UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September
30, 2015
OR
¨ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______
to ______
Commission File Number 000-54946
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
(Exact Name of Registrant as Specified
in Its Charter)
Maryland |
|
26-3136483 |
(State or other Jurisdiction of Incorporation or Organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
712 Fifth Avenue, 9th Floor, New York, NY |
|
10019 |
(Address or Principal Executive Offices) |
|
(Zip Code) |
(212) 843-1601
(Registrant’s Telephone Number, Including
Area Code)
None
(Former name, former address or former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes x
No ¨
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer |
¨ |
|
Accelerated Filer |
¨ |
Non-Accelerated Filer |
¨ |
(Do not check if a smaller reporting company) |
Smaller reporting company |
x |
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Number of shares outstanding of the
registrant’s
classes of common stock, as of November
4, 2015:
Class A Common Stock: 19,201,565 shares
Class B-3 Common Stock: 353,629 shares
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
FORM 10-Q
September 30, 2015
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per
share amounts)
| |
(Unaudited) | | |
| |
| |
September 30, 2015 | | |
December 31, 2014 | |
ASSETS | |
| | | |
| | |
Net Real Estate Investments | |
| | | |
| | |
Land | |
$ | 53,335 | | |
$ | 37,909 | |
Buildings and improvements | |
| 369,496 | | |
| 240,074 | |
Furniture, fixtures and equipment | |
| 10,910 | | |
| 6,481 | |
Total Gross Operating Real Estate Investments | |
| 433,741 | | |
| 284,464 | |
Accumulated depreciation | |
| (19,220 | ) | |
| (10,992 | ) |
Total Net Operating Real Estate Investments | |
| 414,521 | | |
| 273,472 | |
Operating real estate held for sale, net | |
| 15,185 | | |
| 14,939 | |
Total Net Real Estate Investments | |
| 429,706 | | |
| 288,411 | |
Cash and cash equivalents | |
| 64,933 | | |
| 23,059 | |
Restricted cash | |
| 11,200 | | |
| 11,091 | |
Due from affiliates | |
| 914 | | |
| 570 | |
Accounts receivable, prepaid and other assets | |
| 4,015 | | |
| 753 | |
Investments in unconsolidated real estate joint ventures | |
| 55,326 | | |
| 18,331 | |
In-place lease intangible assets, net | |
| 1,315 | | |
| 745 | |
Deferred financing costs, net | |
| 2,953 | | |
| 2,199 | |
Non-real estate assets associated with operating real estate held for sale | |
| 992 | | |
| 927 | |
Total Assets | |
$ | 571,354 | | |
$ | 346,086 | |
| |
| | | |
| | |
LIABILITIES AND EQUITY | |
| | | |
| | |
Mortgages payable | |
$ | 301,268 | | |
$ | 201,343 | |
Mortgage payable associated with operating real estate held for sale | |
| 11,500 | | |
| 11,500 | |
Accounts payable | |
| 659 | | |
| 634 | |
Other accrued liabilities | |
| 7,585 | | |
| 3,345 | |
Due to affiliates | |
| 1,669 | | |
| 1,946 | |
Distributions payable | |
| 2,000 | | |
| 889 | |
Liabilities associated with operating real estate held
for sale | |
| 387 | | |
| 418 | |
Total Liabilities | |
| 325,068 | | |
| 220,075 | |
Equity | |
| | | |
| | |
Stockholders’ Equity | |
| | | |
| | |
Preferred stock, $0.01 par value, 250,000,000 shares authorized; none issued and outstanding | |
| — | | |
| — | |
Common stock - Class A, $0.01 par value, 747,586,185 shares authorized; 19,201,450
and 7,531,188 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively | |
| 192 | | |
| 75 | |
Common stock - Class B-1, $0.01 par value, 804,605 shares authorized; none
and 353,630 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively | |
| — | | |
| 4 | |
Common stock - Class B-2, $0.01 par value, 804,605 shares authorized; none and 353,630 shares issued and
outstanding as of September 30, 2015 and December 31, 2014, respectively
| |
| — | | |
| 4 | |
Common stock - Class B-3, $0.01 par value, 804,605 shares authorized; 353,629
shares issued and outstanding | |
| 4 | | |
| 4 | |
Additional paid-in-capital | |
| 248,563 | | |
| 113,511 | |
Distributions in excess of cumulative earnings | |
| (34,040 | ) | |
| (21,213 | ) |
Total Stockholders’ Equity | |
| 214,719 | | |
| 92,385 | |
Noncontrolling Interests | |
| | | |
| | |
Operating partnership units | |
| 2,760 | | |
| 2,949 | |
Partially owned properties | |
| 28,807 | | |
| 30,677 | |
Total Noncontrolling Interests | |
| 31,567 | | |
| 33,626 | |
Total Equity | |
| 246,286 | | |
| 126,011 | |
TOTAL LIABILITIES AND EQUITY | |
$ | 571,354 | | |
$ | 346,086 | |
See Notes to Consolidated Financial Statements
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per
share amounts)
| |
Three Months Ended | | |
Nine Months Ended | |
| |
September 30, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Revenues | |
| | | |
| | | |
| | | |
| | |
Net rental income | |
$ | 11,049 | | |
$ | 9,185 | | |
$ | 29,611 | | |
$ | 19,754 | |
Other property revenues | |
| 511 | | |
| 371 | | |
| 1,454 | | |
| 793 | |
Total revenues | |
| 11,560 | | |
| 9,556 | | |
| 31,065 | | |
| 20,547 | |
Expenses | |
| | | |
| | | |
| | | |
| | |
Property operating | |
| 4,698 | | |
| 4,067 | | |
| 12,924 | | |
| 9,008 | |
General and administrative | |
| 1,246 | | |
| 778 | | |
| 2,912 | | |
| 2,048 | |
Management fees | |
| 896 | | |
| 225 | | |
| 3,051 | | |
| 548 | |
Acquisition costs | |
| 739 | | |
| 379 | | |
| 1,409 | | |
| 3,528 | |
Depreciation and amortization | |
| 3,993 | | |
| 4,781 | | |
| 10,499 | | |
| 9,598 | |
Total expenses | |
| 11,572 | | |
| 10,230 | | |
| 30,795 | | |
| 24,730 | |
Operating (loss) income | |
| (12 | ) | |
| (674 | ) | |
| 270 | | |
| (4,183 | ) |
Other income (expense) | |
| | | |
| | | |
| | | |
| | |
Other income | |
| — | | |
| 52 | | |
| 62 | | |
| 185 | |
Equity in income of unconsolidated real estate joint ventures | |
| 2,366 | | |
| 412 | | |
| 4,391 | | |
| 492 | |
Gain on sale of unconsolidated real estate joint venture interest | |
| 11 | | |
| — | | |
| 11,303 | | |
| — | |
Interest expense, net | |
| (2,967 | ) | |
| (2,549 | ) | |
| (7,985 | ) | |
| (5,817 | ) |
Total other (expense) income | |
| (590 | ) | |
| (2,085 | ) | |
| 7,771 | | |
| (5,140 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net (loss) income from continuing operations | |
| (602 | ) | |
| (2,759 | ) | |
| 8,041 | | |
| (9,323 | ) |
| |
| | | |
| | | |
| | | |
| | |
Discontinued operations | |
| | | |
| | | |
| | | |
| | |
Income (loss) on operations of rental property | |
| — | | |
| 114 | | |
| — | | |
| (3 | ) |
Loss on early extinguishment of debt | |
| — | | |
| — | | |
| — | | |
| (880 | ) |
Gain on sale of joint venture interest | |
| — | | |
| — | | |
| — | | |
| 1,006 | |
Income from discontinued
operations | |
| — | | |
| 114 | | |
| — | | |
| 123 | |
| |
| | | |
| | | |
| | | |
| | |
Net (loss) income | |
| (602 | ) | |
| (2,645 | ) | |
| 8,041 | | |
| (9,200 | ) |
Net (loss) income attributable to noncontrolling interests | |
| | | |
| | | |
| | | |
| | |
Operating partnership units | |
| (8 | ) | |
| (116 | ) | |
| 57 | | |
| (321 | ) |
Partially-owned properties | |
| (20 | ) | |
| (382 | ) | |
| 5,827 | | |
| (1,149 | ) |
Net (loss) income attributable to noncontrolling interests | |
| (28 | ) | |
| (498 | ) | |
| 5,884 | | |
| (1,470 | ) |
Net (loss) income attributable to common stockholders | |
$ | (574 | ) | |
$ | (2,147 | ) | |
$ | 2,157 | | |
$ | (7,730 | ) |
| |
| | | |
| | | |
| | | |
| | |
(Loss) income per common share - Basic(1) | |
| | | |
| | | |
| | | |
| | |
Continuing operations | |
$ | (0.03 | ) | |
$ | (0.38 | ) | |
$ | 0.13 | | |
$ | (1.84 | ) |
Discontinued operations | |
$ | - | | |
$ | 0.02 | | |
$ | - | | |
$ | 0.03 | |
| |
$ | (0.03 | ) | |
$ | (0.36 | ) | |
$ | 0.13 | | |
$ | (1.81 | ) |
| |
| | | |
| | | |
| | | |
| | |
(Loss) income per common share – Diluted(1) | |
| | | |
| | | |
| | | |
| | |
Continuing operations | |
$ | (0.03 | ) | |
$ | (0.38 | ) | |
$ | 0.13 | | |
$ | (1.84 | ) |
Discontinued operations | |
$ | - | | |
$ | 0.02 | | |
$ | - | | |
$ | 0.03 | |
| |
$ | (0.03 | ) | |
$ | (0.36 | ) | |
$ | 0.13 | | |
$ | (1.81 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average basic common shares
outstanding(1) | |
| 20,166,384 | | |
| 5,877,417 | | |
| 16,383,736 | | |
| 4,269,378 | |
Weighted average diluted common shares
outstanding(1) | |
| 20,166,384 | | |
| 5,877,417 | | |
| 16,396,038 | | |
| 4,269,378 | |
(1) Share
and per share amounts have been restated to reflect the effects of two reverse stock splits of the Company’s Class B common
stock, which occurred during the first quarter of 2014. See Note 1, "Organization and Nature of Business" and Note 11,
"Stockholders' Equity" for further discussion.
See Notes to Consolidated Financial Statements
BLUEROCK
RESIDENTIAL GROWTH REIT, INC.
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2015
CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY (Unaudited)
(In thousands, except share
and per share amounts)
| |
Class
A
Common Stock | | |
Class
B-1
Common Stock | | |
Class
B-2
Common Stock | | |
Class
B-3
Common Stock | | |
| | |
| | |
| | |
| | |
| |
| |
Number
of Shares | | |
Par
Value | | |
Number
of Shares | | |
Par
Value | | |
Number
of Shares | | |
Par
Value | | |
Number
of Shares | | |
Par
Value | | |
Additional
Paid- in Capital | | |
Cumulative
Distributions | | |
Net
loss to Common Stockholders | | |
Noncontrolling
Interests | | |
Total Equity | |
Balance, January 1, 2015 | |
| 7,531,188 | | |
$ | 75 | | |
| 353,630 | | |
$ | 4 | | |
| 353,630 | | |
$ | 4 | | |
| 353,629 | | |
$ | 4 | | |
$ | 113,511 | | |
$ | (9,930 | ) | |
$ | (11,283 | ) | |
$ | 33,626 | | |
$ | 126,011 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of Class A common stock, net | |
| 10,948,002 | | |
| 109 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 131,204 | | |
| - | | |
| - | | |
| - | | |
| 131,313 | |
Conversion of Class B-1 into Class A shares | |
| 353,630 | | |
| 4 | | |
| (353,630 | ) | |
| (4 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Conversion of Class B-2 into Class A shares | |
| 353,630 | | |
| 4 | | |
| - | | |
| - | | |
| (353,630 | ) | |
| (4 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Vesting of restricted stock compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 102 | | |
| - | | |
| - | | |
| - | | |
| 102 | |
Issuance of restricted stock | |
| 15,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Issuance of Long-Term Incentive Plan ("LTIP")
units for compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,964 | | |
| - | | |
| - | | |
| - | | |
| 2,964 | |
Vesting of LTIP Unit compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,239 | | |
| - | | |
| - | | |
| - | | |
| 1,239 | |
Capital contributions from noncontrolling interests | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,334 | | |
| 1,334 | |
Distributions declared | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (14,984 | ) | |
| - | | |
| (246 | ) | |
| (15,230 | ) |
Disposition of noncontrolling interests | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (7,409 | ) | |
| (7,409 | ) |
Change in additional paid-in capital due to
acquisitions | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (457 | ) | |
| - | | |
| - | | |
| - | | |
| (457 | ) |
Distributions to noncontrolling interests | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,622 | ) | |
| (1,622 | ) |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,157 | | |
| 5,884 | | |
| 8,041 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, September 30, 2015 | |
| 19,201,450 | | |
$ | 192 | | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 353,629 | | |
$ | 4 | | |
$ | 248,563 | | |
$ | (24,914 | ) | |
$ | (9,126 | ) | |
$ | 31,567 | | |
$ | 246,286 | |
See Notes to Consolidated Financial Statements
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands, except share and per
share amounts)
| |
Nine Months Ended | |
| |
September 30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Cash flows from operating activities | |
| | | |
| | |
Net income (loss) | |
$ | 8,041 | | |
$ | (9,200 | ) |
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 10,824 | | |
| 10,048 | |
Amortization of fair value adjustments on mortgages payable | |
| (204 | ) | |
| (225 | ) |
Equity in income of unconsolidated joint ventures | |
| (4,391 | ) | |
| (492 | ) |
Gain on sale of real estate assets of unconsolidated joint ventures | |
| (11,303 | ) | |
| (1,006 | ) |
Distributions from unconsolidated real estate joint ventures | |
| 6,958 | | |
| 383 | |
Share-based compensation attributable to directors' stock compensation
plan | |
| 102 | | |
| 36 | |
Share-based compensation to Former Advisor - LTIP Units | |
| - | | |
| 2,117 | |
Share-based compensation to Manager - LTIP Units | |
| 4,203 | | |
| 672 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Due to affiliates, net | |
| 734 | | |
| (409 | ) |
Accounts receivable, prepaids and other assets | |
| (3,329 | ) | |
| (862 | ) |
Accounts payable and other accrued liabilities | |
| 4,232 | | |
| 3,303 | |
Net cash provided by operating activities | |
| 15,867 | | |
| 4,365 | |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Increase in restricted cash | |
| (112 | ) | |
| (2,275 | ) |
Acquisitions of consolidated real estate investments | |
| (116,952 | ) | |
| (16,850 | ) |
Capital expenditures | |
| (2,470 | ) | |
| (7,435 | ) |
Proceeds from sale of joint venture interests | |
| - | | |
| 4,985 | |
Proceeds from sale of unconsolidated real estate joint venture interests | |
| 15,590 | | |
| - | |
Purchases of interests from noncontrolling members | |
| (7,866 | ) | |
| (15,447 | ) |
Investments in unconsolidated joint ventures | |
| (45,192 | ) | |
| (8,512 | ) |
Net cash used in investing activities | |
| (157,002 | ) | |
| (45,534 | ) |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Distributions to common stockholders | |
| (14,119 | ) | |
| (3,396 | ) |
Distributions to noncontrolling interests | |
| (1,622 | ) | |
| (4,977 | ) |
Capital contributions from noncontrolling interests | |
| 1,334 | | |
| 4,271 | |
Borrowings on mortgages payable | |
| 68,224 | | |
| 15,566 | |
Repayments on mortgages payable | |
| (1,037 | ) | |
| (238 | ) |
Repayments of line of credit | |
| - | | |
| (7,571 | ) |
Payments of deferred financing fees | |
| (1,084 | ) | |
| (1,835 | ) |
Net proceeds from issuance of common stock | |
| 131,313 | | |
| 43,977 | |
Net cash provided by financing activities | |
| 183,009 | | |
| 45,797 | |
| |
| | | |
| | |
Net increase in cash and cash equivalents | |
$ | 41,874 | | |
$ | 4,628 | |
| |
| | | |
| | |
Cash and cash equivalents at beginning of period | |
$ | 23,059 | | |
$ | 2,984 | |
| |
| | | |
| | |
Cash and cash equivalents at end of period | |
$ | 64,933 | | |
$ | 7,612 | |
Supplemental Disclosure of Cash Flow Information | |
| | | |
| | |
| |
| | | |
| | |
Cash paid during the period for interest | |
$ | 7,622 | | |
$ | 5,400 | |
Distributions payable – declared and unpaid | |
$ | 1,111 | | |
$ | 452 | |
Accrued offering costs | |
$ | - | | |
$ | 635 | |
Mortgages assumed upon property acquisitions | |
$ | 32,942 | | |
$ | 116,800 | |
Class A common stock issued for property acquisitions | |
$ | - | | |
$ | 15,188 | |
OP Units issued for property acquisition | |
$ | - | | |
$ | 4,100 | |
See Notes to Consolidated Financial Statements
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Organization and Nature of Business
Bluerock Residential
Growth REIT, Inc. (the “Company”) was incorporated as a Maryland corporation on July 25, 2008. The Company’s
objective is to maximize long-term stockholder value by acquiring well-located institutional-quality apartment properties in demographically
attractive growth markets across the United States. The Company seeks to maximize returns through investments where it believes
it can drive substantial growth in its funds from operations and net asset value through one or more of its Core-Plus, Value-Add,
Opportunistic and Invest-to-Own investment strategies.
The Company has elected
to be treated, and currently qualifies, as a real estate investment trust (“REIT”), for federal income tax purposes.
As a REIT, the Company generally is not subject to corporate-level income taxes. To maintain its REIT status, the Company is required,
among other requirements, to distribute annually at least 90% of its “REIT taxable income,” as defined by the Internal
Revenue Code of 1986, as amended (the “Code”), to the Company’s stockholders. If the Company fails to qualify
as a REIT in any taxable year, it would be subject to federal income tax on its taxable income at regular corporate tax rates.
The Company raised
capital in a continuous registered offering, carried out in a manner consistent with offerings of non-listed REITs, from its inception
until September 9, 2013, when it terminated the continuous registered offering in connection with the Company’s Board of
Directors (the “Board’s”) consideration of strategic alternatives to maximize value to its stockholders. The
Company subsequently determined to register shares of newly authorized Class A common stock that were to be offered in a firmly
underwritten public offering (the “IPO”), by filing a registration statement on Form S-11 (File No. 333-192610) with
the SEC, on November 27, 2013. On March 28, 2014, the SEC declared the registration statement effective and the Company announced
the pricing of the IPO of 3,448,276 shares of Class A common stock at a public offering price of $14.50 per share for total gross
proceeds of $50.0 million. The net proceeds of the IPO, which closed on April 2, 2014, were approximately $44.0 million after
deducting underwriting discounts and commissions and offering costs.
In connection with
the IPO, shares of the Company’s Class A common stock were listed on the NYSE MKT for trading under the symbol “BRG.”
Pursuant to the second articles of amendment and restatement to its charter filed on March 26, 2014 (the “Second Charter
Amendment”), each share of its common stock outstanding immediately prior to the listing, including shares sold in its continuous
registered offering, was changed into one-third of a share of each of Class B-1 common stock, Class B-2 common stock and Class
B-3 common stock. Following the filing of the Second Charter Amendment, the Company effected a 2.264881-to-1 reverse stock split
of its outstanding shares of Class B-1 common stock, Class B-2 common stock and Class B-3 common stock, and on March 31, 2014,
the Company effected an additional 1.0045878-to-1 reverse stock split of its outstanding shares of Class B-1 common stock, Class
B-2 common stock and Class B-3 common stock.
As of March 31, 2014,
the Company was externally managed by Bluerock Multifamily Advisor, LLC, an affiliate of Bluerock (the “Former Advisor”),
pursuant to an advisory agreement (the “Advisory Agreement”). In connection with the completion of the IPO, the Company
engaged BRG Manager, LLC, also an affiliate of Bluerock (the “Manager”), to provide external management services to
us under a new management agreement (the “Management Agreement”), and terminated the Advisory Agreement with the Former
Advisor.
Substantially concurrently
with the completion of the IPO, the Company completed a series of related contribution transactions pursuant to which it acquired
indirect equity interests in four apartment properties, and a 100% fee simple interest in a fifth apartment property for an aggregate
asset value of $152.3 million (inclusive of Villas at Oak Crest, which is accounted for under the equity method, and Springhouse,
in which the Company already owned an interest and which has been reported as consolidated prior to the IPO).
The Company subsequently
determined to register additional shares of its Class A common stock to be offered in a firmly underwritten public offering, (the
“October 2014 Follow-On Offering”), by filing a registration statement on Form S-11 (File No. 333-198770) with the
SEC on September 16, 2014. On October 2, 2014, the SEC declared the Registration Statement effective and the Company announced
the pricing of the October 2014 Follow-On Offering at a public offering price of $11.90 per share. The Company closed the October
2014 Follow-On Offering of 3,035,444 shares of Class A common stock, inclusive of shares sold pursuant to the full exercise of
the overallotment option by the underwriters, on October 8, 2014. Net proceeds of the October 2014 Follow-On Offering were approximately
$32.9 million after deducting underwriting discounts and commissions and offering costs.
On January 20, 2015,
the Company completed an underwritten shelf takedown offering (the “January 2015 Follow-On Offering”) of 4,600,000
shares of Class A common stock, par value $0.01 per share, inclusive of shares sold pursuant to the full exercise of the overallotment
option by the underwriters. The shares were registered with the SEC pursuant to a registration statement on Form S-3 (File No.
333-200359) filed with the SEC on November 19, 2014 and declared effective on December 19, 2014. The public offering price of
$12.50 per share was announced on January 14, 2015. Net proceeds of the January 2015 Follow-On Offering were approximately $53.7
million after deducting underwriting discounts and commissions and offering costs.
On May 22, 2015, the
Company completed an underwritten shelf takedown offering (the “May 2015 Follow-On Offering”) of 6,348,000 shares
of Class A common stock, par value $0.01 per share, inclusive of shares sold pursuant to the full exercise of the overallotment
option by the underwriters. The shares were registered with the SEC pursuant to a registration statement on Form S-3 (File No.
333-200359) filed with the SEC on November 19, 2014 and declared effective on December 19, 2014. The public offering price of
$13.00 per share was announced on May 19, 2015. Net proceeds of the May 2015 Follow-On Offering were approximately $77.6 million
after deducting underwriting discounts and commissions and offering costs.
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of September 30,
2015, the Company's portfolio consisted of interests in sixteen properties (thirteen operating properties and three development
properties). The Company’s sixteen properties contain an aggregate of 4,991 units, comprised of 4,097 operating
units and 894 units under development. As of September 30, 2015, these properties, exclusive of our development properties, and
Whetstone and EOS, the lease-up properties, were approximately 95% occupied.
Note 2 – Basis of Presentation and Summary of Significant
Accounting Policies
Principles of Consolidation and Basis of Presentation
The Company operates
as an umbrella partnership REIT in which Bluerock Residential Holdings, L.P. (its “Operating Partnership”), or its
wholly-owned subsidiaries, owns substantially all of the property interests acquired on the Company’s behalf. As of September
30, 2015, limited partners other than the Company owned approximately 5.50% of the Operating Partnership (1.37% is held by holders
of limited partnership interest in the Operating Partnership (“OP Units”) and 4.13% is held by holders of the Operating
Partnership’s long-term incentive plan units (“LTIP Units”)). Bluerock Real Estate, L.L.C., a Delaware limited
liability company, is referred to as Bluerock (“Bluerock”), and the Company’s external manager, BRG Manager,
LLC, a Delaware limited liability company, is referred to as its Manager (“Manager”). Both Bluerock and the Manager
are related parties with respect to the Company, but are not within the Company’s control and are not consolidated in the
Company’s financial statements.
Because the Company
is the sole general partner of its Operating Partnership and has unilateral control over its management and major operating decisions
(even if additional limited partners are admitted to the Operating Partnership), the accounts of the Operating Partnership are
consolidated in its consolidated financial statements. The Company consolidates entities in which it controls more than 50% of
the voting equity and in which control does not rest with other investors. Investments in real estate joint ventures over which
the Company has the ability to exercise significant influence, but for which it does not have financial or operating control,
are accounted for using the equity method of accounting. These entities are reflected on the Company’s consolidated financial
statements as “Investments in unconsolidated real estate joint ventures.” All significant intercompany accounts and transactions
have been eliminated in the consolidated financial statements. The Company will consider future joint ventures for consolidation
in accordance with the provisions required by the of the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Topic 810: Consolidation.
Certain amounts in
prior year financial statement presentation have been reclassified to conform to the current period presentation.
Interim Financial Information
The accompanying
unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) for interim financial reporting, and the instructions to Form 10-Q
and Article 10-1 of Regulation S-X. Accordingly, the financial statements for interim reporting do not include all of the
information and notes or disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results
for interim periods should not be considered indicative of the operating results for a full year.
The balance sheet
at December 31, 2014 has been derived from the audited financial statements at that date, but does not include all of the
information and disclosures required by GAAP for complete financial statements. For further information, refer to the financial
statements and notes thereto included in our audited consolidated financial statements for the year ended December 31, 2014
contained in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on March
4, 2015.
Summary of Significant Accounting
Policies
There have been no
significant changes to the Company’s accounting policies since it filed its audited consolidated financial statements in
its Annual Report on Form 10-K for the year ended December 31, 2014.
Use of Estimates
The preparation of
the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
New Accounting Pronouncements
In April 2015, the
FASB issued Accounting Standards Update No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the
Presentation of Debt Issuance Costs” (“ASU 2015-03”). The amendments in ASU 2015-03 require that debt issuance
costs be presented in the balance sheet as a direct deduction from the carrying amount of that liability, consistent with debt
discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in ASU 2015-03.
The amendments in ASU 2015-03 become effective for public business entities in the first annual period beginning after December
15, 2015, and interim periods within those fiscal years, with early application permitted. The Company is currently evaluating
the impact of this accounting standard.
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In February 2015,
the FASB issued Accounting Standards Update No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis”
(“ASU 2015-02”). ASU 2015-02 eliminates specific consolidation guidance for limited partnerships and revises other
aspects of consolidation analysis, including how kick-out rights, fee arrangements and related parties are assessed. ASU 2015-02
is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after
December 15, 2015, with early adoption permitted. The Company is currently evaluating the impact of ASU 2015-02 on the Company’s
financial statements.
In January 2015,
the FASB issued Accounting Standards Update No. 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20):
Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items” (“ASU 2015-01”),
which eliminates the concept of extraordinary items and require items that are either unusual in nature or infrequently occurring
to be reported as a separate component of income from continuing operations or disclosed in the notes to the financial statements.
ASU 2015-01 is effective for periods beginning after December 15, 2015, with early adoption permitted. ASU 2015-01 is not expected
to have a material impact on the Company's financial statements.
In August 2014, the
FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern” (“ASU 2014-15”), which
requires an entity's management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial
doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are
issued. ASU 2014-15 is effective for periods beginning after December 15, 2016. ASU 2014-15 is not expected to have a material
impact on the Company's financial statements.
In May 2014, the
FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). The
updated standard is a new comprehensive revenue recognition model that requires revenue to be recognized in a manner that depicts
the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange
for those goods or services. In July 2015, the FASB voted to approve the deferral of the effective date of ASU 2014-09 by one
year. Therefore, ASU 2014-09 will become effective for the Company in the first quarter of the fiscal year ending December 31,
2018. Early adoption is permitted, but not earlier than the first quarter of the fiscal year ending December 31, 2017. The ASU
allows for either full retrospective or modified retrospective adoption. The Company has not selected a transition method, and
is currently evaluating the effect that ASU 2014-09 will have on the consolidated financial statements and related disclosures.
Note 3 – Real Estate Assets Held
for Sale, Discontinued Operations and Sale of Joint Venture Equity Interests
Real Estate Assets Held for Sale and
Discontinued Operations
The Company had reported
its Creekside property as held for sale in the Company’s Annual Report on Form 10-K for the year ended December
31, 2013. On March 28, 2014, the special purpose entity that owned the Creekside property, in which the Company held a 24.7% indirect
equity interest, sold the Creekside property as discussed below. On August 28, 2014, the Company’s Investment Committee
approved a plan to sell North Park Towers and the Company has classified amounts related to the property as held for sale as of
December 31, 2014 and September 30, 2015. See Note 14 for information regarding the sale of North Park Towers on October 16, 2015.
