.10% indirect interest in Enders Place, which the Company already has a controlling interest in, as if this had been acquired on January 1, 2013. |
| · | the interest expense incurred on the supplemental Enders Place mortgage of $8.00 million which bears a fixed interest rate of 5.01% and matures on November 1, 2022. Pro forma adjustments to historical for the nine months ended September 30, 2014, included increasing interest expense $0.27 million. |
| · | the operating units’ interest in the consolidated property’s net income (loss). |
| 7 |
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014
(Continued)
| (k) | Represents depreciation and amortization expense adjustment to historical for the nine months ended September 30, 2014 based on the preliminary allocation of the purchase price. Depreciation expense is calculated using the straight-line method over the estimated useful life of 30 – 35 years for the building, 15 years for building and land improvements and five to seven years for furniture, fixtures and equipment. Amortization expense on identifiable intangible assets is recognized using the straight-line method over the life of the lease, which is generally less than one year. Amortization expense on the lender loan assumption fees have been recognized using the straight-line method over the life of the remaining term of the mortgages. |
| (l) | Represents interest expense incurred on a $41.82 million mortgage loan which bears a fixed interest rate of 4.40% and matures on October 1, 2022, based on the fair value of debt, calculated as if the loan were acquired on January 1, 2013. Amounts presented are at fair value. |
| (m) | Represents interest expense incurred on a $19.86 million mortgage loan which bears a fixed interest rate of 3.86% and matures on May 1, 2019, based on the fair value of debt, calculated as if the loan were acquired on January 1, 2013. Amounts presented are at fair value. |
| (n) | Represents interest expense estimated to have incurred on the $42.00 million mortgage loan which bears a fixed interest rate of 4.45% and matures on March 31, 2018, calculated as if the loan were acquired on January 1, 2013. Amounts presented are at fair value. |
| (o) | Represents the noncontrolling interest in the consolidated property’s net income (loss). |
| (p) | Represents the Company’s interest in the consolidated property’s net income (loss). |
| 8 |
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2013
| Pro Forma Adjustments for | ||||||||||||||||||||||||||||||||||||||||||||
| Bluerock
Residential Growth REIT, INC. (a) | Village
Green of Ann Arbor (b) | Villas
at Oak Crest (c) | Lansbrook
Village (d) | Arium
Grande Lakes (e) | UCF
Orlando (f) | Alexan
CityCentre (g) | Alexan
Blaire House (h) | Discontinued Operations (i) | Other
items (j) | Pro
Forma Total | ||||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||||||||
| Net rental income | $ | 11,675 | $ | 5,935 | $ | - | $ | 6,623 | $ | 3,711 | $ | - | $ | - | $ | - | $ | (35 | ) | $ | - | $ | 27,909 | |||||||||||||||||||||
| Other | 540 | 565 | - | 416 | 231 | - | - | - | (28 | ) | - | 1,724 | ||||||||||||||||||||||||||||||||
| Total revenues | 12,215 | 6,500 | - | 7,039 | 3,942 | - | - | - | (63 | ) | - | 29,633 | ||||||||||||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||||||||||||||
| Property operating expenses | 6,200 | 2,920 | - | 3,613 | 1,467 | - | - | - | (485 | ) | - | 13,715 | ||||||||||||||||||||||||||||||||
| General and administrative expenses | 1,307 | - | - | - | - | - | - | - | (1 | ) | - | 1,306 | ||||||||||||||||||||||||||||||||
| Asset management fees | 489 | - | - | - | - | - | - | - | (104 | ) | - | 385 | ||||||||||||||||||||||||||||||||
| Acquisition costs | 192 | - | (k) | - | (k) | - | (k) | - | (k) | - | - | - | (200 | ) | - | (8 | ) | |||||||||||||||||||||||||||
| Depreciation and amortization | 5,152 | 3,131 | (l) | - | 3,692 | (l) | 2,112 | (l) | - | - | - | (71 | ) | - | 14,016 | |||||||||||||||||||||||||||||
| Total expenses | 13,340 | 6,051 | - | 7,305 | 3,579 | - | - | - | (861 | ) | - | 29,414 | ||||||||||||||||||||||||||||||||
| Operating (loss) income | (1,125 | ) | 449 | - | (266 | ) | 363 | - | - | - | 798 | - | 219 | |||||||||||||||||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||||||||||||||||||
| Equity in earnings (loss) of unconsolidated joint ventures | (103 | ) | - | 427 | - | - | 544 | 985 | 2,604 | 103 | - | 4,560 | ||||||||||||||||||||||||||||||||
| Equity in gain on sale of real estate asset of | ||||||||||||||||||||||||||||||||||||||||||||
| unconsolidated joint venture | 1,604 | - | - | - | - | - | - | - | (1,604 | ) | - | - | ||||||||||||||||||||||||||||||||
| Interest expense | (4,595 | ) | (1,840 | )(m) | - | (1,869 | )(n) | (537 | )(o) | - | - | - | (10 | ) | (404 | ) | (9,255 | ) | ||||||||||||||||||||||||||
| Total other (expense) income | (3,094 | ) | (1,840 | ) | 427 | (1,869 | ) | (537 | ) | 544 | 985 | 2,604 | (1,511 | ) | (404 | ) | (4,695 | ) | ||||||||||||||||||||||||||
| Net income (loss) from continuing operations | (4,219 | ) | (1,391 | ) | 427 | (2,135 | ) | (174 | ) | 544 | 985 | 2,604 | (713 | ) | (404 | ) | (4,476 | ) | ||||||||||||||||||||||||||
