BRG Bluerock Residential Growth REIT, Inc. - 10-K

Item 1A.     Risk Factors

Risks Related to the Merger

There may be unexpected delays in the completion of the Merger, or the Merger may not be completed at all.

The Merger is currently expected to close during the first half of 2022, assuming that all of the conditions in the Merger Agreement are satisfied or waived. The Merger Agreement provides that either we or the Parent may terminate the Merger Agreement if the Merger has not been completed on or prior to the date that is nine months after the date of the Merger Agreement, which date may be extended to complete the Separation and the Distribution, by the Company, up to the date that is ten months after the date of the Merger Agreement, or by Parent, up to the date that is twelve months after the date of the Merger Agreement.  In addition, Parent may terminate the Merger Agreement under certain circumstances and subject to certain restrictions, including if the Board effects a Company Adverse Recommendation Change.  Certain events may delay the completion of the Merger or result in a termination of the Merger Agreement. Some of these events are outside the control of either party. In particular, completion of the Merger requires the affirmative vote of a majority of our outstanding common stock as of the record date for the special meeting of stockholders. If the required vote is not obtained at a special meeting (including any adjournment or postponement thereof) at which the Merger has been voted upon, either we or the Parent may terminate the Merger Agreement. There can be no assurance that our stockholders will vote affirmatively at any special meeting to approve the Merger.

Parent has represented in the Merger Agreement that it will have sufficient cash at the Effective Time, that when combined with debt financing Parent is obtaining concurrently, for which it has received a commitment that is subject to conditions, will be sufficient to pay the cash Merger Consideration, and any and all amounts required to be paid in connection with the consummation of the transactions contemplated by the Merger Agreement, including the Merger, any related fees and expenses and the repayment or refinancing of certain of our indebtedness.

We may incur significant additional costs in connection with any delay in completing the Merger or termination of the Merger Agreement, in addition to significant transaction costs, including legal, financial advisory, accounting, and other costs we have already incurred. We cannot assure you that the conditions to the completion of the Merger will be satisfied or waived or that any adverse change, effect, event, circumstance, occurrence or state of facts that could give rise to the termination of the Merger Agreement, including but not limited to Parent's failure to consummate the necessary financing arrangements to ensure that it will have sufficient cash at the Effective Time, will not occur, and we cannot provide any assurances as to whether or when the Merger will be completed.

The Merger and related transactions are subject to stockholder approval.

The Merger cannot be completed unless it is approved by the affirmative vote of the stockholders entitled to cast a majority of all the votes entitled to be cast on the Merger by the holders of issued and outstanding shares of Company Common Stock.  If stockholder approval is not obtained, the Merger and related transactions cannot be completed.

Failure to complete the Merger could negatively impact the value of our Class A common stock and the future value of our business and financial results.

If the Merger is not completed, our ongoing business could be adversely affected and we will be subject to a variety of risks associated with the failure to complete the Merger, including but not limited to:

being required, under certain circumstances, to pay to Parent a termination fee of $60 million;

Table of Contents

incurrence of substantial costs relating to the proposed Merger, such as legal, accounting, financial advisory, filing, printing and mailing fee; and

diversion of resources and the focus of our management from operational matters and other strategic opportunities while working to implement the Merger.

If the Merger is not completed, these risks could negatively impact the value of our Class A common stock, the future value of our business, and our financial results.

Moreover, if the Merger is not completed, we may consider other strategic alternatives, which are subject to other risks and uncertainties.

The pendency of the Merger could adversely affect our business and operations.

In connection with the pending Merger, some of our tenants or vendors may delay or defer decisions, which could negatively impact our revenues, earnings, cash flows and expenses regardless of whether the Merger is completed. Similarly, employees may experience uncertainty about their future roles with the combined company following the Merger, which may materially adversely affect our ability to attract and retain key personnel during the pendency of the Merger. We also may experience negative impacts on our relationships with our joint venture partners and lenders, some of which have certain rights, including consent rights, in connection with a change of control transactions, such as the Merger. In addition, due to operating covenants in the Merger Agreement, we may be unable, during the pendency of the Merger, to pursue certain strategic transactions, undertake certain significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions that are not in the ordinary course of business, even if such actions could prove beneficial.

An adverse judgment in any litigation challenging the Merger may prevent the Merger from becoming effective or from becoming effective within the expected time-frame.

It is possible that stockholders may file lawsuits challenging the Merger or the other transactions contemplated by the Merger Agreement, which may name us or our Board as defendants. We cannot assure you as to the outcome of any such lawsuits, including the amount of costs associated with defending such claims or any other liabilities that may be incurred in connection with the litigation of such claims. If any plaintiffs are successful in obtaining an injunction prohibiting the parties from completing the Merger on the agreed-upon terms, such an injunction may delay the completion of the Merger in the expected time-frame, or may prevent the Merger from being completed altogether. Whether or not any plaintiff’s claim is successful, this type of litigation may result in significant costs, and divert management’s attention and resources, which could adversely affect the operation of our business.

The Merger Agreement contains provisions that could discourage a potential competing acquirer of the Company or could result in any competing acquisition proposal being at a lower price than it might otherwise be.

The Merger Agreement contains provisions that, subject to limited exceptions, restrict our ability to solicit, initiate, knowingly encourage or facilitate any third-party proposals to acquire all or a significant part of our company. With respect to any bona fide third-party acquisition proposal, we generally have an opportunity to offer to modify the terms of the Merger Agreement in response to such proposal before our Board, or committee thereof, and may withdraw or modify its recommendation to our stockholders in response to such acquisition proposal. Upon termination of the Merger Agreement in certain circumstances, we may be required to pay a substantial termination fee to Parent.

These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of our company from considering or proposing a competing acquisition, even if the potential competing acquirer was prepared to pay consideration with a higher per share cash value than that value proposed to be received or realized in the Merger, or might result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee and expense reimbursement that may become payable in certain circumstances under the Merger Agreement.

Table of Contents

Risks Related to COVID-19

The ongoing pandemic of the novel coronavirus (“COVID-19”), or the future outbreak of other highly infectious or contagious diseases, could materially and adversely impact or disrupt our financial condition, results of operations, cash flows and performance.

Since its discovery in December 2019, the COVID-19 pandemic has spread from China to many other countries, including the United States. The outbreak was declared to be a pandemic by the World Health Organization, and the Health and Human Services Secretary declared a public health emergency in the United States in response to the outbreak. Considerable uncertainty still surrounds the COVID-19 virus and its potential effects, and the extent of and effectiveness of any responses taken on a national and local level. However, measures taken to limit the impact of COVID-19, including social distancing and other restrictions on travel, congregation and business operations have resulted in significant negative economic impacts. While many of these measures have been lifted, additional cases of COVID-19 and new variants thereof have resulted in, and may continue to result in, governments reinstating these or similar measures. Further, while vaccines have been developed and are being administered, it is unclear when or if vaccines may allow a return to full pre-pandemic activity levels. While some operations have been allowed to fully or partially re-open, the long-term impact of COVID-19 on the United States and world economies remains uncertain and may continue to adversely impact the global economy, the duration and scope of which cannot currently be predicted.

Our operating results depend, in large part, on revenues derived from leasing space in our properties to residential tenants and the ability of tenants to generate sufficient income to pay their rents in a timely manner. The market and economic challenges created by the COVID-19 pandemic, and measures implemented to prevent its spread, may adversely affect our returns and profitability and, as a result, our ability to make distributions to our stockholders or to realize appreciation in the value of our properties. The spread of the COVID-19 virus or new variants thereof could result in further increases in unemployment, and tenants that experience deteriorating financial conditions as a result of the pandemic may be unwilling or unable to pay rent in full on a timely basis. In some cases, we may have to restructure tenants’ rent obligations, and may not be able to do so on terms as favorable to us as those currently in place. Numerous state, local, federal and industry-initiated efforts, including eviction moratoriums or similar actions to protect residential tenants from eviction, have been implemented and may be extended or reinstated, which may also affect our ability to collect rent or enforce remedies for the failure to pay rent. In the event of tenant nonpayment, default or bankruptcy, we may incur costs in protecting our investment and re-leasing our property, and may have limited ability to renew existing leases or sign new leases at projected rents. Our properties may also incur significant costs or losses related to shelter-in-place orders, quarantines, infection or other related factors. The federal government has implemented various forms of aid, both to individual Americans and to the market sectors negatively affected by COVID-19. However, certain of such programs were slow to begin operating and in certain locations funds have taken longer than expected to be distributed. Further, in certain locations, adequate funds may not exist to assist with all unpaid rent. There can be no certainty that such aid will be available to our tenants or to us in any amount, or in amounts sufficient to mitigate the material reduction in revenue we may experience. Until such time as the virus is contained or eradicated and commerce and employment return to more customary levels, we may experience material reductions in our operating revenue.

Additionally, as a result of an extended economic downturn, the real estate market may be unable to attract the same level of capital investment that it attracts at the time of our purchases or there may be a reduction in the number of companies seeking to acquire properties, which may result in the value of our properties not appreciating or decreasing significantly below the amount for which we acquired them.

In light of the severe economic, market and other disruptions worldwide caused by the ongoing COVID-19 pandemic, there can be no assurance that conditions in the bank lending, capital and other financial markets will not deteriorate as a result of the pandemic, or that our access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings, renewals or refinancings. A constriction on lending by financial institutions could reduce the number of properties we can acquire, our cash flow from operations and our ability to make distributions to our stockholders. If we are unable to refinance maturing indebtedness with respect to a particular property and are unable to pay the same, then the lender may foreclose on such property and result in materially adverse impact on our financial results. Financial and real estate market disruptions could also adversely affect the availability of financing from Freddie Mac and Fannie Mae, which could decrease the amount of available liquidity and credit for use in acquiring and further diversifying our portfolio of multifamily assets, and also detrimentally impact the real estate market in general.

Table of Contents

The global impact of the ongoing COVID-19 pandemic continues to evolve rapidly including mutating variants of COVID-19, and the extent of these effects on our operational and financial performance will depend on future events and/or developments, which are highly uncertain and cannot be predicted with confidence, including the duration, scope and severity of the pandemic, the emergence and characteristics of new variants, the timing and effectiveness of COVID-19 vaccines (including against COVID-19 variant strains), the creation and duration of, or the reinstatement of, government measures to contain or mitigate its impact, including vaccine mandates, the timing and effectiveness of government rent relief programs and the timing and effectiveness of vaccine administration, and the direct and indirect economic effects of the pandemic and related containment measures, among others. Thus, the COVID-19 pandemic presents material uncertainty and risk with respect to our performance, financial condition, results of operations, cash flows and performance. Moreover, many of the risk factors set forth in this Annual Report on Form 10-K are heightened and further exacerbated as a result of the impact of the COVID-19 pandemic. In addition, if in the future there is an outbreak of another highly infectious or contagious disease, the Company and our properties may be subject to similar risks as posed by COVID-19.

Risks Related to our Business and Properties

We face numerous risks associated with the real estate industry that could adversely affect our results of operations through decreased revenues or increased costs.

As a real estate company, we are subject to various changes in real estate conditions, and any negative trends in such real estate conditions may adversely affect our results of operations through decreased revenues or increased costs. These conditions include:

changes in national, regional and local economic conditions, which may be negatively impacted by concerns about inflation, deflation, government deficits, high unemployment rates, decreased consumer confidence and liquidity concerns, particularly in markets in which we have a high concentration of properties;

fluctuations and relative increases in interest rates, which could adversely affect our ability to obtain financing on favorable terms or at all;

the inability of residents and tenants to pay rent;

the existence and quality of the competition, such as the attractiveness of our properties as compared to our competitors’ properties based on considerations such as convenience of location, rental rates, amenities and safety record;

increased operating costs, including increased real property taxes, maintenance, insurance and utilities costs;

weather conditions that may increase or decrease energy costs and other weather-related expenses;

oversupply of apartments, commercial space or single-family housing or a reduction in demand for real estate in the markets in which our properties are located;

a favorable interest rate environment that may result in a significant number of potential residents of our apartment communities deciding to purchase homes instead of renting;

changes in, or increased costs of compliance with, laws and/or governmental regulations, including those governing usage, zoning, the environment and taxes; and

rent control or stabilization laws, or other laws regulating rental housing, which could prevent us from raising rents to offset increases in operating costs.

Moreover, other factors may adversely affect our results of operations, including potential liability under environmental and other laws and other unforeseen events, many of which are discussed elsewhere in the following risk factors. Any or all of these factors could materially adversely affect our results of operations through decreased revenues or increased costs.

Table of Contents

As of December 31, 2021, we held seventy-eight real estate investments, consisting of forty-nine consolidated operating investments and twenty-nine investments held through preferred equity, loan or ground lease investments, located primarily in markets in the Southern United States. Any adverse developments in local economic conditions or the demand for apartment units in these markets may negatively impact our results of operations.

Our current portfolio of properties consists primarily of apartment communities and single-family residential homes geographically concentrated in the Southern United States, and our portfolio going forward may consist primarily of the same. For the year ended December 31, 2021, properties in Florida, Georgia, Texas, Arizona and Colorado comprised 26%, 17%, 15%, 13% and 8%, respectively, of our total rental revenue. As such, we are currently susceptible to local economic conditions and the supply of and demand for apartment and single-family residential units in these markets. If there is a downturn in the economy or an oversupply of or decrease in demand for apartment and single-family residential units in these markets, our business could be materially adversely affected to a greater extent than if we owned a real estate portfolio that was more diversified in terms of both geography and industry focus.

We may not be successful in identifying and consummating suitable investment opportunities.

Our investment strategy requires us to identify suitable investment opportunities compatible with our investment criteria. We may not be successful in identifying suitable opportunities that meet our criteria or in consummating investments, including those identified as part of our investment pipeline, on satisfactory terms or at all. Our ability to make investments on favorable terms may be constrained by several factors including, but not limited to, competition from other investors with significant capital, including other publicly-traded REITs and institutional investment funds, which may significantly increase investment costs; and/or the inability to finance an investment on favorable terms or at all. The failure to identify or consummate investments on satisfactory terms, or at all, may impede our growth and negatively affect our cash available for distribution to our stockholders.

Adverse economic conditions may negatively affect our results of operations and, as a result, our ability to make distributions to our stockholders or to realize appreciation in the value of our properties.

Our operating results may be adversely affected by market and economic challenges, which may negatively affect our returns and profitability and, as a result, our ability to make distributions to our stockholders or to realize appreciation in the value of our properties. These market and economic challenges include, but are not limited to, the following:

any future downturn in the U.S. economy and high unemployment could result in tenant defaults under leases, vacancies at our apartment communities and concessions or reduced rental rates under new leases due to reduced demand. In addition, such downturns could result in reduced demand for homes, which may reduce home prices and make home purchases more affordable as an alternative to apartment renting, which also may materially adversely reduce the demand at our apartment communities;

the rate of household formation or population growth in our target markets or a continued or exacerbated economic slow-down experienced by the local economies where our properties are located or by the real estate industry generally may result in changes in supply of or demand for our apartment units; and

the failure of the real estate market to attract the same level of capital investment in the future that it attracted at the time of our purchases or a reduction in the number of companies seeking to acquire properties may result in the value of our investments not appreciating or decreasing, possibly significantly, below the amount we pay for these investments.

The length and severity of any economic slow-down or downturn cannot be predicted. Our operations and, as a result, our ability to make distributions to our stockholders and/or our ability to realize appreciation in the value of our properties could be materially and adversely affected to the extent that an economic slow-down or downturn is prolonged or becomes severe.

Table of Contents

Our revenues are significantly influenced by demand for apartment properties generally, and a decrease in such demand will likely have a greater adverse effect on our revenues than if we owned a more diversified real estate portfolio.

Our current portfolio is focused predominately on apartment properties, and we expect that our portfolio going forward will focus predominately on the same. As a result, we are subject to risks inherent in investments in a single industry, and a decrease in the demand for apartment properties would likely have a greater adverse effect on our rental revenues than if we owned a more diversified real estate portfolio. Resident demand at apartment properties was adversely affected by the most recent U.S. recession, including the reduction in spending, reduced home prices and high unemployment, together with the price volatility, dislocations and liquidity disruptions in the debt and equity markets, as well as the rate of household formation or population growth in our markets, changes in interest rates or changes in supply of, or demand for, similar or competing apartment properties in an area. If economic recovery slows or stalls, these conditions could persist and we could experience downward pressure on occupancy and market rents at our apartment properties, which could cause a decrease in our rental revenue. Any such decrease could impair our ability to satisfy our substantial debt service obligations or make distributions to our stockholders.

The properties in our investment pipeline are subject to contingencies that could delay or prevent acquisition or investment in those properties.

At any given time, we are generally in discussions regarding a number of properties for acquisition or investment, which we refer to as our investment pipeline. However, we may not have completed our diligence process on these properties or development projects or have definitive investment or purchase and sale agreements, as applicable, and several other conditions may be required to be met in order for us to complete these acquisitions or developments, including approval by our investment committee or Board. If we are planning to use proceeds of an offering of our securities to fund these acquisitions or investments and are unable to complete the acquisition of the interests or investment in any of these properties or experience significant delays in executing any such acquisition or investment, we will have issued securities in an offering without realizing a corresponding current or future increase in earnings and cash flow from acquiring those interests or developing those properties, and may incur expenses in connection with our attempts in consummating such acquisition or investment, which could have a material adverse impact on our financial condition and results of operations. In addition, to the extent the uses of proceeds from an offering are designated for the acquisition of or investment in these properties, we will have no specific designated use for the net proceeds from the offering allocated to the purchase or development and investors will be unable to evaluate in advance the manner in which we will invest, or the economic merits of the properties we may ultimately acquire or develop with such proceeds.

Our expenses may remain constant or increase, even if our revenues decrease, causing our results of operations to be adversely affected.

Costs associated with our business, such as mortgage payments, real estate taxes, insurance premiums and maintenance costs, are relatively inflexible and generally do not decrease, and may increase, when a property is not fully occupied, rental rates decrease, tenants fail to pay rent or other circumstances cause a reduction in property revenues. As a result, if revenues drop, we may not be able to commensurately reduce our expenses, which would adversely affect our financial condition and results of operations.

We compete with numerous other parties or entities for real estate assets and tenants and may not compete successfully.

We compete with numerous other persons or entities engaged in real estate investment activities, many of which have greater resources than we do. Some of these investors may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. Our competitors may be willing to offer space at rates below our rates, causing us to lose existing or potential tenants.

Competition from other apartment properties for tenants could reduce our profitability and the return on your investment.

The apartment property industry is highly competitive. Our competitors may be willing to offer space at rental rates below ours, which may cause us to lose existing or potential tenants. This competition could reduce occupancy levels and revenues at our apartment properties, which could adversely affect our financial condition and results of operations. We expect to face competition for tenants from many sources. We will face competition from other apartment communities both in the immediate vicinity and in the larger geographic market where our apartment communities will be located. If overbuilding of apartment properties occurs near our properties the increased number of available apartment units may decrease occupancy and/or apartment rental rates at our properties.

Table of Contents

Increased competition and increased affordability of single-family homes could limit our ability to retain residents, lease apartment units or increase or maintain rents.

Any apartment properties we may acquire will most likely compete with numerous housing alternatives in attracting residents, including single-family homes, as well as owner-occupied single and multifamily homes available to rent. Competitive housing in a particular area and the increasing affordability of owner occupied single and multifamily homes available to rent or buy (including as may be caused by declining mortgage interest rates and government programs to promote home ownership) could adversely affect our ability to retain our residents, lease apartment units and increase or maintain rental rates.

Increased construction of similar properties that compete with our properties in any particular location could adversely affect the operating results of our properties and our cash available for distribution to our stockholders.

We may acquire properties in locations which experience increases in construction of properties that compete with our properties. This increased competition and construction could:

make it more difficult for us to find tenants to lease units in our apartment properties;

force us to lower our rental prices or grant leasing concessions in order to lease units in our apartment properties; and/or

substantially reduce our revenues and cash available for distribution to our stockholders.

Our investments will be dependent on tenants for revenue, and lease terminations could reduce our revenues from rents, resulting in the decline in the value of your investment.

The underlying value of our properties and the ability to make distributions to you depend upon the ability of the tenants of our properties to generate enough income to pay their rents in a timely manner, and the success of our investments depends upon the occupancy levels, rental income and operating expenses of our properties and our Company. Tenants’ inability to timely or fully pay their rents may be impacted by their employment prospects and/or other constraints on their personal finances, including debts, purchases and other factors. These and other changes beyond our control may adversely affect our tenants’ ability to make their required lease payments. In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as landlord and may incur costs in protecting our investment and re-leasing our property. We may be unable to re-lease the property for the rent previously received. We may be unable to sell a property with low occupancy without incurring a loss. These events and others could cause us to reduce the amount of distributions we make to stockholders and may also cause the value of your investment to decline.

Our operating results and distributable cash flow depend on our ability to generate revenue from leasing our properties to tenants on terms favorable to us.

Our operating results depend, in large part, on revenues derived from leasing space in our properties. We are subject to the credit risk of our tenants, and to the extent our tenants default on their leases or fail to make their required rental payments we may suffer a decrease in our revenue. In addition, if a tenant does not fully pay its rent, we may not be able to enforce our rights as landlord without delays and we may incur substantial legal costs. We are also subject to the risk that we will not be able to lease space in our value-added or opportunistic properties or that, upon the expiration of leases for space located in our properties, leases may not be renewed, the space may not be re-leased or the terms of renewal or re-leasing (including the cost of required renovations or concessions to customers) may be less favorable to us than current lease terms. If vacancies continue for a long period of time, we may suffer reduced revenues resulting in decreased distributions to our stockholders. In addition, the resale value of such affected properties could be diminished because the market value of a particular property will depend principally upon the cash flow generated by its leases. Further, costs associated with real estate investment, such as real estate taxes and maintenance costs, generally are not reduced when circumstances cause a reduction in revenue. These events would cause a significant decrease in net revenues and could cause us to reduce the amount of distributions to our stockholders.

Table of Contents

Short-term apartment leases expose us to the effects of declining market rent, which could adversely impact our ability to make cash distributions to our stockholders.

We expect that substantially all of our apartment leases will be for a term of one year or less. Because these leases generally permit the residents to leave at the end of the lease term without penalty, our rental revenues may be impacted by declines in market rents more quickly than if our leases were for longer terms.

Costs incurred in complying with governmental laws and regulations may reduce our net income and the cash available for distributions.

Our company and the properties we own and expect to own are subject to various federal, state and local laws and regulations relating to environmental protection and human health and safety. Federal laws, including the National Environmental Policy Act, the Comprehensive Environmental Response, Compensation, and Liability Act, the Solid Waste Disposal Act as amended by the Resource Conservation and Recovery Act, the Federal Water Pollution Control Act, the Federal Clean Air Act, the Toxic Substances Control Act, the Emergency Planning and Community Right to Know Act and the Hazard Communication Act and their resolutions and corresponding state and local counterparts govern matters such as wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials and the remediation of contamination associated with disposals, that require compliance, sometimes at considerable expense. Some of these laws and regulations impose joint and several liability on tenants, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were illegal. The properties we own and acquire must comply with the Americans with Disabilities Act of 1990 which generally requires that certain types of buildings and services be made accessible and available to people with disabilities, and the Fair Housing Amendments Act of 1988, which requires that apartment properties first occupied after March 13, 1991 be accessible to handicapped residents and visitors, may require us to make costly modifications to our properties. Compliance with these laws and any new or more stringent laws or regulations may require us to incur material expenditures. Future laws, ordinances or regulations may impose material environmental liability. In addition, there are various federal, state and local fire, health, life-safety and similar regulations with which we may be required to comply, and which may subject us to liability in the form of fines or damages for noncompliance.

Our properties may be affected by our tenants’ activities or actions, the existing condition of land when we buy it, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties. The presence of hazardous substances, or the failure to properly remediate these substances, may make it difficult or impossible to sell or rent such property. Any material expenditures, fines, or damages we must pay will reduce our ability to make distributions and may reduce the value of your investment.

As the owner of real property, we could become subject to liability for asbestos-containing building materials in the buildings on our properties .

Some of our properties may contain asbestos-containing materials. Environmental laws typically require that owners or operators of buildings with asbestos-containing building materials properly manage and maintain these materials, adequately inform or train those who may come in contact with asbestos and undertake special precautions, including removal or other abatement, in the event that asbestos is disturbed during building renovation or demolition. These laws may impose fines and penalties on building owners or operators for failure to comply with these requirements. In addition, third parties may be entitled to seek recovery from owners or operators for personal injury associated with exposure to asbestos-containing building materials.

In addition, many insurance carriers are excluding asbestos-related claims from standard policies, pricing asbestos endorsements at prohibitively high rates or adding significant restrictions to this coverage. Because of our difficulty in obtaining specialized coverage at rates that correspond to the perceived level of risk, we may not obtain insurance for asbestos-related claims. We will continue to evaluate the availability and cost of additional insurance coverage from the insurance market. If we purchase insurance for asbestos, the cost could have a negative impact on our results of operations.

Table of Contents

Costs associated with addressing indoor air quality issues, moisture infiltration and resulting mold remediation may be costly.

As a general matter, concern about indoor exposure to mold or other air contaminants has been increasing as such exposure has been alleged to have a variety of adverse effects on health. As a result, there have been a number of lawsuits in our industry against owners and managers of apartment communities relating to indoor air quality, moisture infiltration and resulting mold. Some of our properties may contain microbial matter such as mold and mildew. The terms of our property and general liability policies generally exclude certain mold-related claims. Should an uninsured loss arise against us, we would be required to use our funds to resolve the issue, including litigation costs. We can offer no assurance that liabilities resulting from indoor air quality, moisture infiltration and the presence of or exposure to mold will not have a future impact on our business, results of operations or financial condition.

A change in the United States government policy with regard to Fannie Mae and Freddie Mac could impact our financial condition .

Fannie Mae and Freddie Mac are a major source of financing for the apartment real estate sector. We and other apartment companies in the apartment real estate sector depend frequently on Fannie Mae and Freddie Mac to finance growth by purchasing or guarantying apartment loans. Prior initiatives in the recent past, including proposed legislation, have sought to wind down Fannie Mae and Freddie Mac. Any decision by the government to eliminate or downscale Fannie Mae or Freddie Mac, to reduce their acquisitions or guarantees of apartment real estate mortgage loans, or to reduce government support for multi-family housing more generally, may adversely affect interest rates, capital availability, development of multi-family communities and our ability to refinance our existing mortgage obligations as they come due and to obtain additional long-term financing for the acquisition of additional apartment communities on favorable terms or at all.

If we are not able to cost-effectively maximize the life of our properties, we may incur greater than anticipated capital expenditure costs, which may adversely affect our ability to make distributions to our stockholders.

While many of the existing properties we acquire have undergone substantial renovations since they were constructed, older properties may carry certain risks including unanticipated repair costs associated with older properties, increased maintenance costs as older properties continue to age, and cost overruns due to the need for special materials and/or fixtures specific to older properties. Although we take a proactive approach to property preservation, utilizing a preventative maintenance plan, and selective improvements that mitigate the cost impact of maintaining exterior building features and aging building components, if we are not able to cost-effectively maximize the life of our properties, we may incur greater than anticipated capital expenditure costs which may adversely affect our financial condition, results of operations and/or ability to make distributions to our stockholders.

Any uninsured losses or high insurance premiums will reduce our net income and the amount of our cash distributions to stockholders.

We will attempt to ensure adequate insurance is obtained to cover significant areas of risk to us as a company and to our properties. However, there are types of losses at the property level, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters, which are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. We may not have adequate insurance coverage for such losses. If any of our properties incurs a casualty loss that is not fully insured, the value of our assets will be reduced by any such uninsured loss. In addition, other than any working capital reserve or other reserves we may establish for a particular property, we could have no source of funding to repair or reconstruct any uninsured damaged property. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced cash flow that would result in lower distributions to stockholders.

Table of Contents

We may be adversely affected by laws, regulations or other issues related to climate change.

We may become subject to laws or regulations related to climate change, which could cause our business, results of operations and financial condition to be impacted adversely. The federal government has enacted, and some of the states and localities in which we operate may enact, certain climate change laws and regulations or have begun regulating carbon footprints and greenhouse gas emissions. Although these laws and regulations have not had any known material adverse effects on our business to date, they could result in substantial costs, including compliance costs, increased energy costs, retrofit costs and construction costs, including monitoring and reporting costs, and capital expenditures for environmental control facilities and other new equipment. Furthermore, our reputation could be negatively affected if we violate climate change laws or regulations. We cannot predict how future laws and regulations, or future interpretations of current laws and regulations, related to climate change will affect our properties, business, results of operations and financial condition. Lastly, the potential physical impacts of climate change on our operations are highly uncertain and would be particular to the geographic circumstances in areas in which we operate. These may include changes in global weather patterns, which could include local changes in rainfall and storm patterns and intensities, water shortages, changing sea levels and changing temperature averages or extremes. These impacts may adversely affect our properties, our business, financial condition and results of operations.

Climate change may adversely impact our properties directly and may lead to additional compliance obligations and costs as well as additional taxes and fees .

