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): November 10, 2015
| Bluerock Residential Growth REIT, Inc. | |||||||||
| (Exact Name of Registrant as Specified in Its Charter) | |||||||||
| Maryland | 001-36369 | 26-3136483 | |||||||
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(State or other jurisdiction of incorporation
or organization) |
(Commission File Number)
|
(I.R.S. Employer Identification No.) |
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712 Fifth Avenue, 9th Floor New York, NY 10019 |
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| (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) |
| ¨ | re-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 1.01 | ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. |
On April 2, 2014, Bluerock Residential Growth REIT, Inc., or the Company, entered into a Management Agreement (as amended by that certain First Amendment to Management Agreement dated February 11, 2015 and that certain Second Amendment to Management Agreement dated August 6, 2015, the Management Agreement) with its operating partnership, Bluerock Residential Holdings, L.P., or the Operating Partnership, and its manager, BRG Manager, LLC, or the Manager, pursuant to which the Manager administers the business activities and day-to-day operations of the Company and the Operating Partnership. The Management Agreement provides for the monthly reimbursement by the Company to the Manager, for certain documented expenses of the Manager and its affiliates incurred on behalf of the Company, the Operating Partnership and each of their respective subsidiaries that are reasonably necessary for the performance by the Manager of its duties and functions thereunder, or the Reimbursable Expenses.
On November 10, 2015, the Board, including its independent directors, approved the amendment of the Management Agreement pursuant to a Third Amendment to Management Agreement, effective November 10, 2015, or the Third Amendment, pursuant to which Reimbursable Expenses are to be paid to the Manager either (i) in monthly installments, in cash, or (ii) in quarterly installments at the end of the applicable quarter, in units of the Operating Partnership’s long-term incentive plan, or LTIP Units, in each case at the election of the Board. The Board will make such determinations in advance of each quarter; provided, that at any time during the fourth quarter of 2015, the Board may elect to pay Reimbursable Expenses for the fourth quarter of 2015, if any, as a single payment in LTIP Units following the end of such quarter. The number of LTIP Units payable as Reimbursable Expenses, if any, will be calculated in accordance with the corresponding calculation with respect to the Incentive Fee as specified in the Management Agreement. The Board, including its independent directors, authorized and approved the entry by the Company into the Third Amendment and found the terms of the Third Amendment to be fair, competitive and commercially reasonable and no less favorable to the Company than similar agreements between unaffiliated parties under the same circumstances. Except as amended by the Third Amendment, the terms of the Management Agreement are identical to those of the Management Agreement previously in effect.
On November 10, 2015, the Board, including its independent directors, elected to make payment of the Reimbursable Expenses for the fourth quarter of 2015 as a single payment in LTIP Units following the end of the fourth quarter of 2015. The amount of such payment will be based on actual Reimbursable Expenses incurred during the fourth quarter of 2015, and the number of LTIP Units payable as Reimbursable Expenses will then be calculated in accordance with the corresponding calculation with respect to the Incentive Fee as specified in the Management Agreement.
LTIP Units issued as Reimbursable Expenses shall be fully vested upon issuance, and may convert to OP Units upon reaching capital account equivalency with the OP Units held by the Company, and may then be settled in shares of the Company’s Class A common stock. The Manager will be entitled to receive “distribution equivalents” with respect to the Manager LTIP Units at the same time distributions are paid to the holders of the Company’s Class A common stock.
The foregoing description of the Third Amendment is a summary and is qualified in its entirety by the terms of the Third Amendment, a copy of which is filed as Exhibit No. 10.1 to this Current Report on Form 8-K and incorporated by reference into this Item 1.01.
| ITEM 3.02 | UNREGISTERED SALES OF EQUITY SECURITIES. |
Securities for Services
Base Management Fee
The Management Agreement further provides for the payment of a base management fee to the Manager, or the Base Management Fee, to compensate the Manager for advisory services and certain general management services rendered thereunder. Pursuant to the terms of the Management Agreement, the Base Management Fee is payable in quarterly installments in cash or LTIP Units, and is calculated by the Manager as set forth in the Management Agreement, which calculation is subject to review by the Company’s board of directors, or the Board.
On November 10, 2015, the Manager provided the Board with its calculation of the quarterly installment of the Base Management Fee for the three months ended September 30, 2015. The Board reviewed such calculation, and on November 10, 2015, the Board, including its independent directors, authorized and approved payment of the quarterly installment of the Base Management Fee for the three months ended September 30, 2015 entirely in LTIP Units.
The Board, including its independent directors, further approved the issuance by the Operating Partnership to the Manager, on November 18, 2015 (five business days following November 10, 2015), or the Issuance Date, of a number of LTIP Units equal to (i) the dollar amount of the portion of the quarterly installment of the Base Management Fee payable in such LTIP Units (calculated by the Manager as $895,863), divided by (ii) the average of the closing prices of the Company’s Class A common stock, $0.01 par value per share, on the NYSE MKT on the five business days prior to the Issuance Date, or the Manager LTIP Units, in payment of the quarterly installment of the Base Management Fee.
The Board authorized the Company, as the General Partner of the Operating Partnership, to cause the Operating Partnership to issue the Manager LTIP Units to the Manager in reliance upon exemptions from registration provided by Section 4(A)(2) of the Securities Act of 1933 and Regulation D. The Manager has a substantive, pre-existing relationship with the Company and is an “accredited investor” as defined in Regulation D.