| Discontinued operations | ||||||||||||||||||||||||||||||||||||||||||||
| (Loss) income on operations of rental property | (194 | ) | - | - | - | - | - | - | - | 194 | - | - | ||||||||||||||||||||||||||||||||
| (Loss) income from discontinued operations | (194 | ) | - | - | - | - | - | - | - | 194 | - | - | ||||||||||||||||||||||||||||||||
| Net (loss) income | (4,413 | ) | (1,391 | ) | 427 | (2,135 | ) | (174 | ) | 544 | 985 | 2,604 | (519 | ) | (404 | ) | (4,476 | ) | ||||||||||||||||||||||||||
| Net (loss) income attributable to Noncontrolling Interest | ||||||||||||||||||||||||||||||||||||||||||||
| Operating Units | - | - | - | - | - | - | - | - | - | (45 | ) | (45 | ) | |||||||||||||||||||||||||||||||
| Partially Owned Properties | (1,443 | ) | (715 | )(p) | - | (354 | )(p) | (9 | )(p) | - | - | - | 413 | (150 | ) | (2,258 | ) | |||||||||||||||||||||||||||
| Net (loss) income attributable to Noncontrolling Interest | (1,443 | ) | (715 | ) | - | (354 | ) | (9 | ) | - | - | - | 413 | (195 | ) | (2,303 | ) | |||||||||||||||||||||||||||
| Net (loss) income attributable to common shareholders | $ | (2,970 | ) | $ | (676 | )(q) | $ | 427 | $ | (1,781 | )(q) | $ | (165 | )(q) | $ | 544 | $ | 985 | $ | 2,604 | $ | (932 | ) | $ | (209 | ) | $ | (2,173 | ) | |||||||||||||||
| Earnings (loss) per common share - continuing operations | ||||||||||||||||||||||||||||||||||||||||||||
| Basic Income (Loss) Per Common Share | $ | (1.18 | ) | $ | (0.16 | ) | ||||||||||||||||||||||||||||||||||||||
| Diluted Income (Loss) Per Common Share | $ | (1.18 | ) | $ | (0.16 | ) | ||||||||||||||||||||||||||||||||||||||
| Earnings (loss) per common share - discontinued operations | ||||||||||||||||||||||||||||||||||||||||||||
| Basic Income (Loss) Per Common Share | $ | (0.09 | ) | $ | - | |||||||||||||||||||||||||||||||||||||||
| Diluted Income (Loss) Per Common Share | $ | (0.09 | ) | $ | - | |||||||||||||||||||||||||||||||||||||||
| Weighted Average Basic Common Shares Outstanding | 2,348,849 | 13,517,655 | ||||||||||||||||||||||||||||||||||||||||||
| Weighted Average Diluted Common Shares Outstanding | 2,348,849 | 13,517,655 | ||||||||||||||||||||||||||||||||||||||||||
See Notes to Unaudited Pro Forma Consolidated Statement of Operations
| 9 |
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2013
| (a) | Historical consolidated financial information derived from the Company’s annual report on Form 10-K for the year ended December 31, 2013, as adjusted for reclassifying Enders Place property from discontinued operations to continuing operations. |
| (b) | Represents adjustments to historical operations of the Company to give effect to the purchase of the Village Green of Ann Arbor Property as if these assets had been acquired on January 1, 2013. Adjustments were derived directly from the property’s actual results of operations, including pro forma adjustments for the year ended December 31, 2013. Pro forma adjustments to historical included: increasing depreciation and amortization $1.54 million and increasing interest expense $0.12 million. |
| (c) | Represents the purchase of the Villas at Oak Crest Property as if these assets had been acquired on January 1, 2013 and recorded under the equity method. Per the joint venture agreement, the interests the Company acquired earn a total 15.0% preferred return. Therefore, in accordance with the joint venture agreement the pro forma was adjusted for the $0.43 million of equity in earnings from unconsolidated joint ventures, for the year ended December 31, 2013. |
| (d) | Represents adjustments to historical operations of the Company to give effect to the purchase of the Lansbrook Village Property as if these assets had been acquired on January 1, 2013. Adjustments were derived directly from the property’s actual results of operations, including pro forma adjustments for the year ended December 31, 2013. Pro forma adjustments to historical included: increasing depreciation and amortization $3.69 million and increasing interest expense $1.87 million. |
| (e) | Represents adjustments to historical operations of the Company to give effect to the purchase of the ARIUM Grande Lakes Property as if these assets had been acquired on January 1, 2013. Adjustments were derived directly from the property’s actual results of operations, including pro forma adjustments for the year ended December 31, 2013. Pro forma adjustments to historical included: increasing depreciation and amortization $1.47 million and decreasing interest expense $0.83 million. |
| (f) | Represents the preferred investment in the UCF Orlando Property as if this investment had been acquired on January 1, 2013 and recorded under the equity method. Per the joint venture agreement, the interests the Company is acquiring earns a total 15.0% preferred return. Therefore, in accordance with the joint venture agreement the pro forma was adjusted for the $0.54 million of equity in earnings from unconsolidated joint ventures, for the year ended December 31, 2013. |