Property Classified as Discontinued
Operations
The following is
a summary of the results of operations of the Creekside property classified as discontinued operations for the three and nine
months ended September 30, 2014 (amounts in thousands); there were no operations for the three and nine months ended September
30, 2015 as the property was sold on March 28, 2014:
| |
Three Months Ended | | |
Nine Months Ended | |
| |
September 30, | | |
September 30, | | |
September 30, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Total revenues | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 508 | |
Expenses | |
| | | |
| | | |
| | | |
| | |
Property operating | |
| — | | |
| 114 | | |
| — | | |
| (171 | ) |
Depreciation and amortization | |
| — | | |
| — | | |
| — | | |
| (183 | ) |
Management fees | |
| — | | |
| — | | |
| — | | |
| (8 | ) |
Interest, net | |
| — | | |
| — | | |
| — | | |
| (149 | ) |
Loss on operations of rental property | |
$ | — | | |
$ | 114 | | |
$ | — | | |
$ | (3 | ) |
Gain on sale of joint venture interest | |
| — | | |
| — | | |
| — | | |
| 1,006 | |
Loss on early extinguishment
of debt | |
| — | | |
| — | | |
| — | | |
| (880 | ) |
(Loss) Income from discontinued
operations | |
$ | — | | |
$ | 114 | | |
$ | — | | |
$ | 123 | |
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sale of Joint Venture Equity Interests
On December 10, 2014,
the Company through BEMT Augusta, LLC, sold its 25.0% interest in the Estates at Perimeter/Augusta, Bluerock Special Opportunity
+ Income Fund II, LLC (“Fund II”) sold its 25.0% interest, and an unaffiliated third party (“BRG Co-Owner”),
sold its 50.0% interest, to Waypoint Residential Services, LLC, an unaffiliated third party, for an aggregate of $26.0 million,
subject to a loan prepayment penalty and certain prorations and adjustments typical in such real estate transactions. After deduction
for payment of the existing mortgage indebtedness and loan prepayment penalty, closing costs and fees, the sale of the Company’s
interest in the Estates at Perimeter/Augusta generated net proceeds to the Company of approximately $1.7 million and a gain on
sale of $0.6 million.
On December 9, 2014,
the Company, through BEMT Berry Hill, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Operating
Partnership (“BEMT Berry Hill’), entered into a series of transactions and agreements to restructure the ownership
of Berry Hill (the “Restructuring Transactions”).
Prior to the Restructuring Transactions, the Company held a 25.1% indirect equity interest in Berry Hill,
Bluerock Special Opportunity + Income Fund III, LLC (“Fund III”), a Delaware limited liability company and an affiliate
of the Company’s Manager, held a 28.4% indirect equity interest, Bluerock Growth Fund, LLC (“BGF”), a Delaware
limited liability company and an affiliate of the Company’s Manager, held a 29.0% indirect equity interest, and Stonehenge
23Hundred JV Member, LLC (“Stonehenge JV Member”), an affiliate of Stonehenge Real Estate Group, LLC (“Stonehenge”),
an unaffiliated third party, held the remaining 17.5% indirect equity interest plus a promote interest based on investment return
hurdles for its service as developer of the property. These indirect equity interests were all held in BR Stonehenge 23Hundred
JV, LLC, a Delaware limited liability company, which owns 100% of 23Hundred, LLC (“23Hundred”), a Delaware limited
liability company, which in turn owned 100% of Berry Hill.
Following the Restructuring
Transactions, as of December 31, 2014, Berry Hill was owned in tenancy-in-common interests, adjusted for the agreed Stonehenge
promote interest as follows: (i) BEMT Berry Hill and Fund III, through 23Hundred, held a 42.2% undivided tenant-in-common interest
(the Company, through BEMT Berry Hill own a 19.8% indirect equity interest and Fund III owns a 22.4% indirect equity interest);
(ii) BGF’s subsidiary BGF 23Hundred, LLC, a Delaware limited liability company, holds a 22.9% undivided tenant-in-common
interest; and (iii) Stonehenge JV Member’s subsidiary SH 23Hundred TIC, LLC, a Delaware limited liability company, holds
a 34.8% undivided tenant-in-common interest.
As a result of the restructuring,
the Company no longer controlled Berry Hill through its voting rights. The Company’s investment in Berry Hill has been deconsolidated
and was subsequently accounted for under the equity method of accounting as of December 31, 2014.
On January 14, 2015,
the Company, along with the other two holders of tenant-in-common interests in Berry Hill, sold their respective interests to
2300 Berry Hill General Partnership, an unaffiliated third party. The aggregate purchase price was $61.2 million, subject to certain
prorations and adjustments typical in such real estate transactions. After deduction for payment of the existing mortgage indebtedness
and payment of closing costs and fees, the sale of the Company’s interest in Berry Hill generated net proceeds of approximately
$7.3 million to the Company and a consolidated gain on sale of $11.3 million, of which the Company’s pro rata share of gain
is $5.3 million before disposition expenses of $0.1 million, which was included in the Company’s statement of operations
for the nine months ended September 30, 2015.
On December 3, 2014,
the Company, through BR Waterford Crossing JV, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the
Operating Partnership (“BRG Grove”) and Bell HNW Waterford, LLC, a Delaware limited liability company and an unaffiliated
third party (“BRG Co-Owner”), owned a 252-unit apartment community located in Hendersonville, Tennessee named the
Grove at Waterford, as tenants-in-common. BRG Grove owned a 60.0% tenant-in-common interest in the Grove at Waterford property. On
December 18, 2014, BRG Grove sold its 60.0% tenant-in-common interest in the Grove at Waterford property, and BRG Co-Owner its
40.0% tenant-in-common interest, to Bell Hendersonville, an unaffiliated third party, for an aggregate of $37.7 million, subject
to a loan prepayment penalty and certain prorations and adjustments typical in such real estate transactions. After deduction
for payment of the existing mortgage indebtedness and loan prepayment penalty, closing costs and fees, the sale of the Company’s
interest in the Grove at Waterford generated net proceeds to the Company of approximately $9.0 million and a gain on sale of $3.5
million.
On March 28, 2014,
BR Creekside, LLC, a special-purpose entity in which the Company holds a 24.7% indirect equity interest, sold the Creekside property
to SIR Creekside, LLC, an unaffiliated third party, for $18.9 million, subject to certain prorations and adjustments typical in
such real estate transactions. After deduction for payment of the existing mortgage indebtedness encumbering the Creekside property
in the approximate amount of $13.5 million and payment of closing costs and fees, excluding disposition fees of approximately
$0.1 million deferred by the Former Advisor, the sale of the Creekside property generated net proceeds to the Company of approximately
$1.2 million and a gain on sale of $1.0 million.
Note 4 – Investments in Real Estate
As of September 30,
2015, the Company was invested in thirteen operating real estate properties and three development properties through joint venture
partnerships. The following tables provide summary information regarding our operating and development investments, which are
either consolidated or presented on the equity method of accounting.
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Operating Properties
Multifamily Community Name/Location | |
Number of Units | | |
Date Built/Renovated (1) | | |
Ownership Interest | | |
Average Rent (2) | | |
% Occupied (3) | |
ARIUM Grandewood/ Orlando, FL (4) | |
| 306 | | |
| 2005 | | |
| 95.00 | % | |
$ | 1,169 | | |
| 96 | % |
ARIUM Palms/ Orlando, FL | |
| 252 | | |
| 2008 | | |
| 95.00 | % | |
| 1,156 | | |
| 92 | % |
Ashton I/ Charlotte, NC | |
| 322 | | |
| 2012 | | |
| 100.0 | % | |
| 1,022 | | |
| 91 | % |
Enders Place at Baldwin Park/ Orlando, FL | |
| 220 | | |
| 2003 | | |
| 89.50 | % | |
| 1,563 | | |
| 97 | % |
EOS/ Orlando, FL (5) | |
| 296 | | |
| Est. 2015 | | |
| — | | |
| 1,211 | | |
| 30 | % |
Fox Hill/ Austin , TX | |
| 288 | | |
| 2010 | | |
| 94.62 | % | |
| 1,093 | | |
| 99 | % |
Lansbrook Village/ Palm Harbor, FL | |
| 601 | | |
| 2004 | | |
| 76.81 | % | |
| 1,167 | | |
| 93 | % |
MDA Apartment/ Chicago, IL | |
| 190 | | |
| 2006 | | |
| 35.31 | % | |
| 2,244 | | |
| 96 | % |
North Park Towers/ Southfield, MI (6) | |
| 313 | | |
| 2000 | | |
| 100.0 | % | |
| 1,065 | | |
| 95 | % |
Park & Kingston/ Charlotte, NC | |
| 153 | | |
| 2014 | | |
| 96.00 | % | |
| 1,195 | | |
| 98 | % |
Springhouse at Newport News/Newport News, VA | |
| 432 | | |
| 1985 | | |
| 75.00 | % | |
| 826 | | |
| 95 | % |
Village Green of Ann Arbor/ Ann Arbor, MI | |
| 520 | | |
| 2013 | | |
| 48.61 | % | |
| 1,159 | | |
| 95 | % |
Whetstone / Durham, NC (5) | |
| 204 | | |
| 2015 | | |
| — | | |
| 1,325 | | |
| 67 | % |
Total/Average | |
| 4,097 | | |
| | | |
| | | |
$ | 1,189 | | |
| 95 | % |
(1) Represents date of
last significant renovation or year built if there were no renovations.
(2) Represents the average effective
monthly rent per occupied unit for all occupied units for the three months ended September 30, 2015, excluding Whetstone and EOS
which are still in lease-up. Total concessions for the three months ended September 30, 2015 amounted to approximately $91,000.
(3) Percent occupied is calculated
as (i) the number of units occupied as of September 30, 2015, divided by (ii) total number of units, expressed as a percentage,
excluding Whetstone and EOS which are still in lease-up.
(4) ARIUM
Grandewood was formerly called ARIUM Grande Lakes.
(5) Whetstone and EOS are currently
preferred equity investments providing a stated investment return and both properties are in leaseup and actual average rents were
$966 and $1,174, respectively, net of upfront leaseup concessions.
(6) This property is classified
as held for sale as of September 30, 2015 and accounted for on a consolidated basis based on our 100% ownership in the property.
Amounts related to this investment are classified as held for sale assets/liabilities on the Company’s consolidated balance
sheet.
Depreciation expense was $3.1 million and $2.6 million for the three months ended September 30, 2015
and 2014, respectively, and $8.2 million and $6.0 million, for the nine months ended September 30, 2015 and 2014, respectively,
including amounts in discontinued operations.
Intangibles related to the Company’s consolidated investments
in real estate consist of the value of in-place leases. In-place leases are amortized over the remaining term of the in-place
leases, which is approximately six months. Amortization expense related to the in-place leases was $0.9 million and $2.1 million
for the three months ended September 30, 2015 and 2014, respectively, and $2.3 million and $3.8 million for the nine months ended
September 30, 2015 and 2014, respectively.
Development Properties
Multifamily Community Name/Location | |
Number
of Units | | |
Initial Occupancy | |
Final
Units to be
Delivered | |
Pro
Forma Average Rent (1) | |
| |
| | |
| |
| |
| |
Alexan CityCentre / Houston, TX | |
| 340 | | |
4Q 2016 | |
4Q 2017 | |
$ | 2,144 | |
Alexan Southside Place / Houston, TX | |
| 269 | | |
3Q 2017 | |
2Q 2018 | |
$ | 2,019 | |
Cheshire Bridge / Atlanta, GA | |
| 285 | | |
1Q 2017 | |
3Q 2017 | |
$ | 1,559 | |
Total/Average | |
| 894 | | |
| |
| |
$ | 1,921 | |
(1) Represents
the average pro forma effective monthly rent per occupied unit for all expected occupied units upon stabilization.
Note 5 – Acquisition of Real Estate
The following describes
the Company’s significant acquisition activity during the nine months ended September 30, 2015:
Acquisition of Interest in Park &
Kingston
On March 16, 2015, the Company, through a wholly-owned subsidiary of its Operating Partnership, completed
an investment of $6.3 million in a multi-tiered joint venture along with Fund III to acquire 153 newly-constructed units (the “Phase
I Units”) in a Class AA apartment community in Charlotte, North Carolina known as the Park & Kingston Apartments (“Park
& Kingston”). The Company’s indirect ownership interest in Park & Kingston was 46.95%. The purchase price for
the Phase I Units of $27.85 million was funded, in part, with a $15.25 million senior mortgage loan secured by the Park & Kingston
property and improvements.
The Company also
has the ability to acquire 15 units under development at Park & Kingston (the “Phase II Units”), for a purchase
price of $2.87 million. The seller has commenced, and will manage and complete the development of the Phase II Units. Upon completion
of the development of and upon the issuance of a certificate of occupancy for the Phase II Units, closing will occur, financed
with supplemental financing of up to 70% of the appraised value of the Phase II Units per the senior mortgage loan discussed above.
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In May 2015, the Company invested an additional $6.5 million, plus customary prorations, in equity in
Park & Kingston, increasing the Company’s indirect ownership interest in the property from 46.95% to approximately 96.0%.
The additional interests were purchased from Fund III based on the original purchase price on a pro rata basis, plus customary
prorations.
Acquisition of Interest in Fox Hill
On March 26, 2015, the Company, through subsidiaries of its Operating Partnership, completed an investment
of $10.2 million in a multi-tiered joint venture along with Fund III, and three unaffiliated investors (collectively, the “Third
Parties”), to acquire a 288-unit apartment community located in Austin, Texas known as the Fox Hill Apartments (“Fox
Hill”). The Company’s indirect ownership in Fox Hill was 85.27%. The purchase price of $38.15 million was funded, in
part, with a $26.71 million senior mortgage loan secured by the Fox Hill Property and improvements.
In May 2015, the Company invested an additional $1.1 million, plus customary prorations, in equity in
Fox Hill, increasing the Company’s indirect ownership interest in the property from 85.27% to approximately 94.62%. The additional
interests were purchased from Fund III based on the original purchase price on a pro rata basis, plus customary prorations.
Acquisition of Interest in Ashton I
On August 19, 2015,
the Company, through subsidiaries of its Operating Partnership, completed an investment of $13.5 million to acquire a 100% fee
simple interest in a 322-unit apartment community located in Charlotte, North Carolina known as the Ashton Reserve at Northlake
Phase I (“Ashton I”). The purchase price of $44.75 million was funded, in part, with the assumption of a $31.9 million
senior mortgage loan secured by the Ashton I Property and improvements.
In addition, the Company, through a subsidiary
of the Operating Partnership, expects to subsequently acquire an additional 151-unit apartment community currently under construction
on land immediately adjacent to Ashton I, to be known as Ashton Reserve at Northlake Phase II, or Ashton II. On August 19, 2015,
the Company entered into an assignment and assumption of purchase and sale agreement with an unaffiliated third-party, pursuant
to which it assumed the obligations under the purchase agreement to acquire Ashton II following completion of construction and
stabilization thereof. The Company expects to close on the acquisition of Ashton II for a purchase price of approximately $20.6
million, subject to customary adjustments and prorations, and subject to final adjustment and pricing based on the then existing
financial condition of Ashton II based on a closing rent roll.
Acquisition of ARIUM Palms at World
Gateway, formerly known as Century Palms at World Gateway
On August 20,
2015, the Company, through subsidiaries of its Operating Partnership, completed an investment of $13.0 million in a
multi-tiered joint venture along with an unaffiliated investor, to acquire a 252-unit apartment community located in Orlando,
Florida known as the ARIUM Palms at World Gateway Apartments (“ARIUM Palms”). The Company’s indirect
ownership in ARIUM Palms was 95.0%. The purchase price of $37.0 million was funded, in part, with a $25.0 million senior
mortgage loan secured by the ARIUM Palms Property and improvements.
Preliminary Purchase Price Allocations
The acquisitions of
Park & Kingston, Fox Hill, Ashton I and ARIUM Palms have been accounted for as business combinations. The purchase prices were
allocated to the acquired assets and liabilities based on their estimated fair values at the dates of acquisition. The preliminary
measurements of fair value reflected below are subject to change. The Company expects to finalize the purchase price allocations
as soon as practical, but no later than one year from each property’s respective acquisition date.
The following table
summarizes the assets acquired at the acquisition date. The amounts listed below reflect provisional amounts that will be updated
as information becomes available (amounts in thousands):
| |
Preliminary Purchase
Price Allocation | |
Land | |
$ | 15,270 | |
Building | |
| 112,431 | |
Building improvements | |
| 8,884 | |
Land improvements | |
| 6,265 | |
Furniture and fixtures | |
| 3,136 | |
In-place leases | |
| 2,806 | |
Total assets acquired | |
$ | 148,792 | |
In connection with the acquisition of Ashton I, the Company assumed mortgage debt with a fair value of
approximately $32.9 million.
The pro-forma information
presented below represents the change in consolidated revenue and earnings as if the Company's significant acquisitions of Village
Green of Ann Arbor, North Park Towers, Lansbrook Village, ARIUM Grandewood, Fox Hill, Ashton I and ARIUM Palms (collectively,
the "Recent Acquisitions"), had occurred on January 1, 2014 (amounts in thousands, except per share amounts). Park &
Kingston is excluded from the pro forma information as the property was under development during 2014.
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| |
Nine Months Ended September 30, | | |
Nine Months Ended September 30, | |
| |
2015 | | |
2014 | |
| |
As Reported | | |
Pro-Forma
Adjustments | | |
Pro-Forma | | |
As Reported | | |
Pro-Forma
Adjustments | | |
Pro-Forma | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Revenues | |
$ | 31,065 | | |
$ | 5,811 | | |
$ | 36,876 | | |
$ | 20,547 | | |
$ | 17,292 | | |
$ | 37,839 | |
Net income (loss) | |
$ | 8,041 | | |
$ | 2,283 | | |
$ | 10,324 | | |
$ | (9,200 | ) | |
$ | (6,140 | ) | |
$ | (15,340 | ) |
Net income (loss) attributable to BRG | |
$ | 2,157 | | |
$ | 2,173 | | |
$ | 4,330 | | |
$ | (7,730 | ) | |
$ | (5,521 | ) | |
$ | (13,251 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Earnings (loss) per share, basic and diluted (1) | |
$ | 0.13 | | |
| | | |
$ | 0.26 | | |
$ | (1.81 | ) | |
| | | |
$ | (3.10 | ) |
(1) Pro-forma earnings (loss) per share, both basic
and diluted, are calculated based on the net income (loss) attributable to BRG.
Aggregate property level revenues and net
loss for the Recent Acquisitions, since the properties’ respective acquisition dates, that are reflected in the Company’s
consolidated statement of operations for the nine months ended September 30, 2015 amounted to $20.1 million and $1.1 million,
respectively.
Note 6 – Investments in Unconsolidated Real Estate
Joint Ventures
Following is a summary
of the Company’s ownership interests in the investments reported under the equity method of accounting. The carrying amount
of the Company’s investments in unconsolidated real estate joint ventures as of September 30, 2015 and December 31, 2014
is summarized in the table below (amounts in thousands):
Property | |
September 30, 2015 | | |
December 31, 2014 | |
| |
| | |
| |
Alexan CityCentre | |
$ | 6,505 | | |
$ | 6,505 | |
EOS | |
| 3,629 | | |
| 3,629 | |
Alexan Southside Place | |
| 17,322 | | |
| - | |
Whetstone | |
| 12,231 | | |
| - | |
Cheshire Bridge | |
| 15,639 | | |
| - | |
23Hundred@Berry Hill | |
| - | | |
| 4,906 | |
Villas at Oak Crest | |
| - | | |
| 3,170 | |
Other | |
| - | | |
| 121 | |
Total | |
$ | 55,326 | | |
$ | 18,331 | |
The Company’s
investments in Alexan CityCentre, EOS, Alexan Southside Place, Whetstone and Cheshire Bridge represent preferred
equity investments with the following stated returns:
| |
Current Pay
Annualized | | |
Accrued
Annualized | | |
Total
Annualized | |
Property | |
Preferred
Return | | |
Preferred
Return | | |
Preferred
Return | |
Alexan CityCentre | |
| 15.0 | % | |
| — | | |
| 15.0 | % |
EOS | |
| 15.0 | % | |
| — | | |
| 15.0 | % |
Alexan Southside Place | |
| 15.0 | % | |
| — | | |
| 15.0 | % |
Whetstone | |
| 15.0 | % | |
| — | | |
| 15.0 | % |
Cheshire Bridge | |
| 15.0 | % | |
| — | | |
| 15.0 | % |
The equity in income
(loss) of the Company’s unconsolidated real estate joint ventures for the three and nine months ended September 30, 2015
and 2014 is summarized below (amounts in thousands):
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| |
Three Months Ended September
30, | | |
Nine Months Ended September
30, | |
Property | |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Villas at Oak Crest | |
$ | 278 | | |
$ | 100 | | |
$ | 489 | | |
$ | 214 | |
Alexan CityCentre | |
| 246 | | |
| 181 | | |
| 730 | | |
| 181 | |
Alexan Southside Place | |
| 655 | | |
| — | | |
| 1,341 | | |
| — | |
EOS | |
| 137 | | |
| 93 | | |
| 407 | | |
| 93 | |
Whetstone | |
| 462 | | |
| — | | |
| 669 | | |
| — | |
Cheshire Bridge | |
| 591 | | |
| — | | |
| 787 | | |
| — | |
The Estates at Perimeter/Augusta | |
| — | | |
| 38 | | |
| (1 | ) | |
| 4 | |
Other | |
| (3 | ) | |
| — | | |
| (31 | ) | |
| — | |
Equity in earnings of unconsolidated joint venture | |
$ | 2,366 | | |
$ | 412 | | |
$ | 4,391 | | |
$ | 492 | |
Summary combined
financial information for the Company’s investments in unconsolidated real estate joint ventures as of September 30, 2015
and December 31, 2014 and for the three and nine months ended September 30, 2015 and 2014, is as follows:
| |
September 30, 2015 | | |
December 31, 2014 | |
Balance Sheets: | |
| | | |
| | |
Real estate, net of depreciation | |
$ | 119,649
| | |
$ | 55,091 | |
Real estate, net of depreciation, held for sale | |
| — | | |
| 31,334 | |
Other assets | |
| 22,254
| | |
| 1,193 | |
Other assets, held for sale | |
| — | | |
| 2,458 | |
Total assets | |
$ | 141,903
| | |
$ | 90,076 | |
| |
| | | |
| | |
Mortgages payable | |
$ | 61,998 | | |
$ | 19,820 | |
Mortgage payable, held for sale | |
| — | | |
| 23,569 | |
Other liabilities | |
| 3,680 | | |
| 2,812 | |
Other liabilities, held for sale | |
| — | | |
| 1,026 | |
Total liabilities | |
$ | 65,678 | | |
$ | 47,227 | |
Members’ equity | |
| 76,225 | | |
| 42,849 | |
Total liabilities and members’ equity | |
$ | 141,903 | | |
$ | 90,076 | |
| |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Operating Statement: | |
| | | |
| | | |
| | | |
| | |
Rental revenues | |
$ | 561 | | |
$ | 694 | | |
$ | 1,885 | | |
$ | 1,992 | |
Operating expenses | |
| (695 | ) | |
| (264 | ) | |
| (2,166 | ) | |
| (786 | ) |
Income before debt service, acquisition costs, and depreciation and amortization | |
| (134 | ) | |
| 430 | | |
| (281 | ) | |
| 1,206 | |
Interest expense, net | |
| (167 | ) | |
| (189 | ) | |
| (544 | ) | |
| (562 | ) |
Acquisition costs | |
| — | | |
| — | | |
| (66 | ) | |
| — | |
Depreciation and amortization | |
| (721 | ) | |
| (204 | ) | |
| (1,304 | ) | |
| (605 | ) |
Operating (loss) | |
| (1,022 | ) | |
| 37 | | |
| (2,195 | ) | |
| 39 | |
Gain on sale | |
| — | | |
| — | | |
| 29,200 | | |
| — | |
Net (loss) income | |
$ | (1,022 | ) | |
$ | 37 | | |
$ | 27,005 | | |
$ | 39 | |
Acquisition of Alexan Southside Place
(formerly referred to as Alexan Blaire House) Interests
On January 12, 2015, through BRG Southside, LLC, a wholly-owned subsidiary of its Operating Partnership,
the Company made a convertible preferred equity investment in a multi-tiered joint venture, along with Fund II and Fund III, which
are affiliates of the Manager, and an affiliate of Trammell Crow Residential, to develop an approximately 269-unit Class A apartment
community located in Houston, Texas, to be known as Alexan Southside Place. Alexan Southside Place will be developed upon a tract
of land ground leased from Prokop Industries BH, L.P., a Texas limited partnership, by BR Bellaire BLVD, LLC, as tenant under an
85-year ground lease. We have made a capital commitment of $17.3 million to acquire 100% of the preferred equity interests in BRG
Southside, LLC all of which has been funded as of September 30, 2015.
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Alexan Southside Place Construction
Financing
On April 7, 2015,
the Company, through BR Bellaire BLVD, LLC, an indirect subsidiary, entered into a $31.8 million construction loan with Bank of
America, NA which is secured by the leasehold interest in the Alexan Southside Place property. The loan matures on April 7, 2019,
and contains a one-year extension option, subject to certain conditions including a debt service coverage, loan to value ratio
and payment of an extension fee. The loan bears interest on a floating basis on the amount drawn based on the base rate plus 1.25%
or LIBOR plus 2.25%. Regular monthly payments are interest-only during the initial term, with payments during the extension period
based on a thirty year amortization. The loan can be prepaid without penalty.
Acquisition of Whetstone Interests
On May 20, 2015, through BRG Whetstone Durham, LLC, a wholly-owned subsidiary of its Operating Partnership,
the Company made a convertible preferred equity investment in a multi-tiered joint venture, along with Fund III and an affiliate
of TriBridge Residential, LLC, to acquire a 204-unit Class A apartment community located in Durham, North Carolina, to be known
as Whetstone Apartments. The Company has made a capital commitment of $12.2 million to acquire 100% of the preferred equity interests
in BRG Whetstone Durham, LLC all of which has been funded as of September 30, 2015. The acquisition of Whetstone Apartments was
partially funded by a bridge loan of approximately $25.2 million secured by the Whetstone Apartment property. The loan matures
May 18, 2016 and bears interest on a floating basis based on LIBOR plus 2.0%. The loan can be prepaid without penalty. The Company
provided certain standard scope non-recourse carveout guaranties in conjunction with the loan.
Acquisition of Cheshire Bridge Interests
On May 29, 2015, through
BRG Cheshire, LLC, a wholly-owned subsidiary of its Operating Partnership, the Company made a convertible preferred equity investment
in a multi-tiered joint venture, along with Fund III and an affiliate of Catalyst Development Partners II, to develop a 285-unit
Class A apartment community located in Atlanta, Georgia, to be known as Cheshire Bridge Apartments. The Company has made a capital
commitment of $15.6 million to acquire 100% of the preferred equity interests in BRG Cheshire, LLC, all of which has been funded
as of September 30, 2015.
Sale of Villas at Oak Crest
The controlling member
of the joint venture that owned the Villas at Oak Crest apartment community determined to sell the property. The property was sold
in September 2015 and upon closing, the Company received a distribution of its original investment plus accrued return.
Note 7 – Mortgages Payable
The following table summarizes certain information as of September
30, 2015 and December 31, 2014, with respect to the Company’s indebtedness (amounts in thousands):
| |
Outstanding Principal | | |
As of September 30, 2015 | |
Property | |
September 30, 2015 | | |
December 31, 2014 | | |
Interest Rate | | |
Fixed/ Floating | |
Maturity Date |
ARIUM Grandewood | |
$ | 29,444 | | |
$ | 29,444 | | |
| 1.87 | % | |
Floating (1) | |
December 1, 2024 |
ARIUM Palms | |
| 24,999 | | |
| - | | |
| 2.42 | % | |
Floating (2) | |
September 1, 2022 |
Ashton I | |
| 31,900 | | |
| - | | |
| 4.67 | % | |
Fixed | |
December 1, 2025 |
Enders Place at Baldwin Park(3) | |
| 25,250 | | |
| 25,475 | | |
| 4.30 | % | |
Fixed | |
November 1, 2022 |
Fox Hill | |
| 26,705 | | |
| - | | |
| 3.57 | % | |
Fixed | |
April 1, 2022 |
Lansbrook Village | |
| 43,628 | | |
| 42,357 | | |
| 4.40 | % | |
Blended (4) | |
March 31, 2018 |
MDA Apartments | |
| 37,600 | | |
| 37,600 | | |
| 5.35 | % | |
Fixed | |
January 1, 2023 |
Park & Kingston | |
| 15,250 | | |
| - | | |
| 3.21 | % | |
Fixed | |
April 1, 2020 |
Springhouse at Newport News | |
| 22,264 | | |
| 22,515 | | |
| 5.66 | % | |
Fixed | |
January 1, 2020 |
Village Green of Ann Arbor | |
| 42,518 | | |
| 43,078 | | |
| 3.92 | % | |
Fixed | |
October 1, 2022 |
Total | |
| 299,558 | | |
| 200,469 | | |
| | | |
| |
|
Fair value adjustments | |
| 1,710 | | |
| 874 | | |
| | | |
| |
|
Total continuing operations | |
| 301,268 | | |
| 201,343 | | |
| | | |
| |
|
North Park Towers - held for sale | |
| 11,500 | | |
| 11,500 | | |
| 5.65 | % | |
Fixed | |
January 6, 2024 |
Total | |
$ | 312,768 | | |
$ | 212,843 | | |
| | | |
| |
|
(1) ARIUM Grandewood Senior Loan bears interest at a floating rate of 1.67% plus one month LIBOR. At September 30, 2015, the interest rate was 1.87%.
(2) ARIUM Palms loan bears interest at a floating rate of 2.22% plus one month LIBOR. At September 30, 2015, the interest rate was 2.42%.
(3) The principal includes a $17.3 million loan at a 3.97% interest rate and an $8.0 million supplemental loan at a 5.01% interest rate.
(4) The principal balance includes the initial advance of $42.0 million at a fixed rate of 4.45% and an additional advance of $1.6 million that bears interest at a floating rate of three month LIBOR plus 3.00%, as of September 30, 2015, the additional advance had an interest rate of 3.31%.