We cannot reliably predict the extent, rate, or impact of climate change. As such, the potential physical impacts of climate change on our operations are highly uncertain and would be particular to the geographic circumstances in areas in which we operate. These may include changes in global weather patterns, which could include local changes in rainfall and storm patterns and intensities, water shortages, changing sea levels and changing temperature averages or extremes. Further, population migration may occur in response to these or other factors and negatively impact our properties. Climate and other environmental changes may result in volatile or decreased demand for space at certain of our properties or, in extreme cases, our inability to operate certain properties at all. Climate change may also have indirect effects on our business by increasing the cost of insurance or making insurance unavailable. Although we strive to identify, analyze, and respond to the risk and opportunities that climate change presents, at this time, there can be no assurance that climate change will not have an adverse effect on the value of our properties and our financial performance.

We may have difficulty selling real estate investments, and our ability to distribute all or a portion of the net proceeds from such sale to our stockholders may be limited.

Real estate investments are relatively illiquid. We will have a limited ability to vary our portfolio in response to changes in economic or other conditions. We will also have a limited ability to sell assets in order to fund working capital and similar capital needs. When we sell any of our properties, we may not realize a gain on such sale. We may not elect to distribute any proceeds from the sale of properties to our stockholders; for example, we may use such proceeds to:

purchase additional properties;

fund capital commitments to our joint ventures;

repay debt, if any;

buy out interests of any co-venturers or other partners in any joint venture in which we are a party;

create working capital reserves; and/or

make repairs, maintenance, tenant improvements or other capital improvements or expenditures to our remaining properties.

Our ability to sell our properties may also be limited by our need to avoid a 100% penalty tax that is imposed on gain recognized by a REIT from the sale of property characterized as dealer property. In order to ensure that we avoid such characterization, we may be required to hold our properties for the production of rental income for a minimum period of time, generally two years, and comply with certain other requirements in the Internal Revenue Code of 1986, as amended (the “Code”). As such, we could be restricted from selling a property at an opportune time to maximize proceeds.

Table of Contents

Representations and warranties made by us in connection with sales of our properties may subject us to liability that could result in losses and could harm our operating results and, therefore, distributions we make to our stockholders.

When we sell a property, we may be required to make representations and warranties regarding the property and other customary items. In the event of a breach of such representations or warranties, the purchaser of the property may have claims for damages against us, rights to indemnification from us or otherwise have remedies against us. In any such case, we may incur liabilities that could result in losses and could harm our operating results and, therefore distributions we make to our stockholders.

We may be unable to redevelop existing properties successfully and our investments in the development of new properties will be subjected to development risk, either of which could adversely affect our results of operations due to unexpected costs, delays and other contingencies.

As part of our operating strategy, we intend to selectively expand and/or redevelop existing properties as market conditions warrant, as well as invest in development of new properties, including through our Invest-to-Own strategy. In addition to the risks associated with real estate investments in general as described above, there are material additional risks associated with development activities including the following:

we or our development partners may be unable to obtain, or face delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations, which could result in costly delays, increased development costs and/or lower than expected lease rates;

developers may incur development costs for a property that exceed original estimates due to, among other things, increased materials, labor or other costs, changes in development plans or unforeseen environmental conditions, which could make completion of the property more costly or entirely uneconomical;

land, insurance and construction costs may be higher than expected in our markets; therefore, we may be unable to attract rents that compensate for these increases in costs;

we may abandon redevelopment or Invest-to-Own development opportunities that we have already begun to explore, and we may fail to recover expenses already incurred in connection with exploring any such opportunities;

rental rates and occupancy levels may be lower and operating and/or capital costs may be higher than anticipated;

changes in applicable zoning and land use laws may require us to abandon projects prior to their completion, resulting in the loss of development costs incurred up to the time of abandonment; and

possible delays in completion because of construction delays, delays in the receipt of zoning, occupancy and other approvals, or other factors outside of our control.

Any one or more of these risks may cause us or the projects in which we invest to incur unexpected delays or development costs, and/or cause us not to be able to achieve targeted rental rates, which could negatively affect our financial condition, results of operations and/or reduce distributions.

W e may acquire some properties with existing lock-out provisions, which may prohibit or inhibit us from selling a property for an indeterminate period of time, or may require us to maintain specified debt levels for a period of years on some properties.

Loan provisions could materially restrict us from selling or otherwise disposing of or refinancing properties. These provisions would affect our ability to turn our investments into cash and thus reduce cash available for distributions to you. Loan provisions may prohibit us from reducing the outstanding indebtedness with respect to properties, refinancing such indebtedness on a non-recourse basis at maturity, or increasing the amount of indebtedness with respect to such properties.

Table of Contents

Loan provisions could impair our ability to take actions that would otherwise be in the best interests of our stockholders and, therefore, may have an adverse impact on the value of our stock, relative to the value that would result if the loan provisions did not exist. Without limitation, such loan provisions could preclude us from participating in major transactions that could result in a disposition of our assets or a change in control even though that disposition or change in control might be in the best interests of our stockholders.

Our investments could be adversely affected if a member of our Bluerock operating partner network performs poorly at one or more of our projects, which could adversely affect returns to our stockholders.

In general, we expect to rely on members of our operating partner network for the day-to-day management and development of our real estate investments. Members of our network are not fiduciaries to us, and generally will have limited capital invested in a project, if any. One or more members of our network may perform poorly in managing our project investments for a variety of reasons, including failure to properly adhere to budgets or properly implement the property business plan. A member of our network may also underperform for strategic reasons related to projects or assets that the partner is involved in with a Bluerock affiliate but not our Company. If a member of our network does not perform well, we may not be able to ameliorate the adverse effects of poor performance by terminating the partner and finding a replacement partner to manage our projects in a timely manner. In such an instance, the returns to our stockholders could be adversely affected.

Actions of our joint venture partners could subject us to liabilities in excess of those contemplated or prevent us from taking actions which are in the best interests of our stockholders, which could result in lower investment returns to our stockholders.

We have entered into, and in the future intend to enter into, joint ventures with affiliates and other third parties, including with members of our operating partner network, to acquire or improve properties. We may also purchase properties in partnerships, co-tenancies or other co-ownership arrangements. Such investments may involve risks not otherwise present when acquiring real estate directly, including, for example:

joint venturers may share certain approval rights over major decisions and reduce our flexibility to maximize project values or limit property costs;

that such co-venturer, co-owner or partner may at any time have economic or business interests or goals which are or which become inconsistent with our business interests or goals, including inconsistent goals relating to the timing of the sale of properties held in the joint ventures and/or the timing of termination or liquidation of joint venture;

the possibility that our co-venturer, co-owner or partner in an investment might become insolvent or bankrupt and thus be unable to fulfill its financial obligations to us in that investment;

the possibility that we may incur liabilities as a result of an action or omission by taken by our co-venturer, co-owner or partner;

that such co-venturer, co-owner or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives, including our policy with respect to maintaining our qualification as a REIT;

disputes between us and our joint venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business and result in subjecting the properties owned by the applicable joint venture to additional risk; or

under certain joint venture arrangements, neither venture partner may have the power to control the venture, and an impasse could be reached which might have a negative influence on the joint venture.

Table of Contents

These events might subject us to costs or liabilities in excess of those contemplated and thus reduce your investment returns. If we have a right of first refusal or buy/sell right to buy out a co-venturer, co-owner or partner, we may be unable to finance such a buy-out if it becomes exercisable or we may be required to purchase such interest at a time when it might not otherwise be in our best interest to do so. If our ownership interest is subject to a buy/sell right, we may not have sufficient cash, available borrowing capacity or other capital resources to allow us to elect to purchase an interest of a co-venturer subject to the buy/sell right, in which case we may be forced to sell our interest as the result of the exercise of such right when we would otherwise prefer to keep our interest. Finally, we may not be able to sell our interest in a joint venture if or when we desire to exit the venture.

Your investment return may be reduced if we are required to register as an investment company under the Investment Company Act; if we are subject to registration under the Investment Company Act, we will not be able to continue our business.

Neither we, nor our Operating Partnership, nor any of our subsidiaries intend to register as an investment company under the Investment Company Act. We expect that our Operating Partnership’s and subsidiaries’ investments in real estate will represent the substantial majority of our total asset mix, which would not subject us to the Investment Company Act. In order to maintain an exemption from regulation under the Investment Company Act, we intend to engage, through our Operating Partnership and our wholly and majority owned subsidiaries, primarily in the business of buying real estate, and qualifying real estate investments must be made within a year after cash is received by us. If we are unable to invest a significant portion of cash proceeds in properties within one year of receipt, we may avoid being required to register as an investment company by temporarily investing any unused proceeds in government securities with low returns, which would reduce the cash available for distribution to stockholders and possibly lower your returns.

We expect that most of our assets will continue to be held through wholly owned or majority owned subsidiaries of our Operating Partnership. We expect that most of these subsidiaries will be outside the definition of investment company under Section 3(a)(1) of the Investment Company Act as they are generally expected to hold at least 60% of their assets in real property or in entities that they manage or co-manage that own real property. Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, which we refer to as the 40% test. Excluded from the term “investment securities,” among other things, are U.S. government securities and securities issued by majority owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act. We believe that we, our Operating Partnership and most of the subsidiaries of our Operating Partnership will not fall within either definition of investment company as we invest primarily in real property, through our wholly or majority owned subsidiaries, the majority of which we expect to have at least 60% of their assets in real property or in entities that they manage or co-manage that own real property. As these subsidiaries would be investing either solely or primarily in real property, they would be outside of the definition of “investment company” under Section 3(a)(1) of the Investment Company Act. We are organized as a holding company that conducts its businesses primarily through the Operating Partnership, which in turn is a holding company conducting its business through its subsidiaries. Both we and our Operating Partnership intend to conduct our operations so that they comply with the 40% test. We will monitor our holdings to ensure continuing and ongoing compliance with this test. In addition, we believe that neither we nor the Operating Partnership will be considered an investment company under Section 3(a)(1)(A) of the Investment Company Act because neither we nor the Operating Partnership will engage primarily or hold itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, through the Operating Partnership’s wholly-owned or majority owned subsidiaries, we and the Operating Partnership will be primarily engaged in the non-investment company businesses of these subsidiaries.

In the event that the value of investment securities held by the subsidiaries of our Operating Partnership were to exceed 40%, we expect our subsidiaries to be able to rely on the exclusion from the definition of “investment company” provided by Section 3(c)(5)(C) of the Investment Company Act. Section 3(c)(5)(C), as interpreted by the staff of the SEC, requires each of our subsidiaries relying on this exception to invest at least 55% of its portfolio in “mortgage and other liens on and interests in real estate,” which we refer to as “qualifying real estate assets” and maintain at least 70% to 90% of its assets in qualifying real estate assets or other real estate-related assets. The remaining 20% of the portfolio can consist of miscellaneous assets.

Table of Contents

What we buy and sell is therefore limited to these criteria. How we determine to classify our assets for purposes of the Investment Company Act will be based in large measure upon no-action letters issued by the SEC staff in the past and other SEC interpretive guidance. These no-action positions were issued in accordance with factual situations that may be substantially different from the factual situations we may face, and a number of these no-action positions were issued more than ten years ago. Pursuant to this guidance, and depending on the characteristics of the specific investments, certain joint venture investments may not constitute qualifying real estate assets and therefore investments in these types of assets may be limited. No assurance can be given that the SEC will concur with our classification of our assets. Future revisions to the Investment Company Act or further guidance from the SEC may cause us to lose our exclusion from registration or force us to re-evaluate our portfolio and our investment strategy. Such changes may prevent us from operating our business successfully.

In the event that we, or our Operating Partnership, were to acquire assets that could make either entity fall within the definition of investment company under Section 3(a)(1) of the Investment Company Act, we believe that we would still qualify for an exclusion from registration pursuant to Section 3(c)(6). Section 3(c)(6) excludes from the definition of investment company any company primarily engaged, directly or through majority owned subsidiaries, in one or more of certain specified businesses. These specified businesses include the real estate business described in Section 3(c)(5)(C) of the Investment Company Act. It also excludes from the definition of investment company any company primarily engaged, directly or through majority owned subsidiaries, in one or more of such specified businesses from which at least 25% of such company’s gross income during its last fiscal year is derived, together with any additional business or businesses other than investing, reinvesting, owning, holding, or trading in securities. Although the SEC staff has issued little interpretive guidance with respect to Section 3(c)(6), we believe that we and our Operating Partnership may rely on Section 3(c)(6) if 55% of the assets of our Operating Partnership consist of, and at least 55% of the income of our Operating Partnership is derived from, qualifying real estate assets owned by wholly owned or majority owned subsidiaries of our Operating Partnership.

To ensure that neither we, nor our Operating Partnership nor subsidiaries are required to register as an investment company, each entity may be unable to sell assets they would otherwise want to sell and may need to sell assets they would otherwise wish to retain. In addition, we, our Operating Partnership or our subsidiaries may be required to acquire additional income or loss-generating assets that we might not otherwise acquire or forego opportunities to acquire interests in companies that we would otherwise want to acquire. Although we, our Operating Partnership and our subsidiaries intend to monitor our respective portfolios periodically and prior to each acquisition or disposition, any of these entities may not be able to maintain an exclusion from registration as an investment company. If we, our Operating Partnership or our subsidiaries are required to register as an investment company but fail to do so, the unregistered entity would be prohibited from engaging in our business, and criminal and civil actions could be brought against such entity. In addition, the contracts of such entity would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of the entity and liquidate its business.

We have experienced losses in the past, and we may experience similar losses in the future.

From inception of our Company through June 30, 2019, we had a cumulative net loss of $28.1 million. Our losses can be attributed, in part, to acquisition costs and depreciation and amortization expenses, which substantially reduced our income. We cannot assure you that, in the future, we will be profitable or that we will realize growth in the value of our assets.

Our internal control over financial reporting may not be effective, which could adversely affect our reputation, results of operations and stock price.

The accuracy of our financial reporting depends on the effectiveness of our internal control over financial reporting. Internal control over financial reporting can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements and may not prevent or detect misstatements because of its inherent limitations. These limitations include the possibility of human error, inadequacy or circumvention of internal controls and fraud. If we do not attain and maintain effective internal control over financial reporting or implement controls sufficient to provide reasonable assurance with respect to the preparation and fair presentation of our financial statements, we could be unable to file accurate financial reports on a timely basis, and our reputation, results of operations and stock price could be materially adversely affected.

Table of Contents

We have very limited sources of capital other than cash from property operations and the proceeds of offerings of our securities to meet our primary liquidity requirements.

We have very limited sources of capital other than cash from property operations and the net proceeds of offerings of our securities to meet our primary liquidity requirements. As a result, we may not be able to pay our liabilities and obligations when they come due other than with the net proceeds of an offering and depending on business conditions at the time we might not be able to effectuate an offering, which in either case may limit our ability to implement our business plan. In the past, we have relied on borrowing from affiliates to help finance our business activities. We have no current intention to borrow from affiliates, but we may do so in the future.  However, there are no assurances that we will be able to borrow from affiliates in the future, or extend the maturity date of any loans that may be outstanding and due to affiliates.

You will have limited control over changes in our policies and day-to-day operations, which limited control increases the uncertainty and risks you face as a stockholder. In addition, our Board may change our major operational policies without your approval.

Our Board determines our major policies, including our policies regarding financing, growth, debt capitalization, REIT qualification and distributions. Our Board may amend or revise these and other policies without a vote of the stockholders. Under the Maryland General Corporation Law and our charter, our stockholders have a right to vote only on limited matters. See “Important Provisions of Maryland Corporate Law and Our Charter and Bylaws” in any applicable prospectus or prospectus supplement.

We are responsible for the day-to-day operations of our Company and the selection and management of investments and have broad discretion over the use of proceeds from offerings of our securities. Accordingly, you should not purchase our securities unless you are willing to entrust all aspects of the day-to-day management and the selection and management of investments to us, who will manage our Company. In addition, we may retain independent contractors to provide various services for our Company, and you should note that such contractors will have no fiduciary duty to you or the other stockholders and may not perform as expected or desired.

In addition, while any applicable prospectus or prospectus supplement outlines our investment policies and generally describes our target portfolio, our Board may make adjustments to these policies based on, among other things, prevailing real estate market conditions and the availability of attractive investment opportunities. While we have no current intention of changing our investment policies, we will not forego an attractive investment because it does not fit within our targeted asset class or portfolio composition. We may use the proceeds of an offering to purchase or invest in any type of real estate which we determine is in the best interest of our stockholders. As such, our actual portfolio composition may vary substantially from the target portfolio described in the applicable prospectus or prospectus supplement.

Your rights as stockholders and our rights to recover claims against our officers, and directors are limited.

Under Maryland law, our charter, our bylaws and the terms of certain indemnification agreements with our directors and employment or services agreements with our executive officers, we may generally indemnify our officers, our directors, and their respective affiliates to the maximum extent permitted by Maryland law. Maryland law permits us to indemnify our present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or threatened to be made a party by reason of their service in those or other capacities unless it is established that: (1) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty; (2) the director or officer actually received an improper personal benefit in money, property or services; or (3) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. As a result, we and our stockholders may have more limited rights against our directors, officers, employees and agents, and their affiliates, than might otherwise exist under common law. In addition, we may be obligated to fund the defense costs incurred by our directors, officers, employees and agents in some cases.

A limit on the percentage of our capital stock and common stock a person may own may discourage a takeover or business combination, which could prevent our common stockholders from realizing a premium price for their common stock.

Our charter restricts direct or indirect ownership by one person or entity to no more than 9.8% in value of the outstanding shares of our capital stock or 9.8% in number of shares or value, whichever is more restrictive, of the outstanding shares of our common stock unless exempted (prospectively or retroactively) by our Board. This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price to our stockholders.

Table of Contents

Our charter permits our Board to issue stock with terms that may subordinate the rights of our common stockholders or discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.

Our Board may amend our charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority to issue and may classify or reclassify any unissued common stock or preferred stock into other classes or series of stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption of any such stock. Our Board has authorized a total of 250,000,000 shares of preferred stock for issuance, of which, as of December 31, 2021, there are issued and outstanding 359,197 shares of Series B Preferred Stock, 2,295,845 shares of Series C Preferred Stock, 2,774,338 shares of Series D Preferred Stock, and 28,272,134 shares of Series T Preferred Stock, all of which are senior to our common stock with respect to priority of dividend payments and rights upon liquidation, dissolution or winding up.  Our Board could also authorize the issuance of up to approximately 203,621,000 additional shares of preferred stock with terms and conditions that could have priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Such preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price to holders of our common stock.

We depend on our key employees. There is no guarantee that our key employees will remain employed with us for any specified period of time, and will not engage in competitive activities if they cease to be employed with us.

We depend on our key employees. In particular, our success depends to a significant degree upon the contributions of Messrs. Kamfar, Babb, MacDonald, Ruddy, Vohs, and DiFranco, who each entered into employment agreements with us, and Mr. Konig, who entered into a services agreement with us through his wholly-owned law firm, Konig & Associates, LLC, on substantially the same terms as the employment agreements. Each such agreement became effective upon the closing of the Internalization (except Mr. DiFranco’s, which became effective on November 5, 2018) and each (including Mr. DiFranco’s) had an initial term through and including December 31, 2020. Effective as of December 31, 2021, each of the employment agreements automatically renewed for a renewal term through and including December 31, 2022. The departure or the loss of the services of Messrs. Kamfar, Babb, MacDonald, Ruddy, Vohs, DiFranco or Konig could have a material adverse effect on our business, financial condition, results of operations and ability to effectively operate our business.

Further, the employment and services agreements we entered into with each of Messrs. Kamfar, Babb, MacDonald, Ruddy, Vohs, DiFranco and Konig contain certain restrictions on these executives, including a restriction on engaging in activities that are deemed competitive to our business. Although we believe these covenants to be enforceable under current law in the states in which we do business, there can be no guarantee that if our executives were to breach these covenants and engage in competitive activities, a court of law would fully enforce these restrictions. If these executives were to terminate their employment or service relationship with us and engage in competitive activities, such activities could have a material adverse effect on our business, financial condition and results of operations.

Our management manages our portfolio pursuant to very broad investment guidelines approved by our Board, which does not approve each investment and financing decision made by our management unless required by our investment guidelines.

Our management is authorized to follow very broad investment guidelines established by our Board. Our Board will periodically review our investment guidelines and our portfolio of assets but will not, and will not be required to, review all of our proposed investments, except in limited circumstances as set forth in our investment guidelines. In addition, in conducting periodic reviews, our Board may rely primarily on information provided to them by our management. Furthermore, transactions entered into by our management may be costly, difficult or impossible to unwind by the time they are reviewed by our Board. Our management has great latitude within the broad parameters of our investment guidelines in determining the types and amounts of assets in which to invest on our behalf, including making investments that may result in returns that are substantially below expectations or result in losses, which would materially and adversely affect our business and results of operations, or may otherwise not be in the best interests of our stockholders.

Table of Contents

We are highly dependent on information systems and therefore systems failures, cybersecurity incidents or other technology disruptions could negatively impact our business.

Our operations are highly dependent upon our information systems that support our business processes, including marketing, leasing, resident and vendor communication, property management and work order processing, finance and intracompany communications throughout our operations. Certain critical components of our information systems are dependent upon third-party providers and a significant portion of our business operations are conducted over the internet. These systems and websites require access to telecommunications or the internet, each of which is subject to system security risks, cybersecurity breaches, outages, and other risks. As a result, we could be severely impacted by a catastrophic occurrence, such as a natural disaster or a terrorist attack, or a circumstance that disrupted access to telecommunications, the internet or operations at our third-party providers, including viruses or experienced computer programmers that could penetrate network security defenses and cause system failures and disruptions of operations. We have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, maintain the security and integrity of our information technology networks and related systems, and manage the risk of a security breach or disruption, but these measures, as well as our increased awareness of the nature and extent of a risk of a cyber incident, do not guarantee that our financial results, operations, business relationships or confidential information will not be negatively impacted by such an incident. In addition, while we believe we utilize appropriate duplication and back-up procedures, a significant outage in telecommunications, the internet or at our third-party providers could nonetheless negatively impact our operations.

Our third-party service providers are primarily responsible for the security of their own information technology environments and in certain instances, we rely significantly on third-party service providers to supply and store our sensitive data in a secure manner. All such third-party vendors face risks relating to cybersecurity similar to ours which could disrupt their businesses and therefore adversely impact us. While we provide guidance and specific requirements in some cases, we do not directly control any of such parties’ information technology security operations, or the amount of investment they place in guarding against cybersecurity threats. Accordingly, we are subject to any flaws in or breaches to their information technology systems or those which they operate for us.

Although no material incidents have occurred to date, we cannot be certain that our security efforts and measures will be effective or that our financial results will not be negatively impacted by such an incident should one occur.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

Information security risks have generally increased in recent years due to the rise in new technologies and the increased sophistication and activities of perpetrators of cyber-attacks. In the ordinary course of our business we acquire and store sensitive data, including intellectual property, our proprietary business information and personally identifiable information of our prospective and current residents, our employees and third-party service providers in our offices and on our networks and website and on third-party vendor networks. We may share some of this information with vendors who assist us with certain aspects of our business. The secure processing and maintenance of this information is critical to our operations and business and growth strategies. Despite our security measures and those of our third-party vendors, our information technology and such infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disruption to our operations and the services we provide to customers or damage our reputation, and thus could have a material adverse impact on our business, financial condition or results of operations. In addition, a security breach could require that we expend significant additional resources to enhance our information security systems and could result in a disruption to our operations.

Table of Contents

Risks Related to Related Party Transactions

We may pursue less vigorous enforcement of the terms of certain agreements in connection with related party transactions because of conflicts of interest with certain of our officers and directors, and the terms of those agreements may be less favorable to us than they might otherwise be in an arm’s-length transaction.

The agreements we enter into in connection with related party transactions are expected to contain limited representations and warranties and have limited express indemnification rights in the event of a breach of those agreements. Furthermore, Mr. Kamfar, our Chairman and Chief Executive Officer, currently serves as an officer of Bluerock, an affiliate of our former Manager, and will have a conflict with respect to any matters that require consideration by our Board that occur between us and Bluerock. Even if we have actionable rights, we may choose not to enforce, or to enforce less vigorously, our rights under these agreements or under other agreements we may have with these parties, because of our desire to maintain positive relationships with these individuals.

Risks Related to Conflicts of Interest

Conflicts of interest may exist or could arise in the future with our Operating Partnership and its limited partners, which may impede business decisions that could benefit our stockholders.

Conflicts of interest may exist or could arise as a result of the relationships between us and our affiliates, on the one hand, and our Operating Partnership or any member thereof, on the other. Our directors and officers have duties to our Company and our stockholders under applicable Maryland law in connection with their management of our Company. At the same time, we, as general partner of our Operating Partnership, have fiduciary duties to our Operating Partnership and to its limited partners under Delaware law in connection with the management of our Operating Partnership. Our duties to our Operating Partnership and its limited partners as the general partner may come into conflict with the duties of our directors and officers to our Company and our stockholders. These conflicts may be resolved in a manner that is not in the best interest of our stockholders.

Conflicts of interest exist between our interests and the interests of Bluerock and its affiliates.

Examples of these potential conflicts of interest include:

The possibility that certain of our officers and their respective affiliates will face conflicts of interest relating to the purchase and leasing of properties, and that such conflicts may not be resolved in our favor;

The possibility that the competing demands for the time of certain of our officers may result in them spending insufficient time on our business, which may result in our missing investment opportunities or having less efficient operations, which could reduce our profitability and result in lower distributions to you;

Some of our current investments, generally in development projects, have been made through joint venture arrangements with various investment funds affiliated with Bluerock (in addition to unaffiliated third parties), which arrangements were not the result of arm’s-length negotiations of the type normally conducted between unrelated co-venturers, and which could result in a disproportionate benefit to affiliates of Bluerock;

Competition for the time and services of Bluerock personnel that work for us and our affiliates under the Administrative Services Agreement; and

Determinations of rental expense sharing between Bluerock and us under the Leasehold Cost-Sharing Agreement.

Any of these and other conflicts of interest could have a material adverse effect on the returns on our investments, our ability to make distributions to stockholders and the trading price of our stock.

Table of Contents

The ownership by our executive officers, of a significant portion of the outstanding shares of our common stock on a fully diluted basis could allow our executive officers to exert significant influence over our Company in a manner that may not be in the best interests of our other stockholders.

As of March 7, 2022, our executive officers beneficially own approximately 9.1% of our outstanding Class A common stock and Class C common stock on a fully diluted basis. As a result of our executive officers’ significant ownership in our Company, our executive officers will have significant influence over our affairs and could exercise such influence in a manner that is not in the best interests of our other stockholders, including with respect to matters submitted to our stockholders for approval such as the election of directors and any merger, consolidation or sale of all or substantially all of our assets. Our executive officers may have interests that differ from our other stockholders, and may accordingly vote in ways that may not be consistent with the interests of those other stockholders.

Certain of our executive officers have interests that may conflict with the interests of stockholders.

Messrs. Kamfar, MacDonald, Ruddy, Vohs, DiFranco and Konig are also affiliated with or are executive and/or senior officers of Bluerock and their affiliates. These individuals may have personal and professional interests that conflict with the interests of our stockholders with respect to business decisions affecting us and our Operating Partnership. As a result, the effect of these conflicts of interest on these individuals may influence their decisions affecting the negotiation and consummation of the transactions whereby we acquire apartment properties in the future from Bluerock or its affiliates, or in the allocation of investment opportunities to us by Bluerock or its affiliates.

Messrs. Kamfar, MacDonald, Ruddy, Vohs, DiFranco and Konig will have competing demands on their time and attention.

Messrs. Kamfar, MacDonald, Ruddy, Vohs, DiFranco and Konig have competing demands on their respective time and attention, principally with respect to the provision of services to certain outside entities affiliated with Bluerock. Such competing demands are not expected to be different from those that existed prior to the Internalization, but there is no assurance those demands will not increase and may result in these individuals devoting time to such outside entities in a manner that could adversely affect our business. Under their respective employment or services agreements (as applicable), Mr. Kamfar and certain of our other executive officers are permitted to devote time to certain outside activities, so long as those duties and activities do not unreasonably interfere with the performance of their respective duties to us.

If we acquire direct or indirect interests in properties from a Bluerock Fund with which we have joint ventured in a development deal, the price may be higher than we would pay if the transaction were the result of arm’s-length negotiations.

We are a party to certain development joint ventures with the Bluerock Funds, among other third parties, and under the terms of such joint ventures, we may, from time to time, seek to acquire the minority interest held by such Bluerock Fund. The prices we pay for such interests will not be the subject of arm’s-length negotiations, which means that the acquisitions may be on terms less favorable to us than those negotiated in an arm’s-length transaction. We may pay more for such interests than we would have in an arm’s-length transaction, which would reduce our cash available for investment in other properties or distribution to our stockholders.

Legal counsel for us, Bluerock and some of our affiliates is the same law firm.

