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 Annual Report on Form 10-K filed with the SEC on February 22, 2017 and its other filings with the SEC. 

See accompanying notes to combined historical statements of revenues and certain direct operating expenses.

CWS Portfolio

Notes to Combined Historical Statements of Revenues and Certain Direct Operating Expenses

The CWS Portfolio consists of The Mansions at Canyon Springs Apartments, a 335 unit multi-family apartment community located in San Antonio, Texas; The Towers at TPC Apartments, a 139 unit multi-family apartment community located in San Antonio, Texas; The Estates at Crown Ridge Apartments, a 352 unit multi-family apartment community located in San Antonio, Texas; The Mansions at Cascades I Apartments, a 328 unit multi-family apartment community located in Tyler, Texas; and The Mansions at Cascades II Apartments, a 254 unit multi-family apartment community located in Tyler, Texas. These properties are collectively referred to as the “CWS Portfolio” or the “Properties”.

The CWS Portfolio was acquired pursuant to a purchase agreement between an affiliate of Bluerock Residential Holdings, L.P. (Bluerock Residential Growth REIT, Inc.’s operating partnership) and BRE MF Crown Ridge LLC, BRE MR Canyon Springs LLC, BRE MF Cascades I LLC, BRE MF Cascades II LLC, and BRG MF TPC, LLC (collectively the “Sellers”) on June 9, 2017.

The accompanying Combined Historical Statements of Revenues and Certain Direct Operating Expenses (“Combined Historical Statements”) have been prepared for the purpose of complying with Rule 3-14 of the United States Securities and Exchange Commission Regulation S-X and are not intended to be a complete presentation of the Properties’ revenues and expenses.

The Combined Historical Statements have been prepared on the accrual basis of accounting and requires management of the Properties to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting periods. Actual results may differ from those estimates.

In preparation of the accompanying Combined Historical Statements, subsequent events were evaluated for recognition and disclosure through August 9, 2017, which is the date the Combined Historical Statements were available to be issued.

In the opinion of the Properties’ management, all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation (in accordance with the Basis of Presentation as described in Note 2) have been made to the accompanying unaudited amounts for the three month periods ended March 31, 2017 and 2016.

The CWS Portfolio contains 1,408 units that are rented to tenants under various lease agreements that are generally one year in length. All leases are accounted for as operating leases. Rental income is recognized as earned over the life of the lease agreements on a straight-line basis.

Some of the leases include provisions under which the Properties are reimbursed for certain operating costs. Revenue related to these reimbursed costs is recognized in the period the applicable costs are incurred and billed to tenants pursuant to the lease agreements.

Other rental revenue in the Combined Historical Statements consists of charges billed to tenants for pet, administrative, application and other fees and is recognized when earned.

Certain direct operating expenses include only those costs expected to be comparable to the proposed future operations of the Properties. Property operating costs include administrative, maintenance, marketing, payroll, utilities, taxes and insurance, repairs, and improvements. Costs such as depreciation, amortization, interest, and professional fees are excluded.

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, 2016, and for the six months ended June 30, 2017 (unaudited), and the related notes thereto.

The unaudited pro forma condensed consolidated balance sheet, as of December 31, 2016, and statement of operations for the year ended December 31, 2016, and six months ended June 30, 2017, have been prepared to provide pro forma financial information with regard to the CWS Portfolio acquisition on June 9, 2017, which the Company expects to consolidate and includes pro forma information for each of the transactions described below for which pro forma information has been provided in previous filings. The unaudited pro forma financial information gives effect to:

The pro forma condensed consolidated balance sheet at December 31, 2016 assumes that the CWS Portfolio acquisition and the Class A Common Stock Offering transactions referred to above occurred on January 1, 2016. The Company’s consolidated balance sheet at June 30, 2017 contained in the Form 10-Q filed on August 9, 2017 reflects the assets acquired and liabilities assumed in conjunction with the CWS Portfolio acquisition on June 9, 2017.

The pro forma consolidated statements of operations assume the transactions referred to above occurred on January 1, 2016.

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.

All completed acquisitions are accounted for as asset acquisitions. The purchase prices were allocated to the acquired assets and assumed liabilities based on their estimated fair values at the dates of acquisition.

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, 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.