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lansbrook Village Mortgage Payable
On March 21, 2014, the Company, through
an indirect subsidiary (the “Lansbrook Borrower”), entered into a $48 million loan with General Electric Capital Corporation,
which is secured by Lansbrook Village. The $48.0 million is comprised of a $42.0 million initial advance and an additional $6.0
million of additional borrowing for the acquisition and improvement of additional units. At September 30, 2015, the Lansbrook
Borrower has borrowed $1.6 million of the $6.0 million of additional borrowable funds. The loan matures on March 31, 2018 and
bears interest at a fixed rate 4.45% per annum, with interest-only payments due until May 1, 2016 and principal payments beginning
thereafter based upon a 30-year amortization schedule. Yield maintenance payments will be required to the extent the loan is prepaid
before the third month prior to the maturity date and thereafter the loan may be prepaid without penalty. At the time of repayment,
whether prepaid or paid at maturity, a $240,000 exit fee is due to the lender. The loan is nonrecourse to the Company and the
Lansbrook Borrower, with recourse carve-outs for certain deeds, acts or failures to act on the part of the Lansbrook Borrower
or any of its officers, members, managers or employees.
Park & Kingston Mortgage Payable
On March 16, 2015, the Company, through
an indirect subsidiary (the “Park & Kingston Borrower”), entered into a $15.25 million loan with the Federal
National Mortgage Association (“Fannie Mae”), which is secured by Park & Kingston. The loan matures on April 1,
2020 and bears interest at a fixed rate of 3.21%, with interest-only payments due for the entire loan term. Yield maintenance
payments will be required to the extent prepaid before the sixth month prior to the maturity date; during the period from the
sixth month prior to the maturity date to the third month prior to the maturity date, a prepayment premium of 1% of the principal
being prepaid will be required, and thereafter the loan may be prepaid without penalty. The loan is nonrecourse to the Park &
Kingston Borrower with recourse carve-outs for certain deeds, acts or failures to act on the part of the Park & Kingston Borrower,
or any of its officers, members, managers or employees.
Fox Hill Mortgage Payable
On March 26, 2015, the Company, through
an indirect subsidiary (the “Fox Hill Borrower”), entered into a $26.7 million loan with Walker & Dunlop,
LLC, which is secured by Fox Hill. The loan was subsequently assigned to Fannie Mae. The loan matures on April 1, 2022 and bears
interest at a fixed rate of 3.57%, with interest-only payments due until May 1, 2019 and fixed monthly payments based on 30-year
amortization thereafter. During the first 60 months of the term, the loan may be prepaid at any time with at least 30 business
days prior notice and the payment of a prepayment premium equal to the greater of (i) 1% of the principal balance and (ii) a yield
maintenance amount calculated as set forth in the loan agreement. After the first 60 months of the term through the fourth month
prior to the end of the term, the loan may be prepaid at any time with at least 30 business days prior notice and the payment
of a prepayment premium equal to 1% of the principal balance, and thereafter, the loan may be prepaid at any time at par. The
loan is nonrecourse to the Company and the Fox Hill Borrower with recourse carve-outs for certain deeds, acts or failures to act
on the part of the Company and the Fox Hill Borrower, or any of its officers, members, managers or employees.
Ashton I Mortgage Payable
On August 19, 2015,
the Company, through an indirect subsidiary (the “Ashton I Borrower”), assumed a $31.9 million loan with Sun Life
Assurance Company of Canada which is secured by Ashton I. The loan matures on December 1, 2025 and bears interest at a fixed rate
of 4.67%, with interest-only payments due through December 1, 2016, and fixed monthly payments based on 30-year amortization thereafter.
The loan may be prepaid in full at any time with thirty (30) days' prior written notice to the lender, and the payment of a prepayment
premium equal to the greater of (i) 1.0% of the unpaid principal balance or (ii) a yield maintenance amount calculated as set forth
in the loan documents. The loan is nonrecourse to the Ashton I Borrower with recourse carve-outs for certain deeds, acts or failures
to act on the part of the Ashton I Borrower, or any of its officers, members, managers or employees.
ARIUM Palms Mortgage Payable
On August 20, 2015,
the Company, through an indirect subsidiary (the “ARIUM Palms Borrower”), entered into a $25.0 million loan with
Jones Long LaSalle Operations, L.L.C., on behalf of Freddie Mac, which is secured by ARIUM Palms. The loan matures on September
1, 2022 and bears interest on a floating basis based on LIBOR plus 2.22%, with interest-only payments due until September 1, 2019
and fixed monthly payments based on 30-year amortization thereafter. The ARIUM Palms Borrower also entered into a three-year interest
rate cap agreement with a cap rate of 5.75%. After the first 24 months of the term through the fourth month prior to the end of
the term, the loan may be prepaid at any time with at least 30 business days prior notice and the payment of a make whole premium
equal to 1% of the principal balance, and thereafter, the loan may be prepaid at any time at par. The loan is nonrecourse to the
Company and the ARIUM Palms Borrower with recourse carve-outs for certain deeds, acts or failures to act on the part of the Company
and the ARIUM Palms Borrower, or any of its officers, members, managers or employees.
As of September 30, 2015,
contractual principal payments for the five subsequent years and thereafter are as follows (amounts in thousands):
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year | |
Total | |
2015 (October 1-December 31) | |
$ |
375 | |
2016 | |
| 2,762 | |
2017 | |
| 3,532 | |
2018 | |
| 45,364 | |
2019 | |
| 3,888 | |
Thereafter | |
| 255,137 | |
| |
$ | 311,058 | |
Add: Unamortized fair value debt adjustment | |
| 1,710 | |
Total | |
$ | 312,768 | |
The net book value of real estate assets
providing collateral for these above borrowings were $429.7 million and $288.4 million at September 30, 2015 and December 31,
2014, respectively.
Note 8 – Line of Credit
As of January 1, 2014, the outstanding balance on the Company's working capital line of credit provided
by Fund II and Fund III, both of which are affiliates of our Manager, was $7.6 million. On April 2, 2014, the line of credit
was paid in full with proceeds from the IPO and extinguished.
Note 9 – Fair Value of Financial Instruments
As
of September 30, 2015 and December 31, 2014, the Company believes the carrying value of cash and cash equivalents, accounts receivable,
due to and from affiliates, accounts payable, accrued liabilities, and distributions payable approximate their fair value based
on their highly-liquid nature and/or short-term maturities. As of September 30, 2015 and December 31, 2014, the approximate
fair value of mortgages payable were $319.1 million and $215.8 million, respectively, compared to the carrying value of $312.8
million and $212.8 million, respectively, inclusive of the North Park Towers mortgage payable, which is classified as held for
sale. The fair value of mortgages payable is estimated based on the Company’s current interest rates (Level 3 inputs,
as defined in ASC Topic 820, “Fair Value Measurement”) for similar types of borrowing arrangements.
Note 10 – Related Party Transactions
In connection with
the Company’s investments in the Enders Place at Baldwin Park, Berry Hill and MDA Apartments, it entered into a line of credit
agreement with Fund II and Fund III. As of January 1, 2014, the outstanding balance on the Company's working capital line of credit
provided by Fund II and Fund III, both of which are affiliates of our Manager, was $7.6 million. On April 2, 2014, the line
of credit was paid in full with proceeds of the IPO and extinguished.
In connection with
the Company’s acquisition of an interest in the Villas at Oak Crest, the Company assumed a receivable of $0.3 million from
Fund II related to accrued interest on Fund II’s investment in the Villas at Oak Crest prior to the contribution of their
interest to the Company, and as of December 31, 2014, the Company had a corresponding payable to Fund II for this amount. The payable
to Fund II of $0.3 million was paid off in September 2015 in conjunction with the sale of the Villas at Oak Crest.
In May 2015, the Company
invested an additional $6.5 million, plus customary prorations, in equity in Park & Kingston, increasing the Company’s
indirect ownership interest in the property from 46.95% to approximately 96.0%. The additional interests were purchased from Fund
III, an affiliate of our Manager, based on the original purchase price on a pro rata basis, plus customary prorations.
In May 2015, the Company
invested an additional $1.1 million, plus customary prorations, in equity in Fox Hill, increasing the Company’s indirect
ownership interest in the property from 85.27% to approximately 94.62%. The additional interests were purchased from Fund III,
an affiliate of our Manager, based on the original purchase price on a pro rata basis, plus customary prorations.
As of March 31, 2014,
the Company was externally managed by our Former Advisor pursuant to the Advisory Agreement. In connection with the completion
of the IPO, the Company terminated the Advisory Agreement with the Former Advisor, and the Company entered into a new management
agreement (the “Management Agreement”), with the Manager, on April 2, 2014. The terms and conditions of the Management
Agreement, which became effective as of April 2, 2014, and the Advisory Agreement, which was effective for the reported periods
prior to April 2, 2014, are described below.
Management Agreement
The Management Agreement
requires the Manager to manage the Company’s business affairs in conformity with the investment guidelines and other policies
that are approved and monitored by the Company’s board of directors. The Manager acts under the supervision and direction
of the Board. Specifically, the Manager is responsible for (1) the selection, purchase and sale of the Company’s investment
portfolio, (2) the Company’s financing activities, and (3) providing the Company with advisory and management services.
The Manager provides the Company with a management team, including a chief executive officer, president, chief accounting officer
and chief operating officer, along with appropriate support personnel. None of the officers or employees of the Manager are dedicated
exclusively to the Company.
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company pays the Manager a base management fee in an amount equal to the sum of: (A) 0.25% of the
Company’s stockholders’ existing and contributed equity prior to the IPO and in connection with our contribution transactions,
per annum, calculated quarterly based on the Company’s stockholders’ existing and contributed equity for the most recently
completed calendar quarter and payable in quarterly installments in arrears, and (B) 1.5% of the equity per annum of the Company’s
stockholders who purchase shares of the Company’s Class A common stock, calculated quarterly based on their equity for the
most recently completed calendar quarter and payable in quarterly installments in arrears. The base management fee is payable independent
of the performance of the Company’s investments. The base management fee expense for the Manager was $0.9 million and $2.1
million for the three and nine months ended September 30, 2015. The Company has amended the Management Agreement to provide that
the base management fee can be payable in cash or LTIP Units, at the election of the Board. Base management fees of $0.7 million
were expensed during the three months ended June 30, 2015, which were paid through the issuance of 59,077 LTIP Units on August
13, 2015. The number of LTIP Units issued for the base management fee or incentive fee will be based on the fees earned divided
by the 5-day trailing average Class A common stock price prior to issuance. Base management fees of $0.9 million were expensed
during the three months ended September 30, 2015, which will be paid through the issuance of approximately 74,780 LTIP Units assuming
the $11.98 common stock price at September 30, 2015.
The Company also
pays the Manager an incentive fee with respect to each calendar quarter in arrears. The incentive fee is equal to the difference
between (1) the product of (x) 20% and (y) the difference between (i) the Company’s adjusted funds from operations (“AFFO”),
for the previous 12-month period, and (ii) the product of (A) the weighted average of the issue price of equity securities issued
in the IPO and in future offerings and transactions, multiplied by the weighted average number of all shares of the Company’s
Class A common stock outstanding on a fully-diluted basis (including any restricted stock units, any restricted shares of Class
A common stock, LTIP Units, and other shares of common stock underlying awards granted under the Incentive Plans and OP Units)
in the previous 12-month period, exclusive of equity securities issued prior to the IPO or in the contribution transactions, and
(B) 8%, and (2) the sum of any incentive fee paid to the Manager with respect to the first three calendar quarters of such previous
12-month period; provided, however, that no incentive fee is payable with respect to any calendar quarter unless AFFO is greater
than zero for the four most recently completed calendar quarters, or the number of completed calendar quarters since the closing
date of the IPO, whichever is less. For purposes of calculating the incentive fee during the first 12 months after completion
of the IPO, AFFO will be determined by annualizing the applicable period following completion of the IPO. One half of each quarterly
installment of the incentive fee will be payable in LTIP Units, calculated pursuant to the formula above. The remainder of the
incentive fee will be payable in cash or in LTIP Units, at the election of the Board, in each case calculated pursuant to the
formula above. Incentive fees of $0.15 million were expensed during the three months ended December 31, 2014, which resulted in
the issuance of 10,896 LTIP Units on February 18, 2015. Incentive fees to the Manager of $0.9 million were expensed during the
three months ended March 31, 2015, which resulted in the issuance of 67,837 LTIP Units on May 14, 2015. No incentive fees to the
Manager were earned or expensed during the three months ended June 30, 2015 or September 30, 2015.
Management fee expense
of $0.1 million and $0.7 million was recorded as part of general and administrative expenses for the three and nine months ended
September 30, 2015 and $1.0 million for the year ended December 31, 2014, respectively, related to the 179,562 LTIP Units granted
in connection with the IPO. The expense recognized during 2014 was based on a price of $12.43 per LTIP Unit, which represents
the closing share price for the Company’s Class A common stock on December 31, 2014. These LTIP Units vest over a three
year period that began in April 2014, and 59,854 LTIP Units vested on April 30, 2015.
On July 2, 2015, the Company issued a grant of LTIP Units under the Amended 2014 Incentive Plans to the
Company’s external manager, BRG Manager, LLC. The equity grant consisted of 283,390 LTIP Units. The LTIP Units will vest
ratably over a three year period that began in July 2015, subject to certain terms and conditions. The LTIP Units may be convertible
into OP Units under certain conditions and then may be settled in shares of the Company’s Class A common stock. The LTIP
Units provide for the payment of distribution equivalents at the same time distributions are paid to holders of the Company’s
Class A common stock. LTIP expense of $0.5 million and $0.5 million was recorded as part of general and administrative expenses
for the three and nine months ended September 30, 2015, respectively, related to these LTIP Units. The expense recognized during
2015 was based on a price of $11.98 per LTIP Unit, which represents the closing share price for the Company’s Class A common
stock on September 30, 2015.
The Company is also
required to reimburse the Manager for certain expenses and pay all operating expenses, except those specifically required to be
borne by the Manager under the Management Agreement. The Manager waived all reimbursements for the three and six months ended
June 30, 2015. Reimbursements of $0.1 million were expensed during the three months ended September 30, 2015 and are recorded
as part of general and administrative expenses.
The initial term
of the Management Agreement expires on April 2, 2017 (the third anniversary of the closing of the IPO), and will be automatically
renewed for a one-year term on each anniversary date thereafter unless previously terminated in accordance with the terms of the
Management Agreement. Following the initial term of the Management Agreement, the Management Agreement may be terminated annually
upon the affirmative vote of at least two-thirds of the Company’s independent directors, based upon (1) unsatisfactory performance
that is materially detrimental to the Company, or (2) the Company’s determination that the fees payable to the Manager are
not fair, subject to the Manager’s right to prevent such termination due to unfair fees by accepting a reduction of the
fees agreed to by at least two-thirds of the Company’s independent directors. The Company must provide 180 days’ prior
notice of any such termination. Unless terminated for cause, as further described in the Management Agreement, the Manager will
be paid a termination fee equal to three times the sum of the base management fee and incentive fee earned, in each case, by the
Manager during the 12-month period immediately preceding such termination, calculated as of the end of the most recently completed
fiscal quarter before the date of termination. The Company may also terminate the Management Agreement at any time, including
during the initial term, without the payment of any termination fee, for cause with 30 days’ prior written notice from the
Board.
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the initial
three-year term of the Management Agreement, the Company may not terminate the Management Agreement except as described above
or in the following circumstance: At the earlier of (i) April 2, 2017 (three years following the completion of the IPO), and (ii)
the date on which the value of the Company’s stockholders’ equity exceeds $250.0 million, the Board may, but is not
obligated to, internalize the Company’s management. The Manager may terminate the Management Agreement if it becomes required
to register as an investment company under the Investment Company Act, with such termination deemed to occur immediately before
such event, in which case the Company would not be required to pay a termination fee. In addition, if the Company defaults in
the performance of any material term of the Management Agreement and the default continues for a period of 30 days after written
notice to the Company, the Manager may terminate the Management Agreement upon 60 days’ written notice. If the Management
Agreement is terminated by the Manager upon a breach by the Company, the Company is required to pay the Manager the termination
fee described above.
The Manager may retain,
at its sole cost and expense, the services of such persons and firms as the Manager deems necessary in connection with our management
and operations (including accountants, legal counsel and other professional service providers), provided that such expenses are
in amounts no greater than those that would be payable to third-party professionals or consultants engaged to perform such services
pursuant to agreements negotiated on an arm’s-length basis. The Manager has in the past retained, and going forward may
retain Konig & Associates, P.C., a professional corporation wholly-owned by Michael L. Konig, the Company’s Chief Operating
Officer, Secretary and General Counsel, to provide transaction based legal services, if the Manager determines that such retention
would be less expensive than retaining third party professionals. The Company incurred $0.2 million in fees and expenses during
the year ended December 31, 2014 for the firm’s transaction-related work on the contribution transactions, the IPO and the
October 2014 Follow-On Offering. There was approximately $25,000 of fees and expenses payable by the Company to Konig & Associates,
P.C. in conjunction with the October 2014 Follow-On Offering, as of December 31, 2014.
Prior and Terminated Advisory Agreement
Prior to the entry
by the Company into the Management Agreement upon the completion of the IPO and the concurrent termination of the Advisory Agreement,
the Former Advisor performed essentially the same duties and responsibilities as the Company’s new Manager. The Advisory
Agreement had a one-year term expiring October 14, 2014, and was renewable for an unlimited number of successive one-year
periods upon the mutual consent of the Company and its Advisor.
The Former Advisor
was entitled to receive a monthly asset management fee for the services it provided pursuant to the Advisory Agreement. For 2013
and subsequent, the monthly asset management fee was one-twelfth of 0.65% of the higher of the cost or the value of each asset,
where (A) cost equals the amount actually paid, excluding acquisition fees and expenses, to purchase each asset it acquires, including
any debt attributable to the asset (including any debt encumbering the asset after acquisition), provided that, with respect to
any properties the Company develops, constructs or improves, cost will include the amount expended by the Company for the development,
construction or improvement, and (B) the value of an asset is the value established by the most recent independent valuation report,
if available, without reduction for depreciation, bad debts or other non-cash reserves. The asset management fee was based
only on the portion of the cost or value attributable to our investment in an asset if the Company did not own all of an asset.
Pursuant to the Advisory
Agreement, the Former Advisor was entitled to receive an acquisition fee for its services in connection with the investigation,
selection, sourcing, due diligence and acquisition of a property or investment. For 2013 and subsequent, the acquisition
fee was 2.50% of the purchase price. The purchase price of a property or investment was equal to the amount paid or allocated
to the purchase, development, construction or improvement of a property, inclusive of expenses related thereto, and the amount
of debt associated with such real property or investment. The purchase price allocable for joint venture investments was equal
to the product of (1) the purchase price of the underlying property and (2) the Company’s ownership percentage in the joint
venture.
The Former Advisor
was also entitled to receive a financing fee for any loan or line of credit, made available to the Company. The Former Advisor
was entitled to re-allow some, or all, of this fee to reimburse third parties with whom it subcontracted to procure such financing
for the Company. On October 21, 2013, the Company amended its Advisory Agreement to decrease the financing fee from 1.0% to 0.25%
of any loan made to the Company. In addition, to the extent the Former Advisor provided a substantial amount of services in connection
with the disposition of one or more of our properties or investments (except for securities traded on a national securities exchange),
the Former Advisor would receive fees equal to the lesser of (A) 1.5% of the sales price of each property or other investment
sold or (B) 50% of the selling commission that would have been paid to a third-party broker in connection with such a disposition.
In no event were disposition fees paid to the Former Advisor or its affiliates and unaffiliated third parties to exceed, in the
aggregate, 6% of the contract sales price. On October 21, 2013, the Company amended its Advisory Agreement to change the disposition
fee to only 1.5% of the sales price of each property or other investment sold, such that the disposition fee was no
longer determined based on selling commissions payable to third-party sales brokers.
In addition to the
fees payable to the Former Advisor, the Company reimbursed the Former Advisor for all reasonable expenses incurred in connection
with services provided to the Company, subject to the limitation that it would not reimburse any amount that would cause the Company’s
total operating expenses at the end of the four preceding fiscal quarters to exceed the greater of 2% of our average invested
assets or 25% of its net income determined (1) without reductions for any additions to reserves for depreciation, bad debts or
other similar non-cash reserves and (2) excluding any gain from the sale of our assets for the period. Notwithstanding the
above, the Company was permitted to reimburse amounts in excess of the limitation if a majority of its independent directors determined
such excess amount was justified based on unusual and non-recurring factors. If such excess expenses were not approved by a majority
of the Company’s independent directors, the Former Advisor was required to reimburse us at the end of the four fiscal quarters
the amount by which the aggregate expenses during the period paid or incurred by us exceeded the limitations provided above.
The Company was not permitted to reimburse the Former Advisor for personnel costs in connection with services for which the Former
Advisor received acquisition, asset management or disposition fees. Due to the limitation discussed above and because operating
expenses incurred directly by the Company exceeded the 2% threshold, the Board, including all of its independent directors, reviewed
the total operating expenses for the four fiscal quarters ended December 31, 2013 and the Company’s total operating
expenses for the four fiscal quarters ended March 31, 2014 and unanimously determined the excess amounts to be justified because
of the costs of operating a public company in its early stage of operation and the Company’s initial difficulties with raising
capital were considered to be non-recurring in nature. As the Board has previously approved such expenses, all operating
expenses for the year ended 2013 and the three months ended March 31, 2014 have been expensed as incurred.
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company had issued
1,000 shares of convertible stock, par value $0.01 per share, to the Former Advisor, pursuant to the Advisory Agreement, that
upon completion of the IPO were convertible to shares of common stock if and when: (A) the Company had made total distributions
on the then outstanding shares of its common stock equal to the original issue price of those shares plus an 8% cumulative, non-compounded,
annual return on the original issue price of those shares or (B) subject to specified conditions, the Company listed its common
stock for trading on a national securities exchange. We listed shares of our Class A common stock on the NYSE MKT on March 28,
2014. At that time, the terms for converting the convertible stock would not be achieved and so we amended our charter on March
26, 2014 to remove the convertible stock as an authorized class of our capital stock.
In general, under
the Advisory Agreement, the Company contracted property management services for certain properties directly to non-affiliated
third parties, in which event it was to pay the Former Advisor an oversight fee equal to 1% of monthly gross revenues of such
properties.
All of the Company’s
executive officers, and some of its directors, are also executive officers, managers and/or holders of a direct or indirect controlling
interest in the Manager and other Bluerock-affiliated entities. As a result, they owe fiduciary duties to each of these
entities, their members, limited partners and investors, which fiduciary duties may from time to time conflict with the fiduciary
duties that they owe to the Company and its stockholders.
Some of the
material conflicts that the Manager or its affiliates face are: 1) the determination of whether an investment opportunity should
be recommended to us or another Bluerock-sponsored program or Bluerock-advised investor; 2) the allocation of the time of key
executive officers, directors, and other real estate professionals among the Company, other Bluerock-sponsored programs and Bluerock-advised
investors, and the activities in which they are involved; and 3) the fees received by the Manager and its affiliates.
Pursuant to the terms
of the Advisory Agreement and the Management Agreement, summarized below are the related party amounts payable to our Former Advisor
and the Manager, as of September 30, 2015 and December 31, 2014 (in thousands):
| |
September 30, 2015 | | |
December 31, 2014 | |
Amounts Payable to the Former Advisor under our Prior and Terminated Advisory
Agreement | |
| | | |
| | |
Asset management and oversight fees | |
$ | - | | |
$ | 404 | |
Acquisition fees and disposition fees | |
| - | | |
| 740 | |
Financing fees | |
| - | | |
| 36 | |
Total payable to the Former Advisor | |
| - | | |
| 1,180 | |
| |
| | | |
| | |
Amounts Payable to the Manager under the New Management Agreement | |
| | | |
| | |
Base management fee | |
| 896 | | |
| 310 | |
Incentive fee | |
| - | | |
| 146 | |
Other | |
| 143 | | |
| 7 | |
Total payable to the Manager | |
| 1,039 | | |
| 463 | |
Total amounts payable to Former Advisor and Manager | |
$ | 1,039 | | |
$ | 1,643 | |
The Former Advisor
was entitled to the payment of certain fees in compensation for advisory and general management services rendered thereunder for
periods prior to the Company’s initial public offering on April 2, 2014, and reimbursements for certain costs and expenses
incurred in connection with the provision thereof, in an aggregate amount of $1.18 million. Effective on September 4, 2015, the
Former Advisor and Manager entered into an Assignment Agreement pursuant to which the Former Advisor assigned its right to payment
of the obligation due to the Former Advisor to the Manager. The Manager agreed to receive the payment entirely in LTIP Units of
the Operating Partnership. The obligation was paid by the number of LTIP Units equal to (i) the dollar amount of the obligation
payable in such LTIP Units (calculated as $1.18 million), divided by (ii) the average of the closing prices of the Company’s
Class A Common Stock, $0.01 par value per share, on the NYSE MKT on the five business days prior to the issuance date. The payment
was made through the issuance of 108,119 LTIP Units by the Operating Partnership to the Manager on the September 14, 2015. The
LTIP Units were fully vested upon issuance, and may convert to OP Units upon reaching capital account equivalency with the OP
Units held by the Company, and may then be settled in shares of the Company’s Class A common stock. The Manager will be
entitled to receive “distribution equivalents” with respect to the LTIP Units at the same time distributions are paid
to the holders of the Company’s Class A common stock.
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of September 30,
2015 and December 31, 2014, we had $0.6 million and $0.3 million, respectively, in payables due to related parties other than
our Manager and Former Advisor.
As of September 30,
2015 and December 31, 2014, we had $0.9 million and $0.6 million, respectively, in receivables due to us from related parties
other than our Manager and Former Advisor.
Bluerock Property Management, LLC
The Company incurred $0.05 million and
$0.14 million in property management fees to Bluerock Property Management, LLC, an affiliate of Bluerock, on behalf of the North
Park Towers property during the three and nine months ended September 30, 2015.
Note 11 – Stockholders’
Equity
Net Income (Loss) Per Common Share
Basic net income
(loss) per common share is computed by dividing net income (loss) attributable to common stockholders, less dividends on restricted
stock expected to vest plus gains on redemptions on common stock, by the weighted average number of common shares outstanding
for the period. Diluted net income (loss) per common share is computed by dividing net income (loss) attributable to common
stockholders by the sum of the weighted average number of common shares outstanding and any potential dilutive shares for the
period. Net income (loss) attributable to common stockholders is computed by adjusting net income (loss) for the non-forfeitable
dividends paid on non-vested restricted stock.
The Company considers
the requirements of the two-class method when preparing earnings per share. Earnings per share is not affected by the two-class
method because the Company’s Class A, B-1, B-2 and B-3 common stock and LTIP Units participate in dividends on a one-for-one
basis.
The following table reconciles the components
of basic and diluted net (loss) income per common share (amounts in thousands, except share and per share amounts):
| |
Three Months Ended September
30, | | |
Nine Months Ended September
30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Net (loss) income from continuing operations attributable to common stockholders | |
$ | (574 | ) | |
$ | (2,261 | ) | |
| 2,157 | | |
$ | (7,853 | ) |
Dividends on restricted stock expected to vest | |
| (4 | ) | |
| (1 | ) | |
| (12 | ) | |
| (6 | ) |
Basic net (loss) income from continuing operations attributable to common
stockholders | |
$ | (578 | ) | |
$ | (2,262 | ) | |
$ | 2,145 | | |
$ | (7,859 | ) |
Basic net (loss) income from discontinued operations attributable to common
stockholders | |
$ | - | | |
$ | 114 | | |
$ | - | | |
$ | 123 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average common shares outstanding(1) | |
| 20,166,384 | | |
| 5,877,417 | | |
| 16,383,736 | | |
| 4,269,378 | |
| |
| | | |
| | | |
| | | |
| | |
Potential dilutive shares(2) | |
| — | | |
| — | | |
| 12,302 | | |
| — | |
Weighted average common shares outstanding
and potential dilutive shares(1) | |
| 20,166,384 | | |
| 5,877,417 | | |
| 16,396,038 | | |
| 4,269,378 | |
| |
| | | |
| | | |
| | | |
| | |
(Loss) income per common share, basic | |
| | | |
| | | |
| | | |
| | |
Continuing operations | |
$ | (0.03 | ) | |
$ | (0.38 | ) | |
$ | 0.13 | | |
$ | (1.84 | ) |
Discontinued operations | |
$ | - | | |
$ | 0.02 | | |
$ | - | | |
$ | 0.03 | |
| |
$ | (0.03 | ) | |
$ | (0.36 | ) | |
$ | 0.13 | | |
$ | (1.81 | ) |
| |
| | | |
| | | |
| | | |
| | |
(Loss) income per common share, diluted | |
| | | |
| | | |
| | | |
| | |
Continuing operations | |
$ | (0.03 | ) | |
$ | (0.38 | ) | |
$ | 0.13 | | |
$ | (1.84 | ) |
Discontinued operations | |
$ | - | | |
$ | 0.02 | | |
$ | - | | |
$ | 0.03 | |
| |
$ | (0.03 | ) | |
$ | (0.36 | ) | |
$ | 0.13 | | |
$ | (1.81 | ) |
The number of shares
and per share amounts for the prior period have been retroactively restated to reflect the two reverse stock splits of the Class
B common stock discussed below.