KVCF, PLC acts as legal counsel to us, Bluerock, Fund I and the Bluerock Funds, and some of our affiliates. KVCF, PLC is not acting as counsel for any specific group of stockholders or any potential investor. There is a possibility in the future that the interests of the various parties may become adverse and, under the Code of Professional Responsibility of the legal profession, KVCF, PLC may be precluded from representing any one or all of such parties. If any situation arises in which our interests appear to be in conflict with those of our affiliates, additional counsel may be retained by one or more of the parties to assure that their interests are adequately protected. Moreover, should such a conflict not be readily apparent, KVCF, PLC may inadvertently act in derogation of the interest of parties which could adversely affect us, and our ability to meet our investment objectives and, therefore, our stockholders.

Table of Contents

We have entered into joint venture investments with affiliates of Bluerock and may continue to do so in the future.

As of December 31, 2021, twenty of our investments in equity interests in real property have been made through joint venture arrangements with affiliates of Bluerock, as well as unaffiliated third parties. While we have no current expectation of investing in additional development projects with affiliates of Bluerock in the future, in the event such opportunities arise that we determine to be in the best interest of our stockholders, it is likely that we will work together with such Bluerock affiliates to apportion the investments among us and such other programs in accordance with the investment objectives of the various programs, with our Company initially taking a senior or preferred capital position to such affiliates in the development project and having the right to elect into common ownership with such programs under certain conditions. The negotiation of such investments will not be at arm’s-length and conflicts of interest will arise in the process. We cannot assure you that we will be as successful as we otherwise would be if we enter into joint venture arrangements with programs sponsored by Bluerock or with affiliates of Bluerock. It is possible that we could pay more for an asset in this type of transaction than we would pay in an arm’s-length transaction with an unaffiliated third party.

In addition, an affiliated co-venturer may have economic or business interests or goals that are or may become inconsistent with our business interests or goals. Since Bluerock and its affiliates have an interest in us and control any affiliated co-venturer, agreements and transactions between the co-venturers with respect to any such joint venture do not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers.

Risks Related To Debt Financing

We have used and may continue to use mortgage and other debt financing to acquire properties or interests in properties and otherwise incur other indebtedness, which increases our expenses and could subject us to the risk of losing properties in foreclosure if our cash flow is insufficient to make loan payments.

We are permitted to acquire real properties and other real estate-related investments, including entity acquisitions, by assuming either existing financing secured by the asset or by borrowing new funds. In addition, we may incur or increase our mortgage debt by obtaining loans secured by some or all of our assets to obtain funds to acquire additional investments or to pay distributions to our stockholders. We also may borrow funds if necessary to satisfy the requirement that we distribute at least 90% of our annual “REIT taxable income,” or otherwise as is necessary or advisable to assure that we maintain our qualification as a REIT for federal income tax purposes.

There is no limit on the amount we may invest in any single property or other asset or on the amount we can borrow to purchase any individual property or other investment. If we mortgage a property and have insufficient cash flow to service the debt, we risk an event of default which may result in our lenders foreclosing on the properties securing the mortgage.

If we cannot repay or refinance loans incurred to purchase our properties, or interests therein, then we may lose our interests in the properties secured by the loans we are unable to repay or refinance.

We may be adversely affected by changes in LIBOR reporting practices, the method in which LIBOR is determined, the elimination of LIBOR or the use of alternative reference rates.

As of December 31, 2021, we had approximately $217.4 million of mortgages payable and revolving credit facilities outstanding that are indexed to the London Interbank Offered Rate (“LIBOR”). In July 2017, the Financial Conduct Authority of the U.K. (the “FCA”), the United Kingdom regulator that regulates LIBOR, announced its intention to phase out LIBOR rates by the end of 2021. The FCA has statutory powers to require panel banks to contribute to LIBOR where necessary. The administrator for LIBOR announced on March 5, 2021 that it would permanently cease to publish most LIBOR settings beginning on January 1, 2022 and will cease to publish the overnight, one-month, three-month, six-month and 12-month U.S. dollar LIBOR settings on July 1, 2023.  Accordingly, the FCA has stated that is does not intend to persuade or compel banks to submit to LIBOR after such respective dates. Until such time, however, FCA panel banks have agreed to continue to support LIBOR. In October 2021, the federal bank regulatory agencies issued a Joint Statement on Managing the LIBOR Transition. In that guidance, the agencies offered their regulatory expectations and outlined potential supervisory and enforcement consequences for banks that fail to adequately plan for and implement the transition away from LIBOR. The failure to properly transition away from LIBOR may result in increased supervisory scrutiny.

Table of Contents

The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee (“ARRC”), a steering committee comprised of large U.S. financial institutions, has proposed replacing U.S. dollar LIBOR with a new index calculated by short-term repurchase agreements — the Secured Overnight Financing Rate (“SOFR”). Although there have been certain issuances utilizing SOFR, it is unknown at this time whether these or other alternative reference rates will attain market acceptance as replacements for LIBOR, and there is currently no definitive information regarding the future utilization of LIBOR or of any particular replacement rate. Such developments and any other legal or regulatory changes in the method by which LIBOR is determined or the transition from LIBOR to a successor benchmark may result in, among other things, a sudden or prolonged increase or decrease in LIBOR, a delay in the publication of LIBOR, and changes in the rules or methodologies in LIBOR, which may discourage market participants from continuing to administer or to participate in LIBOR’s determination and could result in LIBOR no longer being determined and published. If a published U.S. dollar LIBOR rate is no longer available, the interest rates on our mortgages payable and revolving credit facilities that are indexed to LIBOR will be determined using various alternative methods, any of which may result in interest obligations which are more than or do not otherwise correlate over time with the payments that would have been made on such debt if U.S. dollar LIBOR was available in its current form. Further, the same costs and risks that may lead to the unavailability of U.S. dollar LIBOR may make one or more of the alternative methods impossible or impracticable to determine. Any of these proposals or consequences could have a material adverse effect on our financing costs, and as a result, our financial condition, operating results and cash flows.

High levels of debt or increases in interest rates could increase the amount of our loan payments, which could reduce the cash available for distribution to stockholders.

Our policies do not limit us from incurring debt. For purposes of calculating our leverage, we assume full consolidation of all of our real estate investments, whether or not they would be consolidated under GAAP, include assets we have classified as held for sale, and include any joint venture level indebtedness in our total indebtedness.

Higher debt levels cause us to incur higher interest charges, resulting in higher debt service payments, and may be accompanied by restrictive covenants. Interest we pay reduces cash available for distribution to stockholders. Additionally, with respect to our variable rate debt, increases in interest rates increase our interest costs, which reduces our cash flow and our ability to make distributions to you. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments in properties at times which may not permit realization of the maximum return on such investments and could result in a loss. In addition, if we are unable to service our debt payments, our lenders may foreclose on our interests in the real property that secures the loans we have entered into.

High mortgage rates may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our cash flow from operations and the amount of cash distributions we can make.

To qualify as a REIT, we will be required to distribute at least 90% of our annual taxable income (excluding net capital gains) to our stockholders in each taxable year, and thus our ability to retain internally generated cash is limited. Accordingly, our ability to acquire properties or to make capital improvements to or remodel properties will depend on our ability to obtain debt or equity financing from third parties or the sellers of properties. If mortgage debt is unavailable at reasonable rates, we may not be able to finance the purchase of properties. If we place mortgage debt on properties, we run the risk of being unable to refinance the properties when the debt becomes due or of being unable to refinance on favorable terms. If interest rates are higher when we refinance the properties, our income could be reduced. We may be unable to refinance properties. If any of these events occurs, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to you and may hinder our ability to raise capital by issuing more stock or borrowing more money.

Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to you.

When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage the property, discontinue insurance coverage, or impose other limitations. These or other limitations may limit our flexibility and prevent us from achieving our operating plans.

Table of Contents

If mortgage debt is unavailable at reasonable rates, it may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our cash flows from operations and the amount of cash distributions we can make.

If we are unable to borrow monies on terms and conditions that we find acceptable, we likely will have to reduce the number of properties we can purchase, and the return on the properties we do purchase may be lower. If we place mortgage debt on properties, we run the risk of being unable to refinance the properties when the debt becomes due or of being unable to refinance on favorable terms. If interest rates are higher when we refinance the properties, our income could be reduced. As such, we may find it difficult, costly or impossible to refinance indebtedness which is maturing. If any of these events occur, our interest cost would increase as a result, which would reduce our cash flow. This, in turn, could reduce cash available for distribution to our stockholders and may hinder our ability to raise capital by issuing more stock or borrowing more money. If we are unable to refinance maturing indebtedness with respect to a particular property and are unable to pay the same, then the lender may foreclose on such property.

Financial and real estate market disruptions could adversely affect the multifamily property sector’s ability to obtain financing from Freddie Mac and Fannie Mae, which could adversely impact us.

Fannie Mae and Freddie Mac are major sources of financing for the multifamily sector and both have historically experienced losses due to credit-related expenses, securities impairments and fair value losses. If new U.S. government regulations (i) heighten Fannie Mae’s and Freddie Mac’s underwriting standards, (ii) adversely affect interest rates, or (iii) reduce the amount of capital they can make available to the multifamily sector, it could reduce or remove entirely a vital resource for multifamily financing. Any potential reduction in loans, guarantees and credit-enhancement arrangements from Fannie Mae and Freddie Mac could jeopardize the effectiveness of the multifamily sector’s available financing and decrease the amount of available liquidity and credit that could be used to acquire and diversify our portfolio of multifamily assets, and thus could materially adversely affect our financial condition, results of operations and ability to make distributions to our investors.

Volatility in and regulation of the commercial mortgage-backed securities market has limited and may continue to impact the pricing of secured debt.

As a result of the past crisis in the residential mortgage-backed securities markets, the most recent global recession and some occasional market concerns over its ability to refinance or repay existing commercial mortgage-backed securities as they come due, liquidity previously provided by the commercial mortgage-backed securities and collateralized debt obligations markets has significantly decreased. In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act imposes significant new regulations related to the mortgage backed securities industry and market participants, which has contributed to uncertainty in the market. The volatility in the commercial mortgage-backed securities market could result in the following adverse effects on our incurrence of secured debt, which could have a materially negative impact on our financial condition, results of operations, cash flow and cash available for distribution:

higher loan spreads;

tighter loan covenants;

reduced loan to value ratios and resulting borrower proceeds; and

higher amortization and reserve requirements.

Some of our mortgage loans may have “due on sale” provisions, which may impact the manner in which we acquire, sell and/or finance our properties.

We may obtain financing with “due-on-sale” and/or “due-on-encumbrance” clauses when financing our properties. Due-on-sale clauses in mortgages allow a mortgage lender to demand full repayment of the mortgage loan if the borrower sells the mortgaged property. Similarly, due-on-encumbrance clauses allow a mortgage lender to demand full repayment if the borrower uses the real estate securing the mortgage loan as security for another loan. In such event, we may be required to sell our properties on an all-cash basis, which may make it more difficult to sell the property or reduce the selling price.

Table of Contents

Lenders may be able to recover against our other properties under our mortgage loans.

In financing our property acquisitions, we will seek to obtain secured nonrecourse loans. However, only recourse financing may be available, in which event, in addition to the property securing the loan, the lender would have the ability to look to our other assets for satisfaction of the debt if the proceeds from the sale or other disposition of the property securing the loan are insufficient to fully repay it. Also, in order to facilitate the sale of a property, we may allow the buyer to purchase the property subject to an existing loan whereby we remain responsible for the debt.

If we are required to make payments under any “bad boy” carve-out guaranties that we may provide in connection with certain mortgages and related loans, our business and financial results could be materially adversely affected.

In obtaining certain nonrecourse loans, we may provide standard carve-out guaranties. These guaranties are only applicable if and when the borrower directly, or indirectly through agreement with an affiliate, joint venture partner or other third party, voluntarily files a bankruptcy or similar liquidation or reorganization action or takes other actions that are fraudulent or restricted (commonly referred to as “bad boy” guaranties). Although we believe that “bad boy” carve-out guaranties are not guaranties of payment in the event of foreclosure or other actions of the foreclosing lender that are beyond the borrower’s control, some lenders in the real estate industry have recently sought to make claims for payment under such guaranties. In the event such a claim were made against us under a “bad boy” carve-out guaranty following a foreclosure, and such claim were successful, our business and financial results could be materially adversely affected.

Interest-only indebtedness may increase our risk of default and ultimately may reduce our funds available for distribution to our stockholders.

We may finance our property acquisitions using interest-only mortgage indebtedness. During the interest-only period, the amount of each scheduled payment will be less than that of a traditional amortizing mortgage loan. The principal balance of the mortgage loan will not be reduced (except in the case of prepayments) because there are no scheduled monthly payments of principal during this period. After the interest-only period, we will be required either to make scheduled payments of amortized principal and interest or to make a lump-sum or “balloon” payment at maturity. These required principal or balloon payments will increase the amount of our scheduled payments and may increase our risk of default under the related mortgage loan. If the mortgage loan has an adjustable interest rate, the amount of our scheduled payments also may increase at a time of rising interest rates. Increased payments and substantial principal or balloon maturity payments will reduce the funds available for distribution to our stockholders because cash otherwise available for distribution will be required to pay principal and interest associated with these mortgage loans.

To hedge against interest rate fluctuations, we may use derivative financial instruments that may be costly and ineffective, may reduce the overall returns on your investment, and may expose us to the credit risk of counterparties.

To the extent consistent with maintaining our qualification as a REIT, we may use derivative financial instruments to hedge exposures to interest rate fluctuations on loans secured by our assets and investments in collateralized mortgage-backed securities. Derivative instruments may include interest rate swap contracts, interest rate cap or floor contracts, futures or forward contracts, options or repurchase agreements. Our actual hedging decisions will be determined in light of the facts and circumstances existing at the time of the hedge and may differ from time to time.

Table of Contents

To the extent that we use derivative financial instruments to hedge against interest rate fluctuations, we will be exposed to financing, basis risk and legal enforceability risks. In this context, credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. Basis risk occurs when the index upon which the contract is based is more or less variable than the index upon which the hedged asset or liability is based, thereby making the hedge less effective. Finally, legal enforceability risks encompass general contractual risks, including the risk that the counterparty will breach the terms of, or fail to perform its obligations under, the derivative contract. If we are unable to manage these risks effectively, our results of operations, financial condition and ability to make distributions to you will be adversely affected.

Complying with REIT requirements may limit our ability to hedge risk effectively.

We must satisfy two gross income tests annually to maintain our qualification as a REIT. First, at least 75% of our gross income for each taxable year must consist of defined types of income that we derive, directly or indirectly, from investments relating to real property or mortgages on real property or qualified temporary investment income (the “75% Gross Income Test”). Second, in general, at least 95% of our gross income for each taxable year must consist of income that is qualifying income for purposes of the 75% Gross Income Test, other types of interest and dividends, gain from the sale or disposition of shares or securities, or any combination of these (the “95% Gross Income Test”).

These and other REIT provisions of the Code may limit our ability to hedge the risks inherent to our operations. From time to time, we may enter into hedging transactions with respect to one or more of our assets or liabilities. Our hedging transactions may include entering into interest rate swaps, caps and floors, options to purchase these items, and futures and forward contracts. Any income or gain derived by us from transactions that hedge certain risks, such as the risk of changes in interest rates, will not be treated as gross income for purposes of either the 75% Gross Income Test or the 95% Gross Income Test, unless specific requirements are met. Such requirements include that the hedging transaction be properly identified within prescribed time periods and that the transaction either (1) hedges risks associated with indebtedness issued by us that is incurred to acquire or carry real estate assets or (2) manages the risks of currency fluctuations with respect to income or gain that qualifies under the 75% Gross Income Test or 95% Gross Income Test (or assets that generate such income). To the extent that we do not properly identify such transactions as hedges, hedge with other types of financial instruments, or hedge other types of indebtedness, the income from those transactions is not likely to be treated as qualifying income for purposes of the 75% Gross Income Test and the 95% Gross Income Test. As a result of these rules, we may have to limit the use of hedging techniques that might otherwise be advantageous, which could result in greater risks associated with interest rate or other changes than we would otherwise incur.

You may not receive any profits resulting from the sale of one of our properties, or receive such profits in a timely manner, because we may provide financing for the purchaser of such property.

If we liquidate our Company, you may experience a delay before receiving your share of the proceeds of such liquidation. In a forced or voluntary liquidation, we may sell our properties either subject to or upon the assumption of any then outstanding mortgage debt or, alternatively, may provide financing to purchasers. We may take a purchase money obligation secured by a mortgage as partial payment. We do not have any limitations or restrictions on our taking such purchase money obligations. To the extent we receive promissory notes or other property instead of cash from sales, such proceeds, other than any interest payable on those proceeds, will not be included in net sale proceeds until and to the extent the promissory notes or other property are actually paid, sold, refinanced or otherwise disposed of. In certain cases, we may receive initial down payments in the year of sale in an amount less than the selling price and subsequent payments may be spread over a number of years. In such cases, you may experience a delay in the distribution of the proceeds of a sale until such time.

Table of Contents

Risks Related to Offerings of our Class A Common Stock

The market price and trading volume of our Class A common stock has been volatile at times following the initial public offering (the “IPO”), and these trends may continue following an offering, which may adversely impact the market for shares of our Class A common stock and make it difficult for purchasers to sell their shares.

Prior to the IPO, there was no active market for our common stock. Although our Class A common stock is listed on the NYSE American, the stock markets, including the NYSE American on which our Class A common stock is listed, have from time to time experienced significant price and volume fluctuations. Our Class A common stock has frequently traded below the IPO price since the completion of the IPO. As a result, the market price of shares of our Class A common stock may be similarly volatile, and holders of shares of our Class A common stock may from time to time experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. The offering price for shares of our Class A common stock is expected to be determined by negotiation between us and the underwriters. Purchasers may not be able to sell their shares of Class A common stock at or above the offering price.

The price of shares of our Class A common stock could be subject to wide fluctuations in response to a number of factors, including those listed in this “Risk Factors” section and others such as:

the impacts of the COVID-19 pandemic, or the future outbreak of other highly infectious or contagious diseases, on our financial condition, results of operations, cash flows and performances;

our operating performance and the performance of other similar companies;

actual or anticipated differences in our quarterly operating results;

changes in our revenues or earnings estimates or recommendations by securities analysts;

publication of research reports about us, the apartment or single-family residential real estate sector, apartment tenants or the real estate industry;

increases in market interest rates, which may lead investors to demand a higher distribution yield for shares of our Class A common stock, and would result in increased interest expenses on our debt;

the current state of the credit and capital markets, and our ability and the ability of our tenants to obtain financing;

additions and departures of key personnel;

increased competition in the multifamily or single-family residential real estate business in our target markets;

the passage of legislation or other regulatory developments that adversely affect us or our industry;

speculation in the press or investment community;

equity issuances by us (including the issuances of OP and LTIP Units), or common stock resales by our stockholders, or the perception that such issuances or resales may occur;

actual, potential or perceived accounting problems;

changes in accounting principles;

failure to qualify as a REIT;

terrorist acts, natural or man-made disasters or threatened or actual armed conflicts; and

Table of Contents

general market and local, regional and national economic conditions, particularly in our target markets, including factors unrelated to our performance.

No assurance can be given that the market price of shares of our Class A common stock will not fluctuate or decline significantly in the future or that holders of shares of our Class A common stock will be able to sell their shares when desired on favorable terms, or at all. From time to time in the past, securities class action litigation has been instituted against companies following periods of extreme volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources.

In addition, our charter contains restrictions on the ownership and transfer of our stock, and these restrictions may inhibit your ability to sell your stock. Our charter contains a restriction on ownership of our shares that generally prevents any one person from owning more than 9.8% in value of our outstanding shares of stock or more than 9.8% in value or in number of shares, whichever is more restrictive, of our outstanding shares of common stock, unless otherwise excepted (prospectively or retroactively) by our Board.

Sales of shares of our Class A common stock, or the perception that such sales will occur, may have adverse effects on our share price.

We cannot predict the effect, if any, of future sales of Class A common stock, or the availability of shares for future sales, on the market price of our Class A common stock. Sales of substantial amounts of Class A common stock, including shares of Class A common stock issued in an offering, issuable upon the exchange of OP Units, the sale of shares of Class A common stock held by our current stockholders, and the sale of any shares we may issue under our incentive plans, or the perception that these sales could occur, may adversely affect prevailing market prices for our Class A common stock. We may be required to conduct additional offerings to raise more funds. These offerings or the perception of a need for offerings may affect the market prices for our Class A common stock.

An increase in market interest rates may have an adverse effect on the market price of our Class A common stock.

One of the factors that investors may consider in deciding whether to buy or sell our Class A common stock is our distribution yield, which is our distribution rate as a percentage of our share price, relative to market interest rates. If market interest rates increase, prospective investors may desire a higher distribution yield on our Class A common stock or may seek securities paying higher dividends or interest. The market price of our Class A common stock likely will be based primarily on the earnings that we derive from rental income with respect to our investments and our related distributions to stockholders, and not from the underlying appraised value of the properties themselves. As a result, interest rate fluctuations and capital market conditions are likely to affect the market price of our Class A common stock, and such effects could be significant. For example, if interest rates rise without an increase in our distribution rate, the market price of our Class A common stock could decrease because potential investors may require a higher distribution yield on our Class A common stock as market rates on interest-bearing securities, such as bonds, rise.

We have paid and may continue to pay distributions from offering proceeds, borrowings or the sale of assets to the extent our cash flow from operations or earnings are not sufficient to fund declared distributions. Rates of distribution to you will not necessarily be indicative of our operating results. If we make distributions from sources other than our cash flows from operations or earnings, we will have fewer funds available for the acquisition of properties and your overall return may be reduced.

Our organizational documents permit us to make distributions from any source, including the net proceeds from an offering. There is no limit on the amount of offering proceeds we may use to pay distributions. We have funded and may continue to fund distributions from the net proceeds of our offerings, borrowings and the sale of assets to the extent distributions exceed our earnings or cash flows from operations. While our policy is generally to pay distributions from cash flow from operations, our distributions through December 31, 2021 have been paid from proceeds from our underwritten and continuous offerings and at the market (“ATM”) offerings, and sales of assets, and may in the future be paid from additional sources, such as from borrowings. To the extent we fund distributions from sources other than cash flow from operations, such distributions may constitute a return of capital and we will have fewer funds available for the acquisition of properties and your overall return may be reduced. Further, to the extent distributions exceed our earnings and profits, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder will be required to recognize capital gain.

Table of Contents

We have issued Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock, which, along with future issuances of debt securities and preferred equity, ranks senior to our Class A common stock in priority of dividend payment and upon liquidation, dissolution and winding up, and may adversely affect the trading price of our Class A common stock.

As of December 31, 2021, we have issued and outstanding 359,197 shares of Series B Preferred Stock, 2,295,845 shares of Series C Preferred Stock, 2,774,338 shares of Series D Preferred Stock and 28,272,134 shares of Series T Preferred Stock, all of which are senior to our common stock with respect to priority of dividend payments and rights upon liquidation, dissolution or winding up.  The Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock may limit our ability to make distributions to holders of our Class A common stock. In the future, we may issue debt or additional preferred equity securities or incur other borrowings. Upon our liquidation, holders of our debt securities, other loans and Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock and additional preferred stock, if any, will receive a distribution of our available assets before common stockholders. Any additional preferred stock, if issued, likely will also have a preference on periodic distribution payments, which could eliminate or otherwise limit our ability to make distributions to holders of our Class A common stock and Class C common stock. Holders of shares of our Class A common stock bear the risk that our future issuances of debt or equity securities, including Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock or our incurrence of other borrowings may negatively affect the trading price of our Class A common stock.

We operate as a holding company dependent upon the assets and operations of our subsidiaries, and because of our structure, we may not be able to generate the funds necessary to make dividend payments on our common stock.

We generally operate as a holding company that conducts its businesses primarily through our Operating Partnership, which in turn is a holding company conducting its business through its subsidiaries. These subsidiaries conduct all of our operations and are our only source of income. Accordingly, we are dependent on cash flows and payments of funds to us by our subsidiaries as dividends, distributions, loans, advances, leases or other payments from our subsidiaries to generate the funds necessary to make dividend payments on our common stock. Our subsidiaries’ ability to pay such dividends and/or make such loans, advances, leases or other payments may be restricted by, among other things, applicable laws and regulations, current and future debt agreements and management agreements into which our subsidiaries may enter, which may impair our ability to make cash payments on our common stock. In addition, such agreements may prohibit or limit the ability of our subsidiaries to transfer any of their property or assets to us, any of our other subsidiaries or to third parties. Our future indebtedness or our subsidiaries’ future indebtedness may also include restrictions with similar effects.

In addition, because we are a holding company, stockholders’ claims will be structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed money) of our Operating Partnership and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation or reorganization, claims of our stockholders will be satisfied only after all of our and our Operating Partnership’s and its subsidiaries’ liabilities and obligations have been paid in full.

Your percentage of ownership may be diluted if we issue new shares of stock.

Stockholders have no rights to buy additional shares of our stock in the event we issue new shares of stock. We may issue common stock, convertible debt or preferred stock pursuant to a subsequent public offering or a private placement, to sellers of properties we directly or indirectly acquire instead of, or in addition to, cash consideration, or to Bluerock in payment of some or all of the operating expense reimbursements that were earned by Bluerock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Investors purchasing shares of our Class A common stock in an offering who do not participate in any future stock issuances will experience dilution in the percentage of the issued and outstanding shares of Class A common stock they own.

Table of Contents

Redemption of our Series B Preferred Stock, Series C Preferred Stock or Series T Preferred Stock for shares of our Class A common stock will dilute the ownership interest of existing holders of our Class A common stock, including stockholders whose shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series T Preferred Stock were previously redeemed for shares of our Class A common stock, and stockholders whose shares of Series B Preferred Stock or Series T Preferred Stock were previously converted into shares of our Class A common stock or whose Warrants were previously exercised for shares of our Class A common stock.

Commencing on the date of original issuance of the shares of Series B Preferred Stock, the holders of shares of Series B Preferred Stock may require us to redeem such shares at a redemption price equal to their stated value (initially $1,000 per share), less a declining redemption fee (if applicable), plus an amount equal to any accrued but unpaid dividends. Further, commencing on July 19, 2023, the holders of shares of our Series C Preferred Stock have the option to cause us to redeem their shares at a redemption price of $25.00 per share, plus an amount equal to all accrued but unpaid dividends. In addition, commencing on the date of original issuance of the shares of Series T Preferred Stock, the holders of shares of Series T Preferred Stock may require us to redeem such shares at a redemption price equal to their stated value (initially $25.00 per share), less a declining redemption fee (if applicable), plus an amount equal to any accrued but unpaid dividends. The redemption price for any such redemptions of shares of Series B Preferred Stock, Series C Preferred Stock or Series T Preferred Stock is payable, in our sole discretion, in cash or in equal value of shares of our Class A common stock, at our option. The redemption of our Series B Preferred Stock, our Series C Preferred Stock or our Series T Preferred Stock for shares of our Class A common stock may result in the dilution of some or all of the ownership interests of existing stockholders, including stockholders whose shares of Series A Preferred Stock, Series B Preferred Stock Series C Preferred Stock or Series T Preferred Stock were previously redeemed for shares of our Class A common stock, and stockholders whose shares of Series B Preferred Stock or Series T Preferred Stock were previously converted into shares of our Class A common stock or whose Warrants were previously exercised for shares of our Class A common stock. Any sales in the public market of our Class A common stock issuable upon any such redemption could adversely affect prevailing market prices of our Class A common stock. In addition, any redemption of our Series B Preferred Stock, Series C Preferred Stock or Series T Preferred Stock for shares of our Class A common stock could depress the price of our Class A common stock.

Our authorized but unissued shares of common and preferred stock may prevent a change in our control.

Our charter authorizes us to issue additional authorized but unissued shares of common or preferred stock. In addition, our Board may, without stockholder approval, amend our charter from time to time to increase or decrease the aggregate number of shares of our stock or the number of shares of stock of any class or series that we have authority to issue and classify or reclassify any unissued shares of common or preferred stock into other classes or series of stock and set the preferences, rights and other terms of the classified or reclassified shares. As a result, our Board may establish a series of common or preferred stock that could delay or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.

Table of Contents

Risks Related to Offerings of our Series B Preferred Stock, our Series C Preferred Stock, our Series D Preferred Stock and/or our Series T Preferred Stock

Because we conduct substantially all of our operations through our Operating Partnership, our ability to pay dividends on any of our Series  B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock depends almost entirely on the distributions we receive from our Operating Partnership. We may not be able to pay dividends regularly on our Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series T Preferred Stock.

We may not be able to pay dividends on a regular quarterly basis in the future on any of our Series C Preferred Stock or Series D Preferred Stock, or on a monthly basis in the future on our Series B Preferred Stock or Series T Preferred Stock. We have contributed, and intend to contribute in the future, the entire net proceeds from the offerings of all such series of preferred stock to our Operating Partnership in exchange for Series B Preferred Units, Series C Preferred Units, Series D Preferred Units and Series T Preferred Units (as applicable) that have substantially the same economic terms as the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and Series T Preferred Stock (respectively). Because we conduct substantially all of our operations through our Operating Partnership, our ability to pay dividends on the Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock will depend almost entirely on payments and distributions we receive on our interests in our Operating Partnership. If our Operating Partnership fails to operate profitably and to generate sufficient cash from operations (and the operations of its subsidiaries), we may not be able to pay dividends on the Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series T Preferred Stock. Furthermore, any new shares of preferred stock on parity with any such series of preferred stock will substantially increase the cash required to continue to pay cash dividends at stated levels. Any common stock or preferred stock that may be issued in the future to finance acquisitions, upon exercise of stock options or otherwise, would have a similar effect.