| (g) | Represents the preferred investment in the Alexan CityCentre Property as if this investment had been acquired on January 1, 2013 and recorded under the equity method. Per the joint venture agreement, the interests the Company is acquiring earns a total 15.0% preferred return. Therefore, in accordance with the joint venture agreement the pro forma was adjusted for the $0.98 million of equity in earnings from unconsolidated joint ventures, for the year ended December 31, 2013. |
| (h) | Represents the preferred investment in the Alexan Blaire House Property as if this investment had been acquired on January 1, 2013 and recorded under the equity method. Per the joint venture agreement, the interests the Company is acquiring earns a total 15.0% preferred return. Therefore, in accordance with the joint venture agreement the pro forma was adjusted for the $2.60 million of equity in earnings from unconsolidated joint ventures, for the year ended December 31, 2013. |
| (i) | Reflects the sale of the Company’s 12.50% indirect equity interest in the Hillsboro property and the Company’s 25.00% indirect equity interest in the Estates at Augusta property that were accounted for under the equity method and the sale of the Company’s 24.70% indirect equity interests in the Creekside property, the Company’s 60.00% indirect equity interest in the Grove at Waterford property and the Company’s 25.10% indirect equity interest in the Berry Hill property, to non-affiliated buyers, which were included in the Company’s historical consolidated statement of operations. Additionally reflects the expected sale of the Company’s 100.00% direct equity interest in the North Park Towers property to non-affiliated buyers, which was included in the Company’s historical consolidated statement of operations. |
| (j) | Other items have been adjusted to reflect: |
| · | the Company’s purchase of an additional 41.10% indirect interest in Enders Place, which the Company already has a controlling interest in, as if this had been acquired on January 1, 2013. |
| · | the interest expense incurred on the supplemental Enders Place mortgage of $8.00 million which bears a fixed interest rate of 5.01% and matures on November 1, 2022. Pro forma adjustments to historical for the year ended December 31, 2013, included increasing interest expense $0.40 million. |
| · | the operating units’ interest in the consolidated property’s net income (loss). |
| 10 |
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2013
(Continued)
| (k) | Acquisition expenses and fees of $2.70 million related to the acquisitions of interests noted above have been excluded due to their nature of being nonrecurring charges. This includes the approximately $2.12 million in acquisition fees under the initial advisory agreement related to the acquisitions calculated based on 2.50% of the pro rata acquisition price, as well as approximately $0.58 million in acquisition related expenditures calculated based on 0.50% of the pro rata acquisition price for Springhouse at Newport News, Village Green of Ann Arbor, Villas at Oak Crest, and Grove at Waterford properties, and 1.50% of the acquisition price for North Park Towers. |
| (l) | Represents depreciation and amortization expense for the year ended December 31, 2013 based on the preliminary allocation of the purchase price. Depreciation expense is calculated using the straight-line method over the estimated useful life of 30 – 35 years for the building, 15 years for building and land improvements and five to seven years for furniture, fixtures and equipment. Amortization expense on identifiable intangible assets is recognized using the straight-line method over the life of the lease, which is generally less than one year. Amortization expense on the lender loan assumption fees have been recognized using the straight-line method over the life of the remaining term of the mortgages. |
| (m) | Represents interest expense incurred on a $41.82 million mortgage loan which bears a fixed interest rate of 4.40% and matures on October 1, 2022, based on the fair value of debt, calculated as if the loan were acquired on January 1, 2013. Amounts presented are at fair value. |
| (n) | Represents interest expense estimated to have incurred on the $42.00 million mortgage loan which bears a fixed interest rate of 4.45% and matures on March 31, 2018, calculated as if the loan were acquired on January 1, 2013. Amounts presented are at fair value. |
| (o) | Represents interest expense estimated to have incurred on the $29.44 million mortgage loan which bears a floating interest rate of 1-month LIBOR plus 1.67% and matures on December 1, 2024, calculated as if the loan were acquired on January 1, 2013. Amounts presented are at fair value. |
| (p) | Represents the noncontrolling interest in the consolidated property’s net income (loss). |
| (q) | Represents the Company’s interest in the consolidated property’s net income (loss). |
| 11 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BLUEROCK RESIDENTIAL GROWTH REIT, INC. | ||
| DATE: January 21, 2015 | /s/ Christopher J. Vohs | |
| Christopher J. Vohs | ||
| Chief Accounting Officer and Treasurer | ||
| 12 |