The effect of the
conversion of OP Units is not reflected in the computation of basic and diluted earnings per share, as they are exchangeable for
Class A Common Stock on a one-for-one basis. The income allocable to such units is allocated on this same basis and reflected
as noncontrolling interests in the accompanying consolidated financial statements. As such, the assumed conversion of these units
would have no net impact on the determination of diluted earnings per share.
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| (1) | For
2015, amounts relate to shares of the Company’s Class A, B-1, B-2, B-3 common stock
and LTIP Units outstanding. For 2014, amounts relate to shares of Class A, B-1, B-2 and
B-3 common stock, common shares and LTIP Units outstanding. |
| (2) | Excludes
15,272 shares of common stock, for the three months ended September 30, 2015 and 4,794
and 5,726 shares of common stock, for the three and nine months ended September 30, 2014,
related to non-vested restricted stock, as the effect would be anti-dilutive. |
Class
B Common Stock
The Company raised
capital in a continuous registered offering, carried out in a manner consistent with offerings of non-listed REITs, from its inception
until September 9, 2013, when it terminated the continuous registered offering in connection with the Board’s consideration
of strategic alternatives to maximize value to the Company’s stockholders. Through September 9, 2013, the Company had raised
an aggregate of $22.6 million in gross proceeds through its continuous registered offering, including its distribution reinvestment
plan.
On January 23, 2014,
the Company's stockholders approved the second articles of amendment and restatement to our charter (the “Second Charter
Amendment”), that provided, among other things, for the designation of a new share class of Class A common stock, and for
the change of each existing outstanding share of our common stock into:
| • | 1/3
of a share of our Class B-1 common stock; plus |
| • | 1/3
of a share of our Class B-2 common stock; plus |
| • | 1/3
of a share of our Class B-3 common stock. |
This transaction
was effective upon filing the Second Charter Amendment with the State Department of Assessments and Taxation of the State of Maryland
on March 26, 2014. Immediately following the filing of the Second Charter Amendment, we effectuated a 2.264881 to 1 reverse stock
split of our outstanding shares of Class B-1 common stock, Class B-2 common stock and Class B-3 common stock, and on March 31,
2014, we effected an additional 1.0045878 to 1 reverse stock split of our outstanding shares of Class B-1 common stock, Class
B-2 common stock and Class B-3 common stock.
The Company refers
to Class B-1 common stock, Class B-2 common stock and Class B-3 common stock collectively as “Class B” common stock.
We listed our Class A common stock on the NYSE MKT on March 28, 2014. Our Class B common stock is identical to our Class A common
stock, except that (i) we do not intend to list our Class B common stock on a national securities exchange, and (ii) shares of
our Class B common stock convert automatically into shares of Class A common stock at specified times, as follows:
| • | March
23, 2015, in the case of our Class B-1 common stock; |
| • | September
19, 2015, in the case of our Class B-2 common stock; and |
| • | March
17, 2016, in the case of our Class B-3 common stock. |
On March 23, 2015,
353,630 shares of Class B-1 common stock converted into Class A common stock in accordance with the above, and no Class B-1 common
stock remains outstanding. On September 19, 2015, 353,630 shares of Class B-2 common stock converted into Class A common stock
in accordance with the above, and no Class B-2 common stock remains outstanding.
Follow-On Equity Offerings
On January 20, 2015,
the Company closed its January 2015 Follow-On Offering of 4,600,000 shares of its Class A common stock, par value $0.01 per share,
inclusive of shares sold pursuant to the full exercise of the overallotment option by the underwriters. The shares were registered
with the SEC pursuant to a registration statement on Form S-3 (File No. 333-200359) filed with the SEC on November 19, 2014
and declared effective on December 19, 2014. The public offering price of $12.50 per share was announced on January 14, 2015.
Net proceeds of the January 2015 Follow-On Offering were approximately $53.7 million after deducting underwriting discounts and
commissions and estimated offering expenses.
On May 22, 2015, the
Company completed an underwritten shelf takedown offering (the “May 2015 Follow-On Offering”) of 6,348,000 shares
of Class A common stock, par value $0.01 per share, inclusive of shares sold pursuant to the full exercise of the overallotment
option by the underwriters. The shares were registered with the SEC pursuant to a registration statement on Form S-3 (File No.
333-200359) filed with the SEC on November 19, 2014 and declared effective on December 19, 2014. The public offering price of
$13.00 per share was announced on May 19, 2015. Net proceeds of the May 2015 Follow-On Offering were approximately $77.6 million
after deducting underwriting discounts and commissions and offering costs.
Operating Partnership and Long-Term
Incentive Plan Units
On April 2, 2014,
concurrently with the completion of the IPO, the Company entered into the Second Amended and Restated Agreement of Limited Partnership
of its Operating Partnership, Bluerock Residential Holdings, L.P. Pursuant to the amendment, the Company is the sole general partner
of the Operating Partnership and may not be removed as general partner by the limited partners with or without cause. The limited
partners of the Operating Partnership are Bluerock REIT Holdings, LLC, BR-NPT Springing Entity, LLC (“NPT”), Bluerock
Property Management, LLC (“BPM”), our Manager, and Bluerock Multifamily Advisor, LLC (the “Former Advisor”),
all of which are affiliates of Bluerock.
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Prior to the completion
of the IPO, the Company owned, directly and indirectly, 100% of the limited partnership units in the Operating Partnership. Effective
as of the completion of the IPO, limited partners other than the Company owned approximately 9.87% of the Operating Partnership
(282,759 OP Units, or 4.59%, were held by OP Unit holders, and 325,578 LTIP Units, or 5.28%, were held by LTIP Unit holders.) As
of September 30, 2015, limited partners other than the Company owned approximately 5.50% of the Operating Partnership (282,759
OP Units, or 1.40%, is held by OP Unit holders, and 854,897 LTIP Units, or 4.10%, is held by LTIP Unit holders.)
The Partnership Agreement,
as amended, provides, among other things, that the Operating Partnership initially has two classes of limited partnership interests,
which are units of limited partnership interest (“OP Units”), and the Operating Partnership’s long-term incentive
plan units (“LTIP Units”). In calculating the percentage interests of the partners in the Operating Partnership, LTIP
Units are treated as OP Units. In general, LTIP Units will receive the same per-unit distributions as the OP Units. Initially,
each LTIP Unit will have a capital account balance of zero and, therefore, will not have full parity with OP Units with respect
to any liquidating distributions. However, the Partnership Agreement Amendment provides that “book gain,” or economic
appreciation, in the Company’s assets realized by the Operating Partnership as a result of the actual sale of all or substantially
all of the Operating Partnership’s assets, or the revaluation of the Operating Partnership’s assets as provided by
applicable U.S. Department of Treasury regulations, will be allocated first to the holders of LTIP Units until their capital account
per unit is equal to the average capital account per-unit of the Company’s OP Unit holders in the Operating Partnership.
We expect that the Operating Partnership will issue OP Units to limited partners, and the Company, in exchange for capital contributions
of cash or property, and will issue LTIP Units pursuant to the Company’s 2014 Equity Incentive Plan for Individuals and
2014 Equity Incentive Plan for Entities (collectively, the “Incentive Plans”), to persons who provide services to
the Company, including the Company’s officers, directors and employees.
Pursuant to the Partnership
Agreement, as amended, any holders of OP Units, other than the Company or its subsidiaries, will receive redemption rights which,
subject to certain restrictions and limitations, will enable them to cause the Operating Partnership to redeem their OP Units
in exchange for cash or, at the Company’s option, shares of the Company’s Class A common stock, on a one-for-one basis.
The Company has agreed to file, not earlier than one year after the closing of the IPO, one or more registration statements registering
the issuance or resale of shares of its Class A common stock issuable upon redemption of the OP Units issued upon conversion of
LTIP Units, which include those issued to the Manager and the Former Advisor. Subject to certain exceptions, the Operating Partnership
will pay all expenses in connection with the exercise of registration rights under the Partnership Agreement.
Equity Incentive Plans
Prior to the Company’s
IPO on April 2, 2014, the Company’s independent directors received an automatic grant of 5,000 shares of restricted
stock on the initial effective date of the continuous registered offering and received an automatic grant of 2,500 shares
of restricted stock when such directors were re-elected at each annual meeting of the Company’s stockholders thereafter
through the 2013 annual meeting held on August 5, 2013. The restricted stock vested 20% at the time of the grant and 20% on each
anniversary thereafter over four years from the date of the grant. All shares of restricted stock granted to the independent directors
receive distributions, whether vested or unvested. The value of the restricted stock granted was determined at the date of grant.
Commencing with the Company’s IPO, the Company’s independent directors will no longer receive automatic grants upon
appointment or reelection at each annual meeting of the Company’s stockholders.
On March 24, 2015,
in accordance with the Company’s 2014 Equity Incentive Plan for Individuals (the “2014 Individuals Plan”), the
Board authorized and each of the Company’s independent directors received two grants of 2,500 restricted shares of the Company’s
Class A common stock. The first grant of 2,500 restricted shares related to services rendered in 2014 (each, a “2014 Restricted
Stock Award”), while the second grant of 2,500 restricted shares relates to services rendered or to be rendered in 2015
(each, a “2015 Restricted Stock Award”). The vesting schedule for each 2014 Restricted Stock Award is as follows:
(i) 834 shares as of March 24, 2015, (ii) 833 shares on March 24, 2016, and (iii) 833 shares on March 24, 2017. The vesting schedule
for each 2015 Restricted Stock Award is as follows: (i) 834 shares as of March 24, 2016, (ii) 833 shares on March 24, 2017, and
(iii) 833 shares on March 24, 2018.
On May 28, 2015,
the Company’s stockholders approved the amendment and restatement of the 2014 Individuals Plan, or the Amended Individuals
Plan, and the 2014 Entities Plan, or the Amended Entities Plan (and together with the Amended Individuals Plan, the Amended 2014
Incentive Plans). The Amended 2014 Incentive Plans allow for the issuance of up to 475,000 shares of Class A common stock. The
Amended 2014 Incentive Plans provide for the grant of options to purchase shares of the Company’s common stock, stock awards,
stock appreciation rights, performance units, incentive awards and other equity-based awards.
A summary of the
status of the Company’s non-vested shares as of September 30, 2015 is as follows (amounts in thousands, except share amounts):
Non-Vested shares | |
Shares
(1) | | |
Weighted average grant-date
fair value (1) | |
Balance at January 1, 2015 | |
| 3,956 | | |
$ | 90 | |
Granted | |
| 15,000 | | |
| 197 | |
Vested | |
| (4,480 | ) | |
| (78 | ) |
Forfeited | |
| — | | |
| — | |
Balance at September 30, 2015 | |
| 14,476 | | |
$ | 209 | |
(1) The number of shares
and per share amounts for the prior period have been retroactively restated to reflect the two reverse stock splits of the Class
B common stock discussed above.
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At September 30,
2015, there was $0.17 million of total unrecognized compensation cost related to unvested restricted stocks granted under the
independent director compensation plan. The original cost is expected to be recognized over a period of 2.4 years.
The Company currently
uses authorized and unissued shares to satisfy share award grants.
Equity Incentive Plans - LTIP Grants
On July 2, 2015, the Company issued a grant of LTIP Units under the Amended 2014 Incentive Plans to the
Company’s external manager, BRG Manager, LLC. The equity grant consisted of 283,390 LTIP Units. The LTIP Units will vest
ratably over a three year period that began in July 2015, subject to certain terms and conditions. The LTIP Units may be convertible
into OP Units under certain conditions and then may be settled in shares of the Company’s Class A common stock. The LTIP
Units provide for the payment of distribution equivalents at the same time distributions are paid to holders of the Company’s
Class A common stock. LTIP expense of $0.5 million and $0.5 million was recorded as part of general and administrative expenses
for the three and nine months ended September 30, 2015, respectively, related to these LTIP Units. The expense recognized during
2015 was based on a price of $11.98 per LTIP Unit, which represents the closing share price for the Company’s Class A common
stock on September 30, 2015.
LTIP Unit activity
A summary of the
activity in the Company’s LTIP Units as of September 30, 2015 is as follows:
LTIP Units | |
Date of Issuance | |
Number of LTIP Units | |
Balance at January 1, 2015 | |
| |
| 325,578 | |
Fourth quarter 2014 Incentive Fee | |
2/18/2015 | |
| 10,896 | |
First quarter 2015 Incentive Fee | |
5/14/2015 | |
| 67,837 | |
Equity Incentive Plan Manager Incentive Grant | |
7/2/2015 | |
| 283,390 | |
Second quarter 2015 Base Management Fee | |
8/13/2015 | |
| 59,077 | |
Former Advisor Obligation | |
9/14/2015 | |
| 108,119 | |
Balance at September 30, 2015 | |
| |
| 854,897 | |
Distributions
On October 10, 2014,
the Board declared monthly dividends for the fourth quarter of 2014 equal to a quarterly rate of $0.29 per share on both the Company’s
Class A common stock and Class B common stock, payable monthly to the stockholders of record as of October 25, 2014, November 25,
2014 and December 25, 2014, which was paid in cash on November 5, 2014, December 5, 2014 and January 5, 2015, respectively.
The declared dividends
equal a monthly dividend on the Class A common stock and Class B common stock as follows: $0.096666 per share for the dividend
paid to stockholders of record as of October 25, 2014, and $0.096667 per share for the dividend paid to stockholders of record
as of November 25, 2014, and December 25, 2014.
On January 9, 2015,
the Board declared monthly dividends for the first quarter of 2015 equal to a quarterly rate of $0.29 per share on both the Company’s
Class A common stock and Class B common stock, payable monthly to the stockholders of record as of January 25, 2015, February 25,
2015 and March 25, 2015, which was paid in cash on February 5, 2015, March 5, 2015 and April 5, 2015, respectively.
The declared dividends
equal a monthly dividend on the Class A common stock and Class B common stock as follows: $0.096666 per share for the dividend
paid to stockholders of record as of January 25, 2015, and $0.096667 per share for the dividend paid to stockholders of record
as of February 25, 2015, and March 25, 2015.
On April 10, 2015,
the Board declared monthly dividends for the second quarter of 2015 equal to a quarterly rate of $0.29 per share on both the Company’s
Class A common stock and Class B common stock, payable monthly to the stockholders of record as of April 25, 2015, May 25, 2015
and June 25, 2015, which was paid in cash on May 5, 2015, June 5, 2015 and July 2, 2015, respectively.
The declared dividends
equal a monthly dividend on the Class A common stock and Class B common stock as follows: $0.096666 per share for the dividend
paid to stockholders of record as of April 25, 2015, and $0.096667 per share for the dividend paid to stockholders of record as
of May 25, 2015, and June 25, 2015.
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On July 10, 2015,
the Board declared monthly dividends for the third quarter of 2015 equal to a quarterly rate of $0.29 per share on both the Company’s
Class A common stock and Class B common stock, payable monthly to the stockholders of record as of July 25, 2015, August 25, 2015
and September 25, 2015, which was paid in cash on August 5, 2015, September 4, 2015 and October 5, 2015, respectively.
The declared dividends
equal a monthly dividend on the Class A common stock and Class B common stock as follows: $0.096667 per share for the dividend
paid to stockholders of record as of July 25, 2015, and as of August 25, 2015, and $0.096666 per share for the dividend paid to
stockholders of record as of September 25, 2015.
A portion of each dividend may constitute a return of capital for tax purposes.
There is no assurance that the Company will continue to declare dividends or at this rate.
Holders of OP and
LTIP Units are entitled to receive "distribution equivalents" at the same time as dividends are paid to holders of the
Company's Class A common stock.
The Company has a
dividend reinvestment plan that allows for participating stockholders to have their dividend distributions automatically invested
in additional Class A common shares based on the average price of the shares on the investment date. The Company plans to issue
Class A common shares to cover shares required for investment.
Distributions declared
and paid for the three and nine months ended September 30, 2015 were as follows (amounts in thousands):
| |
Distributions | |
2015 | |
Declared | | |
Paid | |
First Quarter | |
| | | |
| | |
Class A Common Stock | |
$ | 3,554 | | |
$ | 3,073 | |
Class B-1 Common Stock | |
| 68 | | |
| 103 | |
Class B-2 Common Stock | |
| 103 | | |
| 103 | |
Class B-3 Common Stock | |
| 103 | | |
| 103 | |
OP Units | |
| 82 | | |
| 82 | |
LTIP Units | |
| 96 | | |
| 96 | |
Total first quarter 2015 | |
$ | 4,006 | | |
$ | 3,560 | |
Second Quarter | |
| | | |
| | |
Class A Common Stock | |
$ | 4,852 | | |
$ | 4,236 | |
Class B-2 Common Stock | |
| 103 | | |
| 103 | |
Class B-3 Common Stock | |
| 103 | | |
| 103 | |
OP Units | |
| 82 | | |
| 82 | |
LTIP Units | |
| 110 | | |
| 104 | |
Total second quarter 2015 | |
$ | 5,250 | | |
$ | 4,628 | |
Third Quarter | |
| | | |
| | |
Class A Common Stock | |
$ | 5,500 | | |
$ | 5,465 | |
Class B-2 Common Stock | |
| 68 | | |
| 103 | |
Class B-3 Common Stock | |
| 103 | | |
| 103 | |
OP Units | |
| 82 | | |
| 82 | |
LTIP Units | |
| 221 | | |
| 178 | |
Total third quarter 2015 | |
$ | 5,974 | | |
$ | 5,931 | |
Total nine months ended September 30, 2015 | |
$ | 15,230 | | |
$ | 14,119 | |
Note 12 – Commitments and Contingencies
The Company is subject
to various legal actions and claims arising in the ordinary course of business. Although the outcome of any legal matter cannot
be predicted with certainty, management does not believe that any of these legal proceedings or matters will have a material adverse
effect on the consolidated financial position or results of operations or liquidity of the Company.
Note 13 – Economic Dependency
The Company is dependent
on its Manager, an affiliate of Bluerock, to provide external management services for certain services that are essential to the
Company, including the identification, evaluation, negotiation, purchase and disposition of properties and other investments;
management of the daily operations of its real estate portfolio; and other general and administrative responsibilities. In the
event that the Manager or its affiliates are unable to provide the respective services, the Company will be required to obtain
such services from other sources.
BLUEROCK RESIDENTIAL GROWTH REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14 – Subsequent Events
Declaration of Dividends
On October 7, 2015,
the Board declared monthly dividends for the fourth quarter of 2015 equal to a quarterly rate of $0.29 per share on the Company’s
Class A common stock and $0.29 per share on the Company’s Class B common stock, payable monthly to the stockholders of record
as of October 25, 2015, November 25, 2015 and December 25, 2015, which will be paid in cash on November 5, 2015, December 5, 2015
and January 5, 2016, respectively. Holders of OP and LTIP Units are entitled to receive "distribution equivalents" at
the same time as dividends are paid to holders of the Company's Class A common stock.
The declared dividends
equal a monthly dividend on the Class A common stock and the Class B common stock as follows: $0.096666 per share for the dividend
paid to stockholders of record as of October 25, 2015, $0.096667 per share for the dividend paid to stockholders of record as
of November 25, 2015, and $0.096667 per share for the dividend paid to stockholders of record as of December 25, 2015. A portion
of each dividend may constitute a return of capital for tax purposes. There is no assurance that the Company will continue to
declare dividends or at this rate.
Distributions Paid
The following distributions
were paid to the Company's holders of Class A, Class B-3 common stock as well as holders of OP and LTIP Units subsequent to September
30, 2015 (amounts in thousands):
Shares |
|
Declaration
Date |
|
Record Date |
|
Date Paid |
|
Distributions
per Share |
|
|
Total
Distribution |
|
Class A Common Stock |
|
July 10, 2015 |
|
September 25, 2015 |
|
October 5, 2015 |
|
$ |
0.096666 |
|
|
$ |
1,856 |
|
Class B-3 Common Stock |
|
July 10, 2015 |
|
September 25, 2015 |
|
October 5, 2015 |
|
$ |
0.096666 |
|
|
$ |
34 |
|
OP Units |
|
July 10, 2015 |
|
September 25, 2015 |
|
October 5, 2015 |
|
$ |
0.096666 |
|
|
$ |
27 |
|
LTIP Units |
|
July 10, 2015 |
|
September 25, 2015 |
|
October 5, 2015 |
|
$ |
0.096666 |
|
|
$ |
83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock |
|
October 7, 2015 |
|
October 25, 2015 |
|
November 5, 2015 |
|
$ |
0.096666 |
|
|
$ |
1,856 |
|
Class B-3 Common Stock |
|
October 7, 2015 |
|
October 25, 2015 |
|
November 5, 2015 |
|
$ |
0.096666 |
|
|
$ |
34 |
|
OP Units |
|
October 7, 2015 |
|
October 25, 2015 |
|
November 5, 2015 |
|
$ |
0.096666 |
|
|
$ |
27 |
|
LTIP Units |
|
October 7, 2015 |
|
October 25, 2015 |
|
November 5, 2015 |
|
$ |
0.096666 |
|
|
$ |
83 |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
$ |
4,000 |
|
October 2015 8.250% Series A Cumulative Redeemable Preferred
Stock Offering
On October 21, 2015, the Company closed its October 2015 underwritten offering of 2,875,000 shares of
8.250% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share, liquidation preference $25.00 per share, inclusive
of shares sold pursuant to the full exercise of the overallotment option by the underwriters (the “October 2015 Preferred
Stock Offering”). The shares were registered with the SEC pursuant to a registration statement on Form S-3 (File No. 333-200359)
filed with the SEC on November 19, 2014 and declared effective on December 19, 2014. The public offering price of $25.00 per share
was announced on October 16, 2015. Net proceeds of the October 2015 Preferred Stock Offering were approximately $69.2 million after
deducting underwriting discounts and commissions and estimated offering costs.
Sale of North Park Towers
On October 16, 2015, the Company closed on the sale of the North Park Towers property, located in Southfield,
Michigan. The 100% owned property was sold for approximately $18.2 million, subject to certain prorations and adjustments typical
in such real estate transactions. After deduction for payment of the existing mortgage indebtedness encumbering the North Park
Towers property in the amount of $11.5 million and payment of closing costs and fees, the sale of the property generated net proceeds
for the Company of approximately $6.6 million.
Acquisition of Phillips Creek and Sovereign
Apartments
On October 29, 2015,
the Company, through subsidiaries of its Operating Partnership, completed investments of approximately $17.7 million and approximately
$15.2 million in a multi-tiered joint venture along with an affiliate of Carroll Organization, to acquire (i) a 352-unit Class
A apartment community located in Frisco, Texas known as the Sorrel Phillips Creek Ranch Apartments (the “Phillips Creek
Property”) and (ii) a 322-unit Class A apartment community located in Fort Worth, Texas known as The Sovereign Apartments
(the “Sovereign Property”), respectively. The Company’s indirect ownership interest in the joint venture that
owns the Phillips Creek Property and the Sovereign Property is 95.0%.
The Phillips Creek Property’s purchase price of approximately
$55.3 million was funded, in part, with a $38.7 million senior mortgage loan secured by the Phillips Creek Property and improvements
(the “Phillips Creek Loan”). The Phillips Creek Loan matures May 1, 2023, bears interest on a floating basis based
on LIBOR plus 2.29%, and requires interest only payments for the first 48 months. The Phillips Creek Loan can be prepaid after
the first 18 months with a 1% make whole premium through and including January 31, 2023, and thereafter at par. The Company provided
certain standard scope non-recourse carveout guaranties in conjunction with the Phillips Creek Loan.
The Sovereign Property’s purchase
price of approximately $44.4 million was funded, in part, with a $28.9 million senior mortgage loan secured by the Sovereign Property
and improvements (the “Sovereign Loan”). The Sovereign Loan matures November 10, 2022 and bears interest at a fixed
rate of 3.46%. The Sovereign Loan can be prepaid at any time, subject to certain prepayment fees. The Company provided certain
standard non-recourse carveout guaranties in conjunction with the Sovereign Loan.
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations
The following discussion
and analysis should be read in conjunction with the accompanying consolidated financial statements of Bluerock 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, as “Bluerock”, and we refer to our external
manager, BRG Manager, LLC, a Delaware limited liability company, as our “Manager.” Both Bluerock and our Manager are
affiliated with the Company.
Forward-Looking Statements
Statements included
in this Quarterly Report on Form 10-Q that are not historical facts (including any statements concerning investment objectives,
other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto)
are “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995. These
statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments
and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking
statements are typically identified by the use of terms such as “may,” “should,” “expect,”
“could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,”
“continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.
The forward-looking
statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous
risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic,
competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately
and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements
are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking
statements. Factors that could have a material adverse effect on our operations and future prospects include, but are not limited
to:
|
• |
the factors included in this Quarterly Report on Form 10-Q, including those set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; |
|
|
|
|
• |
use of proceeds of the Company’s equity offerings; |
|
|
|
|
• |
the competitive environment in which we operate; |
|
|
|
|
• |
real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for tenants in such markets; |
|
|
|
|
• |
risks associated with geographic concentration of our investments; |
|
|
|
|
• |
decreased rental rates or increasing vacancy rates; |
|
|
|
|
• |
our ability to lease units in newly acquired or newly constructed apartment properties; |
|
|
|
|
• |
potential defaults on or non-renewal of leases by tenants; |
|
|
|
|
• |
creditworthiness of tenants; |
|
• |
our ability to obtain financing for and complete acquisitions under contract; |
|
|
|
|
• |
development and acquisition risks, including failure of such acquisitions and developments to perform in accordance with projections; |
|
|
|
|
• |
the timing of acquisitions and dispositions; |
|
|
|
|
• |
the performance of the Bluerock strategic partners in our joint venture investments; |
|
|
|
|
• |
potential natural disasters such as hurricanes, tornadoes and floods; |
|
|
|
|
• |
national, international, regional and local economic conditions; |
|
|
|
|
• |
our ability to pay future distributions; |
|
|
|
|
• |
the general level of interest rates; |
|
|
|
|
• |
potential changes in the law or governmental regulations that affect us and interpretations of those laws and regulations, including changes in real estate and zoning or tax laws, and potential increases in real property tax rates; |
|
|
|
|
• |
financing risks, including the risks that our cash flows from operations may be insufficient to meet required payments of principal and interest and we may be unable to refinance our existing debt upon maturity or obtain new financing on attractive terms or at all; |
|
|
|
|
• |
lack of or insufficient amounts of insurance; |
|
|
|
|
• |
our ability to maintain our qualification as a REIT; |
|
• |
litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and |
|
|
|
|
• |
possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us or a subsidiary owned by us or acquired by us. |
Any of the assumptions
underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking
statements included in this report. All forward-looking statements are made as of the date of this report and the risk that actual
results will differ materially from the expectations expressed in this report will increase with the passage of time. Except as
otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking
statements after the date of this report, whether as a result of new information, future events, changed circumstances or any other
reason. The forward-looking statements should be read in light of the risk factors set forth in Item 1A of our Annual Report on
Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 4, 2015, and subsequent filings by us
with the SEC.
Overview
We were incorporated
as a Maryland corporation on July 25, 2008. Our objective is to maximize long-term stockholder value by acquiring well-located
institutional-quality apartment properties in demographically attractive growth markets across the United States. We seek to maximize
returns through investments where we believe we can drive substantial growth in our funds from operations, adjusted funds from
operations and net asset value through one or more of our Core-Plus, Value-Add, Opportunistic and Invest-to-Own investment strategies.
We are externally managed
by our Manager, an affiliate of Bluerock. We conduct our operations through Bluerock Residential Holdings, L.P., our operating
partnership (the “Operating Partnership”), of which we are the sole general partner. The consolidated financial statements
include our accounts and those of the Operating Partnership and its subsidiaries.
As of September 30,
2015, our portfolio consisted of interests in sixteen properties (thirteen operating properties and three development properties).
The sixteen properties contain an aggregate of 4,991 units, comprised of 4,097 operating units and 894 units under development.
As of September 30, 2015, these properties, exclusive of our development properties, and Whetstone and EOS, the lease-up properties,
were approximately 95% occupied.
We have elected to be
taxed as a 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.
Our IPO, Contribution Transactions and
Follow-On Offerings
We raised capital in
a continuous registered offering, carried out in a manner consistent with offerings of non-listed REITs, from our inception until
September 9, 2013, when we terminated the continuous registered offering in connection with the Board’s consideration of
strategic alternatives to maximize value to our stockholders. We subsequently determined to register shares of newly authorized
Class A common stock that were to be offered in a firmly underwritten public offering (the “IPO”), by filing a registration
statement on Form S-11 (File No. 333-192610) with the SEC, on November 27, 2013. On March 28, 2014, the SEC declared the registration
statement effective and we announced the pricing of the IPO of 3,448,276 shares of Class A common stock at a public offering price
of $14.50 per share for total gross proceeds of $50.0 million. The net proceeds of the IPO were approximately $44.0 million after
deducting underwriting discounts and commissions and estimated offering costs.