Your interests in our Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and/or Series T Preferred Stock could be subordinated and/or diluted by the incurrence of additional debt, the issuance of additional shares of preferred stock, including additional shares of any or all of the foregoing series of preferred stock, and by other transactions.

As of December 31, 2021, our total long-term mortgage indebtedness was approximately $1,366.0 million and our credit facilities were undrawn, and we may incur significant additional debt in the future. Each of the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and the Series T Preferred Stock is subordinate to all of our existing and future debt and liabilities and those of our subsidiaries. Our future debt may include restrictions on our ability to pay dividends to preferred stockholders in the event of a default under the debt facilities or under other circumstances. In addition, our charter currently authorizes the issuance of up to 250,000,000 shares of preferred stock in one or more classes or series, and as of December 31, 2021, we have issued and outstanding 359,197 shares of Series B Preferred Stock, 2,295,845 shares of Series C Preferred Stock, 2,774,338 shares of Series D Preferred Stock and 28,272,134 shares of Series T Preferred Stock. The issuance of additional preferred stock on parity with or senior to any or all of the foregoing series of preferred stock would dilute the interests of the holders of shares of preferred stock of the applicable series, and any issuance of preferred stock senior to the Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series T Preferred Stock or any issuance of additional indebtedness, could affect our ability to pay dividends on, redeem or pay the liquidation preference on any or all of the foregoing series of preferred stock.  We may issue preferred stock on parity with any or all of the Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and/or Series T Preferred Stock without the consent of the holders of shares of preferred stock of the applicable series. Other than the Asset Coverage Ratio (as defined below) with respect to the Series C Preferred Stock and the right of holders to cause us to redeem the Series B Preferred Stock, Series C Preferred Stock or Series T Preferred Stock or to convert the Series D Preferred Stock, upon a Change of Control/Delisting (as defined below), none of the provisions relating to any of the foregoing series of preferred stock relate to or limit our indebtedness or afford the holders of shares thereof protection in the event of a highly leveraged or other transaction, including a merger or the sale, lease or conveyance of all or substantially all our assets or business, that might adversely affect the holders of such shares.

Table of Contents

In the event a holder of our Series B Preferred Stock exercises their redemption option, a holder of our Series C Preferred Stock exercises a Redemption at Option of Holder on or after July 19, 2023, or a holder of Series T Preferred Stock exercises their redemption option we may redeem such shares of Series B Preferred Stock, Series C Preferred Stock or Series T Preferred Stock, as applicable, either for cash, or for shares of our Class A common stock, or any combination thereof, in our sole discretion.

If we choose to so redeem for Class A common stock, the holder will receive shares of our Class A common stock and therefore be subject to the risks of ownership thereof. See “--- Risks Related to an Offering of our Class A Common Stock.” Ownership of shares of our Series B Preferred Stock, shares of our Series C Preferred Stock or shares of Series T Preferred Stock will not give you the rights of holders of our common stock. Until and unless you receive shares of our Class A common stock upon redemption, you will have only those rights applicable to holders of our Series B Preferred Stock, Series C Preferred Stock or Series T Preferred Stock (as applicable).

The Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and the Series T Preferred Stock have not been rated.

We have not sought to obtain a rating for the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock or the Series T Preferred Stock. No assurance can be given, however, that one or more rating agencies might not independently determine to issue such ratings or that such a rating, if issued, would not adversely affect the market price of the applicable series of preferred stock. In addition, we may elect in the future to obtain a rating of the Series  B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and/or Series T Preferred Stock, which could adversely impact the market price of the applicable series. Ratings only reflect the views of the rating agency or agencies issuing the ratings and such ratings could be revised downward, placed on negative outlook or withdrawn entirely at the discretion of the issuing rating agency if in its judgment circumstances so warrant. While ratings do not reflect market prices or the suitability of a security for a particular investor, such downward revision or withdrawal of a rating could have an adverse effect on the market price of the Series  B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock or the Series T Preferred Stock. It is also possible that the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and/or Series T Preferred Stock will never be rated.

Dividend payments on the Series B Preferred Stock, on the Series C Preferred Stock, on the Series D Preferred Stock and on the Series T Preferred Stock are not guaranteed.

Although dividends on each of the Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock are cumulative, our Board must approve the actual payment of such distributions. Our Board can elect at any time or from time to time, and for an indefinite duration, not to pay any or all accrued distributions. Our Board could do so for any reason, and may be prohibited from doing so in the following instances:

poor historical or projected cash flows;

the need to make payments on our indebtedness;

concluding that payment of distributions on any or all such series of preferred stock would cause us to breach the terms of any indebtedness or other instrument or agreement; or

determining that the payment of distributions would violate applicable law regarding unlawful distributions to stockholders.

Table of Contents

We intend to use the net proceeds from any offerings of the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and/or the Series T Preferred Stock to fund future investments and for other general corporate and working capital purposes, but any such offerings will not be conditioned upon the closing of pending property investments and we will have broad discretion to determine alternative uses of proceeds.

We intend to use a portion of the net proceeds from any offerings of our Series B Preferred Stock, our Series C Preferred Stock, our Series D Preferred Stock and/or our Series T Preferred Stock to fund future investments and for other general corporate and working capital purposes. However, the offerings will not be conditioned upon the closing of definitive agreements to acquire or invest in any properties. We will have broad discretion in the application of the net proceeds from any such offerings, and holders of our Series B Preferred Stock, our Series C Preferred Stock, our Series D Preferred Stock and our Series T Preferred Stock will not have the opportunity as part of their investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from any such offerings, their ultimate use may vary substantially from their currently intended use, and result in investments that are not accretive to our results from operations.

If we are required to make payments under any “bad boy” carve-out guaranties, recourse guaranties, and completion guaranties that we may provide in connection with certain mortgages and related loans in connection with an event that constitutes a Change of Control or Change of Control/Delisting, our business and financial results could be materially adversely affected.

In causing our subsidiaries to obtain certain nonrecourse loans, we may provide standard carve-out guaranties. These guaranties are generally only applicable if and when the borrower directly, or indirectly through agreement with an affiliate, joint venture partner or other third party, voluntarily files a bankruptcy or similar liquidation or reorganization action or takes other actions that are fraudulent or improper (commonly referred to as “bad boy” guaranties). We also may enter into recourse guaranties with respect to future mortgages, or provide credit support to development projects through completion guaranties, which also could increase risk of repayment. In some circumstances, pursuant to guarantees to which we are a party or that we may enter into in the future, our obligations pursuant to such “bad boy” carve-out guaranties and other guaranties may be triggered by a Change of Control or Change of Control/Delisting, because, among other things, such an event may result indirectly in a change of control of the applicable borrower. Because a Change of Control while any Series B Preferred Stock or Series T Preferred Stock is outstanding, or a Change of Control/Delisting while any Series C Preferred Stock is outstanding, also triggers a right of redemption for cash by the holders thereof, the effect of a Change of Control or Change of Control/Delisting could negatively impact our liquidity and overall financial condition, and could negatively impact the ability of holders of shares of our Series B Preferred Stock, Series C Preferred Stock or Series T Preferred Stock to receive dividends or other amounts on their shares of such Series B Preferred Stock, Series C Preferred Stock or Series T Preferred Stock.

There is a risk of delay in our redemption of the Series B Preferred Stock, Series C Preferred Stock or Series T Preferred Stock and we may fail to redeem such securities as required by their terms.

Substantially all of the investments we presently hold and the investments we expect to acquire in the future are, and will be, illiquid. The illiquidity of our investments may make it difficult for us to obtain cash quickly if a need arises. If we are unable to obtain sufficient liquidity prior to a redemption date, we may be forced to, among other things, engage in a partial redemption or to delay a required redemption. If this were to occur, the market price of shares of the Series B Preferred Stock, Series C Preferred Stock or Series T Preferred Stock might be adversely affected, and stockholders entitled to a redemption payment may not receive payment.

Table of Contents

The Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and the Series T Preferred Stock will bear a risk of early redemption by us.

We may voluntarily redeem some or all of the Series B Preferred Stock, for cash or equal value of shares of our Class A common stock, two years after the issuance date. In addition, we may voluntarily redeem some or all of the Series C Preferred Stock, solely for cash, on or after July 19, 2021.  Finally, we may voluntarily redeem some or all of the Series D Preferred Stock solely for cash, on or after October 13, 2021. We may also voluntarily redeem some or all of the Series T Preferred Stock, for cash or equal value of shares of our Class A common stock, two years after the issuance date. Any such redemptions may occur at a time that is unfavorable to holders of such preferred stock. As of December 31, 2021, the Company has initiated and consummated the redemption of a total of 173,865 shares of Series B Preferred Stock through the issuance of 16,540,204 shares of Class A common stock. We may have an incentive to voluntarily redeem additional shares of Series B Preferred Stock, and/or to voluntarily redeem shares of Series C Preferred Stock, Series D Preferred Stock or Series T Preferred Stock, if market conditions allow us to issue other preferred stock or debt securities at an interest or distribution rate that is lower than the distribution rate on the applicable series of preferred stock. Given the potential for early redemption of the Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock, holders of such shares may face an increased reinvestment risk, which is the risk that the return on an investment purchased with proceeds from the sale or redemption of the Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series T Preferred Stock may be lower than the return previously obtained from the investment in such shares.

Holders of Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and/or Series T Preferred Stock should not expect us to redeem all or any such shares on the date they first become redeemable or on any particular date after they become redeemable.

Except in limited circumstances related to our ability to qualify as a REIT, our compliance with our Asset Coverage Ratio, or a special optional redemption in connection with a Change of Control/Delisting, the Series C Preferred Stock may be redeemed by us at our option, either in whole or in part, only on or after July 19, 2021. Except in limited circumstances related to our ability to qualify as a REIT or a special optional redemption in connection with a Change of Control/Delisting, the Series B Preferred Stock or Series T Preferred Stock may be redeemed by us at our option, either in whole or in part, only on or after two years from the issuance date, and the Series D Preferred Stock may be redeemed by us at our option, either in whole or in part, only on or after October 13, 2021. Any decision we make at any time to propose a redemption of any such series of preferred stock will depend upon, among other things, our evaluation of our capital position and general market conditions at the time. It is likely that we would choose to exercise our optional redemption right only when prevailing interest rates have declined, which would adversely affect the ability of holders of shares of the applicable series of preferred stock to reinvest proceeds from the redemption in a comparable investment with an equal or greater yield to the yield on such series of preferred stock had their shares not been redeemed. In addition, there is no penalty or premium payable on redemption, and the market price of the shares of such series of preferred stock may not exceed the liquidation preference at the time the shares become redeemable for any reason.

Compliance with the Asset Coverage Ratio may result in our early redemption of your Series C Preferred Stock.

The terms of our Series C Preferred Stock require us to maintain asset coverage of at least 200% calculated by determining the percentage value of (1) our total assets plus accumulated depreciation minus our total liabilities and indebtedness as reported in our financial statements prepared in accordance with GAAP (exclusive of the book value of any Redeemable and Term Preferred Stock (as defined below)), over (2) the aggregate liquidation preference, plus an amount equal to all accrued and unpaid dividends, of our outstanding Series C Preferred Stock and any outstanding shares of term preferred stock or preferred stock providing for a fixed mandatory redemption date or maturity date (collectively referred to as “Redeemable and Term Preferred Stock”) on the last business day of any calendar quarter (the “Asset Coverage Ratio”).

If we are not in compliance with the Asset Coverage Ratio, we may redeem shares of Redeemable and Term Preferred Stock, which may include Series C Preferred Stock, including shares that will result in compliance with the Asset Coverage Ratio up to and including 285%. This could result in our ability to redeem a significant amount of the Series C Preferred Stock prior to July 19, 2021.

Table of Contents

We may not have sufficient funds to redeem the Series B Preferred Stock, Series C Preferred Stock and/or Series T Preferred Stock upon a Change of Control/Delisting.

A “Change of Control/Delisting” is when, after the original issuance of the Series  B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series T Preferred Stock any of the following has occurred and is continuing:

a “person” or “group” within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act”), other than our Company, its subsidiaries, and its and their employee benefit plans, has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of our common equity representing more than 50% of the total voting power of all outstanding shares of our common equity that are entitled to vote generally in the election of directors, with the exception of the formation of a holding company;

consummation of any share exchange, consolidation or merger of our Company or any other transaction or series of transactions pursuant to which our common stock will be converted into cash, securities or other property, other than any such transaction where the shares of our common stock outstanding immediately prior to such transaction constitute, or are converted into or exchanged for, a majority of the common stock of the surviving person or any direct or indirect parent company of the surviving person immediately after giving effect to such transaction;

any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of our Company and its subsidiaries, taken as a whole, to any person other than one of the Company’s subsidiaries;

our stockholders approve any plan or proposal for the liquidation or dissolution of our Company;

our Class A common stock ceases to be listed or quoted on a national securities exchange in the United States; or

at least a majority of our Board ceases to be constituted of directors who were either a member of our Board on October 21, 2015 (February 24, 2016 for Series B Preferred Stock, and November 13, 2019 for Series T Preferred Stock), or who became a member of our Board subsequent to that date and whose appointment, election or nomination for election by our stockholders was duly approved by a majority of the continuing directors on our Board at the time of such approval, either by a specific vote or by approval of the proxy statement issued by our Company on behalf of our Board in which such individual is named as nominee for director (each, a “Continuing Director”).

Upon the occurrence of a Change of Control/Delisting, unless we have exercised our right to redeem the Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series T Preferred Stock, each holder of Series B Preferred Stock, Series C Preferred Stock or Series T Preferred Stock will have the right to require us to redeem all or any part of such stockholder’s Series B Preferred Stock, Series C Preferred Stock or Series T Preferred Stock at a price equal to the liquidation preference per share, plus an amount equal to any accumulated and unpaid dividends up to and including the date of payment (and each holder of Series D Preferred Stock will have the right to require us to convert all or some of their Series D Preferred Stock into shares of our Class A common stock (or equivalent value of alternative consideration)). If we experience a Change of Control/Delisting, there can be no assurance that we would have sufficient financial resources available to satisfy our obligations to redeem the Series B Preferred Stock, Series C Preferred Stock or Series T Preferred Stock, and any guarantees or indebtedness that may be required to be repaid or repurchased as a result of such event. Our failure to redeem the Series B Preferred Stock, Series C Preferred Stock or Series T Preferred Stock could have material adverse consequences for us and the holders of the applicable series of preferred stock.  In addition, the special optional redemption in connection with a Change of Control/Delisting feature of the Series C Preferred Stock or Series D Preferred Stock may have the effect of inhibiting a third party from making an acquisition proposal for the Company, or of delaying, deferring or preventing a change of control of the Company under circumstances that otherwise could provide the holders of our Class A common stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series T Preferred Stock with the opportunity for liquidity or the opportunity to realize a premium over the then-current market price or that stockholders may otherwise believe is in their best interests.

Table of Contents

Holders of our Series D Preferred Stock may not be permitted to exercise conversion rights upon a Change of Control/Delisting. If exercisable, the Change of Control/Delisting conversion feature of our Series D Preferred Stock may not adequately compensate such holders and may make it more difficult for a third party to take over our Company or discourage a third party from taking over our Company.

Upon the occurrence of a Change of Control/Delisting, holders of our Series D Preferred Stock will have the right to convert some or all of their Series D Preferred Stock into shares of our Class A common stock (or equivalent value of alternative consideration). Notwithstanding that we generally may not redeem the Series D Preferred Stock prior to October 13, 2021, we have a special optional redemption right in the event of a Change of Control/Delisting, and if we provide notice of our election to redeem the Series D Preferred Stock (whether pursuant to our optional redemption right or our special optional redemption right), the holders of the Series D Preferred Stock will not be permitted to exercise the Change of Control/Delisting Conversion Right with respect to the shares of Series D Preferred Stock subject to such notice. Upon such a conversion, such holders will be limited to a maximum number of shares of our Class A common stock per share of Series D Preferred Stock equal to the lesser of (i) the conversion value (equal to the liquidation preference and unpaid and accrued dividends) divided by the closing price on the date of the event triggering the Change of Control/Delisting and (ii) the share cap of 4.15973, subject to adjustments.

The Change of Control/Delisting conversion feature of our Series D Preferred Stock may have the effect of discouraging a third party from making an acquisition proposal for our Company or of delaying, deferring or preventing certain change of control transactions of our Company under circumstances that stockholders may otherwise believe is in their best interests.

The market price of shares of our Class A common stock received in a conversion of our Series D Preferred Stock may decrease between the date received and the date the shares of Class A common stock are sold.

The market price of shares of our Class A common stock received in a conversion may decrease between the date received and the date the shares of Class A common stock are sold. The stock markets, including the NYSE American, have experienced significant price and volume fluctuations. As a result, the market price of our Class A common stock is likely to be similarly volatile, and recipients of our Class A common stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. The price of our Class A common stock could be subject to wide fluctuations in response to a number of factors, including sales of Class A common stock by other stockholders who received shares of our Class A common stock upon conversion of their Series D Preferred Stock, our financial performance, government regulatory action or inaction, tax laws, interest rates and general market conditions and other factors.

Market interest rates may have an effect on the value of the Series C Preferred Stock or the Series D Preferred Stock.

One of the factors that will influence the price of the Series C Preferred Stock or the Series D Preferred Stock will be the dividend yield on the Series C Preferred Stock or the Series D Preferred Stock (as a percentage of the price of the Preferred Stock, as applicable) relative to market interest rates. An increase in market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of the Series C Preferred Stock or the Series D Preferred Stock to expect a higher dividend yield and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for distribution. Thus, higher market interest rates could cause the market price of the Series C Preferred Stock or the Series D Preferred Stock to decrease.

Holders of the Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock will be subject to inflation risk.

Inflation is the reduction in the purchasing power of money resulting from the increase in the price of goods and services. Inflation risk is the risk that the inflation-adjusted, or “real,” value of an investment in preferred stock or the income from that investment will be worth less in the future. As inflation occurs, the real value of the Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock and dividends payable on such shares decline.

Table of Contents

Holders of Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock have extremely limited voting rights.

The voting rights of holders of shares of Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock will be extremely limited. Our common stock is the only class or series of our stock carrying full voting rights. Voting rights for holders of shares of Series C Preferred Stock and Series D Preferred Stock exist primarily with respect to the ability to elect two additional directors in the event that dividends for each of six quarterly dividend periods payable on the applicable series of such preferred stock are in arrears, and with respect to voting on amendments to our charter that materially and adversely affect the rights of the applicable series of such preferred stock or, with holders of Series B Preferred Stock and Series T Preferred Stock, the creation of additional classes or series of preferred stock that are senior to the applicable series of such preferred stock with respect to a liquidation, dissolution or winding up of our affairs. Holders of Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock have certain additional limited voting rights with respect to amendments to our charter that alter only the contract rights set forth therein of either (a) such series of preferred stock alone, or (b) of any preferred stock (i) ranking on parity with such series of preferred stock with respect to dividend rights and rights upon our liquidation, dissolution or winding up, and (ii) upon which like voting rights have been conferred (which preferred stock currently includes the Series C Preferred Stock, Series D Preferred Stock, and Series T Preferred Stock, but does not include the Series B Preferred Stock). Other than in these limited circumstances, holders of Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, and Series T Preferred Stock will generally not have voting rights.

The amount of the liquidation preference is fixed and holders of Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock will have no right to receive any greater payment.

The payment due upon liquidation is fixed at the liquidation preference of $25.00 per share of Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock, and $1,000.00 per share of Series B Preferred Stock, plus an amount equal to all accrued and unpaid dividends thereon, to, but not including, the date of liquidation, whether or not authorized or declared. If, in the case of our liquidation, there are remaining assets to be distributed after payment of this amount, you will have no right to receive or to participate in these amounts. Further, if the market price of a holder’s shares of Series C Preferred Stock or Series D Preferred Stock is greater than the liquidation preference, the holder will have no right to receive the market price from us upon our liquidation.

Our charter and the articles supplementary establishing each of the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and the Series T Preferred Stock each contain restrictions upon ownership and transfer of such preferred stock which may impair the ability of holders to acquire such preferred stock and the shares of our common stock into which shares thereof may be converted, at the Company’s option, pursuant to the redemption at the option of the holder under certain circumstances. In addition, the Warrant Agreement governing the Warrants issued in connection with the Series B Preferred Stock contains similar restrictions upon ownership and transfer of Warrants, which may impair the ability of holders to acquire Warrants and the shares of our common stock for which such Warrants may be exercisable.

Our charter and the articles supplementary establishing the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock, and the Series T Preferred Stock, and the Warrant Agreement with respect to the Warrants issued in connection with the Series B Preferred Stock, each contain restrictions on ownership and transfer of each such series of preferred stock and the Warrants, which restrictions are intended to assist us in maintaining our qualification as a REIT for federal income tax purposes. For example, to assist us in qualifying as a REIT, the articles supplementary establishing each of the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and the Series T Preferred Stock (respectively) prohibit anyone from owning, or being deemed to own by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% in value or number of shares, whichever is more restrictive, of the outstanding Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series T Preferred Stock (as applicable). Additionally, the Warrant Agreement prohibits any person from beneficially or constructively owning more than 9.8% of our Warrants, and provides that Warrants may not be exercised to the extent such exercise would result in the holder’s beneficial or constructive ownership of more than 9.8%, in number or value, whichever is more restrictive, of our outstanding shares of common stock, or more than 9.8% in value of our outstanding capital stock. You should consider these ownership limitations prior to a purchase of shares of any such series of preferred stock. The restrictions could also have anti-takeover effects and could reduce the possibility that a third party will attempt to acquire control of us, which could adversely affect the market price of the Series C Preferred Stock and the Series D Preferred Stock.

Table of Contents

Our ability to pay dividends or redeem shares is limited by the requirements of Maryland law.

Our ability to pay dividends on or redeem shares of the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and the Series T Preferred Stock is limited by the laws of Maryland. Under applicable Maryland law, a Maryland corporation generally may not make a distribution (including a dividend or redemption) if, after giving effect to the distribution, the corporation would not be able to pay its debts as the debts become due in the usual course of business, or the corporation’s total assets would be less than the sum of its total liabilities plus, unless the corporation’s charter provides otherwise, the amount that would be needed, if the corporation were dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the distribution. Accordingly, we generally may not make a distribution on the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock or the Series T Preferred Stock if, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of our total liabilities plus, unless the terms of such class or series provide otherwise, the amount that would be needed to satisfy the preferential rights upon dissolution of the holders of shares of any class or series of preferred stock then outstanding, if any, with preferences senior to those of the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and the Series T Preferred Stock. Any dividends or redemption payments may be delayed or prohibited.

If our common stock is no longer listed on the NYSE American or another national securities exchange, the ability to transfer or sell shares of the Series C Preferred Stock and the Series D Preferred Stock may be limited and the market value of the Series C Preferred Stock and the Series D Preferred Stock will be materially adversely affected.

If our Class A common stock is no longer listed on the NYSE American or another national securities exchange, it is likely that the Series C Preferred Stock and the Series D Preferred Stock will be delisted as well. Accordingly, if our Class A common stock is delisted, the ability of holders to transfer or sell their shares of the Series C Preferred Stock and the Series D Preferred Stock may be limited and the market value of the Series C Preferred Stock and the Series D Preferred Stock may be materially adversely affected.

To the extent that our distributions represent a return of capital for tax purposes, stockholders may recognize an increased gain or a reduced loss upon subsequent sales (including cash redemptions) of their shares of Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series T Preferred Stock.

The dividends payable by us on the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and the Series T Preferred Stock may exceed our current and accumulated earnings and profits as determined for U.S. federal income tax purposes. If that were to occur, it would result in the amount of distributions that exceed our earnings and profits being treated first as a return of capital to the extent of the stockholder’s adjusted tax basis in the stockholder’s Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock and then, to the extent of any excess over the stockholder’s adjusted tax basis in the stockholder’s Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock, as capital gain. Any distribution that is treated as a return of capital will reduce the stockholder’s adjusted tax basis in the stockholder’s Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock, and subsequent sales (including cash redemptions) of such stockholder’s Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock will result in recognition of an increased taxable gain or reduced taxable loss due to the reduction in such adjusted tax basis.

Table of Contents

There is no public market for our Series B Preferred Stock, Warrants, or Series T Preferred Stock, and we do not expect one to develop.

There is no public market for the Series B Preferred Stock or Warrants offered in the Series B Preferred Stock offering, or for the Series T Preferred Stock offered in the Series T Preferred Stock offering, and we currently have no plan to list the Series B Preferred Stock, the Warrants, or the Series T Preferred Stock on a securities exchange or to include such shares for quotation on any national securities market. Additionally, our charter contains restrictions on the ownership and transfer of our securities, including our Series B Preferred Stock and Series T Preferred Stock, and these restrictions may inhibit the ability to sell shares of our Series B Preferred Stock or our Warrants, and/or shares of our Series T Preferred Stock, promptly or at all. Furthermore, the Warrants will expire four years from the date of issuance. If holders are able to sell the Series B Preferred Stock, Warrants, or Series T Preferred Stock, they may only be able to be sold at a substantial discount from the price originally paid. Therefore, Units comprised of shares of Series B Preferred Stock and Warrants, and/or shares of Series T Preferred Stock, should in each case be purchased only as a long-term investment. After one year from the date of issuance, the Warrants will be exercisable at the option of the holder for shares of our Class A common stock, which currently are publicly traded on the NYSE American. Beginning immediately upon original issuance of any share of Series B Preferred Stock or Series T Preferred Stock, the holder thereof may require us to redeem, and beginning two years from the date of original issuance, we may redeem, any such share, in each case with the redemption price payable, in our sole discretion, in cash or in equal value of shares of our Class A common stock, based on the closing price per share of our Class A common stock for the single trading day prior to the date of redemption. If we opt to pay the redemption price in shares of our Class A common stock, holders of shares of Series B Preferred Stock or Series T Preferred Stock may receive publicly traded shares, as we currently expect to continue listing our Class A common stock on the NYSE American.

There may not be a broad market for our Class A common stock, which may cause our Class A common stock to trade at a discount and make it difficult for holders of Warrants to sell the Class A common stock for which the Warrants are exercisable and for which shares of our Series B Preferred Stock or Series T Preferred Stock may be redeemable at our option.

Our Class A common stock for which the Warrants are exercisable trades on the NYSE American under the symbol “BRG.” Listing on the NYSE American or another national securities exchange does not ensure an actual or active market for our Class A common stock. Historically, our Class A common stock has had a low trading volume. Accordingly, an actual or active market for our Class A common stock may not be maintained, the market for our Class A common stock may not be liquid, the holders of our Class A common stock may be unable to sell their shares of our Class A common stock, and the prices that may be obtained following the sale of our Class A common stock upon the exercise of Warrants or the redemption of shares of Series B Preferred Stock or Series T Preferred Stock may not reflect the underlying value of our assets and business.

Shares of Series B Preferred Stock or Series T Preferred Stock may be redeemed for shares of our Class A common stock, which rank junior to the Series B Preferred Stock and Series T Preferred Stock with respect to dividends and upon liquidation.

The holders of shares of Series B Preferred Stock or Series T Preferred Stock may require us to redeem such shares, with the redemption price payable, in our sole discretion, in cash or in equal value of shares of our Class A common stock, based on the closing price per share of our Class A common stock for the single trading day prior to the date of redemption. We may opt to pay the redemption price in shares of our Class A common stock. The rights of the holders of shares of Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock rank senior to the rights of the holders of shares of our common stock as to dividends and payments upon liquidation. Unless full cumulative dividends on our shares of Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock for all past dividend periods have been declared and paid (or set apart for payment), we will not declare or pay dividends with respect to any shares of our Class A common stock for any period. Upon liquidation, dissolution or winding up of our Company, the holders of shares of our Series B Preferred Stock are entitled to receive a liquidation preference of stated value, $1,000 per share, plus an amount equal to all accrued but unpaid dividends, and holders of shares of each of our Series C Preferred Stock, our Series D Preferred Stock and our Series T Preferred Stock are entitled to receive a liquidation preference of $25.00 per share, plus an amount equal to all accrued and unpaid dividends, in each case prior and in preference to any distribution to the holders of shares of our Class A common stock or any other class of our equity securities.

Table of Contents

We will be able to call shares of Series B Preferred Stock or Series T Preferred Stock for redemption under certain circumstances without the consent of the holder.

We will have the ability to call the outstanding shares of Series B Preferred Stock or Series T Preferred Stock after two years from the date of original issuance of such shares of Series B Preferred Stock or Series T Preferred Stock. At that time, we will have the right to redeem, at our option, the outstanding shares of Series B Preferred Stock or Series T Preferred Stock, in whole or in part, at 100% of the Stated Value per share, plus an amount equal to any accrued and unpaid dividends. As of December 31, 2021, the Company has initiated and consummated the redemption of a total of 173,865 shares of Series B Preferred Stock through the issuance of 16,540,204 shares of Class A common stock.