The Manager LTIP Units shall be fully vested upon issuance, and may convert to OP Units upon reaching capital account equivalency with the OP Units held by the Company, and may then be settled in shares of the Company’s Class A common stock. The Manager will be entitled to receive “distribution equivalents” with respect to the Manager LTIP Units at the same time distributions are paid to the holders of the Company’s Class A common stock.
| ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS. |
(d) Exhibits.
| Exhibit No. | Description |
| 10.1 | Third Amendment to Management Agreement, by and among Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P. and BRG Manager, LLC, dated November 10, 2015 |
SIGNATURE
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 hereunto duly authorized.
| BLUEROCK RESIDENTIAL GROWTH REIT, INC. | |||
| Dated: November 17, 2015 | By: | /s/ Christopher J. Vohs | |
| Christopher J. Vohs | |||
| Chief Accounting Officer and Treasurer | |||
Exhibit Index
| Exhibit No. | Description |
| 10.1 | Third Amendment to Management Agreement, by and among Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P. and BRG Manager, LLC, dated November 10, 2015 |
Exhibit 10.1
THIRD AMENDMENT TO
MANAGEMENT AGREEMENT
This Third Amendment to Management Agreement (this “ Third Amendment ”) is adopted, executed and agreed to as of November 10, 2015, by and among Bluerock Residential Growth REIT, Inc., a Maryland corporation (the “ Company ”), Bluerock Residential Holdings, LP, a Delaware limited partnership (the “ Operating Partnership ”), and BRG Manager, LLC, a Delaware limited liability company (the “ Manager ”). Undefined terms used herein shall have the meaning ascribed to them in the Agreement (as defined below).
W I T N E S S E T H :
WHEREAS , the Company, the Operating Partnership and the Manager are parties to that certain Management Agreement dated April 2, 2014, as amended by that certain First Amendment to Management Agreement dated February 11, 2015 and that certain Second Amendment to Management Agreement dated August 6, 2015 (collectively, the “ Management Agreement ”), a copy of which is attached hereto as Exhibit A , pursuant to which the Manager is entitled to certain fees in exchange for providing to the Company and the Operating Partnership potential investment opportunities and a continuing and suitable investment program consistent with the investment objectives and policies of the Company, and to reimbursement by the Company for certain costs and expenses incurred by the Manager on behalf of the Company.
NOW, THEREFORE , in consideration of the agreements and covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Section 7(c) of the Agreement is hereby deleted in its entirety and replaced with the following paragraph immediately below:
“ (c) Costs and expenses incurred by the Manager on behalf of the Company (collectively, “ Reimbursable Expenses ”) shall be reimbursed to the Manager in arrears, which payments shall be made, at the election of the Board in advance of each quarter , either (i) in monthly installments, in cash, or (ii) in quarterly installments, in LTIP Units. On or prior to the last day of each quarter, the Board shall determine whether payment of Reimbursable Expenses for the following quarter will be made monthly in cash, or as a single payment in LTIP Units following the end of the following quarter; provided, however, that at any time during the fourth quarter of 2015 (“ Q4 2015 ”), the Board may, by Board resolution, elect to pay Reimbursable Expenses for Q4 2015, if any, as a single payment in LTIP Units following the end of Q4 2015. The Manager shall prepare a written statement in reasonable detail documenting the costs and expenses of the Company and those incurred by the Manager on behalf of the Company during each month, and shall deliver such written statement to the Company within thirty (30) days after the end of each month. For any quarter for which the Board has elected to pay Reimbursable Expenses monthly in cash, the Company shall pay all Reimbursable Expenses in cash within five (5) Business Days after the receipt of each written statement without demand, deduction, offset or delay. For any quarter for which the Board has elected to pay Reimbursable Expenses as a single, quarter-end payment in LTIP Units, the Company shall pay all Reimbursable Expenses in LTIP Units within five (5) Business Days after the receipt of the written statement for the last month of such quarter, without demand, deduction, offset or delay. If applicable, the number of LTIP Units payable pursuant to this Section 7(c) to be issued to the Manager will be calculated in accordance with Section 6(f) in the same manner as calculated for the Incentive Fee. The amount of Reimbursable Expenses payable to the Manager shall be subject to adjustment at the end of each calendar year in connection with the annual audit of the Company. The provisions of this Section 7 shall survive the expiration or earlier termination of this Agreement to the extent such Reimbursable Expenses have previously been incurred or are incurred in connection with such expiration or termination.”
2. All other provisions of the Management Agreement, as hereby amended, except as superseded by or inconsistent with this Amendment, shall continue to be in full force and effect.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment effective as of the date first set forth above.
| BLUEROCK RESIDENTIAL GROWTH REIT, INC., | ||||
| a Maryland corporation | ||||
| By: | /s/ Michael L. Konig | |||
| Name: | Michael L. Konig | |||
| Title: | Chief Operating Officer, Secretary and General Counsel | |||
| BLUEROCK RESIDENTIAL HOLDINGS, LP, | ||||
| a Delaware limited partnership | ||||
| By: | Bluerock Residential Growth REIT, Inc., | |||
| its General Partner | ||||
| By: | /s/ Michael L. Konig | |||
| Name: | Michael L. Konig | |||
| Title: | Chief Operating Officer, Secretary and General Counsel | |||
| BRG MANAGER, LLC, | ||||
| a Delaware limited liability company | ||||
| By: | Bluerock Real Estate, L.L.C. | |||
| its Manager | ||||
| By: | /s/ Jordan Ruddy | |||
| Name: | Jordan Ruddy | |||
| Title: | President | |||
EXHIBIT A
Management Agreement
[SEE ATTACHED]