In connection with the
IPO, shares of our Class A common stock were listed on the NYSE MKT for trading under the symbol “BRG.” Pursuant to
the second articles of amendment and restatement to our charter filed on March 26, 2014 (the “Second Charter Amendment”),
each share of our common stock outstanding immediately prior to the listing, including shares sold in our Prior Public Offering
and our Follow On Offering, was changed into one-third of a share of each of Class B-1 common stock, Class B-2 common stock and
Class B-3 common stock. Following the filing of the Second Charter Amendment, we effected a 2.264881-to-1 reverse stock split of
our outstanding shares of Class B-1 common stock, Class B-2 common stock and Class B-3 common stock, and on March 31, 2014, we
effected an additional 1.0045878-to-1 reverse stock split of our outstanding shares of Class B-1 common stock, Class B-2 common
stock and Class B-3 common stock.
Substantially concurrently
with the completion of the IPO, we completed a series of related contribution transactions pursuant to which we acquired indirect
equity interests in four apartment properties, and a 100% fee simple interest in a fifth apartment property for an aggregate asset
value of $152.3 million (inclusive of the Villas at Oak Crest, which is accounted for under the equity method, and Springhouse,
in which we already owned an interest and which has been reported as consolidated for the periods presented). As holders of shares
of our Class A common stock issued in our contribution transactions in connection with our IPO, Fund II and Fund III and their
respective managers have certain registration rights covering the resale of their shares of Class A common stock. In addition,
BR-NPT Springing Entity, LLC (“NPT”) and Bluerock Property Management, LLC, the property manager of North Park Towers
(“BPM”), as holders of OP Units issued in our contribution transactions, and our Manager and our former advisor, as
holders of LTIP Units, have certain registration rights covering the resale of shares of our Class A common stock issued or issuable,
at our option, in exchange for OP Units, including OP Units into which LTIP Units may be converted. Fund II, Fund III and their
respective managers have agreed not to require us to file a registration statement with respect to the resale of their shares of
Class A common stock until January 4, 2016. In addition, NPT and BPM, and our Manager and our Former Advisor, have agreed not to
require us to file a registration statement with respect to the resale of their shares of our Class A common stock issued or issuable,
at our option, in exchange for OP Units, including OP Units into which LTIP Units may be converted, until January 4, 2016.
In October 2014, we completed an underwritten follow-on offering (the “October 2014 Follow-On Offering”),
of 3,035,444 shares of Class A common stock, inclusive of shares sold pursuant to the full exercise of the overallotment option
by the underwriters, on October 8, 2014. Net proceeds of the October 2014 Follow-On Offering were approximately $32.9 million after
deducting underwriting discounts and commissions and estimated offering costs.
On January 20, 2015,
we completed an underwritten shelf takedown offering (the “January 2015 Follow-On Offering”) of 4,600,000 shares of
Class A common stock, inclusive of shares sold pursuant to the full exercise of the overallotment option by the underwriters, on
January 20, 2015. The shares were registered with the SEC pursuant to a registration statement on Form S-3 (File No. 333-200359)
filed with the SEC on November 19, 2014 and declared effective on December 19, 2014. Net proceeds of the January 2015 Follow-On
Offering were approximately $53.7 million after deducting underwriting discounts and commissions and offering costs.
On May 22, 2015, we
completed an underwritten shelf takedown offering (the “May 2015 Follow-On Offering”) of 6,348,000 shares of Class
A common stock, par value $0.01 per share, inclusive of shares sold pursuant to the full exercise of the overallotment option by
the underwriters. The shares were registered with the SEC pursuant to a registration statement on Form S-3 (File No. 333-200359)
filed with the SEC on November 19, 2014 and declared effective on December 19, 2014. The public offering price of $13.00 per share
was announced on May 19, 2015. Net proceeds of the May 2015 Follow-On Offering were approximately $77.6 million after deducting
underwriting discounts and commissions and offering costs.
Our total stockholders’
equity increased $122.3 million from $92.4 million as of December 31, 2014 to $214.7 million as of September 30, 2015. The increase
in our total stockholders’ equity is primarily attributable to the January 2015 Follow-On Offering and the May 2015 Follow-On
Offering, which increased our stockholders’ equity by approximately $131.3 million, our net income of $2.2 million, and was
partially offset by dividends declared of $15.0 million, during the nine months ended September 30, 2015.
October 2015 Preferred Stock Offering
Subsequent to quarter
end, on October 21, 2015, the Company completed an underwritten shelf takedown offering of 2,875,000 shares of 8.250% Series A
Cumulative Redeemable Preferred Stock, par value $0.01 per share, liquidation preference $25.00 per share, inclusive of shares
sold pursuant to the full exercise of the overallotment option by the underwriters (the “October 2015 Preferred Stock Offering”).
The shares were registered with the SEC pursuant to a registration statement on Form S-3 (File No. 333-200359) filed with the SEC
on November 19, 2014 and declared effective on December 19, 2014. The public offering price of $25.00 per share was announced on
October 16, 2015. Net proceeds of the October 2015 Preferred Stock Offering were approximately $69.2 million after deducting underwriting
discounts and commissions and estimated offering costs.
Other Significant
Developments
During the nine months ended September 30, 2015, we made three convertible preferred investments, acquired
four stabilized properties, and disposed of two joint venture equity interests as discussed below. Further, subsequent to quarter
end, we disposed of an additional joint venture equity interest and made an additional joint venture equity investment, each as
discussed below.
Acquisition of Alexan
Southside Place (formerly referred to as Alexan Blaire House) Interests
On January 12, 2015,
through a wholly-owned subsidiary of its Operating Partnership, BRG Southside, LLC, we made a convertible preferred equity investment
in a multi-tiered joint venture, along with Bluerock Special Opportunity + Income Fund II, LLC (“Fund II”) and Bluerock
Special Opportunity + Income Fund III, LLC (“Fund III”), which are affiliates of the Company’s Manager, and an
affiliate of Trammell Crow Residential, to develop an approximately 269-unit Class A, apartment community located in Houston, Texas,
to be known as Alexan Southside Place. Alexan Southside Place will be developed upon a tract of land ground leased from Prokop
Industries BH, L.P., a Texas limited partnership, by BR Bellaire BLVD, LLC, as tenant under an 85-year ground lease. We have made
a capital commitment of $17.3 million to acquire 100% of the preferred equity interests in BRG Southside, LLC, all of which has
been funded as of September 30, 2015. Our preferred membership interest earns and shall be paid on a current basis a preferred
return at the annual rate of 15% times our outstanding amount of our capital contribution. We have the right to convert our preferred
membership interest into a majority common membership interest upon stabilization.
On April 7, 2015, we, through BR Bellaire BLVD, LLC, entered into a $31.8 million construction loan with
Bank of America, NA which is secured by the leasehold interest in the Alexan Southside Place property. The loan matures on April
7, 2019, and contains a one-year extension option, subject to certain conditions including a debt service coverage, loan to value
ratio and payment of an extension fee. The loan bears interest on a floating basis on the amount drawn based on the base rate plus
1.25% or LIBOR plus 2.25%. Regular monthly payments are interest-only during the initial term, with payments during the extension
period based on a thirty year amortization. The loan can be prepaid without penalty.
Acquisition of Interest in Park &
Kingston
On March 16, 2015,
we, through a wholly-owned subsidiary of its Operating Partnership, completed an investment in a multi-tiered joint venture, along
with Fund III, to acquire 153 newly-constructed units (the “Phase I Units”) in a Class AA apartment community in Charlotte,
North Carolina known as the Park & Kingston Apartments (“Park & Kingston”). Our indirect ownership interest
in Park & Kingston was 46.95%. The purchase price for the Phase I Units of $27.87 million was funded, in part, with a $15.25
million senior mortgage loan secured by the Park & Kingston property and improvements.
We also have the ability
to acquire 15 units under development at Park & Kingston (the “Phase II Units”), for a purchase price of $2.87
million. The seller has commenced, and will manage and complete the development of the Phase II Units. Upon completion of the development
of and upon the issuance of a certificate of occupancy for the Phase II Units, closing will occur, financed with supplemental financing
of up to 70% of the appraised value of the Phase II Units per the senior mortgage loan discussed above.
In May 2015, we invested an additional $6.5 million, plus customary prorations, in equity in Park &
Kingston, increasing our indirect ownership interest in the property from 46.95% to approximately 96.0%. The additional interests
were purchased from Fund III based on the original purchase price on a pro rata basis, plus customary prorations.
Acquisition of Interest in Fox Hill
On March 26, 2015,
we, through subsidiaries of its Operating Partnership, completed an investment in a multi-tiered joint venture, along with Fund
III and three unaffiliated investors (collectively, the “Third Parties”), to acquire a 288-unit apartment community
located in Austin, Texas (“Fox Hill”). Our indirect ownership in Fox Hill was 85.27%. The purchase price of $38.15
million was funded, in part, with a $26.71 million senior mortgage loan is secured by the Fox Hill Property and improvements.
In May 2015, we invested
an additional $1.1 million, plus customary prorations, in equity in Fox Hill, increasing our indirect ownership interest in the
property from 85.27% to approximately 94.62%. The additional interests were purchased from Fund III based on the original purchase
price on a pro rata basis, plus customary prorations.
Sale of 23Hundred@Berry Hill Joint Venture
Equity Interest (“Berry Hill”)
On January 14, 2015,
we, along with the other two holders of tenant-in-common interests in 23Hundred@Berry Hill, sold their respective interests to
2300 Berry Hill General Partnership, an unaffiliated third party. The aggregate purchase price was $61.2 million, subject to certain
prorations and adjustments typical in such real estate transactions. After deduction for payment of the existing mortgage indebtedness
and payment of closing costs and fees, the sale of the our interest in 23Hundred@Berry Hill generated net proceeds of approximately
$7.3 million to the Company and a consolidated gain of $11.3 million, of which the our pro rata share of gain is $5.3 million before
disposition expenses of $0.1 million.
Acquisition of Whetstone Interests
On May 20, 2015, through BRG Whetstone Durham, LLC, a wholly-owned subsidiary of its Operating Partnership,
we made a convertible preferred equity investment in a multi-tiered joint venture, along with Fund III and an affiliate of TriBridge
Residential, LLC, to develop a 204-unit Class A apartment community located in Durham, North Carolina, to be known as Whetstone
Apartments. We have made a capital commitment of $12.2 million to acquire 100% of the preferred equity interests in BRG Whetstone
Durham, LLC, all of which has been funded as of September 30, 2015. The acquisition of Whetstone Apartments was partially funded
by a bridge loan of approximately $25.2 million secured by the Whetstone Apartment property. The loan matures May 18, 2016 and
bears interest on a floating basis based on LIBOR plus 2.0%. The loan can be prepaid without penalty. We provided certain standard
scope non-recourse carveout guaranties in conjunction with the loan.
Acquisition of Cheshire Bridge Interests
On May 29, 2015, through
BRG Cheshire, LLC, a wholly-owned subsidiary of its Operating Partnership, we made a convertible preferred equity investment in
a multi-tiered joint venture, along with Fund III and an affiliate of Catalyst Development Partners II, to develop a 285-unit Class
A apartment community located in Atlanta, Georgia, to be known as Cheshire Bridge Apartments. We have made a capital commitment
of $15.6 million to acquire 100% of the preferred equity interests in BRG Cheshire, LLC, all of which has been funded as of September
30, 2015.
Acquisition of Interest in Ashton I
On August 19, 2015,
we, through subsidiaries of its Operating Partnership, completed an investment of $13.5 million to acquire a 100% fee simple interest
in a 322-unit apartment community located in Charlotte, North Carolina known as the Ashton Reserve at Northlake Phase I (“Ashton
I”). The purchase price of $44.75 million was funded, in part, with the assumption of a $31.9 million senior mortgage loan
secured by the Ashton I Property and improvements.
In addition, we, through
a subsidiary of the Operating Partnership, expect to subsequently acquire an additional 151-unit apartment community currently
under construction on land immediately adjacent to Ashton I, to be known as Ashton Reserve at Northlake Phase II, or Ashton II.
On August 19, 2015, we entered into an assignment and assumption of purchase and sale agreement with an unaffiliated third-party,
pursuant to which it assumed the obligations under the purchase agreement to acquire Ashton II following completion of construction
and stabilization thereof. We expect to close on the acquisition of Ashton II for a purchase price of approximately $20.6 million,
subject to customary adjustments and prorations, and subject to final adjustment and pricing based on the then existing financial
condition of Ashton II based on a closing rent roll.
Acquisition of ARIUM Palms at World
Gateway, formerly known as Century Palms at World Gateway
On August 20, 2015,
we, through subsidiaries of its Operating Partnership, completed an investment of $13.0 million in a multi-tiered joint venture
along with an unaffiliated investor, to acquire a 252-unit apartment community located in Orlando, Florida known as the ARIUM Palms
at World Gateway Apartments (“ARIUM Palms”). Our indirect ownership in ARIUM Palms was 95.0%. The purchase price of
$37.0 million was funded, in part, with a $25.0 million senior mortgage loan secured by the ARIUM Palms Property and improvements.
Sale of Villas at Oak Crest
The controlling member
of the joint venture that owned the Villas at Oak Crest apartment community determined to sell the property. The property was sold
in September 2015 and upon closing, the Company received a distribution of its original investment plus accrued return.
Held for Sale – North Park Towers
Subsequent to quarter
end, on October 16, 2015, the Company closed on the sale of the North Park Towers property, located in Southfield, Michigan. The
100% owned property was sold for approximately $18.2 million, subject to certain prorations and adjustments typical in such real
estate transactions. After deduction for payment of the existing mortgage indebtedness encumbering the North Park Towers property
in the amount of $11.5 million and payment of closing costs and fees, the sale of the property generated net proceeds for the Company
of approximately $6.6 million.
Acquisition of Phillips Creek and Sovereign
Apartments
Subsequent to quarter
end, on October 29, 2015, the Company, through subsidiaries of its Operating Partnership, completed investments of approximately
$17.7 million and approximately $15.2 million in a multi-tiered joint venture along with an affiliate of Carroll Organization,
to acquire (i) a 352-unit Class A apartment community located in Frisco, Texas known as the Sorrel Phillips Creek Ranch Apartments
(the “Phillips Creek Property”) and (ii) a 322-unit Class A apartment community located in Fort Worth, Texas known
as The Sovereign Apartments (the “Sovereign Property”), respectively. The Company’s indirect ownership in the
joint venture that owns the Phillips Creek Property and the Sovereign Property is 95.0%. The Phillip Creek Property’s approximate
purchase price of $55.3 million was funded, in part, with a $38.7 million senior mortgage loan secured by the Phillip Creek Property
and improvements. The Sovereign Property’s approximate purchase price of $44.4 million was funded, in part, with a $28.9
million senior mortgage loan secured by the Sovereign Property and improvements.
Results of Operations
The following is a
summary of our stabilized operating real estate investments as of September 30, 2015:
Multifamily Community | |
Date Acquired | |
Number of Units | | |
Our Ownership Interest in Property Owner | | |
Occupancy % | |
Springhouse at Newport News | |
12/3/2009 | |
| 432 | | |
| 75.0 | % | |
| 95 | % |
Enders Place at Baldwin Park(1) | |
10/2/2012 | |
| 220 | | |
| 89.5 | % | |
| 97 | % |
MDA Apartments | |
12/17/2012 | |
| 190 | | |
| 35.3 | % | |
| 96 | % |
Village Green of Ann Arbor | |
4/2/2014 | |
| 520 | | |
| 48.6 | % | |
| 95 | % |
North Park Towers | |
4/3/2014 | |
| 313 | | |
| 100.0 | % | |
| 95 | % |
Lansbrook Village(2) | |
5/23/2014 | |
| 601 | | |
| 76.8 | % | |
| 93 | % |
ARIUM Grandewood | |
11/4/2014 | |
| 306 | | |
| 95.0 | % | |
| 96 | % |
Park & Kingston | |
3/16/2015 | |
| 153 | | |
| 96.0 | % | |
| 98 | % |
Fox Hill | |
3/26/2015 | |
| 288 | | |
| 94.6 | % | |
| 99 | % |
Ashton I | |
8/19/2015 | |
| 322 | | |
| 100.0 | % | |
| 91 | % |
ARIUM Palms | |
8/20/2015 | |
| 252 | | |
| 95.0 | % | |
| 92 | % |
Total | |
| |
| 3,597 | | |
| | | |
| 95 | % |
(1) Includes an additional
22 units acquired during the second quarter of 2014.
(2) Includes an additional
28 units acquired since the original acquisition in May 2014 of which 13 units were acquired in the nine months ended September
30, 2015.
Three Months Ended September 30,
2015 Compared to Three Months Ended September 30, 2014
Revenue
Net rental income
increased $1.8 million, or 20%, to $11.0 million for the three months ended September 30, 2015 as compared to $9.2 million
for the same prior year period. This increase was primarily due to the acquisition of various interests in five properties subsequent
to September 30, 2014, ARIUM Grandewood, Park & Kingston, Fox Hill, Ashton I and ARIUM Palms, offset by the sale of Berry Hill.
Other property
revenue increased $0.1 million, or 25%, to $0.5 million for the three months ended September 30, 2015 as compared to $0.4 million
for the same prior year period. This increase was primarily due to the acquisition of interests in the properties noted above.
Expenses
Property operating
expenses increased $0.6 million, or 15%, to $4.7 million for the three months ended September 30, 2015 as compared to $4.1
million for the same prior year period. This increase was primarily due to the acquisition of interests in the properties noted
above. Property NOI margins improved to 59.4% of total revenues for the three months ended September 30, 2015 from 57.4% in the
prior year quarter. Property NOI margins are computed as total revenues less property operating expenses, divided by total revenues.
General and
administrative expenses amounted to $1.2 million for the three months ended September 30, 2015 as compared to $0.8 million
for the same prior year period. Excluding non-cash amortization of LTIP Units and restricted stock expense of $0.6 million and
$0.3 million for the three months ended September 30, 2015 and 2014, respectively, general and administrative expenses were $0.6
million, or 5.2% of revenues for the three months ended September 30, 2015 as compared to $0.4 million, or 4.6% of revenues, for
the same prior year period.
Management fees
increased to $0.9 million for the three months ended September 30, 2015 as compared to $0.2 million for the same prior year
period. This was primarily due to an increase in equity as a result of the October 2014 Follow-On Offering, the January 2015 Follow-On
Offering and the May 2015 Follow-On Offering. Base management fees of $0.9 million for the quarter ended September 30, 2015 will
be paid in LTIP Units in lieu of cash.
Acquisition costs
increased to $0.7 million for the three months ended September 30, 2015 as compared to $0.4 million for the same prior year
period. This increase was primarily due to the acquisition of the Ashton I and ARIUM Palms apartment communities during the three
months ended September 30, 2015 as compared to the acquisition of two preferred equity investments during the third quarter of
2014.
Depreciation and
amortization expenses was $4.0 million for the three months ended September 30, 2015 as compared to $4.8 million for the same
prior year period.
Other Income and Expense
Other income and
expenses amounted to an expense of $0.6 million for the three months ended September 30, 2015 as compared to other expense
of $2.1 million same prior year period. This was primarily due to an increase of $2.0 million in income from unconsolidated joint
venture interests due to an additional four investments, partially offset by an increase in interest expense, net, of $0.4 million,
as the result of the increase in mortgages payable resulting from the acquisition of interests in the properties mentioned above.
Income from Discontinued Operations
Loss from discontinued
operations was $0.1 million for the three months ended September 30, 2014. There was no income from discontinued operations
in 2015. The 2014 amount related to the discontinued operations of our Creekside property, which was sold on March 28, 2014.
Nine Months Ended September 30, 2015
Compared to Nine Months Ended September 30, 2014
Revenue
Net rental income
increased $9.8 million, or 49%, to $29.6 million for the nine months ended September 30, 2015 as compared to $19.8 million
for the same prior year period. This increase was primarily due to the acquisition of various interests in four properties during
2014, Village Green of Ann Arbor, North Park Towers, Lansbrook Village and ARIUM Grandewood, and four properties during 2015, Park
& Kingston, Fox Hill, Ashton I and ARIUM Palms, offset by the sale of Berry Hill.
Other property
revenue increased $0.7 million, or 87%, to $1.5 million for the nine months ended September 30, 2015 as compared to $0.8 million
for the same prior year period. This increase was primarily due to the acquisition of interests in the properties noted above.
Expenses
Property operating
expenses increased $3.9 million, or 43%, to $12.9 million for the nine months ended September 30, 2015 as compared to $9.0
million for the same prior year period. This increase was primarily due to the acquisition of interests in the properties noted
above. Property NOI margins improved to 58.4% of total revenues for the nine months ended September 30, 2015 from 56.2% in the
prior year period.
General and
administrative expenses amounted to $2.9 million for the nine months ended September 30, 2015 as compared to $2.0 million for
the same prior year period. Excluding non-cash amortization of LTIP Units and restricted stock expense of $1.3 million and $0.7
million for the nine months ended September 30, 2015 and 2014, respectively, general and administrative expenses were $1.6 million,
or 5.1% of revenues for the nine months ended September 30, 2015 as compared to $1.3 million, or 6.5% of revenues, for the same
prior year period.
Management fees
increased to $3.1 million for the nine months ended September 30, 2015 as compared to $0.5 million for the same prior year
period. This was primarily due to an increase in equity as a result of our IPO on April 2, 2014, the October 2014 Follow-On Offering,
the January 2015 Follow-On Offering and the May 2015 Follow-On Offering. Base management fees of $1.6 million for the nine months
ended September 30, 2015 are paid in LTIP Units in lieu of cash.
Acquisition costs
decreased to $1.4 million for the nine months ended September 30, 2015 as compared to $3.5 million for the same prior year
period. This decrease was due primarily to the acquisition of numerous properties during the second quarter of 2014 in conjunction
with the IPO as compared to the acquisitions during the nine months ended September 30, 2015.
Depreciation and
amortization expenses increased to $10.5 million for the nine months ended September 30, 2015 as compared to $9.6 million for
the same prior year period. This increase was primarily due to additional depreciation expense related to the acquisition of interests
in the properties noted above.
Other Income and Expense
Other income and
expenses amounted to income of $7.8 million for the nine months ended September 30, 2015 as compared to an expense of $5.1
million same prior year period. This was primarily due to a gain on the sale of an unconsolidated joint venture interest of $11.3
million in 2015 related to Berry Hill, an increase of $3.9 million in income from unconsolidated joint venture interests due to
an additional four investments, partially offset by an increase in interest expense, net, of $2.2 million, as the result of the
increase in mortgages payable resulting from the acquisition of interests in the properties mentioned above.
Income from Discontinued Operations
Income from discontinued
operations was $0.1 million for the nine months ended September 30, 2014. There was no income from discontinued operations
in 2015. The 2014 amount related to the discontinued operations of our Creekside property, which was sold on March 28, 2014.
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.
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% physical occupancy, subject to loss-to-lease, bad debt and rent concessions.
For comparison of our three months ended September 30, 2015 and 2014, the same store properties included properties owned at July
1, 2014, excluding the Berry Hill property, which was under construction. Our same store properties for the three months ended
September 30, 2015 and 2014 were Springhouse at Newport News, Enders Place at Baldwin Park, Village Green of Ann Arbor, North Park
Towers, MDA and Lansbrook Village. Our non-same store properties for the same period were The Estates at Perimeter/Augusta,
The Reserve at Creekside Village, 23Hundred@Berry Hill, ARIUM Grandewood, Park & Kingston, Fox Hill, Ashton I and ARIUM Palms.
Our same store properties for the nine months ended September 30, 2015 and 2014 were Springhouse at Newport News, Enders Place
at Baldwin Park and MDA Apartments. Our non-same store properties for the same period were The Estates at Perimeter/Augusta,
The Reserve at Creekside Village, 23Hundred@Berry Hill, Grove, Village Green of Ann Arbor, North Park Towers, Lansbrook Village,
ARIUM Grandewood, Park & Kingston, Fox Hill, Ashton I and ARIUM Palms.
The Estates at Perimeter/Augusta
was accounted for under the equity method and Creekside was accounted for as discontinued operations during the three months ended
September 30, 2014. For the three months ended September 30, 2014, the components of non-same store property revenues, property
expenses and net operating income represented by these properties were $0.7 million, $0.2 million and $0.5 million, respectively.
There were no operating properties accounted for under the equity method during the three months ended September 30, 2015.
The Estates at Perimeter/Augusta
was accounted for under the equity method and Creekside were accounted for as discontinued operations during the nine months ended
September 30, 2014. For the nine months ended September 30, 2014, the components of non-same store property revenues, property
expenses and net operating income represented by these properties were $2.5 million, $1.0 million, and $1.5 million, respectively.
The Estates at Perimeter/Augusta, Berry Hill, and Grove were accounted for under the equity method during the nine months September
30, 2015, but are reflected in our table of net operating income as if they were consolidated. For the nine months ended September
30, 2015, the components of non-same store property revenues, property expenses and net operating income represented by these
properties were $0.2 million, $0.05 million and $0.1 million, respectively.
The Estates at Perimeter/Augusta’s
and Berry Hill financial information can be found at Note 6, "Equity Method Investments," and Creekside financial information
can be found at Note 3, “Real Estate Assets Held for Sale, Discontinued Operations and Sale of Joint Venture Equity Interests”
in our Notes to Consolidated Financial Statements. Creekside was sold on March 28, 2014, The Estates at Perimeter/Augusta was
sold on December 10, 2014 and Berry Hill was sold on January 14, 2015.
The following table presents the same store and non-same store
results from operations for the three and nine months ended September 30, 2015 and 2014:
| |
Three Months Ended September 30, | | |
Change | |
| |
2015 | | |
2014 | | |
$ | | |
% | |
Property Revenues | |
| | | |
| | | |
| | | |
| | |
Same Store | |
$ | 8,174 | | |
$ | 7,704 | | |
$ | 470 | | |
| 6.1 | % |
Non-Same Store | |
| 3,386 | | |
| 2,552 | | |
| 834 | | |
| 32.7 | % |
Total property revenues | |
| 11,560 | | |
| 10,256 | | |
| 1,304 | | |
| 12.7 | % |
| |
| | | |
| | | |
| | | |
| | |
Property Expenses | |
| | | |
| | | |
| | | |
| | |
Same Store | |
| 3,423 | | |
| 3,333 | | |
| 90 | | |
| 2.7 | % |
Non-Same Store | |
| 1,304 | | |
| 968 | | |
| 336 | | |
| 34.7 | % |
Total property expenses | |
| 4,727 | | |
| 4,301 | | |
| 426 | | |
| 9.9 | % |
| |
| | | |
| | | |
| | | |
| | |
Same Store NOI | |
| 4,751 | | |
| 4,371 | | |
| 380 | | |
| 8.7 | % |
Non-Same Store NOI | |
| 2,082 | | |
| 1,584 | | |
| 498 | | |
| 31.4 | % |
Total NOI(1) | |
$ | 6,833 | | |
$ | 5,955 | | |
$ | 878 | | |
| 14.7 | % |
|
|
Nine Months Ended
September 30, |
|
|
Change |
|
|
|
2015 |
|
|
2014 |
|
|
$ |
|
|
% |
|
Property Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store |
|
$ |
9,771 |
|
|
$ |
9,206 |
|
|
$ |
565 |
|
|
|
6.1 |
% |
Non-Same Store |
|
|
21,444 |
|
|
|
13,841 |
|
|
|
7,603 |
|
|
|
54.9 |
% |
Total property revenues |
|
|
31,215 |
|
|
|
23,047 |
|
|
|
8,168 |
|
|
|
35.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store |
|
|
3,810 |
|
|
|
3,731 |
|
|
|
79 |
|
|
|
2.1 |
% |
Non-Same Store |
|
|
9,123 |
|
|
|
6,265 |
|
|
|
2,858 |
|
|
|
45.6 |
% |
Total property expenses |
|
|
12,933 |
|
|
|
9,996 |
|
|
|
2,937 |
|
|
|
29.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store NOI |
|
|
5,961 |
|
|
|
5,475 |
|
|
|
486 |
|
|
|
8.9 |
% |
Non-Same Store NOI |
|
|
12,321 |
|
|
|
7,576 |
|
|
|
4,745 |
|
|
|
62.6 |
% |
Total NOI(1) |
|
$ |
18,282 |
|
|
$ |
13,051 |
|
|
$ |
5,231 |
|
|
|
40.1 |
% |
(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 September 30, 2015 Compared to Three
Months Ended September 30, 2014
Same store NOI for
the three months ended September 30, 2015 increased by 8.7% to $4.8 million from $4.4 million for the 2014 period. There was a
6.1% increase in same store property revenues as compared to the 2014 period, primarily attributable to a 4.9% increase in average
rental rates and 20 additional units at our Lansbrook Village property; average occupancy remained flat at approximately 95.3%.
Same store expenses increased 2.7% as a result of higher taxes driven by rising assessed property values from municipalities.
Property revenues
and property expenses for our non-same store properties increased significantly due to the properties acquired during 2014 and
2015. The results of operations for these properties have been included in our consolidated statements of operations from the date
of acquisition.
Nine Months Ended September 30, 2015 Compared to Nine
Months Ended September 30, 2014
Same store NOI for
the nine months ended September 30, 2015 increased by 8.9% to $6.0 million from $5.5 million for the 2014 period. There was a 6.1%
increase in same store property revenues as compared to the 2014 period, primarily attributable to a 3.4% increase in average rental
rates, the acquisition of 22 additional units at our Enders property, and a 120 basis point increase in average occupancy. Same
store expenses increased 2.1% compared to prior year period primarily as a result of higher in taxes driven by rising assessed
property values from municipalities, offset by a decrease in HOA expenses at our Enders property.