Our requirement to redeem the Series B Preferred Stock and/or the Series T Preferred Stock in the event of a Change of Control may, in either case, deter a change of control transaction otherwise in the best interests of our stockholders.

Upon the occurrence of a Change of Control (as defined below) with respect to either the Series B Preferred Stock or the Series T Preferred Stock, we will be required to redeem all outstanding shares of the Series B Preferred Stock or the Series T Preferred Stock (as applicable), in whole, within 60 days after the first date on which such Change of Control occurred, in cash at a redemption price of (i) $1,000 per share of Series B Preferred Stock, and (ii) $25.00 per share of Series T Preferred Stock; in each case, plus an amount equal to all accrued and unpaid dividends, if any, to and including the redemption date. The mandatory redemption feature of each of the Series B Preferred Stock and the Series T Preferred Stock in connection with a Change of Control may each have the effect of inhibiting a third party from making an acquisition proposal for the Company, or of delaying, deferring or preventing a change of control of the Company, under circumstances that otherwise could provide the holders of our Class A common stock, Series B Preferred Stock, and/or Series T Preferred Stock with the opportunity for liquidity or the opportunity to realize a premium over the then-current market price or that stockholders may otherwise believe is in their best interests.

A “Change of Control” is when, (i) after the initial issuance of the Series B Preferred Stock (for purposes of the Series B Preferred Stock), or (ii) after the initial issuance of the Series T Preferred Stock (for purposes of the Series T Preferred Stock), any of the following has occurred and is continuing:

a “person” or “group” within the meaning of Section 13(d) of the Exchange Act, other than our Company, its subsidiaries, and its and their employee benefit plans, has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of our common equity representing more than 50% of the total voting power of all outstanding shares of our common equity that are entitled to vote generally in the election of directors, with the exception of the formation of a holding company;

consummation of any share exchange, consolidation or merger of our Company or any other transaction or series of transactions pursuant to which our Class A common stock will be converted into cash, securities or other property, (1) other than any such transaction where the shares of our Class A common stock outstanding immediately prior to such transaction constitute, or are converted into or exchanged for, a majority of the common stock of the surviving person or any direct or indirect parent company of the surviving person immediately after giving effect to such transaction, and (2) expressly excluding any such transaction preceded by our Company’s acquisition of the capital stock of another company for cash, securities or other property, whether directly or indirectly through one of our subsidiaries, as a precursor to such transactions; or

at least a majority of our Board ceases to be constituted of directors who were either (A) a member of our Board on (i) February 24, 2016, for purposes of the Series B Preferred Stock, or (ii) November 13, 2019, for purposes of the Series T Preferred Stock, or (B) who became a member of our Board subsequent to such applicable date and whose appointment, election or nomination for election by our stockholders was duly approved by a majority of the continuing directors on our Board at the time of such approval, either by a specific vote or by approval of the proxy statement issued by our Company on behalf of our Board in which such individual is named as nominee for director.

Table of Contents

Subject to the Cetera Side Letter and the articles supplementary establishing the Series T Preferred Stock (respectively), upon the sale of any individual property, holders of Series B Preferred Stock and Series T Preferred Stock do not have a priority over holders of our common stock regarding return of capital.

Subject to the Cetera Side Letter and the articles supplementary establishing the Series T Preferred Stock (respectively), holders of our Series B Preferred Stock and our Series T Preferred Stock (respectively) do not have a right to receive a return of capital prior to holders of our common stock upon the individual sale of a property. To provide protection to the holders of the Series B Preferred Stock, our Cetera Side Letter restricts us from selling an asset if the sale would cause us to fail to meet a dividend coverage ratio of at least 1.1:1 based on the ratio of our adjusted funds from operations to dividends required to be paid to holders of our Series B, Series C and Series D Preferred Stock for the two most recent quarters, subject to our ability to maintain status as a REIT for federal income tax purposes. Similarly, to provide protection to the holders of the Series T Preferred Stock, the articles supplementary establishing the Series T Preferred Stock restrict us from selling an asset if the sale would cause us to fail to meet a dividend coverage ratio of at least 1.1:1 based on the ratio of our core funds from operations to dividends required to be paid to holders of our Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock for the two most recent quarters, subject to our ability to maintain status as a REIT for federal income tax purposes. Depending on the price at which such property is sold, it is possible that holders of our common stock will receive a return of capital prior to the holders of our Series B Preferred Stock and/or our Series T Preferred Stock, provided that any accrued but unpaid dividends have been paid in full to holders of Series B Preferred Stock and/or Series T Preferred Stock (as applicable). It is also possible that holders of common stock will receive additional distributions from the sale of a property (in excess of their capital attributable to the asset sold) before the holders of Series B Preferred Stock and/or Series T Preferred Stock (as applicable) receive a return of their capital.

We established the offering prices for each of the Series B Units and the Series T Preferred Stock pursuant to negotiations among us and our affiliated dealer manager; as a result, the actual value of an investment in Series B Units or the Series T Preferred Stock may be substantially less than the amount paid.

The selling prices of the Series B Units and the Series T Preferred Stock were determined, in each case, pursuant to negotiations among us and the dealer manager, which is an affiliate of Bluerock, based upon the following primary factors at the time of each such offering: the economic conditions in and future prospects for the industry in which we compete; our prospects for future earnings; an assessment of our management; the state of our development; the prevailing condition of the equity securities market; the state of the market for non-traded REIT securities; and market valuations of public companies considered comparable to our Company. Because the offering prices are not based upon any independent valuation, the offering prices are not indicative of the proceeds that an investor in the Series B Units or the Series T Preferred Stock would receive upon liquidation.

Your percentage of ownership may become diluted if we issue new shares of stock or other securities, and issuances of additional preferred stock or other securities by us may further subordinate the rights of the holders of our Class A common stock (which you may become upon receipt of redemption payments in shares of our Class A common stock for any of your shares of Series B Preferred Stock, Series C Preferred Stock, or Series T Preferred Stock, or upon exercise of any of your Warrants).

Under the terms of our Series B Preferred Stock, Series C Preferred Stock or Series T Preferred Stock, we may make redemption payments in shares of our Class A common stock. Although the dollar amounts of such payments are unknown, the number of shares to be issued in connection with such payments may fluctuate based on the price of our Class A common stock. Any sales or perceived sales in the public market of shares of our Class A common stock issuable upon such redemption payments could adversely affect prevailing market prices of shares of our Class A common stock. The issuance of shares of our Class A common stock upon such redemption payments also may have the effect of reducing our net income per share (or increasing our net loss per share). In addition, the existence of Series B Preferred Stock, Series C Preferred Stock and Series T Preferred Stock may encourage short selling by market participants because the existence of redemption payments could depress the market price of shares of our Class A common stock.

Our Board is authorized, without stockholder approval, to cause us to issue additional shares of our Class A common stock or to raise capital through the issuance of additional preferred stock (including equity or debt securities convertible into preferred stock), options, warrants and other rights, on such terms and for such consideration as our Board in its sole discretion may determine. Any such issuance could result in dilution of the equity of our stockholders. Our Board may, in its sole discretion, authorize us to issue common stock or other equity or debt securities to persons from whom we purchase apartment communities, as part or all of the purchase price of the community. Our Board, in its sole discretion, may determine the value of any common stock or other equity or debt securities issued in consideration of apartment communities or services provided, or to be provided, to us.

Table of Contents

Our charter also authorizes our Board, without stockholder approval, to designate and issue one or more classes or series of preferred stock in addition to the Series B Preferred Stock (including equity or debt securities convertible into preferred stock) and to set or change the voting, conversion or other rights, preferences, restrictions, limitations as to dividends or other distributions and qualifications or terms or conditions of redemption of each class or series of shares so issued. If any additional preferred stock is publicly offered, the terms and conditions of such preferred stock (including any equity or debt securities convertible into preferred stock) will be set forth in a registration statement registering the issuance of such preferred stock or equity or debt securities convertible into preferred stock. Because our Board has the power to establish the preferences and rights of each class or series of preferred stock, it may afford the holders of any series or class of preferred stock preferences, powers, and rights senior to the rights of holders of common stock or the Series B Preferred Stock. If we ever create and issue additional preferred stock or equity or debt securities convertible into preferred stock with a distribution preference over common stock or the Series B Preferred Stock, payment of any distribution preferences of such new outstanding preferred stock would reduce the amount of funds available for the payment of distributions on our common stock and our Series B Preferred Stock. Further, holders of preferred stock are normally entitled to receive a preference payment if we liquidate, dissolve, or wind up before any payment is made to the common stockholders, likely reducing the amount common stockholders would otherwise receive upon such an occurrence. In addition, under certain circumstances, the issuance of additional preferred stock may delay, prevent, render more difficult or tend to discourage a merger, tender offer, or proxy contest, the assumption of control by a holder of a large block of our securities, or the removal of incumbent management.

Stockholders have no rights to buy additional shares of stock or other securities if we issue new shares of stock or other securities. We may issue common stock, convertible debt or preferred stock pursuant to a subsequent public offering or a private placement, or to sellers of properties we directly or indirectly acquire instead of, or in addition to, cash consideration. Investors purchasing Series B Units in the offering of our Series B Preferred Stock who do not participate in any future stock issuances will experience dilution in the percentage of the issued and outstanding stock they own. In addition, depending on the terms and pricing of any additional offerings and the value of our investments, you also may experience dilution in the book value and fair market value of, and the amount of distributions paid on, your shares of Series B Preferred Stock and common stock, if any.

Holders of the Series B Preferred Stock and the Series T Preferred Stock have no control over changes in our policies and operations.

Our Board determines our major policies, including with regard to investment objectives, financing, growth, debt capitalization, REIT qualification and distributions. Our Board may amend or revise these and other policies without a vote of the stockholders.

In addition, holders of shares of our Series B Preferred Stock have no voting rights under our charter, and otherwise have no voting rights except as set forth in the Cetera Side Letter. Pursuant to the Cetera Side Letter, holders of shares of Series B Preferred Stock have voting rights only in certain limited circumstances, voting together as a single class with the holders of preferred stock (i) ranking on parity with the Series B Preferred Stock with respect to dividend rights and rights upon our liquidation, dissolution or winding up, and (ii) upon which like voting rights have been conferred (such holders, together with holders of shares of Series B Preferred Stock, the “Parity Holders”). The Parity Holders currently include the holders of Series C Preferred Stock, Series D Preferred Stock, and Series T Preferred Stock. The affirmative vote of a majority of the votes cast by the Parity Holders, voting together as a single class, is required to approve (a) the authorization, creation or issuance, or an increase in the number of authorized or issued shares of, any class or series of our capital stock ranking senior to the Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series T Preferred Stock with respect to dividend rights and rights upon our liquidation, dissolution or winding up (any such senior stock, the “Senior Stock”), (b) the reclassification of any of our authorized capital stock into Senior Stock, or (c) the creation, authorization or issuance of any obligation or security convertible into, or evidencing the right to purchase, Senior Stock. Other than in these limited circumstances, holders of Series B Preferred Stock have no voting rights.

Holders of shares of Series T Preferred Stock generally have no voting rights under our charter, except as indicated in the immediately preceding paragraph, and with respect to any amendment of our charter that would alter only the contract rights, as expressly set forth therein, of either (a) the Series T Preferred Stock alone, or (b) of any preferred stock (i) ranking on parity with the Series T Preferred Stock with respect to dividend rights and rights upon our liquidation, dissolution or winding up, and (ii) upon which like voting rights have been conferred (which currently includes the Series C Preferred Stock, Series D Preferred Stock, and Series T Preferred Stock, but does not include the Series B Preferred Stock). Other than in these limited circumstances, holders of Series T Preferred Stock have no voting rights.

Table of Contents

General Risks Related to Ownership of our Securities

The cash distributions you receive may be less frequent or lower in amount than you expect.

Our directors determine the amount and timing of distributions in their sole discretion, subject to operating restrictions included in the Merger Agreement. Our directors consider all relevant factors, including the amount of cash available for distribution, capital expenditure and reserve requirements, general operational requirements and the requirements necessary to maintain our REIT qualification. We cannot assure you that we will consistently be able to generate sufficient available cash flow to make distributions, nor can we assure you that sufficient cash will be available to make distributions to you. We may borrow funds, return capital, make taxable distributions of our stock or debt securities, or sell assets to make distributions. We cannot predict the amount of distributions you may receive and we may be unable to pay or maintain cash distributions or increase distributions over time. Our inability to acquire additional properties or make real estate-related investments or operate profitably may have a negative effect on our ability to generate sufficient cash flow from operations to pay distributions.

Also, because we may receive income from rents at various times during our fiscal year, distributions paid may not reflect our income earned in that particular distribution period. The amount of cash available for distributions will be affected by many factors, such as our ability to acquire properties as offering proceeds become available, the income from those investments and yields on securities of other real estate companies that we invest in, as well as our operating expense levels and many other variables. In addition, to the extent we make distributions to stockholders with sources other than cash flow from operations, the amount of cash that is available for investment in real estate assets will be reduced, which will in turn negatively impact our ability to achieve our investment objectives and limit our ability to make future distributions.

If the properties we acquire or invest in do not produce the cash flow that we expect in order to meet our REIT minimum distribution requirement, we may decide to borrow funds to meet the REIT minimum distribution requirements, which could adversely affect our overall financial performance.

We may decide to borrow funds in order to meet the REIT minimum distribution requirements even if our management believes that the then prevailing market conditions generally are not favorable for such borrowings or that such borrowings would not be advisable in the absence of such tax considerations. If we borrow money to meet the REIT minimum distribution requirement or for other working capital needs, our expenses will increase, our net income will be reduced by the amount of interest we pay on the money we borrow and we will be obligated to repay the money we borrow from future earnings or by selling assets, which may decrease future distributions to stockholders.

We intend to use the net proceeds from any offering of our securities to fund future acquisitions and for other general corporate and working capital purposes, but no offering will be conditioned upon the closing of properties in our then-current pipeline and we will have broad discretion to determine alternative uses of proceeds.

As described under “Use of Proceeds” in any applicable prospectus or prospectus supplement, we intend to use a portion of the net proceeds from any offering of our securities to fund future acquisitions and for other general corporate and working capital purposes. However, no offering will be conditioned upon the closing of any properties. We will have broad discretion in the application of the net proceeds from an offering, and holders of our securities will not have the opportunity as part of their investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from an offering, their ultimate use may vary substantially from their currently intended use.

Material Federal Income Tax Risks

Failure to remain qualified as a REIT would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our stockholders.

We elected to be taxed as a REIT under the federal income tax laws commencing with our taxable year ended December 31, 2010. We believe that we have been organized and have operated in a manner qualifying us as a REIT commencing with our taxable year ended December 31, 2010 and intend to continue to so operate. However, we cannot assure you that we will remain qualified as a REIT.

Table of Contents

If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distributions to our stockholders because:

we would not be able to deduct dividends paid to stockholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates;

we could be subject to possibly increased state and local taxes; and

unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT.

In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions. As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it would adversely affect the value of our securities.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.

To maintain our qualification as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our capital stock. In order to meet these tests, we may be required to forego investments we might otherwise make. Thus, compliance with the REIT requirements may hinder our performance.

In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate assets. The remainder of our investment in securities (other than government securities, securities of taxable REIT subsidiaries (“TRSs”) and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities, securities of TRSs and qualified real estate assets) can consist of the securities of any one issuer, and no more than 20% (25% for 2017 and prior years) of the value of our total assets can be represented by the securities of one or more TRSs. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flows.

Even if we remain qualified as a REIT, we may be subject to certain federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes. In addition, any TRS in which we own an interest will be subject to regular corporate federal, state and local taxes. Any of these taxes would decrease cash available for distributions to stockholders.

Failure to make required distributions would subject us to U.S. federal corporate income tax.

We intend to continue to operate in a manner so as to qualify as a REIT for U.S. federal income tax purposes. In order to remain qualified as a REIT, we generally are required to distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain, each year to our stockholders. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under the Code.

Table of Contents

We may satisfy the 90% distribution test with taxable distributions of our stock or debt securities. On August 11, 2017, the Internal Revenue Service (“IRS”) issued Revenue Procedure 2017-45 authorizing elective cash/stock dividends to be made by publicly offered REITs (e.g., REITs that are required to file annual and periodic reports with the SEC under the Exchange Act). Pursuant to Revenue Procedure 2017-45, effective for distributions declared on or after August 11, 2017, the IRS will treat the distribution of stock pursuant to an elective cash/stock dividend as a distribution of property under Section 301 of the Code (e.g., a dividend), as long as at least 20% of the total dividend is available in cash and certain other parameters detailed in the Revenue Procedure are satisfied. Although we have no current intention of paying dividends in our own stock, if in the future we choose to pay dividends in our own stock, our stockholders may be required to pay taxes in excess of the cash that they receive.

The prohibited transactions tax may subject us to tax on our gain from sales of property and limit our ability to dispose of our properties.

A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property other than foreclosure property, held primarily for sale to customers in the ordinary course of business. Although we intend to acquire and hold all of our assets as investments and not for sale to customers in the ordinary course of business, the IRS may assert that we are subject to the prohibited transaction tax equal to 100% of net gain upon a disposition of real property. Although a safe harbor to the characterization of the sale of real property by a REIT as a prohibited transaction is available, not all of our prior property dispositions qualified for the safe harbor and we cannot assure you that we can comply with the safe harbor in the future or that we have avoided, or will avoid, owning property that may be characterized as held primarily for sale to customers in the ordinary course of business. Consequently, we may choose not to engage in certain sales of our properties or may conduct such sales through a TRS, which would be subject to federal and state income taxation. Additionally, in the event that we engage in sales of our properties, any gains from the sales of properties classified as prohibited transactions would be taxed at the 100% prohibited transaction tax rate.

The ability of our Board to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.

Our charter provides that our Board may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on our total return to our stockholders.

Our ownership of any TRSs will be subject to limitations and our transactions with any TRSs will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms.

Overall, no more than 20% (25% for 2017 and prior years) of the value of a REIT’s assets may consist of stock or securities of one or more TRSs. In addition, the Code limits the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The Code also imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. Furthermore, we will monitor the value of our respective investments in any TRSs for the purpose of ensuring compliance with TRS ownership limitations and will structure our transactions with any TRSs on terms that we believe are arm’s-length to avoid incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to comply with the 20% REIT subsidiaries limitation or to avoid application of the 100% excise tax.

You may be restricted from acquiring or transferring certain amounts of our common stock.

The stock ownership restrictions of the Code for REITs and the 9.8% stock ownership limits in our charter may inhibit market activity in our capital stock and restrict our business combination opportunities.

In order to qualify as a REIT, five or fewer individuals, as defined in the Code to include specified private foundations, employee benefit plans and trusts, and charitable trusts, may not own, beneficially or constructively, more than 50% in value of our issued and outstanding stock at any time during the last half of a taxable year. Attribution rules in the Code determine if any individual or entity beneficially or constructively owns our capital stock under this requirement. Additionally, at least 100 persons must beneficially own our capital stock during at least 335 days of a taxable year. To help insure that we meet these tests, among other purposes, our charter restricts the acquisition and ownership of shares of our capital stock.

Table of Contents

Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. Unless exempted, prospectively or retroactively, by our Board, our charter prohibits any person from beneficially or constructively owning more than 9.8% in value of the aggregate of our outstanding shares of capital stock or 9.8% in value or number of shares, whichever is more restrictive, of the outstanding shares of our common stock. Our Board may not grant an exemption from these restrictions to any proposed transferee whose ownership in excess of such thresholds does not satisfy certain conditions designed to ensure that we will not fail to qualify as a REIT. These restrictions on transferability and ownership will not apply, however, if our Board determines that it is no longer in our best interest to continue to qualify as a REIT or that compliance is no longer required for REIT qualification.

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our stock.

At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. We cannot predict when or if any new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively. We and our stockholders could be adversely affected by any such change in the U.S. federal income tax laws, regulations or administrative interpretations.

The “Tax Cuts and Jobs Act” (the “TCJA”) makes significant changes to the U.S. federal income tax rules for taxation of individuals and corporations. In the case of individuals, the tax brackets have been adjusted, the top federal income rate has been reduced to 37%, special rules reduce taxation of certain income earned through pass-through entities and reduce the top effective rate applicable to ordinary dividends from REITs to 29.6% (through a 20% deduction for ordinary REIT dividends received) and various deductions have been eliminated or limited, including limiting the deduction for state and local taxes to $10,000 per year. Most of the changes applicable to individuals are temporary and apply only to taxable years beginning after December 31, 2017 and before January 1, 2026. The top corporate income tax rate has been reduced to 21%. There are only minor changes to the REIT rules (other than the 20% deduction applicable to individuals for ordinary REIT dividends received). The TCJA makes numerous other large and small changes to the tax rules that do not affect REITs directly but may affect our stockholders and may indirectly affect us.

Stockholders are urged to consult with their tax advisors with respect to the status of the TCJA and any other regulatory or administrative developments and proposals and their potential effect on investment in our stock.

Dividends payable by REITs generally do not qualify for the reduced tax rates available for certain dividends.

The maximum tax rate applicable to “qualified dividend income” payable to U.S. stockholders taxed at individual rates is 20% plus the 3.8% surtax on net investment income, if applicable. Dividends payable by REITs, however, generally are not eligible for the reduced rates on qualified dividend income. Rather, under the TCJA, REIT dividends constitute “qualified business income” and thus a 20% deduction is available to individual taxpayers with respect to such dividends, resulting in a 29.6% maximum federal tax rate (plus the 3.8% surtax on net investment income, if applicable) for individual U.S. stockholders. Additionally, without further legislative action, the 20% deduction applicable to REIT dividends will expire on January 1, 2026. The more favorable rates applicable to regular corporate qualified dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our stock.

Distributions to tax-exempt investors may be classified as unrelated business taxable income and tax-exempt investors would be required to pay tax on the unrelated business taxable income and to file income tax returns.

Neither ordinary nor capital gain distributions with respect to our stock nor gain from the sale of stock should generally constitute unrelated business taxable income to a tax-exempt investor. However, there are certain exceptions to this rule. In particular:

under certain circumstances, part of the income and gain recognized by certain qualified employee pension trusts with respect to our stock may be treated as unrelated business taxable income if our stock is predominately held by qualified employee pension trusts, such that we are a “pension-held” REIT (which we do not expect to be the case);

part of the income and gain recognized by a tax exempt investor with respect to our stock would constitute unrelated business taxable income if such investor incurs debt in order to acquire the stock; and

Table of Contents

part or all of the income or gain recognized with respect to our stock held by social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans which are exempt from federal income taxation under Sections 501(c)(7), (9), (17) or (20) of the Code may be treated as unrelated business taxable income.

We encourage you to consult your tax advisor to determine the tax consequences applicable to you if you are a tax-exempt investor.

Benefit Plan Risks Under ERISA or the Code

If you fail to meet the fiduciary and other standards under the Employee Retirement Income Security Act of 1974, as amended or the Code as a result of an investment in our stock, you could be subject to criminal and civil liabilities and penalties.

Special considerations apply to the purchase of stock or holding of Warrants by employee benefit plans subject to the fiduciary rules of Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), including pension or profit sharing plans and entities that hold assets of such plans, which we refer to as ERISA Plans, and plans and accounts that are not subject to ERISA, but are subject to the prohibited transaction rules of Section 4975 of the Code, including IRAs, Keogh Plans, and medical savings accounts. (Collectively, we refer to ERISA Plans and plans subject to Section 4975 of the Code as “Benefit Plans” or “Benefit Plan Investors”). If you are investing the assets of any Benefit Plan, you should consider whether:

your investment will be consistent with your fiduciary obligations under ERISA and the Code;

your investment will be made in accordance with the documents and instruments governing the Benefit Plan, including the Benefit Plan’s investment policy;

your investment will satisfy the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA, if applicable, and other applicable provisions of ERISA and the Code;

your investment will impair the liquidity of the Benefit Plan;

your investment will produce “unrelated business taxable income” for the Benefit Plan;

you will be able to value the assets of the plan annually in accordance with ERISA requirements and applicable provisions of the Benefit Plan;

you will be able to satisfy plan liquidity requirements as there may be only a limited market to sell or otherwise dispose of our stock; and

your investment will constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.

Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA and the Code may result in the imposition of civil and criminal penalties, and can subject the fiduciary to personal liability for claims for damages or for equitable remedies. In addition, if an investment in our stock or holding of Warrants constitutes a prohibited transaction under ERISA or the Code, the fiduciary or IRA owner who authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested. In the case of a prohibited transaction involving an IRA owner, the IRA may be disqualified and all of the assets of the IRA may be deemed distributed and subjected to tax. Benefit Plan Investors should consult with counsel before making an investment in our securities.

Plans that are not subject to ERISA or the prohibited transactions of the Code, such as government plans or church plans, may be subject to similar requirements under state law. The fiduciaries of such plans should review all details to ensure themselves that the investment satisfies applicable law.

Table of Contents

For additional discussion of significant factors that make an investment in our shares risky, see the Liquidity and Capital Resources Section under Item 7. — Management’s Discussion and Analysis of Financial Conditions and Results of Operations of this report.

Item 7.       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 Residential Growth REIT, Inc., and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Bluerock Residential Growth REIT, Inc., a Maryland corporation, and, as required by context, Bluerock Residential Holdings, L.P., a Delaware limited partnership, which we refer to as our “Operating Partnership,” and to their subsidiaries. We refer to Bluerock Real Estate, L.L.C., a Delaware limited liability company, and Bluerock Real Estate Holdings, LLC, a Delaware limited liability company, together as “Bluerock”, and we refer to our former external manager, BRG Manager, LLC, as our “former Manager.” Both Bluerock and our former Manager are affiliated with the Company. See also “Forward-Looking Statements” preceding Part I.

Overview

We were incorporated as a Maryland corporation on July 25, 2008. Our principal business objective is to generate attractive risk-adjusted investment returns by assembling a high-quality portfolio of multifamily apartment communities and single-family residential homes located in demographically attractive growth markets and by implementing our investment strategies and our “Live/Work/Play Initiatives” to achieve sustainable long-term growth in both our funds from operations and net asset value.

On October 31, 2017, we became an internally-managed REIT as a result of the completion of the management internalization transactions (the “Internalization”), and we are no longer externally managed by our former Manager.

We conduct our operations through our Operating Partnership, of which we are the sole general partner. The consolidated financial statements include our accounts and those of the Operating Partnership.

Table of Contents

As of December 31, 2021, we held an aggregate of 20,263 units, comprised of 16,837 multifamily units and 3,426 single-family residential units. The aggregate number of units are held through seventy-eight real estate investments, consisting of forty-nine consolidated operating investments and twenty-nine investments held through preferred equity, loan or ground lease investments. As of December 31, 2021, our consolidated operating investments were approximately 95.9% occupied.

We have elected to be taxed as a Real Estate Investment Trust (“REIT”) under Sections 856 through 860 of the Code and have qualified as a REIT commencing with our taxable year ended December 31, 2010. In order to continue 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. We intend to continue to organize and operate in such a manner as to remain qualified as a REIT.

Proposed Merger

On December 20, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Badger Parent LLC (“Parent”) and Badger Merger Sub LLC (“Merger Sub”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, the Company will be merged with and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger. The Merger and the other transactions contemplated by the Merger Agreement were unanimously approved by the Board. Parent and Merger Sub are affiliates of Blackstone Real Estate Partners IX L.P., an affiliate of Blackstone Inc.

Pursuant to the terms and conditions in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of common stock, par value $0.01 per share, of the Company (the “Company Common Stock”), that is issued and outstanding immediately prior to the Effective Time will automatically be converted into the right to receive $24.25 in cash, without interest (the “Per Share Merger Consideration”).

We will deliver a notice of redemption (the “Preferred Stock Redemption Notice”) to the holders of our Series B Redeemable Preferred Stock, par value $0.01 per share (“Series B Preferred Stock”), 7.625% Series C Cumulative Redeemable Preferred Stock, par value $0.01 per share (“Series C Preferred Stock”), 7.125% Series D Cumulative Preferred Stock, par value $0.01 per share (“Series D Preferred Stock”), and Series T Redeemable Preferred Stock, par value $0.01 per share (“Series T Preferred Stock”), in accordance with their respective Articles Supplementary, in order to provide that such preferred stock will be redeemed effective as of the Effective Time. Each share of Series C Preferred Stock, Series D Preferred Stock and Series T Preferred Stock will be redeemed for an amount equal to $25.00 plus an amount equal to all accrued and unpaid dividends to and including the redemption date set forth in the Preferred Stock Redemption Notice, without interest. Each share of Series B Preferred Stock will be redeemed for an amount equal to $1,000.00 plus an amount equal to all accrued and unpaid dividends to and including the redemption date set forth in the Preferred Stock Redemption Notice, without interest.

The outstanding warrants to purchase Class A common stock of the Company (the “Company Warrants”) will remain outstanding following the Effective Time in accordance with their terms, but the Exercise Price (as defined in the Warrant Agreements with respect to the Company Warrants) will be adjusted so that the holder of any Company Warrant exercised after the Effective Time will be entitled to receive in cash the amount of the Per Share Merger Consideration which, if the Company Warrant had been exercised immediately prior to the Closing, such holder would have been entitled to receive upon the consummation of the Merger.