Property revenues
and property expenses for our non-same store properties increased significantly due to the properties acquired during 2014 and
2015. The results of operations for these properties have been included in our consolidated statements of operations from the date
of acquisition.
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.
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 because 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.
However, NOI should
only be used as an alternative measure of our financial performance. The following table reflects same store and non-same store
contributions to consolidated NOI, together with a reconciliation of NOI to net (loss) income, as computed in accordance with GAAP
for the periods presented (amounts in thousands):
| |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Net operating income | |
| | | |
| | | |
| | | |
| | |
Same store | |
$ | 4,751 | | |
$ | 4,371 | | |
$ | 5,961 | | |
$ | 5,475 | |
Non-same store | |
| 2,082 | | |
| 1,584 | | |
| 12,321 | | |
| 7,576 | |
Total net operating income | |
| 6,833 | | |
| 5,955 | | |
| 18,282 | | |
| 13,051 | |
Less: | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| 2,942 | | |
| 2,583 | | |
| 7,980 | | |
| 6,062 | |
Total property income | |
| 3,891 | | |
| 3,372 | | |
| 10,302 | | |
| 6,989 | |
Less: | |
| | | |
| | | |
| | | |
| | |
Noncontrolling interest pro-rata share of property income | |
| 752 | | |
| 1,638 | | |
| 2,673 | | |
| 3,650 | |
Other (income) loss related to JV/MM entities | |
| 14 | | |
| 17 | | |
| 66 | | |
| 56 | |
Pro-rata share of properties’ income | |
| 3,125 | | |
| 1,717 | | |
| 7,563 | | |
| 3,283 | |
Less pro-rata share of: | |
| | | |
| | | |
| | | |
| | |
Depreciation and amortization | |
| 3,082 | | |
| 2,872 | | |
| 7,641 | | |
| 5,494 | |
Amortization of non-cash interest expense | |
| 148 | | |
| 81 | | |
| 243 | | |
| 150 | |
Line of credit interest, net | |
| — | | |
| — | | |
| — | | |
| 191 | |
Management fees | |
| 890 | | |
| 219 | | |
| 3,011 | | |
| 536 | |
Acquisition and disposition costs | |
| 682 | | |
| 318 | | |
| 1,367 | | |
| 3,657 | |
Corporate operating expenses | |
| 1,245 | | |
| 769 | | |
| 2,886 | | |
| 2,000 | |
Add pro-rata share of: | |
| | | |
| | | |
| | | |
| | |
Other income | |
| 23 | | |
| 31 | | |
| 91 | | |
| 103 | |
Equity in operating earnings of unconsolidated joint ventures | |
| 2,327 | | |
| 364 | | |
| 4,331 | | |
| 464 | |
Gain on sale of joint venture interest, net of fees | |
| (2 | ) | |
| — | | |
| 5,320 | | |
| 448 | |
Net (loss) income attributable to common stockholders | |
$ | (574 | ) | |
$ | (2,147 | ) | |
$ | 2,157 | | |
$ | (7,730 | ) |
Liquidity and Capital Resources
Liquidity is a measure
of our ability to meet potential cash requirements. Our primary liquidity requirements relate to (a) our operating expenses and
other general business needs, (b) distributions to our stockholders, (c) investments and capital requirements to fund development
and renovations at existing properties and (d) ongoing commitments to repay borrowings, including our maturing short-term debt.
We believe the properties
underlying the Company’s real estate investments are performing well and had a portfolio-wide debt service coverage ratio
of 2.03x and occupancy of 95% at September 30, 2015. Prior to our IPO, our cash resources had been inadequate to meet our primary
liquidity needs as our corporate operating expenses exceeded the cash flow received from our investments in real estate joint ventures.
The primary reason for our previous negative operating cash flow had been the size of our portfolio relative to the general and
administrative expenses required to operate as a public company. These costs included accounting and related fees to our independent
auditors, legal fees, costs of being an SEC reporting company, director compensation and director and officer insurance premiums.
In October 2014, we completed an underwritten follow-on offering (the “October 2014 Follow-On Offering”),
of 3,035,444 shares of Class A common stock, inclusive of shares sold pursuant to the full exercise of the overallotment option
by the underwriters, on October 8, 2014. Net proceeds of the October 2014 Follow-On Offering were approximately $32.9 million after
deducting underwriting discounts and commissions and estimated offering costs.
In January 2015, we
completed an underwritten shelf takedown offering (the “January 2015 Follow-On Offering”) of 4,600,000 shares of Class
A common stock, inclusive of shares sold pursuant to the full exercise of the overallotment option by the underwriters, on January
20, 2015. Net proceeds of the January 2015 Follow-On Offering were approximately $53.7 million after deducting underwriting discounts
and commissions and offering costs.
On May 22, 2015, the
Company completed an underwritten shelf takedown offering (the “May 2015 Follow-On Offering”) of 6,348,000 shares of
Class A common stock, par value $0.01 per share, inclusive of shares sold pursuant to the full exercise of the overallotment option
by the underwriters. The shares were registered with the SEC pursuant to a registration statement on Form S-3 (File No. 333-200359)
filed with the SEC on November 19, 2014 and declared effective on December 19, 2014. The public offering price of $13.00 per share
was announced on May 19, 2015. Net proceeds of the May 2015 Follow-On Offering were approximately $77.6 million after deducting
underwriting discounts and commissions and offering costs.
The net proceeds of
our IPO, the October 2014 Follow-On Offering, the January 2015 Follow-On Offering and the May 2015 Follow-On Offering (collectively
the “Follow-On Offerings”), provided us with the ability to grow our asset base quickly and better service our general
and administrative expenses. The Management Agreement with our Manager should provide an overall lower fee structure than our previous
Advisory Agreement with our Former Advisor, which we believe will help reduce our corporate general and administrative expenses.
Subsequent to quarter end, on October 21, 2015, the Company completed an underwritten shelf takedown offering
of 2,875,000 shares of 8.250% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share, liquidation preference
$25.00 per share, inclusive of shares sold pursuant to the full exercise of the overallotment option by the underwriters (the “October
2015 Preferred Stock Offering”). The shares were registered with the SEC pursuant to a registration statement on Form S-3
(File No. 333-200359) filed with the SEC on November 19, 2014 and declared effective on December 19, 2014. The public offering
price of $25.00 per share was announced on October 16, 2015. Net proceeds of the October 2015 Preferred Stock Offering were approximately
$69.2 million after deducting underwriting discounts and commissions and estimated offering costs.
In general, we believe
our cash flows from operations, available cash balances, the use of equity offerings, including the October 2015 Preferred Stock
Offering, and other financing arrangements will be sufficient to fund our liquidity requirements with respect to our existing portfolio
for the next 12 months. We expect that the additional properties added to our portfolio in the contribution transactions at the
initial closing of the IPO, together with borrowings we or our subsidiaries may obtain and the investments and acquisitions we
have made with the proceeds from the IPO and have made and expect to make as a result of the completion of the Follow-On Offerings
and the October 2015 Preferred Stock Offering, will have a significant positive impact on our future results of operations. In
general, we expect that our income and expenses related to our portfolio will increase in future periods as a result of anticipated
future investments in and acquisitions of real estate, including our investments in development projects.
We may also selectively
sell assets at appropriate times, which would be expected to generate cash sources for our liquidity needs.
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 as determined by our Manager. 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.
We may seek to utilize
credit facilities or loans from unaffiliated parties when possible. Previously, we have relied on borrowing from affiliates to
help finance our business activities. On October 2, 2012, we entered into the Fund LOC pursuant to which we were initially entitled
to borrow up to $12.5 million. On April 2, 2014, the Fund LOC was paid in full with proceeds from our IPO and extinguished.
If we are unable to
obtain financing on favorable terms or at all, we may have 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.
In prior quarters,
including the three and six months ended June 30, 2015, our Former Advisor deferred payment by us as needed of asset management
fees, acquisition fees and organizational and offering costs incurred by us. Effective on September 4, 2015, the Former Advisor
and Manager entered into an Assignment Agreement pursuant to which the Former Advisor assigned its right to payment of the obligation
due to the Former Advisor to the Manager. The Manager agreed to receive payment entirely in LTIP Units of the Operating Partnership,
and payment was made through the issuance of 108,119 LTIP Units by the Operating Partnership on September 14, 2015.
In prior quarters,
including the three and six months ended June 30, 2015, our Manager waived current year reimbursable operating expenses, to support
our continued operations. Reimbursements of $0.1 million were expensed during the three months ended September 30, 2015 and are
recorded as part of general and administrative expenses.
For the remainder
of 2015, the Company expects to maintain a distribution paid on a monthly basis to all of our stockholders at a quarterly rate
of $0.29 per share. To the extent the Company continues to pay distributions at this rate, the Company expects to substantially
use cash flows from operations to fund distribution payments. The Board will review the distribution rate quarterly, and there
can be no assurance that the current distribution level will be maintained. While our policy is generally to pay distributions
from cash flow from operations, our distributions through September 30, 2015 have been paid from proceeds from our continuous registered
public offering, proceeds from the IPO and Follow-On Offerings and sales of assets, and may in the future be paid from additional
sources, such as from borrowings.
Off-Balance Sheet Arrangements
As of September 30,
2015, we did not have any off-balance sheet arrangements that have had or are reasonably likely to have a material effect on our
financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures. As of September
30, 2015, we own interests in five joint ventures that are accounted for under the equity method as we exercise significant influence
over, but do not control, the investee.
Cash Flows from Operating Activities
As of September 30,
2015, we owned indirect equity interests in sixteen real estate properties (thirteen operating properties and three development
properties), eleven of which are consolidated for reporting purposes. During the nine months ended September 30, 2015, net
cash provided by operating activities was $15.9 million. After the net income of $8.0 million was reduced for $0.7 million
of non-cash items, net cash provided by operating activities consisted of the following:
|
• |
Distributions from unconsolidated joint ventures of $7.0 million; |
|
• |
Increase in accounts payable and accrued liabilities of $4.2 million; |
|
|
|
|
• |
Increase in our payables due to affiliates of $0.7 million; and offset by an |
|
|
|
|
• |
Increase in accounts receivable and other assets of $3.3 million. |
Cash Flows from Investing Activities
During the nine months
ended September 30, 2015, net cash used in investing activities was $157.0 million, primarily due to the following:
|
• |
$116.9 million used in acquiring consolidated real estate investments; |
|
|
|
|
• |
$45.2 million used in acquiring investments in unconsolidated joint ventures; |
|
|
|
|
• |
$2.5 million used on capital expenditures; |
|
|
|
|
• |
$7.9 million used on purchases of interests from noncontrolling members; |
|
|
|
|
• |
$0.1 million in our restricted cash balance; and |
|
|
|
|
• |
Partially offset by a decrease of $15.6 million in cash proceeds received for the sale of the Berry Hill property. |
Cash Flows from Financing Activities
During the nine months
ended September 30, 2015, net cash provided by financing activities was $183.0 million, primarily due to the following:
|
• |
$131.3 million raised in our January and May 2015 Follow-On Offerings on January 20, 2015 and May 22, 2015, respectively; |
|
|
|
|
• |
net borrowings of $68.2 million on mortgages payable; |
|
|
|
|
• |
$1.3 million increase in capital contributions from noncontrolling interests; |
|
|
|
|
• |
partially offset by $1.6 million in distributions paid to our noncontrolling interests; |
|
|
|
|
• |
$14.1 million paid in cash distributions paid to stockholders; |
|
|
|
|
• |
$1.1 million increase in deferred financing costs; and |
|
|
|
|
• |
$1.0 million of repayments of our mortgages payable. |
Capital Expenditures
The following table
summarizes our total capital expenditures for the three and nine months ended September 30, 2015 and 2014 (amounts in thousands):
| |
For the nine months ended September 30, | |
| |
2015 | | |
2014 | |
New development | |
$ | - | | |
$ | 5,946 | |
Redevelopment/renovations | |
| 1,380 | | |
| 912 | |
Routine capital expenditures | |
| 1,091 | | |
| 577 | |
Total capital expenditures | |
$ | 2,471 | | |
$ | 7,435 | |
The majority of our
capital expenditures during the nine months ended September 30, 2014 related to our development property, Berry Hill, which was
acquired in October 2012 and became stabilized during the three months ended September 30, 2014.
We define redevelopment
and renovation costs as non-recurring capital expenditures for significant projects that upgrade units or common areas and projects
that are revenue enhancing for the three and nine months ended September 30, 2015. We define routine capital expenditures as capital
expenditures that are incurred at every property and exclude development, investment, revenue enhancing and non-recurring capital
expenditures.
Funds
from Operations and Adjusted Funds from Operations
Funds from operations
(“FFO”), 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 National Association of Real Estate Investment Trusts, or NAREIT's, definition, as net income, computed in accordance
with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization of real estate assets, plus impairment
write-downs of depreciable real estate, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis.
In addition to FFO,
we use adjusted funds from operations (“AFFO”). AFFO is a computation made by analysts and investors to measure a real
estate company's operating performance by removing the effect of items that do not reflect ongoing property operations.
In computing AFFO,
we further adjust FFO by adding back certain items that are not added to net income in NAREIT's definition of FFO, such as acquisition
expenses, equity based compensation expenses, and any other non-recurring or non-cash expenses, which are costs that do not relate
to the operating performance of our properties, and subtracting recurring capital expenditures (and when calculating the quarterly
incentive fee payable to our Manager only, we further adjust FFO to include any realized gains or losses on our real estate investments).
During the three months
ended September 30, 2015, we incurred $0.7 million of acquisition expense and $0.1 million of disposition expense, of which $0.7
million was our pro rata share of the expense. During the nine months ended September 30, 2015, we incurred $1.4 million of acquisition
expense and $0.8 million of disposition expense, of which $1.4 million was our pro-rata share of the expense.
Our calculation of
AFFO differs from the methodology used for calculating AFFO by certain other REITs and, accordingly, our AFFO may not be comparable
to AFFO reported by other REITs. Our management utilizes FFO and AFFO as measures of our operating performance after adjustment
for certain non-cash items, such as depreciation and amortization expenses, and acquisition expenses 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, AFFO and other supplemental performance measures
are defined in various ways throughout the REIT industry, we also believe that FFO and AFFO may provide us and our stockholders
with an additional useful measure to compare our financial performance to certain other REITs. We also use AFFO for purposes of
determining the quarterly incentive fee, if any, payable to our Manager.
Neither FFO nor AFFO
is equivalent to net income or cash generated from operating activities determined in accordance with GAAP. Furthermore, FFO and
AFFO 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 AFFO should be considered as an alternative to
net income as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure
of our liquidity.
The table below presents
our calculation of FFO and AFFO for the three and nine months ended September 30, 2015 and 2014 (in thousands).
We have acquired interests in ten additional properties subsequent
to June 30, 2014 and sold four properties that were owned during the quarter ended September 30, 2014. The results presented
in the table below are not directly comparable and should not be considered an indication of our future operating performance.
| |
Three Months Ended | | |
Nine Months Ended | |
| |
September 30, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Net (loss) income attributable to common stockholders | |
$ | (574 | ) | |
$ | (2,147 | ) | |
$ | 2,157 | | |
$ | (7,730 | ) |
Common stockholders pro-rata share of: | |
| | | |
| | | |
| | | |
| | |
Real estate depreciation and amortization(1) | |
| 3,082 | | |
| 2,872 | | |
| 7,641 | | |
| 5,494 | |
Loss (gain) on sale of joint venture interests | |
| 2 | | |
| — | | |
| (5,320 | ) | |
| (448 | ) |
FFO | |
$ | 2,510 | | |
$ | 725 | | |
$ | 4,478 | | |
$ | (2,684 | ) |
Common stockholders pro-rata share of: | |
| | | |
| | | |
| | | |
| | |
Amortization of non-cash interest expense (income) | |
| 148 | | |
| 81 | | |
| 243 | | |
| 150 | |
Acquisition and disposition costs | |
| 682 | | |
| 318 | | |
| 1,367 | | |
| 3,657 | |
Normally recurring capital expenditures(2) | |
| (215 | ) | |
| (162 | ) | |
| (513 | ) | |
| (250 | ) |
Non-cash equity compensation | |
| 1,529 | | |
| 326 | | |
| 3,821 | | |
| 676 | |
Non-recurring equity in earnings of unconsolidated joint ventures | |
| (289 | ) | |
| — | | |
| (289 | ) | |
| — | |
AFFO | |
$ | 4,365 | | |
$ | 1,288 | | |
$ | 9,107 | | |
$ | 1,549 | |
FFO per share | |
$ | 0.12 | | |
$ | 0.12 | | |
$ | 0.27 | | |
$ | (0.63 | ) |
AFFO per share | |
$ | 0.22 | | |
$ | 0.22 | | |
$ | 0.56 | | |
$ | 0.36 | |
Weighted average common shares outstanding | |
| 20,181,656 | | |
| 5,877,417 | | |
| 16,396,038 | | |
| 4,269,378 | |
(1) The real estate
depreciation and amortization amount includes our share of consolidated real estate-related depreciation and amortization of intangibles,
less amounts attributable to noncontrolling interests, and our similar estimated share of unconsolidated depreciation and amortization,
which is included in earnings of our unconsolidated real estate joint venture investments.
(2) Normally recurring
capital expenditures exclude development, investment, revenue enhancing and non-recurring capital expenditures.
Operating cash flow,
FFO and AFFO may also be used to fund all or a portion of certain capitalizable items that are excluded from FFO and AFFO, such
as tenant improvements, building improvements and deferred leasing costs.
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 AFFO the same way, so comparisons with other REITs may not be meaningful. FFO
or AFFO should not be considered as an alternative to net income (loss), 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 AFFO should be
reviewed in connection with other GAAP measurements.
Distributions
On October 10, 2014,
the Board declared monthly dividends for the fourth quarter of 2014 equal to a quarterly rate of $0.29 per share on both the Company’s
Class A common stock and Class B common stock, payable to the stockholders of record as of October 25, 2014, November 25, 2014
and December 25, 2014, which was paid in cash on November 5, 2014, December 5, 2014 and January 5, 2015, respectively.
The declared dividends
equal a monthly dividend on the Class A common stock and Class B common stock as follows: $0.096666 per share for the dividend
paid to stockholders of record as of October 25, 2014, and $0.096667 per share for the dividend paid to stockholders of record
as of November 25, 2014, and December 25, 2014.
On January 9, 2015,
the Board declared monthly dividends for the first quarter of 2015 equal to a quarterly rate of $0.29 per share on both the Company’s
Class A common stock and Class B common stock, payable to the stockholders of record as of January 25, 2015, February 25, 2015
and March 25, 2015, which was paid in cash on February 5, 2015, March 5, 2015 and April 5, 2015, respectively. Holders of
OP and LTIP Units are entitled to receive "distribution equivalents" at the same time as dividends are paid to holders
of the Company's Class A common stock.
The declared dividends
equal a monthly dividends on the Class A common stock and the Class B common stock as follows: $0.096666 per share for the distributions
paid to stockholders of record as of January 25, 2015, $0.096667 per share for the distributions paid to stockholders of record
as of February 25, 2015, and $0.096667 per share for the distributions paid to stockholders of record as of March 25, 2015.
On
April 10, 2015, the Board declared monthly dividends for the second quarter of 2015 equal to a quarterly rate of $0.29 per share
on both the Company’s Class A common stock and Class B common stock, payable to the stockholders of record as of April 25,
2015, May 25, 2015 and June 25, 2015, which was paid in cash on May 5, 2015, June 5, 2015 and July 5, 2015, respectively. Holders
of OP and LTIP Units are entitled to receive "distribution equivalents" at the same time as dividends are paid to holders
of the Company's Class A common stock.
The declared dividends
equal a monthly dividends on the Class A common stock and the Class B common stock as follows: $0.096666 per share for the distributions
paid to stockholders of record as of April 25, 2015, $0.096667 per share for the distributions paid to stockholders of record as
of May 25, 2015, and $0.096667 per share for the distributions paid to stockholders of record as of June 25, 2015.
On July 10, 2015,
the Board declared monthly dividends for the third quarter of 2015 equal to a quarterly rate of $0.29 per share on the Company’s
Class A common stock and $0.29 per share on the Company’s Class B common stock, payable monthly to the stockholders of record
as of July 25, 2015, August 25, 2015 and September 25, 2015, which will be paid in cash on August 5, 2015, September 5, 2015 and
October 5, 2015, respectively. Holders of OP and LTIP Units are entitled to receive "distribution equivalents" at the
same time as dividends are paid to holders of the Company's Class A common stock.
The declared dividends
equal a monthly dividend on the Class A common stock and the Class B common stock as follows: $0.096667 per share for the dividend
paid to stockholders of record as of July 25, 2015, $0.096667 per share for the dividend paid to stockholders of record as of August
25, 2015, and $0.096666 per share for the dividend paid to stockholders of record as of September 25, 2015.
On October 7, 2015,
the Board declared monthly dividends for the fourth quarter of 2015 equal to a quarterly rate of $0.29 per share on the Company’s
Class A common stock and $0.29 per share on the Company’s Class B common stock, payable monthly to the stockholders of record
as of October 25, 2015, November 25, 2015 and December 25, 2015, which will be paid in cash on November 5, 2015, December 5, 2015
and January 5, 2016, respectively. Holders of OP and LTIP Units are entitled to receive "distribution equivalents" at
the same time as dividends are paid to holders of the Company's Class A common stock.
The declared dividends
equal a monthly dividend on the Class A common stock and the Class B common stock as follows: $0.096666 per share for the dividend
paid to stockholders of record as of October 25, 2015, $0.096667 per share for the dividend paid to stockholders of record as of
November 25, 2015, and $0.096667 per share for the dividend paid to stockholders of record as of December 25, 2015.
A portion of each
dividend may constitute a return of capital for tax purposes. There is no assurance that the Company will continue to declare dividends
or at this rate.
Our Board will determine
the amount of dividends to be paid to our stockholders. The Board’s determination will be based on a number of factors, including
funds available from operations, our capital expenditure requirements and the annual distribution requirements necessary to maintain
our REIT status under the Internal Revenue Code. As a result, our distribution rate and payment frequency may vary from time to
time. However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our “REIT
taxable income” each year. Especially during the early stages of our operations, we may declare distributions in excess of
funds from operations.
Significant Accounting Policies and
Critical Accounting Estimates
Our significant accounting
policies and critical accounting estimates are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014
and Note 2 “Basis of Presentation and Summary of Significant Accounting Policies” to the Consolidated Financial Statements.
Subsequent Events
Other than the items
disclosed in Note 14, “Subsequent Events” to our interim Consolidated Financial Statements for the period ended September
30, 2015, no material events have occurred that required recognition or disclosure in these financial statements. See Note
14 to our interim Consolidated Financial Statements for discussion.
Item 3. Quantitative and
Qualitative Disclosures about Market Risk
We have omitted a
discussion of quantitative and qualitative disclosures about market risk because, as a smaller reporting company, we are not required
to provide such information.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Evaluation of Disclosure Controls and
Procedures
As required by Rule
13a-15(b) and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management,
including our Chief Executive Officer and Chief Accounting Officer, evaluated, as of September 30, 2015, the effectiveness of our
disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e). Based on that evaluation,
our Chief Executive Officer and Chief Accounting Officer concluded that our disclosure controls and procedures were effective as
of September 30, 2015, to provide reasonable assurance that information required to be disclosed by us in this report filed or
submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules
and forms of the Exchange Act and is accumulated and communicated to management, including the Chief Executive Officer and Chief
Accounting Officer, as appropriate to allow timely decisions regarding required disclosures.
We believe, however,
that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the
controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of
fraud or error, if any, within a company have been detected.
Changes in Internal Control over Financial
Reporting
There has been no
change in internal control over financial reporting that occurred during the nine months ended September 30, 2015 that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Other than the following,
there have been no material changes to our potential risks and uncertainties presented in the section entitled “Risk Factors”
in our Annual Report on Form 10-K for the twelve months ended December 31, 2014 filed with the SEC on March 4, 2015.
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. During the early stages of our operations, we have
funded and expect to 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 September 30, 2015 have been paid from proceeds from our continuous registered
offerings conducted prior to the IPO, proceeds from the IPO and the Follow-On 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.
Item 2. Unregistered Sales of
Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
10.1 |
Limited Liability Company
Agreement of BR Carroll World Gateway, LLC by and between BR Carroll World Gateway Orlando JV, LLC, Michael L. Konig and
Jordan B. Ruddy, effective as of July 7, 2015 |
|
|
10.2 |
Limited Liability Company Agreement
of BR Carroll World Gateway Orlando JV, LLC by and between BR World Gateway JV Member, LLC and Carroll Co-Invest III World Gateway,
LLC, dated as of August 20, 2015 |
|
|
10.3 |
Limited Liability Company
Agreement of BRG World Gateway Orlando, LLC by Bluerock Residential Holdings, L.P., effective as of June 24, 2015 |
|
|
10.4 |
Multifamily Loan and Security
Agreement by and between BR Carroll World Gateway, LLC and Jones Lang LaSalle Operations, L.L.C., dated as of August 20, 2015 |
|
|
10.5 |
Guaranty by Bluerock Residential
Growth REIT, Inc. and MPC Partnership Holdings LLC for the benefit of Jones Lang LaSalle Operations,
L.L.C., dated as of August 20, 2015 |
|
|
10.6 |
Florida Amended and Restated Multifamily
Note by and between BR Carroll World Gateway, LLC and Jones Lang LaSalle Operations, L.L.C., dated as of August 20, 2015 |
|
|
10.7 |
Amended and Restated Multifamily
Mortgage, Assignment of Rents and Security Agreement by and between BR Carroll World Gateway, LLC and Jones Lang LaSalle Operations,
L.L.C., dated as of August 20, 2015 |
|
|
10.8 |
Agreement to Amend or Comply by
and between BR Carroll World Gateway, LLC and Jones Lang LaSalle Operations, L.L.C., dated as of August 20, 2015 |
|
|
10.9 |
Assignment of Management Agreement
and Subordination of Management Fees by and between BR Carroll World Gateway, LLC, Jones Lang LaSalle Operations, L.L.C. and Carroll
Management Group, LLC, dated as of August 20, 2015
|
10.10 |
60-Day Letter by BR Carroll World
Gateway, LLC for the benefit of Jones Lang LaSalle Operations, L.L.C., dated as of August 20, 2015 |
|
|
10.11 |
Borrower’s Underwriting
Certificate by BR Carroll World Gateway, LLC for the benefit of Jones Lang LaSalle Operations, L.L.C., dated as of August
20, 2015 |
|
|
10.12 |
MMP
and O&M Programs Implementation Certificate by BR Carroll World Gateway,
LLC for the benefit of Jones Lang LaSalle Operations, L.L.C., dated as of August 20, 2015 |
|
|
10.13 |
Backstop Agreement by and between
MPC Partnership Holdings LLC, Carroll Management Group, LLC, and Bluerock Residential Growth REIT, Inc., dated as of August 20,
2015 |
10.14 | LTIP Unit Vesting Agreement by and between Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings, L.P., and
BRG Manager, LLC, dated July 2, 2015, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on July 9, 2015 |
10.15 | Presentation, dated July 15, 2015, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form
8-K filed on July 15, 2015 |
10.16 | Press Release, dated August 11, 2015, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form
8-K filed on August 11, 2015 |
10.17 | Supplemental Financial Information incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form
8-K filed on August 11, 2015 |
10.18 | Second Amendment to Management Agreement, by and among Bluerock Residential Growth REIT, Inc., Bluerock Residential Holdings,
L.P. and BRG Manager, LLC, dated August 6, 2015, incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed on August 12, 2015 |
10.19 | Promissory Note by AR I Borrower, LLC for the benefit of Sun Life Assurance Company of Canada, dated as of November 22, 2013,
incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 25, 2015 |
10.20 | Deed of Trust and Security Agreement and Fixture Filing by AR I Borrower, LLC, in favor of Sun Life Assurance Company of Canada,
dated as of November 22, 2013, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed
on August 25, 2015 |
10.21 | Assignment of Leases and Rents by AR I Borrower, LLC for the benefit of Sun Life Assurance Company of Canada, dated as of November
22, 2013, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on August 25, 2015 |
10.22 | Note, Deed of Trust, and Related Loan Documents Assignment, Assumption and Modification Agreement by and among Sun Life Assurance
Company of Canada, BR Ashton I Owner, LLC, Bluerock Residential Growth REIT, Inc., AR I Borrower, LLC, and Rob Meyer, Mark Mechlowitz,
Jorge Sardinas, Robert Fishel, and Harold Katz, dated as of August 19, 2015, incorporated by reference to Exhibit 10.4 to the Company’s
Current Report on Form 8-K filed on August 25, 2015 |
10.23 | Environmental Indemnity by Bluerock Residential Growth REIT, Inc. and BR Ashton I Owner, LLC for the benefit of Sun Life Assurance
Company of Canada, dated as of August 19, 2015, incorporated by reference to Exhibit 10.5 to the Company’s Current Report
on Form 8-K filed on August 25, 2015 |
10.24 | Guaranty of Non-Recourse Carve-Outs by Bluerock Residential Growth REIT, Inc. in favor of Sun Life Assurance Company of Canada,
dated as of August 19, 2015, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed
on August 25, 2015 |
10.25 | Letter of Undertaking by and between BR Ashton I Owner, LLC and Sun Life Assurance Company of Canada, dated as of August 19,
2015, incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on August 25, 2015 |
10.26 | Management Agreement by and between BR Ashton I Owner, LLC and GREP Southeast, LLC, dated as of August 19, 2015, incorporated
by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on August 25, 2015 |
10.27 | Estoppel and Agreement by AR I Borrower, LLC for the benefit of BR Ashton I Owner, LLC, dated as of August 18, 2015, incorporated
by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on August 25, 2015 |
10.28 | Assignment of Purchase and Sale Agreement and Escrow Instructions by and between BRG Ashton NC, LLC and BR Ashton I Owner,
LLC, dated as of August 19, 2015, incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K
filed on August 25, 2015 |
10.29 | Bill of Sale and Assignment and Assumption of Leases and Service Contracts by and between AR I Borrower, LLC and BR Ashton
I Owner, LLC, dated as of August 19, 2015, incorporated by reference to Exhibit 10.11 to the Company’s Current Report on
Form 8-K filed on August 25, 2015 |
10.30 | Limited Liability Company Agreement of BRG Ashton NC, LLC by and between BRG Ashton NC, LLC and Bluerock Residential Holdings,
L.P., dated as of April 15, 2015, incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K
filed on August 25, 2015 |
10.31 | Limited Liability Company Agreement of BR Ashton I Owner, LLC by and between BR Ashton I Owner, LLC and BRG Ashton NC, LLC,
dated as of July 7, 2015, incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed on
August 25, 2015 |
10.32 | Assignment Agreement, between and among Bluerock Multifamily Advisor, LLC and BRG Manager, LLC, dated September 4, 2015, incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 11, 2015 |
|
|
31.1 |
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
31.2 |
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
32.1 |
Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
101.1 |
The following information from
the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2015, formatted in XBRL (eXtensible Business
Reporting Language): (i) Balance Sheets; (ii) Statements of Operations; (iii) Statement of Stockholders’ Equity; (iv) Statements
of Cash Flows.
|
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
BLUEROCK RESIDENTIAL GROWTH REIT, INC. |
|
|
|
DATE: November 12, 2015 |
|
/s/ R. Ramin Kamfar |
|
|
R. Ramin Kamfar |
|
|
Chief Executive Officer and President |
|
|
(Principal Executive Officer) |
DATE: November 12, 2015 |
|
/s/ Christopher J. Vohs |
|
|
Christopher J. Vohs |
|
|
Chief Accounting Officer and Treasurer |
|
|
(Principal Financial Officer, Principal Accounting Officer) |
Exhibit 10.1
LIMITED LIABILITY COMPANY AGREEMENT OF
BR CARROLL WORLD GATEWAY, LLC
THIS LIMITED LIABILITY
COMPANY AGREEMENT of BR CARROLL WORLD GATEWAY, LLC, a Delaware limited liability company (the “Company”), as
amended from time to time, (the "Agreement") is entered into among BR Carroll World Gateway Orlando JV, LLC, a
Delaware limited liability company, the sole member of the Company (the "Member"), Michael L. Konig (“Springing
Member 1”), and Jordan B. Ruddy (“Springing Member 2” and together with Springing Member 1, the “Springing
Members”).
RECITALS
A. The
Company was formed as a Delaware limited liability company in accordance with the Delaware Limited Liability Company Act, as amended
from time to time (the "Act").
B. The
undersigned desire to execute this Agreement to set forth the terms and conditions under which the management, business, and financial
affairs of the Company will be conducted.
C. Definitions
for this Agreement are set forth in Article XI.
AGREEMENT
NOW, THEREFORE, in
consideration of the foregoing recitals and the mutual promises, covenants, and conditions herein contained, the receipt and sufficiency
of which are hereby acknowledged, the undersigned parties hereby covenant and agree as follows:
ARTICLE I
PURPOSE AND POWERS OF COMP ANY
1.1 Purpose.
The Company's business and purpose shall consist solely of the acquisition, ownership, operation, management, financing and disposition
of the multi-family real estate project consisting of approximately 252 units and located at 9000 Avenue Pointe Circle, Orlando,
Florida 32821 and to be hereafter commonly known as Arium at World Gateway Apartments (the "Mortgaged Property")
and such activities as are necessary, incidental or appropriate in connection therewith.
1.2 Powers.
The Company shall have all powers of a limited liability company formed under the Act and not prohibited by the Act or this Agreement;
provided, however, that during the term of that certain loan from the Lender in the approximate amount of $24,999,000 (the "Loan"),
the Company will comply with the applicable single purpose requirements of the Lender set forth in the Loan Documents and in Section
1.7 of this Agreement.
1.3 Title
to Company Property. All property owned by the Company shall be owned by the Company as an entity and, insofar as permitted
by applicable law, no Member shall have any ownership interest in any Company property in its individual name or right, and each
Member's Membership Interest shall be personal property for all purposes.
1.4 Term.
This Agreement shall not terminate until the Company is terminated in accordance with this Agreement.
1.5 Registered
Office and Registered Agent. The Company's initial registered office and initial registered agent shall be as provided in the
Certificate of Formation. The registered office and registered agent may be changed from time to time by filing the address of
the new registered office and/or the name of the new registered agent pursuant to the Act.
1.6 Formation
and Authorized Person. The Certificate of Formation has been filed with the Secretary of State of the State of Delaware in
accordance with and pursuant to the Act. Chris Vohs is hereby designated as an "authorized person" within the meaning
of the Act, and has executed, delivered and filed the Certificate of Formation of the Company with the Secretary of State of the
State of Delaware, and is hereby authorized to execute, deliver and file any other certificates (and any amendments and/or restatements
thereof) necessary or desirable for the Company to qualify to do business in any other jurisdiction in which the Company may wish
to conduct business (the "Qualification Papers"). The execution, delivery and filing of the Qualification Papers
by Chris Vohs as an "authorized person" within the meaning of the Act is hereby approved and ratified in all respects.
Upon the filing of all of Qualification Papers, his powers as an "authorized person" ceased, and the Member thereupon
became the designated "authorized person" and shall continue as the designated "authorized person" within the
meaning of the Act.
1.7 Limitation
on Certain Activities.
(a) Until
the Loan is paid in full, the Company shall remain a Single Purpose Entity.
(b) A
“Single Purpose Entity” means a limited liability company which, at all times since its formation and thereafter:
| (i) | shall not engage in any business or activity, other than
the ownership, operation and maintenance of the Mortgaged Property and activities incidental thereto; |
| (ii) | shall not acquire, own, hold, lease, operate, manage, maintain,
develop or improve any assets other than the Mortgaged Property and such Personalty as may be necessary for the operation of the
Mortgaged Property and shall conduct and operate its business as presently conducted and operated; |
| (iii) | shall preserve its existence as an entity duly organized,
validly existing and in good standing under the laws of Delaware and shall do all things necessary to observe organizational formalities; |
| (iv) | shall not merge or consolidate with any other Person; |
| (v) | shall not take any action to dissolve, wind-up, terminate
or liquidate in whole or in part; to sell, transfer or otherwise dispose of all or substantially all of its assets; to change
its legal structure; transfer or permit the direct or indirect transfer of any membership interests, other than Transfers permitted
under the Loan Agreement; issue additional membership interests; or seek to accomplish any of the foregoing; |
| (vi) | shall not, without the prior unanimous written consent
of all of the Company’s members: (A) file any insolvency, or reorganization case or proceeding, to institute proceedings
to have the Company be adjudicated bankrupt or insolvent, (B) institute proceedings under any applicable insolvency law, (C) seek
any relief under any law relating to relief from debts or the protection of debtors, (D) consent to the filing or institution
of bankruptcy or insolvency proceedings against the Company, (E) file a petition seeking, or consent to, reorganization or relief
with respect to the Company under any applicable federal or state law relating to bankruptcy or insolvency, (F) seek or consent
to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian, or any similar official for the Company
or a substantial part of its property, (G) make any assignment for the benefit of creditors of the Company, (H) admit in writing
the Company’s inability to pay its debts generally as they become due, or (I) take action in furtherance of any of the foregoing; |
| (vii) | shall not amend or restate its organizational documents
if such change would modify the requirements set forth in Section 6.13 of the Loan Agreement; |
| (viii) | shall not own any subsidiary or make any investment in
any other Person; |
| (ix) | shall not commingle its assets with the assets of any other
Person and shall hold all of its assets in its own name; |
| (x) | shall not incur any debt, secured or unsecured, direct
or contingent (including, without limitation, guaranteeing any obligation), other than the following; provided, no Member of the
Company will be required to contribute any additional capital to satisfy this covenant, (A) the Loan (and any further indebtedness
as described in Section 11.11 of the Loan Agreement with regard to Supplemental Loans) and (B) customary unsecured trade payables
incurred in the ordinary course of owning and operating the Mortgaged Property provided the same are not evidenced by a promissory
note, do not exceed, in the aggregate, at any time a maximum amount of two percent (2%) of the original principal amount of the
Loan and are paid within sixty (60) days of the date incurred; |
| (xi) | shall maintain its records, books of account, bank accounts,
financial statements, accounting records and other entity documents separate and apart from those of any other Person and shall
not list its assets as assets on the financial statement of any other Person; provided, however, that the Company’s assets
may be included in a consolidated financial statement of its Affiliate provided that (A) appropriate notation shall be made on
such consolidated financial statements to indicate the separateness of the Company from such Affiliate and to indicate that the
Company’s assets and credit are not available to satisfy the debts and other obligations of such Affiliate or any other
Person and (B) such assets shall also be listed on the Company’s own separate balance sheet; |
| (xii) | except for capital contributions or capital distributions
permitted under the terms and conditions of its organizational documents, shall only enter into any contract or agreement with
any member or Affiliate of the Company upon terms and conditions that are commercially reasonable and substantially similar to
those that would be available on an arm’s-length basis with third parties; |
| (xiii) | shall not maintain its assets in such a manner that will
be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; |
| (xiv) | shall not assume or guaranty (excluding any guaranty that
has been executed and delivered in connection with the Loan) the debts or obligations of any other Person, hold itself out to
be responsible for the debts of another Person, pledge its assets to secure the obligations of any other Person or otherwise pledge
its assets for the benefit of any other Person, or hold out its credit as being available to satisfy the obligations of any other
Person; |
| (xv) | shall not make or permit to remain outstanding any loans
or advances to any other Person except for those investments permitted under the documents evidencing and/or securing the Loan
and shall not buy or hold evidence of indebtedness issued by any other Person (other than cash or investment-grade securities); |
| (xvi) | shall file its own tax returns separate from those of any
other Person, except to the extent that the Company is treated as a “disregarded entity” for tax purposes and is not
required to file tax returns under applicable law, and shall pay any taxes required to be paid under applicable law; |
| (xvii) | shall hold itself out to the public as a legal entity separate
and distinct from any other Person and conduct its business solely in its own name, shall correct any known misunderstanding regarding
its separate identity and shall not identify itself or any of its Affiliates as a division or department of any other Person; |
| (xviii) | shall maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of its contemplated business operations and shall
pay its debts and liabilities from its own assets as the same shall become due, provided that no member of the Company will be
required to contribute any additional capital to satisfy this covenant; |
| (xix) | shall allocate fairly and reasonably shared expenses with
Affiliates (including, without limitation, shared office space) and use separate stationery, invoices and checks bearing its own
name; |
| (xx) | shall pay (or cause the Property Manager to pay on behalf
of the Company from the Company’s funds) its own liabilities (including, without limitation, salaries of its own employees)
from its own funds; |
| (xxi) | shall not acquire obligations or securities of its members
or Affiliates; |
| (xxii) | except as contemplated or permitted by the property management
agreement with respect to the Property Manager, shall not permit any Affiliate or constituent party independent access to its
bank accounts; |
| (xxiii) | shall maintain a sufficient number of employees (if any)
in light of its contemplated business operations and pay the salaries of its own employees, if any, only from its own funds; |
| (xxiv) | shall satisfy each of the following conditions: |
| (A) | be formed and organized under Delaware law; |
| (B) | have two springing members who are natural persons; |
| (C) | otherwise comply with all Rating Agencies criteria for single member limited liability companies
(including the delivery of Delaware single member limited liability company opinions acceptable in all respects to lenders and
to the Rating Agencies; and |
| (D) | at all times the Company will have one and only one member. |
The provisions of this
Section 1.7 shall govern and supersede any other provision of this Agreement to the contrary.
ARTICLE II
MEMBERS
2.1 Initial
Member.
(a) The
name, address and initial Membership Interest of the initial Member is as follows:
Name | |
Membership Interest | |
BR Carroll World Gateway Orlando JV, LLC | |
| 100 | % |
c/o Bluerock Real Estate, L.L.C. | |
| | |
712 Fifth Avenue, 9th Floor | |
| | |
New York, NY 10019 | |
| | |
(b) The
Member was admitted to the Company as a member of the Company upon its execution of a counterpart signature page to this Agreement.
2.2 Special
Member. Upon the occurrence of any event that causes the Member
to cease to be a member of the Company (other than (i) upon an assignment by the Member of all of its limited liability company
interest in the Company and the admission of the transferee, or (ii) the resignation of the Member and the admission of an additional
member of the Company, (a “Member Cessation Event”)), Springing Member 1 shall, without any action of any Person
and simultaneously with the Member Cessation Event, automatically be admitted to the Company as a Special Member and shall continue
the Company without dissolution. If, however, at the time of a Member Cessation Event, Springing Member 1 has died or is otherwise
no longer able to step into the role of Special Member, then in such event, Springing Member 2 shall, concurrently with the Member
Cessation Event, and without any action of any Person and simultaneously with the Member Cessation Event, automatically be admitted
to the Company as Special Member and shall continue the Company without dissolution. It is the intent of these provisions that
the Company never have more than one Special Member at any particular point in time. No Special Member may resign from the Company
or transfer its rights as Special Member unless a successor Special Member has been admitted to the Company as Special Member by
executing a counterpart to this Agreement. The Special Member shall automatically cease to be a member of the Company upon the
admission to the Company of a substitute member. The Special Member shall be a member of the Company that has no interest in the
profits, losses and capital of the Company and has no right to receive any distributions of Company assets. Pursuant to Section
18-301 of the Act, a Special Member shall not be required to make any capital contributions to the Company and shall not receive
a limited liability company interest in the Company. A Special Member, in its capacity as Special Member, may not bind the Company.
Except as required by any mandatory provision of the Act, a Special Member, in its capacity as Special Member, shall have no right
to vote on, approve or otherwise consent to any action by, or matter relating to, the Company, including, without limitation, the
merger, consolidation or conversion of the Company. In order to implement the admission to the Company of the Special Member, each
of Springing Member 1 and Springing Member 2 shall execute a counterpart to this Agreement. Prior to its admission to the Company
as Special Member, neither Michael L. Konig nor Jordan B. Ruddy shall be a member of the Company.
The Company shall at
all times have a Springing Member 1 and Springing Member 2. No resignation or removal of either Springing Member 1 or Springing
Member 2, and no appointment of a successor Springing Member, shall be effective unless and until such successor shall have executed
a counterpart to this Agreement. In the event of a vacancy in the position of Springing Member 1 or Springing Member 2, the Member
shall, as soon as practicable, appoint a successor Springing Member to fill such vacancy. By signing this Agreement, a springing
member agrees that, should such Springing Member become a Special Member, such springing member will be subject to and bound by
the provisions of this Agreement applicable to a Special Member.
ARTICLE III
MANAGEMENT BY MEMBER
3.1 In
General. The powers of the Company shall be exercised by, or under the authority of, the Member. In addition, the business
and affairs of the Company shall be ·managed under the direction of the Member. Subject to the limitations set forth in
this Agreement, the Member shall be entitled to make all decisions and take all actions for the Company.
3.2 Management
by Member. Except as otherwise limited by this Agreement, the Member shall have the power to do any and all acts necessary,
convenient or incidental to or for the furtherance of the purposes described herein, including all powers, statutory or otherwise;
provided, however, that the Company may, at its election, appoint one or more officers to exercise its rights under this Agreement.
The Member shall be entitled to make all decisions and take all actions for the Company, and the Member has the authority to bind
the Company.
3.3 Required
Approval. Any provision in this Agreement that requires the approval of the Members, but does not specify the particular percentage
interests or number of Members required for such approval, shall be interpreted to require the affirmative vote of the Member or
Members holding a majority of the total Membership Interests from time to time, and specifically shall not be interpreted to require
unanimous consent of the Members.
3.4 Action
By Member. In exercising the voting or other approval rights as provided herein, the Member may act through meetings and/or
written consents.
3.5 Authorization.
The Company is authorized to acquire the Mortgaged Property and to borrow the Loan from Jones Lang LaSalle Operations, L.L.C. for
and on behalf of Freddie Mac, the assignee of the Loan (together with its successors and assigns, the "Lender"),
and from time to time refinance the Loan. In furtherance of the conduct of the purposes described herein, the Company shall possess
and may exercise all of the powers and privileges granted by the Act, and the Company is hereby authorized to do any act, enter
into any agreement, contract or other instrument, and otherwise to engage in any activity and to do any action not prohibited under
the Act or other applicable law which is necessary, useful, desirable or convenient to the conduct, promotion and attainment of
the business and purposes of the Company. In addition, the Company, or the Member on behalf of the Company, may enter into and
perform the Loan Documents and all documents, agreements, certificates, or financing statements contemplated thereby or related
thereto, all without any further act, vote or approval of any other Person notwithstanding any other provision of this Agreement,
the Act or applicable law, rule or regulation. The foregoing authorization shall not be deemed a restriction on the powers of the
Member to enter into other agreements on behalf of the Company in accordance with this Agreement.
ARTICLE IV
ARTICLE IV
INTENTIONALLY OMITTED
ARTICLE V
SUBORDINATION OF INDEMNIFICATION PROVISIONS
5.1 Notwithstanding
any provision hereof to the contrary, any indemnification claim against the Company arising under the Certificate of Formation,
this Agreement or the laws of the state of organization of the Company shall be fully subordinate to any obligations of the Company
arising under the Mortgage or any other Loan Document, and shall only constitute a claim against the Company to the extent of,
and shall be paid by the Company in monthly installments only from, the excess of net operating income of the Company for any month
over all amounts then due under the Mortgage and the other Loan Documents.
ARTICLE VI
EFFECT OF BANKRUPTCY. DEATH OR INCOMPETENCY
OF A MEMBER
6.1 The bankruptcy,
death, dissolution, liquidation, termination or adjudication of incompetency of a Member shall not cause the termination or dissolution
of the Company and the business of the Company shall continue. Upon any such occurrence, the trustee, receiver, executor, administrator,
committee, guardian or conservator of such Member shall have all the rights of such Member for the purpose of settling or managing
its estate or property, subject to satisfying conditions precedent to the admission of such assignee as a substitute member. The
transfer by such trustee, receiver, executor, administrator, committee, guardian or conservator of any Company Interest shall be
subject to all of the restrictions hereunder to which such transfer would have been subject if such transfer had been made by such
bankrupt, deceased, dissolved, liquidated, terminated or incompetent Member. The foregoing shall apply to the extent permitted
by applicable law. Notwithstanding any other provision of the Certificate of Formation or this Agreement, no Member or Special
Member of the Company shall have any right under Section 18-801(b) of the Act to agree in writing to dissolve the Company upon
the bankruptcy of a Member or Special Member or the occurrence of any event that causes a Member or Special Member of the Company
to cease to be a member of the Company. The existence of the Company as a separate legal entity shall continue until the cancellation
of its Certificate of Formation as provided in the Act.
ARTICLE VII
CONTRIBUTIONS TO THE COMPANY AND DISTRIBUTIONS
7.1 Member
Capital Contributions. Upon execution of this Agreement, the Member shall contribute as the Member's initial Capital Contribution,
$100 in cash.
7.2 [Intentionally
Left Blank]
7.3 Distributions
and Allocations. All distributions of cash or other property (except upon the Company's dissolution, which shall be governed
by the applicable provisions of the Act and Article IX hereof) and all allocations of income, profits, and loss shall be made 100%
to the Member in accordance with its Membership Interest. All amounts withheld pursuant to the Code or any provisions of state
or local tax law with respect to any payment or distribution to the Member from the Company shall be treated as amounts distributed
to the Member pursuant to this Section 7.3. Notwithstanding any provision to the contrary contained in this Agreement, the Company
shall not be required to make a distribution to the Member on account of its interest in the Company if such distribution would
violate Section 18-607 of the Act or any other applicable law.
ARTICLE VIII
ASSIGNMENTS AND RESIGNATIONS
8.1 Assignment,
Resignation and Admission Generally.
(a) Assignments.
Subject to the terms of the Loan Documents and this Section 8.l(a), the Member may assign in whole or in part its Membership Interest
in the Company. If the Member transfers all of its Membership Interest pursuant to this Section 8.1, the transferee shall be admitted
to the Company as a member of the Company upon its execution of an instrument signifying its agreement to be bound by the terms
and conditions of this Agreement, which instrument may be a counterpart signature page to this Agreement. Such admission shall
be deemed effective immediately prior to the transfer and, immediately following such admission, and the Member shall cease to
be a member of the Company. Notwithstanding anything in this Agreement to the contrary, any successor to the Member by merger or
consolidation in compliance with the Basic Documents shall, without further act, be the Member hereunder, and such merger or consolidation
shall not constitute an assignment for purposes of this Agreement and the Company shall continue without dissolution.
(b) Resignation.
So long as any obligation is outstanding under the Loan, the Member may not resign, except as permitted under the Basic Documents.
If the Member is permitted to resign pursuant to this Section 8.l(b), an additional member of the Company shall be admitted to
the Company upon its execution of an instrument signifying its agreement to be bound by the terms and conditions of this Agreement,
which instrument may be a counterpart signature page to this Agreement. Such admission shall be deemed effective immediately prior
to the resignation and, immediately following such admission, and the resigning Member shall cease to be a member of the Company.
(c) Admission
of Additional Members. One or more additional members may be admitted to the Company with the written consent of the Member
or the members, if applicable; provided, however, that, notwithstanding the foregoing, except as otherwise provided in the Loan
Documents, so long as any obligation remains outstanding under the Loan, no additional member may be admitted to the Company pursuant
to this Section 8.l(c) unless approved by the Lender.
8.2 Absolute
Prohibition. Notwithstanding any other provision in this Article VIII, the Membership Interest of the Member, in whole or in
part, or any rights to distributions therefrom, shall not be sold, exchanged, conveyed, transferred, pledged, hypothecated, subjected
to a security interest, or otherwise assigned or encumbered, if such action would result in a violation of federal or state securities
laws in the opinion of counsel for the Company.
8.3 Additional
Requirements. In addition to all requirements imposed in this Article VIII, any admission of a member or assignment of a Membership
Interest shall be subject to all restrictions relating thereto expressly imposed by the Act.
8.4 Effect
of Prohibited Action. Any assignment in violation of this Article VIII shall be, to the fullest extent permitted by law, void
and of no force or effect whatsoever.
ARTICLE IX
DISSOLUTION AND TERMINATION
9.1 Dissolution.
Subject to the other provisions of this Agreement, the Company shall be dissolved upon the first to occur of the following: (a)
the termination of the legal existence of the last remaining member of the Company or the occurrence of any other event which terminates
the continued membership of the last remaining member of the Company unless the Company is continued without dissolution in a manner
permitted by this Agreement or the Act or (b) the entry of a decree of judicial dissolution under Section 18-802 of the Act. Upon
the occurrence of any event that causes the last remaining member of the Company to cease to be a member of the Company or that
causes the Member to cease to be a member of the Company (other than upon continuation of the Company without dissolution upon
(i) an assignment by the Member of all of its Membership Interest and the admission of the transferee pursuant to Section 8.1,
or (ii) the resignation of the Member and the admission of an additional member of the Company pursuant to Section 8.1), to the
fullest extent permitted by law, the personal representative of such member is hereby authorized to, and shall, within ninety (90)
days after the occurrence of the event that terminated the continued membership of such member in the Company, agree in writing
(x) to continue the Company and (y) to admit the personal representative or its nominee or designee, as the case may be, as a substitute
member of the Company, effective as of the occurrence of the event that terminated the continued membership of the last remaining
member of the Company.
9.2 Liquidation.
Upon its dissolution, the Company shall wind up its affairs and distribute its assets in accordance with Section 9.4 below and
the Act by either or a combination of the following methods as the Member (or the Person carrying out the liquidation) shall determine:
(a) selling
the Company's assets and, after the satisfaction of Company liabilities, distributing the net proceeds therefrom to the Member;
and/or
(b) subject
to the satisfaction of Company liabilities, distributing the Company's assets to the Member in kind, with the Member accepting
an undivided interest in the Company's assets in satisfaction of its Membership Interest.
9.3 Orderly
Liquidation. A reasonable time as determined by the Member (or the Person carrying out the liquidation) shall be allowed for
the orderly liquidation of the assets of the Company and the discharge of liabilities to the creditors so as to minimize any losses
attendant upon dissolution.
9.4 Distributions.
Upon dissolution, the Company's assets (including any cash on hand) shall be distributed in the following order and in accordance
with the following priorities:
(a) first,
to the satisfaction of the Loan; then
(b) second,
to the satisfaction of the other debts and liabilities of the Company (whether by payment or the making of reasonable provision
for payment thereof) and the expenses of liquidation, including a sales commission to the selling agent, if any; then
(c) third,
to the Member.
9.5 Termination.
The Company shall terminate when (i) all of the assets of the Company, after payment of or due provision for all debts, liabilities
and obligations of the Company, shall have been distributed to the Member in the manner provided for in this Agreement and (ii)
the Certificate of Formation shall have been canceled in the manner required by the Act. The existence of the Company as a separate
legal entity shall continue until cancellation of the Certificate of Formation as provided in the Act.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Governing
Law. This Agreement shall be construed, enforced, and interpreted in accordance with the laws of the State of Delaware, without
regard to conflicts of law provisions and principles thereof.
10.2 Indemnity.
The Company shall indemnify and hold harmless any person who was or is a party to any proceeding, including any proceeding brought
by a member in the right of the Company or brought by or on behalf of any member of the Company, by reason of the fact that he
is or was an officer of the Company, against any liability incurred by him in connection with such proceedings unless he engaged
in willful misconduct or knowing violation of the criminal law or any federal or state securities laws. Furthermore, in any such
proceedings brought by or on behalf of the Company or bought by or on behalf of the members of the Company, no officer shall be
liable to the Company or its members for any monetary damages with respect to any transaction, occurrence, course of conduct or
otherwise, except for liability resulting from such officer's having engaged in willful misconduct or a knowing violation of the
criminal law or any federal or state securities laws.
10.3 Integrated
and Binding Agreement; Amendment. This Agreement contains the entire understanding and agreement among the parties hereto with
respect to the subject matter hereof, and there are no other agreements, understandings, representations or warranties among the
parties hereto other than those set forth herein. This Agreement may be amended only by written agreement of the Member and only
as provided in this Agreement. Notwithstanding any other provision of this Agreement, the parties hereto agree that this Agreement
constitutes a legal, valid and binding agreement, and is enforceable against each of them in accordance with its terms.
10.4 Construction.
Whenever the singular number is used in this Agreement and when required by the context, the same shall include the plural, and
the masculine gender shall include the feminine and neuter genders, and vice versa.
10.5 Headings.
The headings in this Agreement are inserted for convenience only and are in no way intended to describe, interpret, define, or
limit the scope, extent, or intent of this Agreement or any provision hereof.
10.6 Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute one
and the same instrument.
10.7 Severability.
If any provision of this Agreement or the application thereof to any Person or circumstance shall be invalid, illegal, or unenforceable
to any extent, the remainder of this Agreement and the application thereof shall not be affected and shall be enforceable to the
fullest extent permitted by law.
10.8 Notices.
All notices under this Agreement shall be in writing and shall be given to the party entitled thereto by personal service or by
mail, posted to the address maintained by the Company for such person or at such other address as he may specify in writing.
10.9 Rights
and Remedies Cumulative; Waivers. The rights and remedies provided by this Agreement are cumulative and the use of any one
right or remedy by any party shall not preclude or waive the right to use any or all other remedies, and are given in addition
to any other rights the parties may have by law, statute, ordinance, or otherwise. The failure of any party to seek redress for
violation of or to insist upon the strict performance of any covenant or condition of this Agreement shall not prevent a subsequent
act, which would have originally constituted a violation, from having the effect of an original violation.
10.10 Heirs.
Successors, and Assigns. Each and all of the covenants, terms, provisions, and agreements herein contained shall be binding
upon, and inure to the benefit of, the parties hereto and, to the extent permitted by this Agreement, their respective heirs, legal
representatives, successors, and assigns.
10.11 Partition.
Each Member agrees that the assets of the Company are not and will not be suitable for partition. Accordingly, each Member hereby
irrevocably waives (to the fullest extent permitted by law) any and all rights that he may have, or may obtain, to maintain any
action for partition of any of the assets of the Company.
10.12 Tax
Status. It is the intention of the Member that the Company be a disregarded entity for federal income tax purposes under Section
7701 of the Code and the Treasury Regulations promulgated pursuant thereto.
10.13 Effective
Date. Pursuant to Section 18-201(d) of the Act, this Agreement shall be effective as of the time of the filing of the Certificate
of Formation with the Office of the Delaware Secretary of State.