In addition, each award of shares of restricted Class A common stock of the Company that is outstanding immediately prior to the Effective Time will be cancelled in exchange for a cash payment in an amount equal to (i) the number of shares of Company Common Stock subject to such award immediately prior to the Effective Time multiplied by (ii) the Per Share Merger Consideration, without interest and less any applicable withholding taxes.

Prior to the consummation of the Merger, we will complete the separation of our single-family residential real estate business (the “SFR Business”) from our multi-family residential real estate business (the “Separation”). Following the Separation, the SFR Business will be indirectly held by Bluerock Homes Trust, Inc. (“BHM”), a Maryland corporation, and the Operating Partnership, and, prior to the consummation of the Merger, we will distribute the common stock of BHM to our stockholders as of the record date for such distribution in a taxable distribution (the “Distribution”).

Table of Contents

In connection with the Separation, the Operating Partnership will exchange its interests in an entity holding its multi-family residential real estate business with the Company as consideration for a redemption of all of our preferred interests in the Operating Partnership and a portion of our common units in the Operating Partnership (the “Redemption”). As a result, following the Redemption, the Operating Partnership will cease to hold interests in the Company’s multi-family residential real estate business, and will hold the assets related to the SFR Business. Most members of our senior management, along with certain entities related to them, have agreed to retain their interests in the Operating Partnership until the earlier of the Effective Time and the termination of the Merger Agreement, rather than redeeming their interests for cash or shares of Company Common Stock that will receive the Per Share Merger Consideration. As a result, following the Separation and the Distribution, our stockholders who receive shares of BHM in the Distribution are expected to indirectly own approximately 35% of the SFR Business, with holders of units in the Operating Partnership (other than BHM) expected to indirectly own an interest of approximately 65% of the SFR Business. In connection with the Separation and the Distribution, BHM and the Operating Partnership will enter into a management agreement with an affiliate of Bluerock providing for it to be externally managed thereby.

The Merger Agreement contains customary representations, warranties and covenants, including, among others, covenants by the Company to use commercially reasonable efforts to conduct its business in all material respects in the ordinary course, subject to certain exceptions, during the period between the execution of the Merger Agreement and the consummation of the Merger. The obligations of Parent and Merger Sub to consummate the Merger are not subject to any financing condition or the receipt of any financing by Parent or Merger Sub.

The consummation of the Merger is conditioned on the consummation of the Separation and the Distribution, as well as certain customary closing conditions, including, among others, approval of the Merger by the affirmative vote of the stockholders entitled to cast a majority of all the votes entitled to be cast on the Merger by the holders of issued and outstanding Company Common Stock (the “Company Requisite Vote”). The Merger Agreement requires the Company to convene a stockholders’ meeting for purposes of obtaining the Company Requisite Vote.

The Company has agreed not to solicit or enter into an agreement regarding a Company Takeover Proposal (as defined in the Merger Agreement), and, subject to certain exceptions, is not permitted to enter into discussions or negotiations concerning, or provide information to a third party in connection with, any Company Takeover Proposal. However, the Company may, prior to obtaining the Company Requisite Vote, engage in discussions or negotiations and provide information to a third party which has made an unsolicited bona fide written Company Takeover Proposal that did not result from a breach of the non-solicit provisions of the Merger Agreement if the Board determines in good faith, after consultation with its independent financial advisors and outside legal counsel, that such Company Takeover Proposal constitutes or could reasonably be expected to lead to a Company Superior Proposal (as defined in the Merger Agreement).

Prior to the time the Company Requisite Vote is obtained, the Board may, in certain circumstances, effect a Company Adverse Recommendation Change (as defined in the Merger Agreement), subject to complying with specified notice and other conditions set forth in the Merger Agreement.

The Merger Agreement may be terminated under certain circumstances by the Company, including prior to obtaining the Company Requisite Vote, if, after following certain procedures and adhering to certain restrictions, the Board effects a Company Adverse Recommendation Change in connection with a Company Superior Proposal and the Company enters into a definitive agreement providing for the implementation of a Company Superior Proposal. In addition, Parent may terminate the Merger Agreement under certain circumstances and subject to certain restrictions, including if the Board effects a Company Adverse Recommendation Change. The Merger Agreement also may be terminated by either the Company or Parent if the Merger has not been completed on or prior to the date that is nine months after the date of the Merger Agreement, which date may be extended to complete the Separation and the Distribution, by the Company, up to the date that is ten months after the date of the Merger Agreement, or by Parent, up to the date that is twelve months after the date of the Merger Agreement.

Upon a termination of the Merger Agreement, under certain circumstances, the Company will be required to pay a termination fee to Parent of $60 million. Upon termination of the Merger Agreement in certain other circumstances, Parent will be required to pay the Company a termination fee of $200 million.

The foregoing description of the Merger Agreement is only a summary, does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is filed as Exhibit 2.1 to our current report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on December 21, 2021, and is incorporated herein by reference.

Table of Contents

Significant Developments

Acquisitions of and Investments in Real Estate

During the year ended December 31, 2021, we acquired one multifamily operating property representing 276 units and eighteen operating portfolios of single-family residential homes representing an aggregate of 1,613 homes, for total purchase prices of $336.9 million.

Additionally, we entered into sixteen preferred equity investments in both multifamily apartment communities and single-family residential homes, committing $186.2 million, of which $97.6 million was funded (which includes the full funding of seven investments for $68.3 million), during the period.

We made mortgage loan investments in two portfolios of single-family residential homes amounting to $9.9 million.

In addition to the investments summarized in the tables below, we increased our mezzanine loan investments in Avondale Hills, Domain at The One Forty, Motif, Reunion Apartments and Vickers Historic Roswell by approximately $24.1 million in aggregate, increased our preferred equity investments in Alexan CityCentre, Chandler, The Conley and Thornton Flats by approximately $7.5 million in aggregate, and provided increased funding for the Zoey Ground Lease of approximately $8.3 million.

Table of Contents

The following is a summary of our real estate investments made during the year ended December 31, 2021 (dollars in millions):

Number of

Ownership

Purchase

Name - Operating

Location / Market

Date of Investment

Units / Homes

Interest

Price

Multifamily

Windsor Falls

Raleigh, NC

June 17, 2021

Single-Family Residential (1)

Yauger Park Villas

Olympia, WA

April 14, 2021

Wayford at Concord (2)

Concord, NC

June 4, 2021

Indy

Indianapolis, IN

August 12, 2021

Springfield

Springfield, MO

August 18, 2021

Springtown

Springtown, TX

September 15, 2021

Texarkana

Texarkana, TX

September 21, 2021

Lubbock

Lubbock, TX

September 24, 2021

Granbury

Granbury, TX

September 30, 2021

ILE

October 4, 2021

Axelrod

Garland, TX

October 5, 2021

Springtown 2.0

Springtown, TX

October 26, 2021

Lubbock 2.0

Lubbock, TX

October 28, 2021

Lynnwood

Lubbock, TX

November 16, 2021

Golden Pacific

November 23, 2021

Lynnwood 2.0

Lubbock, TX

December 1, 2021

Lubbock 3.0

Lubbock, TX

December 8, 2021

Texas Portfolio 183

Various / TX

December 22, 2021

DFW 189

Dallas-Fort Worth, TX

December 29, 2021

Total Operating

Actual/Planned

Number of

Commitment

Investment

Name - Preferred Equity

Location / Market

Date of Investment

Units / Homes

Amount

Amount

Multifamily

The Riley

Richardson, TX

March 1, 2021

The Reserve at Palmer Ranch (3)

Sarasota, FL

June 10, 2021

Deerwood Apartments

Houston, TX

June 16, 2021

Deercross

Indianapolis, IN

June 25, 2021

Spring Parc

Dallas, TX

July 13, 2021

The Crossings of Dawsonville

Dawsonville, GA

July 14, 2021

Lower Broadway

San Antonio, TX

July 15, 2021

Orange City Apartments

Orange City, FL

July 26, 2021

Renew 3030

Mesa, AZ

August 31, 2021

Single-Family Residential (1)

Peak Housing (4)

April 12, 2021 (5)

Wayford at Innovation Park

Charlotte, NC

June 17, 2021

Willow Park

Willow Park, TX

June 17, 2021

The Cottages of Port St. Lucie

Port St. Lucie, FL

August 26, 2021

The Cottages at Myrtle Beach

Myrtle Beach, SC

September 9, 2021

The Cottages at Warner Robins

Warner Robins, GA

December 8, 2021

The Woods at Forest Hill

Forest Hill, TX

December 20, 2021

Total Preferred Equity

Number of

Commitment

Investment

Name - Mortgage Loan

Market

Date of Investment

Homes

Amount

Amount

Single-Family Residential

Corpus (6)

Corpus Christi, TX

July 9, 2021

Jolin (6)

Weatherford, TX

August 6, 2021

Total Mortgage Loan

Total

Single-Family Residential includes single-family residential homes and attached townhomes/flats.

We purchased the Wayford at Concord property from our unaffiliated joint venture partner, and as part of the transaction, our preferred equity investment was redeemed.

We sold The Reserve at Palmer Ranch to our unaffiliated joint venture partner, and as part of the sale, we simultaneously made a preferred equity investment in the property as part of the Strategic Portfolio.

Table of Contents

Peak Housing consists of our preferred equity investments in a private single-family home REIT. Unit count excludes consolidated operating investment units which are presented separately.

The date of investment represents the initial investment of $10.7 million. There were additional investments of $9.6 million through December 31, 2021.

We recapitalized Corpus and Jolin on December 22, 2021 and received full payoffs of the loans. As part of the recapitalization, both Corpus and Jolin, along with two portfolios of homes previously owned solely by our joint venture partner, were combined into one portfolio known as Texas Portfolio 183.

Sale of Real Estate Assets and Investments

We sold seven operating properties for net proceeds of $189.3 million. Additionally, seven of the properties underlying our preferred equity investments were redeemed for net proceeds of $48.1 million, of which $0.3 million is to be received subsequent to December 31, 2021. We also received mezzanine loan payoffs of approximately $22.8 million from the sale of one property and the recapitalization of two portfolios.

The following is a summary of our real estate sales, mezzanine loan payoffs and redemption of preferred equity investments during the year ended December 31, 2021 (dollars in millions):

Number of

Ownership

Sale

BRG Net

Property

Location

Date Sold

Units

Interest

Price

Proceeds

Operating

ARIUM Grandewood

Orlando, FL

January 28, 2021

James at South First

Austin, TX

February 24, 2021

Marquis at The Cascades

Tyler, TX

March 1, 2021

Plantation Park

Lake Jackson, TX

April 26, 2021

The Reserve at Palmer Ranch (1)

Sarasota, FL

June 10, 2021

Park & Kingston

Charlotte, NC

July 7, 2021

The District at Scottsdale

Scottsdale, AZ

July 7, 2021

Total Operating

Mezzanine Loan

Vickers Historic Roswell

Roswell, GA

June 29, 2021

Corpus (2)

Corpus Christi, TX

December 22, 2021

Jolin (2)

Weatherford, TX

December 22, 2021

Total Mezzanine Loan

Preferred Equity

The Conley

Leander, TX

March 18, 2021

Alexan Southside Place

Houston, TX

March 25, 2021

Wayford at Concord (3)

Concord, NC

June 4, 2021

Mira Vista

Austin, TX

September 23, 2021

Thornton Flats

Austin, TX

December 14, 2021

Belmont Crossing

Smyrna, GA

December 29, 2021

Sierra Terrace

Atlanta, GA

December 29, 2021

Sierra Village

Atlanta, GA

December 29, 2021

Total Preferred Equity

Total

We sold The Reserve at Palmer Ranch to our unaffiliated joint venture partner, and as part of the sale, we simultaneously made a preferred equity investment in the property as part of the Strategic Portfolio.

We recapitalized Corpus and Jolin on December 22, 2021 and received full payoffs for the loans. As part of the recapitalization, both Corpus and Jolin, along with two portfolios of homes previously owned solely by our joint venture partner, were combined into one portfolio known as Texas Portfolio 183.

Table of Contents

We purchased the Wayford at Concord property from our unaffiliated joint venture partner, and as part of the transaction, our preferred equity investment was redeemed.

Series T Preferred Stock Continuous Offering

During the year ended December 31, 2021, we issued 18,535,916 shares of Series T Preferred Stock under a continuous registered offering with net proceeds of approximately $417.1 million after commissions, dealer manager fees and discounts of approximately $46.3 million.

Redemption of 8.250% Series A Cumulative Redeemable Preferred Stock

On February 26, 2021, we redeemed all 2,201,547 outstanding shares of our Series A Preferred Stock at a redemption price of $25.00 per share, plus accrued and unpaid dividends up to, and including, the date of redemption in an amount equal to $0.320833 per share, for a total payment of $25.320833 per share, in cash.

Redemptions of Series B Redeemable Preferred Stock

During the year ended December 31, 2021, we redeemed 154,060 shares of Series B Preferred Stock through the issuance of 14,876,516 shares of Class A common stock.

In December 2019, our Board authorized the repurchase of up to an aggregate of $50 million of our outstanding shares of Class A common stock over a period of one year pursuant to stock repurchase plans. On May 9, 2020, our Board authorized the modification of the stock repurchase plans to provide for the repurchase, from time to time, of up to an aggregate of $50 million in shares of its Class A common stock, 8.250% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share (“Series A Preferred Stock”), 7.625% Series C Cumulative Redeemable Preferred Stock, $0.01 par value per share (“Series C Preferred Stock”), and/or 7.125% Series D Cumulative Preferred Stock, $0.01 par value per share (“Series D Preferred Stock”). On October 29, 2020, our Board authorized new stock repurchase plans for the repurchase, from time to time, of up to an aggregate of $75 million in shares of the Company’s Class A common stock, Series A Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock to be conducted in accordance with Rules 10b5-1 and 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). On February 9, 2021, our Board authorized the modification of the stock repurchase plans to provide for the repurchase, from time to time, of up to an aggregate of $150 million in shares of our Class A common stock, Series C Preferred Stock and/or Series D Preferred Stock. The repurchase plans terminated at the close of the NYSE American trading day on November 8, 2021 (the date on which we filed our Form 10-Q with the SEC for the quarter ended September 30, 2021). The extent to which we repurchased shares of our Class A common stock, Series A Preferred Stock, Series C Preferred Stock, and/or Series D Preferred Stock under the repurchase plans, and the timing of any such repurchases, depended on a variety of factors including general business and market conditions and other corporate considerations. Stock repurchases under the repurchase plans were made in the open market or through privately negotiated transactions, subject to certain price limitations and other conditions established under the plans. Open market repurchases were structured to occur in conformity with the method, timing, price and volume requirements of Rule 10b-18 of the Exchange Act.

During the year ended December 31, 2021, we repurchased 11,140,637 shares of Class A common stock under the repurchase plans for a total purchase price of approximately $119.6 million. During the year ended December 31, 2020, we repurchased shares under the repurchase plans as follows: 3,983,842 shares of Class A common stock, 163,068 shares of Series A Preferred Stock, 27,905 shares of Series C Preferred Stock and 76,264 shares of Series D Preferred Stock for a total purchase price of approximately $46.4 million. During the life of all repurchase plans, the total purchase price of shares we repurchased is approximately $189.1 million.

Our total stockholders’ equity increased $25.5 million from $58.4 million as of December 31, 2020 to $83.9 million as of December 31, 2021. The increase in our total stockholders’ equity is primarily attributable to the issuance of shares of Class A common stock for the redemptions of shares of Series B Preferred Stock of $154.0 million (of which, $150.7 million relates to Company-initiated redemptions) and net income of $91.7 million, offset by dividends declared of $81.0 million, the repurchase of shares of Class A common stock of $119.6 million and preferred stock accretion of $24.6 million during the year ended December 31, 2021.

Table of Contents

COVID-19

We continue to monitor the impact of the ongoing COVID-19 pandemic on all aspects of our business, apartment communities, and single-family residential homes including how it will impact our tenants and business partners. While, consistent with prior quarters, we did not incur any significant impact on our performance during the three months ended December 31, 2021 from the COVID-19 pandemic, going forward we cannot predict the impact that the COVID-19 pandemic will have on our financial condition, results of operations and cash flows due to the numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others. The outbreak of COVID-19 across the globe, including the United States, has significantly and adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak evolved rapidly and, as cases of COVID-19 and new variants thereof have continued to be identified, many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. Certain states and cities, including where we own communities, have developments and where our Company has places of business located, have also reacted by instituting quarantines, restrictions on travel, “stay-at-home” orders, restrictions on types of business that may continue to operate, and/or restrictions on the types of construction projects that may continue. While many of these measures have been lifted, additional cases of COVID-19 and new variants thereof have resulted in, and may continue to result in, governments reinstating these or similar measures. We cannot predict if additional states and cities will implement similar restrictions or when restrictions currently in place will expire. Further, while vaccines have been developed and are being administered, it is unclear when or if vaccines may allow a return to full pre-pandemic activity levels. While some operations have been allowed to fully or partially re-open, the long-term impact of COVID-19 on the United States and world economies remains uncertain and may continue to adversely impact the global economy, the duration and scope of which cannot currently be predicted. As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly, including industries in which our tenants are employed. Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spending as well as other unanticipated consequences remain unknown. We also are unable to predict the impact that COVID-19 will have on our tenants, business partners within our network, and our service providers; and therefore, any material effect on these parties could adversely impact us.

As of December 31, 2021, we collected 97% of rents from our properties for the three months ended December 31, 2021. As of January 31, 2022, we collected 97% of January rents from our properties. In 2020, we had provided rent deferral payment plans as a result of hardships certain tenants experienced due to the impact of COVID-19; for the year ended December 31, 2021, the Company did not provide rent deferral payment plans, compared to the onset of the COVID-19 pandemic (quarter ended June 30, 2020) in which 1% of our tenant base was on payment plans. Although we may receive tenant requests for rent deferrals in the coming months, we do not expect to waive our contractual rights under our lease agreements. Further, while occupancy remains strong at 95.9% and 95.8% as of December 31, 2021 and January 31, 2022, respectively, in future periods, we may experience reduced levels of tenant retention, and reduced foot traffic and lease applications from prospective tenants, as a result of the impact of COVID-19.

The impact of the ongoing COVID-19 pandemic on our rental revenue for 2022 and thereafter cannot be determined at present. The situation surrounding the COVID-19 pandemic remains uncertain, and we continue to actively manage our response in collaboration with business partners in our network and service providers, and to assess potential impacts to our financial position and operating results, as well as potential adverse developments in our business. While we expect COVID-19 may continue to adversely impact our tenants, we believe the knowledge economy renter by choice targeted by our Class A affordable rent strategy should be less impacted by COVID-19 related job loss, which should provide a downside buffer in the interim and allow us to reaccelerate rent growth more quickly once more economic certainty exists around the COVID-19 pandemic.

Since the beginning of the COVID-19 pandemic, we have taken actions to prioritize the health and well-being of our tenants and our employees, while maintaining our high standard of service. As of December 31, 2021, all our properties are open and are complying with federal, state and local government orders. In keeping with such orders, we have implemented, and will continue to implement, operational changes, including the adoption of social distancing practices, additional use of PPE equipment and a virtual leasing/virtual office structure. Our property offices are now open to the public and to residents by appointment and with strict social distancing protocols in place. Work orders are now being completed, also with strict safety protocols in place including PPE equipment and a safety questionnaire of each resident at time of request. Generally, the outdoor amenity areas at our communities, including pools, pet parks, and outdoor social areas, have re-opened with strict social distancing protocols, limited capacity and cleaning protocols implemented. Our properties continue the cleaning protocols for the sanitization of all community common areas (including handrails, doors and elevators).

Table of Contents

In response to shelter-in-place orders, our corporate offices have also transitioned to a remote work environment. There can be no assurances that the continuation of such remote work arrangements for an extended period of time will not strain our business continuity plans, introduce operational risk, including cybersecurity risks, or impair our ability to manage our business.

Industry Outlook

Single-family residential

The single-family rental industry has historically been more resilient to economic cycles than the multi-family sector and is currently benefiting from significant industry tailwinds that have accelerated during the pandemic. We believe industry dynamics present a compelling investment opportunity for us, including:

Supply at accessible price points remains extremely tight, with little new affordable rental product coming on-line over the last decade. These supply and affordability gaps have been in place and intensifying since the wind-down of the Great Recession, with rental prices continuing to increase in step with home price appreciation.

Limited institutional ownership of single-family rental stock, currently estimated to be approximately 2%, creates potential for outsized growth. Our institutionally operated properties benefit from experienced regional owner-operators and a technology-aided platform, delivering not only a competitive market advantage but also operating growth potential that can benefit investors.

Demand fundamentals are strong and strengthening further, particularly from rental-biased and debt-burdened millennials now reaching peak single-family house consumption age. We believe that a continued upswing in propensity to rent, coupled with the limited and depleting supply at the middle-income range, signals significant opportunity.

Multifamily communities

We believe that the apartment sector will continue to deliver attractive performance for the foreseeable future due to favorable underlying demographics and supply and demand fundamentals.

Large demographic trends, including the Millennial generation of 90 million entering prime rental age through 2030, followed by the Gen-Z generation of 82 million, are projected to form more households than the Baby Boomer and the Gen-X generations, which should drive significant renter demand over the coming decades. As one data point, new research from the National Multifamily Housing Council (the “NMHC”) indicates that approximately 4.6 million new rental units will be needed to meet projected demand by 2030, and that current construction trends indicate that only 3 million new units will be delivered.

We believe that a significant amount of institutional capital and public REITs are primarily focused on investing in the big six Gateway Markets of Boston, New York, Washington, D.C., Seattle, San Francisco, and Los Angeles, and that many other primary markets are underinvested by institutional/public capital. As a result, we believe that our target “next generation, knowledge economy” markets, which are primary markets below the “big six,” provide the opportunity to source investments at cap rates that have the potential to provide not only significant current income, but also attractive capital appreciation.

Further, given that a significant portion of the nation’s apartment stock was built prior to 1980, we believe that a number of our target markets are underserved by institutional quality highly amenitized live/work/play apartment properties desired by Millennials as they continue to move into their prime rental years. We also believe that rising construction costs will continue to limit supply in the near to intermediate term, and as such, there is opportunity in our target markets for development and/or redevelopment to deliver institutional quality highly amenitized live/work/play product and capture premium rental rates and generate value.

Results of Operations

Note 3, “Sale of Real Estate Assets”; Note 4, “Investments in Real Estate”; Note 5, “Acquisition of Real Estate”; Note 6, “Notes and Interest Receivable”; and Note 7, “Preferred Equity Investments and Investments in Unconsolidated Real Estate Joint Ventures,” to our Consolidated Financial Statements provide discussion of the various purchases and sales of properties and joint venture equity interests. These transactions have resulted in material changes to the presentation of our financial statements.

Table of Contents

The following is a summary of our stabilized consolidated operating real estate investments as of December 31, 2021:

Year

Number

Ownership

Occupancy

Name

Built/Renovated (1)

of Units

Interest

Multifamily

ARIUM Glenridge

ARIUM Westside

Ashford Belmar

Avenue 25

Burano Hunter’s Creek, formerly ARIUM Hunter’s Creek

Carrington at Perimeter Park

Chattahoochee Ridge

Chevy Chase

Cielo on Gilbert

Citrus Tower

Denim

Elan

Element

Falls at Forsyth

Gulfshore Apartment Homes

Outlook at Greystone

Pine Lakes Preserve

Providence Trail

Roswell City Walk

Sands Parc

The Brodie

The Debra Metrowest, formerly ARIUM Metrowest

The Links at Plum Creek

The Mills

The Preserve at Henderson Beach

The Sanctuary

Veranda at Centerfield

Villages of Cypress Creek

Wesley Village

Windsor Falls

Total Multifamily Units

Average Year

Single-Family Residential (3)

Built

Golden Pacific

ILE

Navigator Villas

Peak

Axelrod

DFW 189

Granbury

Indy

Lubbock

Lubbock 2.0

Lubbock 3.0

Lynnwood

Lynnwood 2.0

Springfield

Springtown

Springtown 2.0

Texarkana

Texas Portfolio 183

Wayford at Concord

Yauger Park Villas

Total Single-Family Units

Total Units/Average

Represents date of most recent significant renovation or date built if no renovations.

Percent occupied is calculated as (i) the number of units occupied as of December 31, 2021 divided by (ii) total number of units, expressed as a percentage.

Single-Family Residential includes single-family residential homes and attached townhomes/flats.

Excludes 50 down units under renovation.

Table of Contents

Year ended December 31, 2021 as compared to the year ended December 31, 2020

Revenue

Rental and other property revenues increased $7.2 million, or 4%, to $203.7 million for the year ended December 31, 2021 as compared to $196.5 million for the same prior year period. This was due to a $28.0 million increase from the acquisition of nineteen investments in 2021 and the full year impact of six investments acquired in 2020, and a $10.1 million increase from same store properties, partially offset by a $30.9 million decrease driven by the sales of seven investments in 2021 and the full period impact of four investments sold in 2020. See Item 1. Business “Summary of Investments and Dispositions”.

Interest income from mezzanine loan and ground lease investments decreased $6.3 million, or 27%, to $17.0 million for the year ended December 31, 2021 as compared to $23.3 million for the same prior year period primarily due to sales of three underlying investments in 2021 and 2020 and decreases in interest rates in 2021, partially offset by increases in the average outstanding balance of mezzanine loans in 2021.

Expenses

Property operating expenses decreased $0.3 million, or 0.4%, to $76.0 million for the year ended December 31, 2021 as compared to $76.3 million for the same prior year period. This was primarily due to a $13.0 million decrease from sold investments, partially offset by a $10.5 million increase from the acquisition of investments in 2021 and 2020 and a $2.2 million increase from same store properties. Property NOI margins increased to 62.7% of total revenues for the year ended December 31, 2021, from 61.2% in the prior year period. Property NOI margins are computed as total property revenues less property operating expenses, divided by total property revenues.

Property management fees expense increased $0.4 million, or 8%, to $5.4 million for the year ended December 31, 2021 as compared to $5.0 million in the same prior year period. Property management fees incurred are based on property level revenues; an increase in property management fees was due to the increase in rental and other property revenues.

General and administrative expenses increased $3.7 million, or 15%, to $27.8 million for the year ended December 31, 2021 as compared to $24.1 million for the same prior year period.

Acquisition and pursuit costs amounted to $0.4 million for the year ended December 31, 2021 as compared to $4.2 million for the same prior year period. The 2020 expense primarily related to the write-off of pre-acquisition costs from abandoned deals due to the uncertainty from COVID-19, of which $3.3 million of the total costs related to two abandoned deals. Abandoned pursuit costs can vary greatly, and the costs incurred in any given period may be significantly different in future periods.

Weather-related losses, net amounted to $1.0 million for the year ended December 31, 2021. The 2021 expense related to freeze damages at eight properties in Texas and storm damages to two properties in Arizona and one property in Florida. No weather-related losses were recorded in 2020.

Depreciation and amortization expenses increased $0.6 million, or 1%, to $80.1 million for the year ended December 31, 2021 as compared to $79.5 million for the same prior year period. This was due to a $12.2 million increase from the acquisition of investments in 2021 and 2020 and a $0.4 million increase from same store properties, partially offset by a $12.0 million decrease driven by the sales of investments in 2021 and 2020.

Other Income and Expense

Other income and expense amounted to net income of $75.2 million for the year ended December 31, 2021 compared to net expense of $16.1 million for the same prior year period. This was primarily due to an increase in gains on sale of real estate investments of $77.9 million, a decrease in allowance for credit losses of $16.0 million, a decrease in loss on early extinguishment of debt of $7.9 million, and a $3.3 million net decrease in interest expense. This was partially offset by an increase in Merger transaction costs of $15.0 million. In addition, the Company recorded a $16.4 million provision for credit losses in the fourth quarter 2020; the provision for credit losses primarily related to a decline in the collectability of the Alexan Southside preferred equity investment since the onset of COVID-19 and its impact on the value of the property.

Table of Contents

Year ended December 31, 2020 as compared to the year ended December 31, 2019

Revenue

Rental and other property revenues increased $11.1 million, or 6%, to $196.5 million for the year ended December 31, 2020 as compared to $185.4 million for the same prior year period. This was due to a $36.2 million increase from the acquisition of six properties in 2020 and the full year impact of eight properties acquired in 2019, and a $1.3 million increase from same store properties, partially offset by a $26.4 million decrease driven by the sales of four properties in 2020 and the full period impact of six properties sold in 2019. See Item 1. Business “Summary of Investments and Dispositions”.

Interest income from mezzanine loan and ground lease investments decreased $1.3 million, or 5%, to $23.3 million for the year ended December 31, 2020 as compared to $24.6 million for the same prior year period primarily due to the consolidation of Cade Boca Raton and a decreased interest rate at Domain at The One Forty, partially offset by increases in the average balance of mezzanine loans outstanding.

Expenses

Property operating expenses increased $1.9 million, or 2%, to $76.3 million for the year ended December 31, 2020 as compared to $74.4 million for the same prior year period. This was due to a $13.2 million increase from the acquisition of properties in 2020 and 2019, and a $1.1 million increase from same store properties, partially offset by a $12.4 million decrease driven by the sales of properties in 2020 and 2019. Property NOI margins increased to 61.2% of total revenues for the year ended December 31, 2020, from 59.8% in the prior year period. Property NOI margins are computed as total property revenues less property operating expenses, divided by total property revenues.

Property management fees expense increased $0.1 million, or 2%, to $5.0 million for the year ended December 31, 2020 as compared to $4.9 million in the same prior year period. Property management fees incurred are based on property level revenues; an increase in property management fees was due to the increase in rental and other property revenues.

General and administrative expenses increased $1.5 million, or 7%, to $24.1 million for the year ended December 31, 2020 as compared to $22.6 million for the same prior year period.

Acquisition and pursuit costs amounted to $4.2 million for the year ended December 31, 2020 as compared to $0.6 million for the same prior year period. Acquisition and pursuit costs incurred for the year ended December 31, 2020 were primarily related to the write-off of pre-acquisition costs from abandoned deals due to the uncertainty from COVID-19, of which $3.3 million of the total costs related to two abandoned deals. Abandoned pursuit costs can vary greatly, and the costs incurred in any given period may be significantly different in future periods.

Weather-related losses, net amounted to $0.4 million for the year ended December 31, 2019. The 2019 expense primarily related to hail damage at one property in Texas and lightning damage at one property in Florida, partially offset by insurance reimbursements related to prior year storms. No weather-related losses were recorded in 2020.

Depreciation and amortization expenses increased to $79.5 million for the year ended December 31, 2020 as compared to $70.5 million for the same prior year period. This was due to a $16.6 million increase from the acquisition of properties in 2020 and 2019 and a $0.7 million increase from same store properties, partially offset by a $8.3 million decrease driven by the sales of properties in 2020 and 2019.

Other Income and Expense

Other income and expense amounted to net expense of $16.1 million for the year ended December 31, 2020 as compared to net expense of $7.6 million for the same prior year period. This was primarily due to an allowance for credit losses of $16.4 million in 2020 combined with an increase in loss from extinguishment of debt of $7.4 million. This was partially offset by an increase in gains on sale of real estate investments of $10.1 million, increase in preferred returns on unconsolidated real estate joint ventures of $1.5 million and a decrease of $3.6 million in interest expense. The Company recorded a $16.4 million provision for credit losses in the fourth quarter of 2020. The provision for credit losses primarily related to a decline in the collectability of the Alexan Southside preferred equity investment since the onset of COVID-19 and its impact on the value of the property.

Table of Contents

Property Operations

We define “same store” properties as those that we owned and operated for the entirety of both periods being compared, except for properties that are in the construction or lease-up phases, or properties that are undergoing development or significant redevelopment, or properties held for sale. We move properties previously excluded from our same store portfolio for these reasons into the same store designation once they have stabilized or the development or redevelopment is complete and such status has been reflected fully in all quarters during the applicable periods of comparison. For newly constructed or lease-up properties or properties undergoing significant redevelopment, we consider a property stabilized upon attainment of 90.0% physical occupancy.

For comparison of our three months ended December 31, 2021 and 2020, the same store properties included properties owned at October 1, 2020. Our same store properties for the three months ended December 31, 2021 and 2020 consisted of 27 properties, representing 9,558 units.

For comparison of our twelve months ended December 31, 2021 and 2020, the same store properties included properties owned at January 1, 2020. Our same store properties for the twelve months ended December 31, 2021 and 2020 consisted of 24 properties, representing 8,628 units.

Because of the limited number of same store properties as compared to the number of properties in our portfolio in 2021 and 2020, respectively, our same store performance measures may be of limited usefulness.

The following table presents the same store and non-same store results from operations for the three months ended December 31, 2021 and 2020 (dollars in thousands):

Three Months Ended

December 31,

Change

Property Revenues

Same Store

Non-Same Store

Total property revenues

Property Expenses

Same Store

Non-Same Store

Total property expenses

Same Store NOI

Non-Same Store NOI

Total NOI (1)

See “Net Operating Income” below for a reconciliation of Same Store NOI, Non-Same Store NOI and Total NOI to net income (loss) and a discussion of how management uses this non-GAAP financial measure.

Table of Contents

The following table presents the same store and non-same store results from operations for the years ended December 31, 2021 and 2020 (dollars in thousands):

Year Ended

December 31,

Change

Property Revenues

Same Store

Non-Same Store

Total property revenues

Property Expenses

Same Store

Non-Same Store

Total property expenses

Same Store NOI

Non-Same Store NOI

Total NOI (1)

See “Net Operating Income” below for a reconciliation of Same Store NOI, Non-Same Store NOI and Total NOI to net income (loss) and a discussion of how management uses this non-GAAP financial measure.

Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020

Same store NOI for the three months ended December 31, 2021 increased 19.7%, or $4.8 million, compared to the 2020 period. Same store property revenues increased 12.0%, or $4.7 million, as compared to the 2020 period, primarily attributable to a 10.5% increase in average rental rates and a 70-basis point increase in occupancy. Of our twenty-seven same store properties, all twenty-seven recognized rental rate increases and fifteen recognized increases in occupancy during the period. In addition, ancillary income, such as termination fees, late fees, and pet fees, increased $0.4 million and bad debt decreased $0.2 million.

Same store expenses for the three months ended December 31, 2021 decreased 0.5%, or $0.08 million, compared to the 2020 period. The decrease was partially due to non-controllable expenses; real estate taxes decreased due to a $0.5 million credit in the current year offset by a $0.2 million increase in insurance due to industrywide multifamily price increases. The remaining increase was due to controllable expenses; $0.2 million increase in utilities, $0.2 million increase in payroll related expenses, $0.06 million increase in seasonal maintenance, offset by a $0.24 million decrease in turnover costs.

Non-same store property revenues and property expenses for the three months ended December 31, 2021 decreased $1.5 million and $0.8 million, respectively, compared to the 2020 period due to the timing and volume of operating property transactions. We acquired twenty-two operating investments representing 2,857 units, of which ten operating investments were acquired during the three months ended December 31, 2021 and have a partial period of operations, and we sold eight operating investments representing 2,286 units since October 1, 2020.

Twelve Months Ended December 31, 2021 Compared to Twelve Months Ended December 31, 2020

Same store NOI for the twelve months ended December 31, 2021 increased 8.9%, or $7.9 million, compared to the 2020 period. Same store property revenues increased 7.1%, or $10.1 million, as compared to the 2020 period, primarily attributable to a 5.3% increase in average rental rates and an 80-basis point increase in occupancy. Of our twenty-four same store properties, all twenty-four recognized increases in rental rates and eighteen recognized increases in occupancy during the period. In addition, ancillary income, such as termination fees, late fees, and pet fees, increased $1.3 million and bad debt decreased $0.7 million.

Table of Contents

Same store expenses for the twelve months ended December 31, 2021 increased 4.1%, or $2.2 million, compared to the 2020 period. The increase was primarily due to non-controllable expenses; insurance increased $0.6 million due to industrywide multifamily price increases and real estate taxes increased $0.3 million due to municipality tax increases. The remaining increase was due to the following increases: $0.45 million in repairs and maintenance, $0.44 million in administrative costs, $0.2 million in marketing, and $0.2 million in payroll related expenses.

Non-same store property revenues and property expenses for the twelve months ended December 31, 2021 decreased $3.0 million and $2.5 million, respectively, compared to the 2020 period due to the timing and volume of operating property transactions. We acquired twenty-five operating investments representing 3,787 units, of which nineteen operating investments were acquired during the year ended December 31, 2021 and have a partial period of operations, and we sold eleven operating investments representing 3,118 units since January 1, 2020.

Prior year’s comparisons

For comparison of our three months ended December 31, 2020 and 2019, the same store properties included properties owned at October 1, 2019. Our same store properties for the three months ended December 31, 2020 and 2019 consisted of 28 properties, representing 9,958 units.

For comparison of our twelve months ended December 31, 2020 and 2019, the same store properties included properties owned at January 1, 2019. Our same store properties for the twelve months ended December 31, 2020 and 2019 consisted of 24 properties, representing 8,459 units.

Because of the limited number of same store properties as compared to the number of properties in our portfolio in 2020 and 2019, respectively, our same store performance measures may be of limited usefulness.

The following table presents the same store and non-same store results from operations for the three months ended December 31, 2020 and 2019 (dollars in thousands):

Three Months Ended

December 31,

Change

Property Revenues

Same Store

Non-Same Store

Total property revenues

Property Expenses

Same Store

Non-Same Store

Total property expenses

Same Store NOI

Non-Same Store NOI

Total NOI (1)

See “Net Operating Income” below for a reconciliation of Same Store NOI, Non-Same Store NOI and Total NOI to net income (loss) and a discussion of how management uses this non-GAAP financial measure.

Table of Contents

The following table presents the same store and non-same store results from operations for the years ended December 31, 2020 and 2019 (dollars in thousands):

Year Ended

December 31,

Change

Property Revenues

Same Store

Non-Same Store

Total property revenues

Property Expenses

Same Store

Non-Same Store

Total property expenses

Same Store NOI

Non-Same Store NOI

Total NOI (1)

See “Net Operating Income” below for a reconciliation of Same Store NOI, Non-Same Store NOI and Total NOI to net income (loss) and a discussion of how management uses this non-GAAP financial measure.

Three Months Ended December 31, 2020 Compared to Three Months Ended December 31, 2019

Same store NOI for the three months ended December 31, 2020 increased 0.2%, or $0.06 million, compared to the 2019 period. Same store property revenues increased 0.6%, or $0.2 million, as compared to the 2019 period, primarily attributable to a 140 basis point increase in occupancy and a 0.2% increase in average rental rates; of our twenty-eight same store properties, twenty-two recognized occupancy increases and fifteen recognized rental rate increases during the period. This increase in revenue was partially offset by a $0.3 million increase in bad debt expense due to the impact of COVID-19.

Same store expenses for the three months ended December 31, 2020 increased 1.1%, or $0.2 million, compared to the 2019 period. The increase was primarily due to the timing of repairs and maintenance expense in 2020. Non-controllable expenses were essentially flat compared to the 2019 period; insurance expenses increased $0.16 million due to industrywide multifamily price increases offset by a $0.19 million decrease in real estate taxes. Real estate tax decrease was due to a $0.35 million credit in the current year offset by $0.16 million of municipality tax increases.

Property revenues and property expenses for our non-same store properties increased due to our investment activity since October 1, 2019: the acquisition of six properties in 2020 and the full period impact of four properties acquired in 2019, partially offset by the sale of four properties in 2020. The results of operations for acquired properties have been included in our consolidated statements of operations from the date of acquisition and the results of operations for disposed properties have been excluded from the consolidated statements of operations since the date of disposition.

Twelve Months Ended December 31, 2020 Compared to Twelve Months Ended December 31, 2019

Same store NOI for the twelve months ended December 31, 2020 increased 0.3%, or $0.2 million, compared to the 2019 period. Same store property revenues increased 0.9% as compared to the 2019 period, primarily attributable to a 90-basis point increase in average occupancy and a 1.2% increase in average rental rates; of our twenty-four same store properties, seventeen recognized occupancy increases and sixteen recognized rental rate increases during the period. The increases were partially offset by a $0.95 million increase in bad debt expense and $0.37 million less ancillary income, such as termination fees and late fees, due to the impact of COVID-19.

Table of Contents

Same store expenses for the twelve months ended December 31, 2020 increased 1.9%, or $1.06 million, compared to the 2019 period. The expense increase was primarily due to non-controllable expenses; insurance expenses increased $0.7 million due to industrywide multifamily price increases and real estate taxes increased $0.6 million from prior year due to municipality tax increases. The increases were partially offset by a $0.3 million decrease in discretionary expenses, such as seasonal maintenance, resident functions, and travel due to COVID-19.

Property revenues and property expenses for our non-same store properties increased due to our investment activity since January 1, 2019: the acquisition of six properties in 2020 and the full period impact of eight properties acquired in 2019, partially offset by the sale of four properties in 2020 and the full period impact of six properties sold in 2019. The results of operations for acquired properties have been included in our consolidated statements of operations from the date of acquisition and the results of operations for disposed properties have been excluded from the consolidated statements of operations since the date of disposition.

Net Operating Income

We believe that net operating income (“NOI”) is a useful measure of our operating performance. We define NOI as total property revenues less total property operating expenses, excluding depreciation and amortization and interest. Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs. NOI also is a computation made by analysts and investors to measure a real estate company’s operating performance.

We believe that this measure provides an operating perspective not immediately apparent from GAAP operating income or net income. We use NOI to evaluate our performance on a same store and non-same store basis; NOI allows us to evaluate the operating performance of our properties because it measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance and captures trends in rental housing and property operating expenses.

Table of Contents

However, NOI should only be used as a supplemental measure of our financial performance. The following table reflects net income (loss) attributable to common stockholders together with a reconciliation to NOI and to same store and non-same store contributions to consolidated NOI, as computed in accordance with GAAP for the periods presented (amounts in thousands):

Year Ended December 31,

Net income (loss) attributable to common stockholders

Add back: Net income (loss) attributable to Operating Partnership Units

Net income (loss) attributable to common stockholders and unit holders

Add common stockholders and Operating Partnership Units pro-rata share of:

Real estate depreciation and amortization

Non-real estate depreciation and amortization

Non-cash interest expense

Unrealized (gain) loss on derivatives

Impairment on preferred investment

Loss on extinguishment of debt and debt modification costs

Provision for credit losses

Property management fees

Acquisition and pursuit costs

Corporate operating expenses

Transaction costs

Weather-related losses, net

Preferred dividends

Preferred stock accretion

Less common stockholders and Operating Partnership units pro-rata share of:

Other income, net

Preferred returns on unconsolidated real estate joint ventures

Interest income from loan and ground lease investments

Gain on sale of real estate investments

Gain on sale of non-depreciable real estate investments

Pro-rata share of properties’ income

Add:

Noncontrolling interest pro-rata share of partially owned property income

Total property income

Add:

Interest expense

Net operating income

Less:

Non-same store net operating income

Same store net operating income

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, both short- and long-term. Our primary short-term liquidity requirements historically have related to (a) our operating expenses and other general business needs, (b) distributions to our stockholders, (c) committed investments and capital requirements to fund development and renovations at existing properties, (d) ongoing commitments to repay borrowings, including our credit facilities and our maturing short-term debt, (e) the redemption of our Series A Preferred Stock, and (f) Class A common stock, Series A Preferred Stock, Series C Preferred Stock and Series D Preferred Stock repurchases under our stock repurchase plans.

Our ability to access capital on favorable terms as well as to use cash from operations to continue to meet our short-term liquidity needs could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic and other risks detailed in Part II, Item 1A titled “Risk Factors” and in the other reports we have filed with the SEC.

Table of Contents

We believe we currently have a stable financial condition; as of December 31, 2021, we collected 97% of rents from our properties for the three months ended December 31, 2021. As of January 31, 2022, we collected 97% of January rents from our properties. In addition, we have provided rent deferral payment plans as a result of hardships certain tenants experienced due to the COVID-19 impact, decreasing from 1% in the quarter ended June 30, 2020, to none in the quarter ended December 31, 2021. Although we expect to continue to receive tenant requests for rent deferrals in the coming months, we do not expect to waive our contractual rights under our lease agreements. Further, while occupancy remains strong at 95.9% and 95.8% as of December 31, 2021 and January 31, 2022, respectively, in future periods we may experience reduced levels of tenant retention as well as reduced foot traffic and lease applications from prospective tenants as a result of COVID-19 impact.

We believe the stabilized properties underlying our consolidated real estate investments are performing well with an occupancy of 95.9%, exclusive of our development properties, at December 31, 2021.

On May 17, 2018, we filed, and on May 23, 2018, the SEC declared effective on Form S-3 (File No. 333-224990), a shelf registration statement that expired in May 2021 (the “May 2018 Shelf Registration Statement”). The securities covered by the May 2018 Shelf Registration Statement cannot exceed $2,500,000,000 in the aggregate and include common stock, preferred stock, depositary shares representing preferred stock, debt securities, warrants to purchase stock or debt securities and units. We may periodically offer one or more of these securities in amounts, prices and on terms to be announced when and if these securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering.

On October 31, 2019, based on general market conditions and related considerations, our Board determined it to be in the best interest of us and our stockholders to replace the Series B Preferred Offering with an offering of up to 32,000,000 shares of a new Series T Redeemable Preferred Stock (the “Series T Preferred Stock”), with a maximum of 20,000,000 shares of Series T Redeemable Preferred Stock offered in the primary offering and an additional 12,000,000 shares of Series T Preferred Stock offered pursuant to a dividend reinvestment plan (collectively, the “Series T Preferred Offering”). On November 13, 2019, we filed a prospectus supplement to our May 2018 Shelf Registration Statement for the Series T Preferred Offering, and on December 20, 2019, we made the initial issuance of Series T Preferred Stock pursuant to the Series T Preferred Offering. As of December 31, 2021, we have issued and outstanding 28,272,134 shares of Series T Preferred Stock.

On September 13, 2019, we and our Operating Partnership entered into an At Market Issuance Sales Agreement with respect to the offering and sale of up to $100,000,000 in shares of Class A common stock in “at the market offerings” as defined in Rule 415 under the Securities Act, including without limitation sales made directly on or through the NYSE American, or on any other existing trading market for Class A common stock or through a market maker (the “Class A ATM Offering”). The Company did not issue any shares through the Class A Common Stock ATM Offering during the year before its expiration in November 2021.  During the life of the Class A Common Stock Offering, the Company had issued a total of 621,110 shares of Class A common stock.

On November 18, 2021, we filed Pre-Effective Amendment No. 1 to the Form S-3 filed on April 20, 2021, and on November 22, 2021, the SEC declared effective on Form S-3 (File No. 333-255388), a shelf registration statement that expires in November 2024 (the “November 2021 Shelf Registration Statement”). The securities covered by the November 2021 Shelf Registration Statement cannot exceed approximately $4.1 billion in the aggregate and include common stock, preferred stock, depositary shares representing preferred stock, debt securities, warrants to purchase stock or debt securities and units. We may periodically offer one or more of these securities in amounts, prices and on terms to be announced when and if these securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering.

We have approximately $128.0 million of cash and $143.3 million of capacity on our credit facilities as of January 31, 2022. At December 31, 2021, we were in compliance with all covenants under our credit facilities. We continue to communicate with our key lenders and believe access to capacity under our credit facilities will remain available for the uses set forth in their terms.

As we did in 2021 and to date in 2022, we expect to maintain a proactive capital allocation process and selectively sell assets at appropriate cap rates, which would be expected to generate cash sources for both our short-term and long-term liquidity needs. Due to the uncertainty surrounding the COVID-19 impact, we had temporarily suspended interior renovations at several properties as part of assuming a more conservative posture; however, we have selectively restarted the program at various properties as we gained more visibility on the economic recovery nationally and within our specific markets.

Table of Contents

Our total stockholders’ equity increased $25.5 million from $58.4 million as of December 31, 2020 to $83.9 million as of December 31, 2021. The increase in our total stockholders’ equity is primarily attributable to the issuance of shares of Class A common stock for the redemptions of shares of Series B Preferred Stock of $154.0 million (of which, $150.7 million relates to Company-initiated redemptions ) and net income of $91.7 million, offset by dividends declared of $81.0 million, the repurchase of shares of Class A common stock of $119.6 million and preferred stock accretion of $24.6 million during the year ended December 31, 2021.

In general, we believe our available cash balances, the Senior and Junior Credit Facilities, the Fannie Facility (each as defined below), other financing arrangements and cash flows from operations will be sufficient to fund our liquidity requirements with respect to our existing portfolio for the next 12 months. We expect that properties added to our portfolio from the proceeds of the Series T Preferred Offering and from the credit facilities will have a positive impact on our future results of operations. In general, we expect that our results related to our portfolio will improve in future periods as a result of anticipated future investments in and acquisitions of real estate. However, there can be no assurance that the worldwide economic disruptions arising from the COVID-19 pandemic will not cause conditions in the lending, capital and other financial markets to deteriorate, nor that our future revenues or access to capital and other sources of funding will not become constrained, which could reduce the amount of liquidity and credit available for use in acquiring and further diversifying our portfolio of multifamily assets. We cannot provide any assurances that we will be able to add properties to our portfolio at the anticipated pace, or at all.

We believe we will be able to meet our primary liquidity requirements going forward through:

$166.5 million in cash available at December 31, 2021;

$143.3 million of capacity on our credit facilities as of December 31, 2021;

cash generated from operating activities; and

proceeds from future borrowings and potential offerings, including potential offerings of common and preferred stock through underwritten offerings, as well as issuances of units of limited partnership interest in our Operating Partnership, or OP Units.

At the current time, we do not anticipate the need to establish any material contingency reserves related to the COVID-19 pandemic, other than the provision for credit loss referred to earlier, but continue to assess along with our network of business partners the possible need for such contingencies, whether at the corporate or property level.

Our primary long-term liquidity requirements relate to (a) costs for additional apartment community and single-family residential homes investments, (b) repayment of long-term debt and our credit facilities, (c) capital expenditures, and (d) cash redemption requirements related to our Series B Preferred Stock, Series C Preferred Stock and Series T Preferred Stock.

Table of Contents

In December 2019, our Board authorized the repurchase of up to an aggregate of $50 million of our outstanding shares of Class A common stock over a period of one year pursuant to stock repurchase plans. On May 9, 2020, our Board authorized the modification of the stock repurchase plans to provide for the repurchase, from time to time, of up to an aggregate of $50 million in shares of our Class A common stock, 8.250% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share (“Series A Preferred Stock”), 7.625% Series C Cumulative Redeemable Preferred Stock, $0.01 par value per share (“Series C Preferred Stock”), and/or 7.125% Series D Cumulative Preferred Stock, $0.01 par value per share (“Series D Preferred Stock”). On October 29, 2020, our Board authorized new stock repurchase plans for the repurchase, from time to time, of up to an aggregate of $75 million in shares of our Class A common stock, Series A Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock to be conducted in accordance with Rules 10b5-1 and 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). On February 9, 2021, our Board authorized the modification of the stock repurchase plans to provide for the repurchase, from time to time, of up to an aggregate of $150 million in shares of our Class A common stock, Series C Preferred Stock and/or Series D Preferred Stock. The repurchase plans terminated at the close of the NYSE American trading day on November 8, 2021 (the date on which we filed our Form 10-Q with the SEC for the quarter ended September 30, 2021). The extent to which we repurchased shares of our Class A common stock, Series C Preferred Stock, and/or Series D Preferred Stock under the repurchase plans, and the timing of such repurchases, depended on a variety of factors including general business and market conditions and other corporate considerations. Stock repurchases under the repurchase plans were made in the open market or through privately negotiated transactions, subject to certain price limitations and other conditions established under the plans. Open market repurchases were structured to occur in conformity with the method, timing, price and volume requirements of Rule 10b-18 of the Exchange Act.

During the year ended December 31, 2021, we repurchased 11,140,637 shares of Class A common stock under the repurchase plans for a total purchase price of approximately $119.6 million. During the year ended December 31, 2020, we repurchased shares under the repurchase plans as follows: 3,983,842 shares of Class A common stock, 163,068 shares of Series A Preferred Stock, 27,905 shares of Series C Preferred Stock and 76,264 shares of Series D Preferred Stock for a total purchase price of approximately $46.4 million. During the life of all repurchase plans, the total purchase price of shares we repurchased is approximately $189.1 million.

We intend to finance our long-term liquidity requirements with net proceeds of additional issuances of common and preferred stock, our credit facilities, as well as future borrowings. Our success in meeting these requirements will therefore depend upon our ability to access capital. Further, our ability to access equity capital is dependent upon, among other things, general market conditions for REITs and the capital markets generally, market perceptions about us and our asset class, and current trading prices of our securities , all of which may continue to be adversely impacted by COVID-19 pandemic.

As we did in 2021 and 2020, we may also selectively sell assets at appropriate times, which would be expected to generate cash sources for both our short-term and long-term liquidity needs.

We may also meet our long-term liquidity needs through borrowings from a number of sources, either at the corporate or project level. We believe the Senior and Junior Credit Facilities, as well as the Fannie Facility, will continue to enable us to deploy our capital more efficiently and provide capital structure flexibility as we grow our asset base. We expect the combination of these facilities to provide us flexibility by allowing us, among other things, to use borrowings under our Senior and Junior Credit Facilities to acquire properties pending placement of permanent mortgage indebtedness, including under the Fannie Facility. In addition to restrictive covenants, these credit facilities contain material financial covenants. At December 31, 2021, we were in compliance with all covenants under our credit facilities. We will continue to monitor the debt markets, including Fannie Mae and Freddie Mac, and as market conditions permit, access borrowings that are advantageous to us.

We intend to continue to use prudent amounts of leverage in making our investments, which we define as having total indebtedness of approximately 65% of the fair market value of the properties in which we have invested. For purposes of calculating our leverage, we assume full consolidation of all of our real estate investments, whether or not they would be consolidated under GAAP, include assets we have classified as held for sale, and include any joint venture level indebtedness in our total indebtedness. However, we are not subject to any limitations on the amount of leverage we may use, and accordingly, the amount of leverage we use may be significantly less or greater than we currently anticipate. We expect our leverage to decline commensurately as we execute our business plan to grow our net asset value.

Table of Contents

If we are unable to obtain financing on favorable terms or at all, we would likely need to curtail our investment activities, including acquisitions and improvements to and developments of, real properties, which could limit our growth prospects. This, in turn, could reduce cash available for distribution to our stockholders and may hinder our ability to raise capital by issuing more securities or borrowing more money. We also may be forced to dispose of assets at inopportune times in order to maintain our REIT qualification and Investment Company Act exemption.

We expect to maintain distributions paid to our Series B Preferred Stock, our Series C Preferred Stock, our Series D Preferred Stock and our Series T Preferred Stock in accordance with the terms of those securities which require monthly or quarterly dividends depending on the series. While our policy is generally to pay distributions from cash flow from operations, our distributions through December 31, 2021 have been paid from cash flow from operations, proceeds from our continuous preferred stock offerings, including our Series T Preferred Stock, proceeds from underwritten securities offerings, and sales of assets and may in the future be paid from additional sources, such as from borrowings.

We have notes receivable in conjunction with properties that are in various stages of development, in lease-up and operating. To date, these investments have been structured as mezzanine loans, and in the future, we may also provide mortgage financing to these types of projects. The notes receivable provide a current stated return, and in certain cases, an accrued return, and required repayment based on a fixed maturity date, generally in relation to the property’s construction loan or mortgage loan maturity. If the property does not repay the notes receivable upon maturity, our income, FFO, CFFO and cash flows could be reduced below the stated returns currently being recognized if the property does not produce sufficient cash flow to pay its operating expenses and debt service, or to refinance its debt obligations. In addition, we have, in certain cases, an option to purchase up to 100% of the common interest which holds an interest in the entity that owns the property. If we were to convert into common ownership, our income, FFO, CFFO and cash flows would be reflective of our pro rata share of the property’s results, which could be a reduction from what our notes receivable currently generate.

We also have preferred membership interests in properties that are in various stages of development, in lease-up and operating. Our preferred equity investments are structured to provide a current preferred return, and in some cases an accrued return, during all phases. Each joint venture in which we own a preferred membership interest is required to redeem our preferred membership interests, plus any accrued but unpaid preferred return, based on a fixed maturity date, generally in relation to the property’s construction loan or mortgage loan maturity. Upon redemption of the preferred membership interests, our income, FFO, CFFO and cash flows could be reduced below the preferred returns currently being recognized. Alternatively, if the joint ventures do not redeem our preferred membership interest when required, our income, FFO, CFFO and cash flows could be reduced if the property does not produce sufficient cash flow to pay its operating expenses, debt service and preferred return obligations. As we evaluate our capital position and capital allocation strategy, we may consider alternative means of financing the loan and preferred equity investment activities at the subsidiary level.

Cash Flows

Year ended December 31, 2021 as compared to the year ended December 31, 2020

As of December 31, 2021, we held seventy-eight real estate investments, consisting of forty-nine consolidated operating investments and twenty-nine investments held through preferred equity, loan or ground lease investments. During the year ended December 31, 2021, net cash provided by operating activities was $82.1 million after net income of $105.2 million was adjusted for the following:

an increase in accounts payable and other accrued liabilities of $21.3 million;

distributions and preferred returns from unconsolidated joint ventures of $11.7 million;

loss on extinguishment of debt of $6.7 million; and

amortization of deferred interest income on mezzanine loan of $3.0 million; offset by

non-cash items of $56.0 million;

an increase in accounts receivable, prepaids and other assets of $5.5 million; and

Table of Contents

an increase in notes and accrued interest receivable of $4.3 million.

Cash Flows from Investing Activities

During the year ended December 31, 2021, net cash provided by investing activities was $39.4 million, primarily due to the following:

$417.9 million of proceeds from the sale of real estate investments;

$51.5 million of proceeds from the sale and redemption of unconsolidated real estate joint ventures; and

$22.3 million of repayments on notes receivable; offset by

$277.8 million used in acquiring consolidated real estate investments;

$146.7 million used in acquiring investments in unconsolidated joint ventures and notes receivable; and

$27.9 million used on capital expenditures.

Cash Flows from Financing Activities

During the year ended December 31, 2021, net cash used in financing activities was $43.9 million, primarily due to the following:

$189.1 million of repayments of our mortgages payable;

$119.6 million paid for the repurchase of Class A common stock;

$63.0 million of repayments on revolving credit facilities;

$63.0 million in cash distributions paid to preferred stockholders;

$55.1 million paid for the redemption of Series A Preferred Stock;

$25.3 million in cash distributions paid to noncontrolling interests;

$16.6 million in cash distributions paid to common stockholders;

$2.1 million in deferred financing costs;

$1.1 million of Class A common stock ATM issuance costs; and

$0.3 million paid for the redemption of Series B Redeemable Preferred Stock;

$0.2 million paid for the redemption of Series T Redeemable Preferred Stock;

partially offset by net proceeds of $416.6 million from the issuance of Series T Redeemable Preferred Stock;

proceeds of $30.0 million from borrowings on revolving credit facilities;

capital contributions of $22.4 million from noncontrolling interests;

borrowings of $15.5 million on mortgages payable; and

Table of Contents

net proceeds of $7.2 million from the exercise of Warrants.

Operating Activities

Net cash flow provided by operating activities increased $7.6 million in 2021 compared to 2020 primarily due to:

Increase in accounts payable and other accrued liabilities of $15.0 million;

Decrease in accounts receivable, prepaid expenses and other assets of $10.3 million; and

An increase in amortization of deferred interest income on mezzanine loan of $3.0 million; offset by

Decrease of $7.9 million attributable to loss on extinguishment of debt;

Increase in notes and accrued interest receivable of $4.3 million;

Net decrease in net due to affiliates of $2.5 million;

Decrease in net distributions of income and preferred returns from preferred equity investments of $2.1 million; and

Operating income, adjusted for non-cash activity, decreased $3.9 million as a result of our acquisitions (net of dispositions).

Investing Activities

Net cash provided by investing activities increased $66.4 million in 2021 compared to 2020 primarily due to:

Higher proceeds from the sales of real estate investments of $223.2 million;

Decrease in investment in notes receivable of $5.1 million;

Lower purchases from noncontrolling interests of $3.7 million; and

Higher proceeds from sale and redemption of unconsolidated real estate joint ventures of $0.8 million; offset by

Higher investments in unconsolidated real estate joint venture interests of $79.5 million;

Decreased repayments on notes receivable of $61.1 million; and

Acquisition of real estate investments and capital expenditures increased $25.9 million.

Financing Activities

Net cash used in financing activities was $43.9 million in 2021 as compared to net cash provided by financing activities of $20.7 million in 2020. This decrease of $64.6 million is primarily explained by:

An increase in net mortgage repayments of $181.0 million;

An increase in Class A common stock repurchases of $79.3 million;

An increase in revolving credit facility repayments of $48.0 million;

An increase in distributions paid of $16.2 million;

Table of Contents

A decrease in Class A common stock offering of $2.0 million;

An increase of miscellaneous offering costs of $1.1 million; offset by

An increase in proceeds from the Series T Preferred Stock continuous offering of $199.2 million;

A decrease in the redemption of Series A Preferred Stock of $28.9 million;

An increase in capital contributions of $19.3 million from noncontrolling interests;

An increase in net proceeds of $7.1 million from the exercise of Warrants;

A decrease in the repurchase of Series A, Series C and Series D Preferred Stock of $6.1 million;

A decrease in deferred financing costs of $2.6 million.

Capital Expenditures

The following table summarizes our total capital expenditures incurred for the years ended December 31, 2021, 2020 and 2019 (amounts in thousands):

Redevelopment/renovations

Normally recurring capital expenditures

Routine capital expenditures

Total capital expenditures

Redevelopment and renovation costs are non-recurring capital expenditures for significant projects that are revenue enhancing through unit or common area upgrades, such as clubhouse renovations and kitchen remodels. Routine capital expenditures are necessary non-revenue generating improvements that extend the useful life of the property and that are less frequent in nature, such as roof repairs and asphalt resurfacing. Normally recurring capital expenditures are necessary non-revenue generating improvements that occur on a regular ongoing basis, such as carpet and appliances.

Funds from Operations and Core Funds from Operations Attributable to Common Stockholders and Unit Holders

We believe that funds from operations (“FFO”), as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), and core funds from operations (“CFFO”) are important non-GAAP supplemental measures of operating performance for a REIT.

FFO attributable to common stockholders and unit holders is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance. We consider FFO to be an appropriate supplemental measure of our 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. We define FFO, consistent with the NAREIT definition, as net income (loss), computed in accordance with GAAP, excluding gains or losses on sales of depreciable real estate property, plus depreciation and amortization of real estate assets, plus impairment write-downs of certain real estate assets and investments in entities where the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for notes receivable, unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis.

Table of Contents

CFFO makes certain adjustments to FFO, removing the effect of items that do not reflect ongoing property operations such as acquisition expenses, non-cash interest, unrealized gains or losses on derivatives, provision for credit losses, losses on extinguishment of debt and debt modification costs (includes prepayment penalties incurred and the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt), one-time weather-related costs, gains or losses on sales of non-depreciable real estate property, shareholder activism, stock compensation expense and preferred stock accretion. Commencing in 2020, we do not deduct the accrued portion of income on our loan and preferred equity investments from FFO to determine CFFO as the income is deemed fully collectible. The accrued portion of the income totaled $2.7 million and $1.1 million, and $7.4 million and $2.3 million for the three and twelve months ended December 31, 2021 and 2020, respectively. We believe that CFFO is helpful to investors as a supplemental performance measure because it excludes the effects of certain items which can create significant earnings volatility, but which do not directly relate to our core recurring property operations. As a result, we believe that CFFO can help facilitate comparisons of operating performance between periods and provides a more meaningful predictor of future earnings potential.

Our calculation of CFFO differs from the methodology used for calculating CFFO by certain other REITs and, accordingly, our CFFO may not be comparable to CFFO reported by other REITs. Our management utilizes FFO and CFFO as measures of our operating performance after adjustment for certain non-cash items, such as depreciation and amortization expenses, and acquisition and pursuit costs that are required by GAAP to be expensed but may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Furthermore, although FFO and CFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO and CFFO may provide us and our stockholders with an additional useful measure to compare our financial performance to certain other REITs.

Neither FFO nor CFFO is equivalent to net income (loss), including net income (loss) attributable to common stockholders, or cash generated from operating activities determined in accordance with GAAP. Furthermore, FFO and CFFO do not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO nor CFFO should be considered as an alternative to net income, including net income (loss) attributable to common stockholders, as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.

We have acquired nineteen operating investments, made fifteen investments through preferred equity or loans, sold seven operating investments and received payoffs of our loan or preferred equity in eleven investments subsequent to December 31, 2020. As of December 31, 2020, we had acquired six operating investments, made eight investments through preferred equity, loans or ground lease, sold six operating investments and received payoffs of our loan or preferred equity in three investments subsequent to December 31, 2019. The results presented in the table below are not directly comparable and should not be considered an indication of our future operating performance.

Table of Contents

The table below presents our calculation of FFO and CFFO for the years ended December 31, 2021, 2020 and 2019 (amounts in thousands, except per share amounts):

Net income (loss) attributable to common stockholders

Add back: Net income (loss) attributable to Operating Partnership Units

Net income (loss) attributable to common stockholders and unit holders

Common stockholders and Operating Partnership Units pro-rata share of:

Real estate depreciation and amortization

Impairment on preferred investment

Gain on sale of real estate investments

FFO attributable to Common Stockholders and Unit Holders

Common stockholders and Operating Partnership Units pro-rata share of:

Acquisition and pursuit costs

Non-cash interest expense

Unrealized (gain) loss on derivatives

Provision for credit losses

Loss on extinguishment of debt and debt modification costs

Amortization of deferred interest income on mezzanine loan

Weather-related losses, net

Non-real estate depreciation and amortization

Transaction costs

Gain on sale of non-depreciable real estate investments

Shareholder activism

Other expense (income), net

Non-cash preferred returns on unconsolidated real estate joint ventures

Non-cash equity compensation

Preferred stock accretion

CFFO Attributable to Common Stockholders and Unit Holders

Per Share and Unit Information:

FFO attributable to Common Stockholders and Unit Holders - diluted

CFFO attributable to Common Stockholders and Unit Holders - diluted

Weighted average common shares and units outstanding - diluted

Operating cash flow, FFO and CFFO may also be used to fund all or a portion of certain capitalizable items that are excluded from FFO and CFFO.

Presentation of this information is intended to assist the reader in comparing the sustainability of the operating performance of different REITs, although it should be noted that not all REITs calculate FFO or CFFO the same way, so comparisons with other REITs may not be meaningful. FFO or CFFO should not be considered as an alternative to net income (loss) attributable to common stockholders or as an indication of our liquidity, nor is either indicative of funds available to fund our cash needs, including our ability to make distributions. Both FFO and CFFO should be reviewed in connection with other GAAP measurements.

Table of Contents

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2021 which consisted of mortgage notes secured by our properties and revolving credit facilities. At December 31, 2021, our estimated future required payments on these obligations were as follows (amounts in thousands):

Less than

Total

one year

Thereafter

Mortgages Payable (Principal)

Revolving Credit Facilities (Principal)

Estimated Interest Payments on Mortgages Payable and Revolving Credit Facilities

Total

Estimated interest payments are based on the stated rates for mortgage notes payable and revolving credit facility assuming the interest rate in effect for the most recent quarter remains in effect through the respective maturity dates.

Table of Contents

Distributions

Payable to stockholders

Date

Declaration Date

of record as of

Amount

Paid or Payable

Class A Common Stock

December 11, 2020

December 24, 2020

January 5, 2021

March 12, 2021

March 25, 2021

April 5, 2021

June 11, 2021

June 25, 2021

July 2, 2021

September 10, 2021

September 24, 2021

October 5, 2021

December 10, 2021

December 23, 2021

January 5, 2022

Class C Common Stock

December 11, 2020

December 24, 2020

January 5, 2021

March 12, 2021

March 25, 2021

April 5, 2021

June 11, 2021

June 25, 2021

July 2, 2021

September 10, 2021

September 24, 2021

October 5, 2021

December 10, 2021

December 23, 2021

January 5, 2022

Series A Preferred Stock

December 11, 2020

December 24, 2020

January 5, 2021

January 27, 2021 (1)

February 26, 2021

February 26, 2021

Series B Preferred Stock

October 9, 2020

December 24, 2020

January 5, 2021

January 13, 2021

January 25, 2021

February 5, 2021

January 13, 2021

February 25, 2021

March 5, 2021

January 13, 2021

March 25, 2021

April 5, 2021

April 12, 2021

April 23, 2021

May 5, 2021

April 12, 2021

May 25, 2021

June 4, 2021

April 12, 2021

June 25, 2021

July 2, 2021

July 12, 2021

July 23, 2021

August 5, 2021

July 12, 2021

August 25, 2021

September 3, 2021

July 12, 2021

September 24, 2021

October 5, 2021

October 11, 2021

October 25, 2021

November 5, 2021

October 11, 2021

November 24, 2021

December 3, 2021

October 11, 2021

December 23, 2021

January 5, 2022

Series C Preferred Stock

December 11, 2020

December 24, 2020

January 5, 2021

March 12, 2021

March 25, 2021

April 5, 2021

June 11, 2021

June 25, 2021

July 2, 2021

September 10, 2021

September 24, 2021

October 5, 2021

December 10, 2021

December 23, 2021

January 5, 2022

Series D Preferred Stock

December 11, 2020

December 24, 2020

January 5, 2021

March 12, 2021

March 25, 2021

April 5, 2021

June 11, 2021

June 25, 2021

July 2, 2021

September 10, 2021

September 24, 2021

October 5, 2021

December 10, 2021

December 23, 2021

January 5, 2022

Series T Preferred Stock (2)

October 9, 2020

December 24, 2020

January 5, 2021

January 13, 2021

January 25, 2021

February 5, 2021

January 13, 2021

February 25, 2021

March 5, 2021

January 13, 2021

March 25, 2021

April 5, 2021

April 12, 2021

April 23, 2021

May 5, 2021

April 12, 2021

May 25, 2021

June 4, 2021

April 12, 2021

June 25, 2021

July 2, 2021

July 12, 2021

July 23, 2021

August 5, 2021

July 12, 2021

August 25, 2021

September 3, 2021

July 12, 2021

September 24, 2021

October 5, 2021

October 11, 2021

October 25, 2021

November 5, 2021

October 11, 2021

November 24, 2021

December 3, 2021

October 11, 2021

December 23, 2021

January 5, 2022

December 10, 2021 (3)

December 23, 2021

December 29, 2021

This dividend was paid on the date indicated to shareholders in conjunction with the redemption of Series A preferred shares.

Shares of newly issued Series T Preferred Stock that are held only a portion of the applicable monthly dividend period receive a prorated monthly dividend based on the actual number of days in the applicable dividend period during which each such share of Series T Preferred Stock was outstanding.

The Board authorized, and the Company declared, an annual Series T Preferred Stock dividend of 0.20% per share of Series T Preferred Stock. Shares of Series T Preferred Stock that were held only for a portion of the applicable annual stock dividend period receive a prorated Series T Preferred Stock dividend based on the actual number of months in the applicable annual stock dividend period during which each such share of Series T Preferred Stock was outstanding. The annual stock dividend equates to $0.05 per share of Series T Preferred Stock.

Table of Contents

A portion of each dividend may constitute a return of capital for tax purposes. There is no assurance that we will continue to declare dividends or at this rate. Holders of OP Units and LTIP Units are entitled to receive “distribution equivalents” at the same time as dividends are paid to holders of our Class A common stock.

We had a dividend reinvestment plan that allowed for participating stockholders to have their Class A common stock dividend distributions automatically reinvested in additional Class A common shares based on the average price of the Class A common shares on the investment date.

We also had a dividend reinvestment plan that allowed for participating stockholders to have their Series T Preferred Stock dividend distributions automatically reinvested in additional shares of Series T Preferred Stock at a price of $25.00 per share. In December 2021, the Board approved the suspension of the dividend reinvestment plans until further notice.

Our Board will determine the amount of dividends to be paid to our stockholders, subject to operating restrictions included in the Merger Agreement. The determination of our Board will be based on several 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. While our policy is generally to pay distributions from cash flow from operations, we may declare distributions in excess of funds from operations.

Table of Contents

Distributions for the year ended December 31, 2021 were as follows (amounts in thousands):

Distributions

Declared

Paid

First Quarter

Class A Common Stock

Class C Common Stock

Series A Preferred Stock

Series B Preferred Stock

Series C Preferred Stock

Series D Preferred Stock

Series T Preferred Stock

OP Units

LTIP Units

Total first quarter 2021

Second Quarter

Class A Common Stock

Class C Common Stock

Series B Preferred Stock

Series C Preferred Stock

Series D Preferred Stock

Series T Preferred Stock

OP Units

LTIP Units

Total second quarter 2021

Third Quarter

Class A Common Stock

Class C Common Stock

Series B Preferred Stock

Series C Preferred Stock

Series D Preferred Stock

Series T Preferred Stock

OP Units

LTIP Units

Total third quarter 2021

Fourth Quarter

Class A Common Stock

Class C Common Stock

Series B Preferred Stock

Series C Preferred Stock

Series D Preferred Stock

Series T Preferred Stock

OP Units

LTIP Units

Total fourth quarter 2021

Total

Critical Accounting Policies and Estimates

Below is a discussion of the accounting policies that we consider critical to an understanding of our financial condition and operating results that may require complex or significant judgment in their application or require estimates about matters which are inherently uncertain.

Table of Contents

Principles of Consolidation and Basis of Presentation

Our consolidated financial statements include our accounts and the accounts of other subsidiaries over which we have control. All inter-company transactions, balances, and profits have been eliminated in consolidation. Interests in entities acquired will be evaluated based on applicable GAAP, which includes the requirement to consolidate entities deemed to be variable interest entities (“VIE”) in which we are the primary beneficiary. If the entity in which we hold an interest is determined not to be a VIE, then the entity will be evaluated for consolidation based on legal form, economic substance, and the extent to which we have control and/or substantive participating rights under the respective ownership agreement.

There are judgments and estimates involved in determining if an entity in which we have made an investment is a VIE and, if so, whether we are the primary beneficiary. The entity is evaluated to determine if it is a VIE by, among other things, calculating the percentage of equity being risked compared to the total equity of the entity. A change in the judgments, assumptions, and estimates used could result in consolidating an entity that should not be consolidated or accounting for an investment using the equity method that should in fact be consolidated, the effects of which could be material to our financial statements.

Real Estate Purchase Price Allocations

Upon the acquisition of real estate properties which do not constitute the definition of a business, we recognize the assets acquired, the liabilities assumed, and any noncontrolling interest as of the acquisition date, measured at their relative fair values. Acquisition-related costs are capitalized in the period incurred and are recorded to the components of the real estate assets acquired. In determining fair values for multifamily apartment community acquisitions, we assess the acquisition-date fair values of all tangible assets, identifiable intangible assets and assumed liabilities using methods like those used by independent appraisers (e.g., discounted cash flow analysis) and which utilize appropriate discount and/or capitalization rates and available market information. In determining fair values for single-family residential home acquisitions, we utilize information obtained from county tax assessment records to assist in the determination of the fair value of land and building. Estimates of future cash flows are based on several factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it was vacant.

Intangible assets include the value of in-place leases, which represents the estimated fair value of the net cash flows of leases in place at the time of acquisition, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject to lease-up. We amortize the value of in-place leases to expense over the remaining non-cancelable term of the respective leases, which on average is six months.

Estimates of the fair values of the tangible assets, identifiable intangible assets and assumed liabilities require us to make significant assumptions to estimate market lease rates, property operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, prevailing interest rates and the number of years the property will be held for investment. The use of inappropriate assumptions could result in an incorrect valuation of acquired tangible assets, identifiable intangible assets and assumed liabilities, which could impact the amount of our net income (loss). Differences in the amount attributed to the fair value estimate of the various assets acquired can be significant based on the assumptions made in calculating these estimates.

Revenue Recognition

We recognize rental revenue on a straight-line basis over the terms of the rental agreements and in accordance with ASC Topic 842 Leases . Rental revenue is recognized on an accrual basis and when the collectability of the amounts due from tenants is deemed probable. Rental revenue is included within rental and other property revenues on our consolidated statements of operations. Amounts received in advance are recorded as a liability within other accrued liabilities on our consolidated balance sheets.

Other property revenues are recognized in the period earned.

We recognize a gain or loss on the sale of real estate assets when the criteria for an asset to be derecognized are met, which include when (i) a contract exists and (ii) the buyer obtains control.

Table of Contents

Preferred Equity Investments and Investments in Unconsolidated Real Estate Joint Ventures

We analyze an investment to determine if it is a variable interest entity (a “VIE”) in accordance with Topic ASC 810 and, if so, whether we are the primary beneficiary requiring consolidation. A VIE is an entity that has (i) insufficient equity to permit it to finance its activities without additional subordinated financial support or (ii) equity holders that lack the characteristics of a controlling financial interest. VIEs are consolidated by the primary beneficiary, which is the entity that has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses of the entity or the right to receive benefits from the entity that potentially could be significant to the entity. Variable interests in a VIE are contractual, ownership, or other financial interests in a VIE that change in value with changes in the fair value of the VIE’s net assets. We continuously re-assess at each level of the investment whether the entity is (i) a VIE, and (ii) if we are the primary beneficiary of the VIE. If it was determined that the entity in which we hold an interest qualified as a VIE and we were the primary beneficiary, the entity would be consolidated.

If after consideration of the VIE accounting literature, we have determined that an entity is not a VIE, we assess the need for consolidation under all other provisions of ASC 810. These provisions provide for consolidation of majority-owned entities where majority voting interest held by us provides control.

In assessing whether we are in control of and requiring consolidation of the limited liability company and partnership venture structures we evaluate the respective rights and privileges afforded each member or partner (collectively referred to as “member”). Our member would not be deemed to control the entity if any of the other members have either (i) substantive kickout rights providing the ability to dissolve (liquidate) the entity or otherwise remove the managing member or general partner without cause or (ii) has substantive participating rights in the entity. Substantive participating rights (whether granted by contract or law) provide for the ability to effectively participate in significant decisions of the entity that would be expected to be made in the ordinary course business.

If it has been determined that we do not have control but do have the ability to exercise significant influence over the entity, we account for these investments as preferred equity investments and investments in unconsolidated real estate joint ventures in our consolidated balance sheets. In accordance with ASC 320 Investments – Debt Securities , we classify each preferred equity investment as a held to maturity debt security as we have the intention and ability to hold the investment until redemption. We earn a fixed return on these investments which is included within preferred returns on unconsolidated real estate joint ventures in our consolidated statements of operations. We evaluate the collectability of each preferred equity investment and estimates a provision for credit loss, as applicable. Refer to the Current Expected Credit Losses (“CECL”) section below for further information regarding CECL and our provision for credit losses.

Mezzanine Loan Investments

We analyze each loan arrangement that involves real estate development to consider whether the loan qualifies for accounting as a loan or as an investment in a real estate development project. We have evaluated our real estate loans, where appropriate, for accounting treatment as loans versus real estate development projects, as required by ASC 310-10 Receivables . For each loan, we have concluded that the characteristics and the facts and circumstances indicate that loan accounting treatment is appropriate. We recognize interest income on our notes receivable on the accrual method unless a significant uncertainty of collection exists. If a significant uncertainty exists, interest income is recognized as collected. Costs incurred to originate our notes receivable are deferred and amortized using the effective interest method over the term of the related notes receivable. We evaluate the collectability of each mezzanine loan investment and estimate a provision for credit loss, as applicable. Refer to CECL section below for further information regarding CECL and our provision for credit losses.

Current Expected Credit Losses (“CECL”)

We estimate provision for credit losses on our mezzanine loan and preferred equity investments under CECL. This method is based on expected credit losses for the life of the investment as of each balance sheet date. The method for calculating the estimate of expected credit loss takes into account historical experience and current conditions for similar loans and reasonable and supportable forecasts about the future.

Table of Contents

We estimate our provision for credit losses using a collective (pool) approach for investments with similar risk characteristics, such as collateral and duration of investment. In measuring the CECL provision for investments that share similar characteristics, we apply a default rate to the investments for the remaining mezzanine loan or preferred equity investment hold period. As we do not have a significant historical population of loss data on our mezzanine loans and preferred equity investments, our default rate utilized for CECL is based on an external historical loss rate for commercial real estate loans.

In addition to analyzing investments as a pool, we perform an individual investment assessment of expected credit losses. If it is determined that the borrower is experiencing financial difficulty, or a foreclosure is probable, or we expect repayment through the sale of the collateral, we calculate expected credit losses based on the value of the underlying collateral as of the reporting date. During this review process, if we determine that it is probable that we will not be able to collect all amounts due for both principal and interest according to the contractual terms of an investment, that mezzanine loan or preferred equity investment is not considered fully recoverable and a provision for credit loss is recorded.

In estimating the value of the underlying collateral when determining if a mezzanine loan or preferred equity investment is fully recoverable, we evaluate estimated future cash flows to be generated from the collateral underlying the investment. The inputs and assumptions utilized to estimate the future cash flows of the underlying collateral are based upon our evaluation of the operating results, economy, market trends, and other factors, including judgments regarding costs to complete any construction activities, lease up and occupancy rates, rental rates, and capitalization rates utilized to estimate the projected cash flows at the disposition. We may also obtain a third-party valuation which may value the collateral through an "as-is" or "stabilized value" methodology. If upon completion of the valuation the fair value of the underlying collateral securing the investment is less than the net carrying value, we record a provision for credit loss on that mezzanine loan or preferred equity investment. As the investment no longer displays the characteristics that are similar to those of the pool of mezzanine loans or preferred equity investments, the investment is removed from the CECL collective (pool) analysis described above.

Our significant accounting policies are more fully described in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” to our Notes to the Consolidated Financial Statements. Certain of our accounting policies require management to make estimates and judgments regarding uncertainties that may affect the reported amounts presented and disclosed in our consolidated financial statements. These estimates and judgments are affected by management’s application of accounting policies. 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.

We base these estimates on historical experience and various other factors that are believed to be reasonable, the results of which form the basis for making judgments under the circumstances. Due to the inherent uncertainty involved in making these estimates, actual results reported may differ from these estimates under different situations or conditions. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. We consider an accounting estimate to be significant if it requires us to make assumptions about matters that were uncertain at the time the estimate was made and changes in the estimate would have had a significant impact on our consolidated financial position or results of operations.

Off-Balance Sheet Arrangements

As of December 31, 2021, we have off-balance sheet arrangements that may have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures. As of December 31, 2021, we own interests in twenty joint ventures that are accounted for as held to maturity debt securities or loans as we exercise significant influence over, but do not control, the investee.

New Accounting Pronouncements

See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” to our Notes to the Consolidated Financial Statements for a description of accounting pronouncements. We do not believe these new pronouncements will have a significant impact on our Consolidated Financial Statements, cash flows or results of operations.

Table of Contents

Subsequent Events

Issuance of LTIP Units under the Fourth Amended 2014 Incentive Plans

On January 1, 2022, we granted an aggregate of 134,131 time-based LTIP Units and an aggregate of 268,265 performance-based LTIP Units to various executive officers under the Fourth Amended 2014 Incentive Plans pursuant to the executive officers’ employment or service agreements. The time-based LTIP Units vest over approximately three years, while the performance-based LTIP Units subject to a three-year performance period and will thereafter vest upon successful achievement of performance-based conditions. All such LTIP Unit grants require continuous employment for vesting.

In addition, on January 1, 2022, we granted 3,546 LTIP Units pursuant to the Fourth Amended 2014 Incentive Plans to each independent member of the Board in payment of the equity portion of their respective annual retainers. The LTIP Units vested immediately upon issuance.

Distributions Declared

Payable to stockholders

Declaration Date

of record as of

Amount

Paid / Payable Date

Series B Preferred Stock

January 14, 2022

January 25, 2022

February 4, 2022

January 14, 2022

February 25, 2022

March 4, 2022

January 14, 2022

March 25, 2022

April 5, 2022

Series T Preferred Stock

January 14, 2022

January 25, 2022

February 4, 2022

January 14, 2022

February 25, 2022

March 4, 2022

January 14, 2022

March 25, 2022

April 5, 2022

Distributions Paid

The following distributions have been paid subsequent to December 31, 2021 (amounts in thousands):

Distributions Paid

January 5, 2022 (to stockholders of record as of December 23, 2021)

Class A Common Stock

Class C Common Stock

Series B Preferred Stock

Series C Preferred Stock

Series D Preferred Stock

Series T Preferred Stock

OP Units

LTIP Units

Total

February 4, 2022 (to stockholders of record as of January 25, 2022)

Series B Preferred Stock

Series T Preferred Stock

Total

March 4, 2022 (to stockholders of record as of February 25, 2022)

Series B Preferred Stock

Series T Preferred Stock

Total

Table of Contents

Stock Activity

Subsequent to December 31, 2021 and as of February 28, 2022, we have issued 1,266,444 shares of Class A common stock upon the exercise of 106,502 Warrants and there are 29,242,107 shares of Class A common stock outstanding and 138,583 Warrants outstanding (refer to Note 13 – Stockholders’ Equity of our consolidated financial statements for further information).

Sale of Alexan CityCentre Interests

On January 20, 2022, Alexan CityCentre, the underlying asset of an unconsolidated joint venture located in Houston, Texas, was sold. Upon the sale, our preferred equity investment was redeemed by the joint venture for $18.7 million, which included its original preferred investment of $18.2 million and accrued preferred return of $0.5 million.

Weatherford Loan Financing

On February 15, 2022, we provided a $9.6 million mezzanine loan (the “Weatherford Mezz Loan”) to an unaffiliated third party for land to be used in the development of 185-build for rent, single-family residential homes in Weatherford, Texas. The Weatherford Mezz Loan matures on May 16, 2022 and contains three (3) thirty-day extension options, subject to certain conditions, and can be prepaid without penalty. The Weatherford Mezz Loan bears interest at 12.0% per annum with interest-only payments during the term of the loan.

Sale of Reunion Apartments

On February 25, 2022, Reunion Apartments, a property located in Orlando, Florida, was sold. Upon the sale, the mezzanine loan that we provided was paid off for $12.5 million, which included principal repayment of $10.0 million, accrued interest of $1.5 million and an incremental payment of $1.0 million to achieve the minimum interest per the terms of the loan agreement.

Sale of The Hartley at Blue Hill

On February 28, 2022, The Hartley at Blue Hill, a property located in Chapel Hill, North Carolina, was sold. The mezzanine loan that we provided was paid off for $34.4 million, which included principal repayment of $31.0 million and accrued interest of $3.4 million. The $5.0 million senior loan that we provided, which is secured by a parcel of land adjacent to The Hartley at Blue Hill property, remains outstanding.