ARTICLE XI
DEFINITIONS
In addition to any other
defined terms herein, the following terms used in this Agreement shall have the following meanings (unless otherwise expressly
provided herein):
(a) "Affiliate"
shall mean any Person controlling or controlled by or under common control with the Company, including, without limitation (i)
any person who has a familial relationship, by blood, marriage or otherwise with any Member or employee of the Company, or any
Affiliate thereof and (ii) any Person which receives compensation for administrative, legal or accounting services from the Company,
or any of its Affiliates. For purposes of this definition, "control" when used with respect to any specified Person,
means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative
to the foregoing.
(b) "Bankruptcy"
shall mean, with respect to any Person, if such Person (i) makes an assignment for the benefit of creditors, (ii) files a voluntary
petition in bankruptcy, (iii) is adjudged a bankrupt or insolvent, or has entered against it an order for relief, in any bankruptcy
or insolvency proceedings, (iv) files a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment,
liquidation or similar relief under any statute, law or regulation, (v) files an answer or other pleading admitting or failing
to contest the material allegations of a petition filed against it in any proceeding of this nature, (vi) seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator of the Person or of all or any substantial part of its properties,
or (vii) if 120 days after the commencement of any proceeding against the Person seeking reorganization, arrangement, composition,
readjustment, liquidation or similar relief under any statute, law or regulation, if the proceeding has not been dismissed, or
if within 90 days after the appointment without such Person's consent or acquiescence of a trustee, receiver or liquidator of such
Person or of all or any substantial part of its properties, the appointment is not vacated or stayed, or within 90 days after the
expiration of any such stay, the appointment is not vacated. The foregoing definition of "Bankruptcy" is intended to
replace and shall supersede and replace the definition of "Bankruptcy" set forth in Sections 18-101(1) and 18-304 of
the Act.
(c) "Basic
Documents" shall mean collectively this Agreement, the Loan Documents, the Property Management Agreement and all documents
and certificates contemplated thereby or delivered in connection therewith.
(d) "Capital
Contribution" shall mean any contribution to the capital of the Company by the Member in cash, property, or services, or a
binding obligation to contribute cash, property, or services, whenever made.
(e) "Certificate
of Formation" shall mean the Certificate of Formation of the Company, as amended and in force from time to time.
(f) “Closing
Date” shall mean the date on which the Company acquires the Mortgaged Property.
(g) “Company
Interest” shall mean any equity interest in the Company, direct or indirect.
(h) "Code"
shall mean the Internal Revenue Code of 1986, as amended, or corresponding provisions of subsequent superseding federal revenue
laws and the rules and regulations promulgated thereunder.
(i) “Company
shall mean BR CARROLL WORLD GATEWAY, LLC.
(j) "Entity"
shall mean any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business
trust, cooperative, association or other entity.
(k) “Lender”
is defined in Section 3.5 of this Agreement.
(l) "Loan"
is defined in Section 1.2 of this Agreement.
(m) “Loan
Agreement” mean that certain loan agreement, dated August 20, 2015, in the amount of Twenty-Four Million Nine Hundred Ninety-Nine
and No/100 Dollars ($24,999,000.00) by and between Lender and the Company.
(n) "Loan
Documents" shall mean collectively the Note, the Mortgage, any guaranty, assignment, indemnity agreement, escrow agreement,
or the functional equivalent of any of the aforementioned, and any and all other documents evidencing or securing the Loan and
any and all documents related thereto.
(m) "Member"
shall mean the Person identified in Article II hereof and includes any Person admitted as an additional member or a substitute
member of the Company pursuant to the provisions of this Agreement, each in its capacity as a member of the Company; provided,
however, the term "Member" shall not include the Special Member.
(n) “Member
Cessation Event” shall have the meaning prescribed in Section 2.2 of this Agreement.
(o) "Membership
Interest" shall mean the Member's limited liability company interest in the Company and the other rights and obligations with
respect thereto as set forth in this Agreement. The Membership Interest is set forth beside the Member's name in Article II of
this Agreement.
(p) "Mortgage"
shall mean that certain security instrument executed by the Company in favor of the Lender pursuant to which the Company grants
a mortgage lien to Lender against the Property.
(q) “Mortgaged
Property” is defined in Section 1.1 of this Agreement.
(r) “Note”
shall mean that certain promissory note related to the Loan and evidencing the Loan Agreement.
(s) "Person"
shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company,
trust (including any beneficiary thereof), unincorporated organization, or government or any agency or political subdivision thereof.
(t) “Personalty”
shall have the meaning prescribed in the Loan Agreement.
(u) "Property
Manager" shall mean Carroll Management Group, LLC, a Georgia limited liability company, and its successors and assigns, so
long as the initial Property Management Agreement is in full force and effect and, thereafter, the entity performing similar services
for the Company with respect to the Mortgaged Property.
(v) "Property
Management Agreement" shall mean that certain management agreement between the Company and the Property Manager with respect
to the management of the Property.
(w) “Rating
Agency” shall have the meaning prescribed in the Loan Agreement.
(x) "Special
Member" shall mean, upon such Springing Member’s admission to the Company as a member of the Company, the Person bound
by this Agreement as Special Member in such Person's capacity as a member of the Company. A Special Member shall only have the
rights and duties expressly set forth in this Agreement.
(y) “Special
Purpose Entity” is defined in Section 1.7 of this Agreement.
(z) “Springing
Member 1” shall be Michael L. Konig or any successor to him.
(aa) “Springing
Member 2” shall be Jordan B. Ruddy or any successor to him.
(bb) “Supplemental
Loan” shall have the meaning prescribed in the Loan Agreement.
(cc) “Transfers”
shall have the meaning prescribed in the Loan Agreement.
[REMAINDER OF THIS PAGE
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The undersigned
hereby agree, acknowledge, and certify that the foregoing constitutes the sole and entire Limited Liability Company Agreement of
the Company.
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MEMBER: |
BR Carroll World Gateway Orlando JV, LLC, |
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a Delaware limited liability company |
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By: |
BR World Gateway JV Member, LLC, |
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a Delaware limited liability company, its manager |
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By: |
BRG World Gateway Orlando, LLC, |
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a Delaware limited partnership, its manager |
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By: |
Bluerock Residential Holdings, LP |
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a Delaware limited partnership, its sole member |
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By: |
Bluerock Residential Growth REIT, Inc., a Maryland corporation, its general partner |
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By: |
/s/ R. Ramin Kamfar |
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Name: |
R. Ramin Kamfar |
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Title: |
Authorized Signatory |
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SPRINGING MEMBER 1: |
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By: |
/s/ Michael L. Konig |
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Name: |
Michael L. Konig |
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SPRINGING MEMBER 2: |
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/s/ Jordan B. Ruddy |
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Name: |
Jordan B. Ruddy |
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Exhibit 10.2
LIMITED LIABILITY COMPANY AGREEMENT
OF
BR CARROLL WORLD GATEWAY ORLANDO JV,
LLC
A DELAWARE LIMITED LIABILITY COMPANY
DATED AS OF AUGUST 20, 2015
LIMITED LIABILITY COMPANY
AGREEMENT
OF
BR CARROLL WORLD GATEWAY ORLANDO JV,
LLC
THIS LIMITED LIABILITY
COMPANY AGREEMENT of BR CARROLL WORLD GATEWAY ORLANDO JV, LLC (“JV” or “Company”)
is made and entered into and is effective as of August 20, 2015, by and between BR World Gateway JV Member, LLC, a Delaware
limited liability company (“Bluerock”) and Carroll Co-Invest III World Gateway, LLC, a Georgia limited
liability company (“Carroll”) (this “Agreement”). Capitalized terms used herein shall have
the meanings ascribed to such terms in this Agreement.
Effective as of August
20, 2015, the Members, by execution of this Agreement, hereby form the Company as a limited liability company pursuant to and in
accordance with the Delaware Limited Liability Company Act (6 Del. C. §18-101 et seq.), as amended from time to time (the
“Act”), and this Agreement; and the Members hereby agree as follows:
| Section 1. | Definitions. As used in this Agreement: |
“Act”
shall mean the Delaware Limited Liability Company Act (currently Chapter 18 of Title 6 of the Delaware Code), as amended from time
to time.
“Adjusted Capital
Account Deficit” shall mean, with respect to any Member, the deficit balance, if any, in such Member’s Capital
Account as of the end of the applicable Fiscal Year after (i) crediting such Capital Account with any amounts which such Member
is deemed to be obligated to restore pursuant to Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), and (ii) debiting such Capital
Account by the amount of the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition
of Adjusted Capital Account Deficit is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
“Advisor”
shall mean any accountant, attorney or other advisor retained by a Member.
“Affiliate”
shall mean with respect to any Person (i) more than ten percent (10%) of the issued and outstanding stock of which, or more than
ten percent (10%) of the ownership interests of which, is owned, directly or indirectly, by a Person, including a Member, (ii)
that now or hereafter owns, directly or indirectly, more than a ten percent (10%) ownership interest in a Person, including the
Company or in any Member, (iii) any agent, trustee, officer, director, employee, partner, member, manager or shareholder or member
of the family of such Person (or any member of the family of any such agent, trustee, officer, director, employee, partner, member,
manager or shareholder) or (iv) any corporation, partnership, limited liability company, trust or other entity that, directly or
indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person. The
term “control” (including the terms “controlled by” and “under common control with”) means
the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise. The term “family” shall be deemed to include
spouses, children, parents, brothers and sisters, and the spouse, children, parents, brothers and sisters of such spouse’s
children, parents, brothers and sisters.
“Agreed Upon
Value” shall mean the fair market value (net of any debt) agreed upon pursuant to a written agreement between the Members
of property contributed by a Member to the capital of the Company, which shall for all purposes hereunder be deemed to be the amount
of the Capital Contribution applicable to such property contributed.
“Agreement”
shall mean this Limited Liability Company Agreement, as amended from time to time.
“Annual Business
Plan” shall mean the business plan for a Fiscal Year of the Company prepared by Property Manager and approved by the
Members as further described in Section 9.3.
“Applicable
Adjustment Percentage” shall have the meaning set forth in Section 5.2(b)(3).
“Backstop Agreement”
shall mean that certain agreement providing for the allocation of liability and contribution for losses arising from any “bad
boy” guaranties constituting part of the Loan Documents.
“Bankruptcy
Code” shall mean Title 11 of the United States Code, as amended or any other applicable bankruptcy or insolvency statute
or similar law.
“Bankruptcy/Dissolution
Event” shall mean, with respect to the affected party, (i) the entry of an Order for Relief under the Bankruptcy Code,
(ii) the admission by such party of its inability to pay its debts as they mature, (iii) the making by it of an assignment for
the benefit of creditors generally, (iv) the filing by it of a petition in bankruptcy or a petition for relief under the Bankruptcy
Code or any other applicable federal or state bankruptcy or insolvency statute or any similar law, (v) the expiration of sixty
(60) days after the filing of an involuntary petition under the Bankruptcy Code without such petition being vacated, set aside
or stayed during such period, (vi) an application by such party for the appointment of a receiver for the assets of such party,
(vii) an involuntary petition seeking liquidation, reorganization, arrangement or readjustment of its debts under any other federal
or state insolvency law, provided that the same shall not have been vacated, set aside or stayed within sixty (60) days after filing,
(viii) the imposition of a judicial or statutory lien on all or a substantial part of its assets unless such lien is discharged
or vacated or the enforcement thereof stayed within sixty (60) days after its effective date, (ix) an inability to meet its financial
obligations as they accrue, or (x) a dissolution or liquidation.
“Beneficial
Owner” shall have the meaning provided in Section 5.7.
“Bluerock”
shall have the meaning provided in the first paragraph of this Agreement.
“Bluerock Transferee”
shall have the meaning set forth in Section 12.2(b)(2).
“BR REIT”
shall mean Bluerock Residential Growth REIT, Inc., a Maryland corporation.
“BR Growth”
shall mean Bluerock Growth Fund, LLC, a Delaware limited liability company.
“BR Growth II”
shall mean Bluerock Growth Fund II, LLC, a Delaware limited liability company.
“BR SOIF II”
shall mean Bluerock Special Opportunity + Income Fund II, LLC, a Delaware limited liability company.
“BR SOIF III”
shall mean Bluerock Special Opportunity + Income Fund III, LLC, a Delaware limited liability company.
“Capital Account”
shall have the meaning provided in Section 5.6.
“Capital Contribution”
shall mean, with respect to any Member, the aggregate amount of (i) cash, and (ii) the Agreed Upon Value of other property contributed
by such Member to the capital of the Company net of any liability secured by such property that the Company assumes or takes subject
to.
“Carroll”
shall have the meaning provided in the first paragraph of this Agreement.
“Carroll Parent”
shall mean MPC Partnership Holdings LLC, a Georgia limited liability company.
“Carroll Change
Event” shall mean (i) gross negligence, willful misconduct, fraud or bad faith by Carroll or any of its Affiliates in
connection with or relating to the Company or the Property; (ii) a Bankruptcy/Dissolution Event shall have occurred with respect
to Carroll or Property Manager; or (iii) failure to satisfy the Carroll Ownership/Control Requirement.
“Carroll Ownership/Control
Requirement” as of any particular date means that each of the following conditions is satisfied: (i) at least one of
the Key Individuals is not then dead, insane as determined by a qualified physician, incapacitated as determined by a qualified
physician, or the subject of a Bankruptcy/Dissolution Event; and (ii) at least one of the Key Individuals is actively involved
in the operation and management of (a) Carroll or Carroll Parent and (b) CMG.
“Carroll Transferee”
shall have the meaning set forth in Section 12.2(b)(1).
“Cash Flow”
shall mean, for any period for which Cash Flow is being calculated, gross cash receipts of the Company (but excluding Capital Contributions),
less the following payments and expenditures: (i) all payments of operating expenses of the Company (or the Subsidiary owning the
Property), (ii) all payments of principal of, interest on and any other amounts due with respect to indebtedness, leases or other
commitments or obligations of the Company (or the Subsidiary owning the Property) (including on loans by Members to the Company),
(iii) all sums expended by the Company (or any Subsidiary owning the Property) for capital expenditures, (iv) all prepaid expenses
of the Company (or any Subsidiary owning the Property), and (v) all sums expended by the Company (or any Subsidiary owning the
Property) which are otherwise capitalized.
“Cause”
shall mean gross negligence, willful misconduct, fraud, bad faith or a Bankruptcy/Dissolution Event, or a termination of the Management
Agreement by or at the behest of a third-party lender under an applicable Collateral Agreement.
“Certificate
of Formation” shall mean the Certificate of Formation of the Company, as amended from time to time.
“CMG”
shall mean Carroll Management Group, LLC, a Georgia limited liability company.
“Code”
shall mean the Internal Revenue Code of 1986, as amended from time to time, including the corresponding provisions of any successor
law.
“Collateral
Agreement” shall mean any agreement, instrument, document or covenant concurrently or hereafter made or entered into
under, pursuant to, or in connection with this Agreement and any certifications made in connection therewith or amendment or amendments
made at any time or times heretofore or hereafter to any of the same (including, without limitation, the Management Agreement and
the Cost Sharing Agreement).
“Company”
shall mean BR Carroll World Gateway Orlando JV, LLC, a Delaware limited liability company organized under the Act.
“Company Minimum
Gain” shall have the meaning given to the term “partnership minimum gain” in Regulations Sections 1.704-2(b)(2)
and 1.704-2(d).
“Confidential
Information” shall have the meaning provided in Section 10.01.
“Controllable
Expenses” shall mean all expenses, other than Uncontrollable Expenses, incurred by the Company or any Subsidiary of the
Company with respect to the Property.
“Cost Sharing
Agreement” shall mean the Agreement to Contribute Earnest Money dated June 15, 2015 by and between Bluerock Real Estate,
L.L.C. and Carroll Acquisitions, LLC with respect to the Property.
“Default Amount”
shall have the meaning provided in Section 5.2(b).
“Default Loan”
shall have the meaning provided in Section 5.2(b)(1).
“Default Loan
Rate” shall have the meaning provided in Section 5.2(b)(1).
“Defaulting
Member” shall have the meaning provided in Section 5.2(b).
“Delaware UCC”
shall mean the Uniform Commercial Code as in effect in the State of Delaware from time to time.
“Dissolution
Event” shall have the meaning provided in Section 13.2.
“Distributable
Funds” with respect to any month or other period, as applicable, shall mean an amount equal to the Cash Flow of the Company
for such month or other period, as applicable, as reduced by reserves for anticipated capital expenditures, future working capital
needs and operating expenses, contingent obligations and other purposes of the Company or any Subsidiary, the amounts of which
shall be reasonably determined from time to time by the Management Committee.
“Distributions”
shall mean the distributions payable (or deemed payable) to a Member (including, without limitation, its allocable portion of Distributable
Funds).
“Emergency Expenditure”
shall have the meaning provided in the Management Agreement.
“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.
“Fiscal Year”
shall mean each calendar year ending December 31.
“Flow Through
Entity” shall have the meaning provided in Section 5.7.
“Foreign Corrupt
Practices Act” shall mean the Foreign Corrupt Practices Act of the United States, 15 U.S.C. Sections 78a, 78m, 78dd-1,
78dd-2, 78dd-3, and 78ff, as amended, if applicable, or any similar law of the jurisdiction where the Property is located or where
the Company or any of its Subsidiaries transacts business or any other jurisdiction, if applicable.
“Imputed Closing
Costs” means an amount (not to exceed one and one quarter percent (1.25%) of the purchase price) that would normally
be incurred by the Company or a Subsidiary if the Property were sold for an amount specified in Section 15.1 or Section
15.2 (as applicable), for title insurance premiums, survey costs, brokerage commissions, legal fees, and other commercially
reasonable closing costs.
“Income”
shall mean the gross income of the Company for any month, Fiscal Year or other period, as applicable, including gains realized
on the sale, exchange or other disposition of the Company’s assets.
“Indemnified
Party” shall have the meaning provided in Section 14.4(a).
“Indemnifying
Party” shall have the meaning provided in Section 14.4(a).
“Inducement Agreements”
shall have the meaning provided in Section 14.4(a).
“Initial Business Plan”
shall have the meaning provided in Section 9.3(a).
“Initiating Member”
shall have the meaning provided in Section 15.2(a).
“Interest”
of any Member shall mean the entire limited liability company interest of such Member in the Company, which includes, without limitation,
any and all rights, powers and benefits accorded a Member under this Agreement and the duties and obligations of such Member hereunder.
“Internal Rate
of Return” and “IRR” shall mean, as of any date, the internal rate of return on the Total Investment
of a Member to such date, calculated to be that discount rate (expressed on a percent per annum basis) which, when divided by twelve
(12), compounded annually and applied to such Total Investment and the corresponding Distributions with respect thereto, causes
the net present value, as of such date, of such Distributions and Total Investment to equal zero (calculated with the “XIRR”
function in Microsoft Excel and using the latest version of Microsoft Excel available as of the date hereof). For this purpose,
Capital Contributions and Distributions shall be assumed to have occurred as of the end of the month in which such Capital Contribution
or Distribution takes place. For purposes of determining the Internal Rates of Return hereunder, calculations shall be denominated
and calculated in US Dollars.
“Key Individual”
shall mean each of Patrick Carroll and Joshua Champion.
“Loan”
shall mean the acquisition loan in the initial principal amount of Twenty-Four Million Nine Hundred Ninety-Nine Thousand and 00/100
Dollars ($24,999,000.00) originally made by Jones Lang LaSalle Operations, L.L.C. for and on behalf of Freddie Mac, the assignee
thereof, which is secured by the Property.
“Loss”
shall mean the aggregate of losses, deductions and expenses of the Company for any month, Fiscal Year or other period, as applicable,
including losses realized on the sale, exchange or other disposition of the Company’s assets.
“Major Decision”
means any decision for the Company to take, or refrain from taking, any action or incurring any obligation with respect to the
following matters (or the effectuation of any such action or obligation):
| (i) | any merger, conversion or consolidation involving the Company
or any Subsidiary or the sale, lease, transfer, exchange or other disposition of all or substantially all of the Company’s
assets or all of the Interests of the Members in the Company, in one or a series of related transactions; |
| (ii) | except as expressly provided in Section 12 with
respect to Transfers by Bluerock or a Bluerock Transferee to a Bluerock Transferee and with respect to Transfers by Carroll as
permitted thereunder, the admission or removal of any Member or the Company’s issuance to any third party of any equity
interest in the Company (including interests convertible into, or exchangeable for, equity interests in the Company); |
| (iii) | except upon the occurrence of any Dissolution Event, any
liquidation, dissolution or termination of the Company or any Subsidiary; |
| (iv) | giving, granting or undertaking any options, rights of
first refusal, deeds of trust, mortgages, pledges, ground leases, security or other interests in or encumbering the Property,
any portion thereof or any other material assets; |
| (v) | selling, conveying or effecting any other direct or indirect
transfer of the Property, any Subsidiary or other material asset of the Company or any portion thereof or the entering into of
any agreement, commitment or assumption with respect to any of the foregoing; |
| (vi) | acquiring, directly or through any Subsidiaries, by purchase,
ground lease or otherwise, any real property or other material asset or the entry into of any agreement, commitment or assumption
with respect to any of the foregoing, or the making or posting of any deposit (refundable or non-refundable); |
| (vii) | taking any action by the Company or any Subsidiary that
is reasonably likely to result in any Member or any of its Affiliates having individual liability under any so called “bad
boy” guaranties or similar agreements provided to third party lenders in respect of financings relating to the Company,
the Subsidiaries or any of their assets which provide for recourse as a result of willful misconduct, fraud or gross negligence
or failure to comply with the covenants or any other provisions of such “bad boy” guaranties; |
| (viii) | institute or settle any Company or Subsidiary legal claims
in excess of $50,000; |
| (ix) | employ, enter into any contract with (or materially modify
any contract with), or otherwise compensate, directly or indirectly, the Manager or any Affiliate of the Manager; |
| (x) | amend, modify, recast, refinance or replace any financing
to which the Company or a Subsidiary is a party or which encumbers the Property; |
| (xi) | incur on behalf of the Company or a Subsidiary during any
year any capital expenditures in excess of $50,000 in the aggregate unless pursuant to the Annual Business Plan approved by the
Members; |
| (xii) | make any loan to any Member, except as expressly provided
for in this Agreement; |
| (xiii) | cause or permit the Company or a Subsidiary to file for
or fail to contest a bankruptcy proceeding, or seek or permit a receivership or make an assignment for the benefit of its creditors; |
| (xiv) | terminate the Management Agreement or issue a notice of
default pursuant to the Management Agreement; provided, however, that (A) such termination shall be subject to the terms of the
Management Agreement and (B) in the event of a default by CMG under the Management Agreement, which default is not cured in any
available cure period, only Bluerock shall be authorized to take any action with respect to any remedies on behalf of the Company
or any Subsidiary, including the right to terminate the Management Agreement, and to solicit bids for, and enter into any replacement
Management Agreement with, any replacement manager thereunder; |
| (xv) | cause or permit any of the organizational documents, including
this Agreement, of the Company or of any Subsidiary of the Company to be amended in any manner, other than any amendment (A) required
(1) by a lender to the Company or any Subsidiary of the Company or (2) in order for a REIT Member to qualify as a “real
estate investment trust” under the Code, in each case, to the extent such amendment referenced in clauses (1) and (2) of
this subparagraph does not result in the dilution of any Member, does not adversely affect any Member’s right to Distributions
pursuant to Section 6 and does not otherwise have a materially adverse effect on the rights of any Member, or (B) that is solely
ministerial in nature to reflect or implement this Agreement under its express terms (such as, for example, to periodically update
the Members’ respective Capital Contribution amounts, Percentage Interests or Management Committee representatives on Exhibit
A); or |
| (xvi) | make distributions to the Members, except in accordance
with Section 6 hereof. |
“Management
Agreement” shall mean that certain property management agreement attached hereto as Exhibit C to be entered into
between the Company (or any Subsidiary of the Company), as owner, and Property Manager, as manager, pursuant to which Property
Manager will provide certain management services for the Property.
“Management
Committee” shall have the meaning provided in Section 9.2(a).
“Manager”
shall have the meaning provided in Section 9.1(a).
“Material
Deviation” shall have the meaning provided in Section 9.3(f).
“Member”
and “Members” shall mean Bluerock, Carroll and any other Person admitted to the Company pursuant to this Agreement.
For purposes of the Act, the Members shall constitute a single class or group of members.
“Member in Question”
shall have the meaning provided in Section 16.12.
“Member Minimum
Gain” shall mean an amount, determined in accordance with Regulations Section 1.704-2(i)(3) with respect to each
Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a
Nonrecourse Liability.
“Member Nonrecourse
Debt” shall have the meaning given the term “partner nonrecourse debt” in Regulations Section 1.704-2(b)(4).
“Member Nonrecourse
Deductions” shall have the meaning given the term “partner nonrecourse deductions” in Regulations Section 1.704-2(i).
“Net Income”
shall mean the amount, if any, by which Income for any period exceeds Loss for such period.
“Net Loss”
shall mean the amount, if any, by which Loss for any period exceeds Income for such period.
“New York UCC”
shall have the meaning set forth in Section 16.17.
“Non-Initiating Member”
shall have the meaning provided in Section 15.2(a).
“Nonrecourse
Deduction” shall have the meaning given such term in Regulations Section 1.704-2(b)(1).
“Nonrecourse
Liability” shall have the meaning given such term in Regulations Section 1.704-2(b)(3).
“Offer” shall
have the meaning provided in Section 15.2(a).
“Offeror” shall
have the meaning provided in Section 15.1(b).
“Offeree” shall
have the meaning provided in Section 15.1(b).
“Owner” shall
mean BR Carroll World Gateway, LLC.
“Ownership Entity”
shall have the meaning provided in Section 15.2(a).
“Percentage
Interest” shall have the meaning provided in Section 5.3.
“Person”
shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company,
trust, unincorporated organization, government or any agency or political subdivision thereof or any other legal entity.
“Preferred Return”
shall mean, with regard to any and all Capital Contributions made by a Member the greater of (a) an Internal Rate of Return equal
to ten percent (10%) or (b) a return on such capital contributions equal to a 1.3 multiple thereof. The Preferred Return shall
be calculated from the date that any such Capital Contributions are made including, in the case of any amounts funded pursuant
to the Cost Sharing Agreement, the date such amounts are actually funded under the Cost Sharing Agreement.
“Property”
shall have the meaning provided in Section 3.
“Property Management
Fee” shall have the meaning provided in Section 9.7.
“Property Manager”
shall mean CMG so long as the initial Management Agreement is in full force and effect and, thereafter, the entity performing similar
services for the Company (or any Subsidiary that owns the Property) with respect to the Property.
“Property Manager
Reports” shall have the meaning set forth in Section 8.2(c).
“Protective
Capital Call” shall mean a Capital Call necessary or advisable to (a) protect the Company’s (or any Subsidiary’s)
interest in the Property (e.g., payment of taxes, repair of the Property following uninsured damage thereto, payment of insurance
premiums, etc.); (b) to prevent a default with respect to any financing obtained by the Company or any Subsidiary (e.g., payment
of debt service following an operating shortfall, reserves required by the lender, a reduction in principal required by the lender
to meet loan to value requirements); or (c) funds required to refinance the Property when the current financing has matured or
will mature in the near future (e.g., commitment fees, loan application fees, equity infusions to meet market loan to value requirements,
etc.).
“Pursuer”
shall have the meaning provided in Section 10.3.
“Regulations”
shall mean the Treasury Regulations promulgated pursuant to the Code, as amended from time to time, including the corresponding
provisions of any successor regulations.
“Reimbursable
Expenses” shall have the meaning provided in the Management Agreement.
“REIT” shall mean a real
estate investment trust as defined in Code Section 856.
“REIT Member” shall mean
any Member, if such Member is a REIT or a direct or indirect subsidiary of a REIT.
“REIT Requirements” shall
mean the requirements for qualifying as a REIT under the Code and Regulations.
“Representatives”
shall have the meaning provided in Section 9.2(a).
“Response Period”
shall have the meaning provided in Section 15.2(b).
“Sale Notice”
shall have the meaning provided in Section 15.2(a).
“Securities
Act” shall mean the Securities Act of 1933, as amended.
“Seller”
shall mean Centennial World Gateway, LLC, a Delaware limited liability company.
“SOIFs”
shall mean, collectively, BR SOIF II and BR SOIF III.
“Subsidiary”
shall mean, with respect to any Person, any corporation, partnership, limited liability company or other entity of which at least
a majority of the capital stock or other equity securities is owned by such Person.
“Tax Matters
Member” shall have the meaning provided in Section 8.3.
“Total Investment”
shall mean the sum of the aggregate Capital Contributions made by a Member.
“Transfer”
means, as a noun, any transfer, sale, assignment, exchange, charge, pledge, gift, hypothecation, conveyance, encumbrance or other
disposition, voluntary or involuntary, by operation of law or otherwise and, as a verb, voluntarily or involuntarily, by operation
of law or otherwise, to transfer, sell, assign, exchange, charge, pledge, give, hypothecate, convey, encumber or otherwise dispose
of.
“Uncontrollable
Expenses” shall mean the following expenses with respect to the Company, Subsidiary or Property: taxes and insurance;
licenses; utilities; unanticipated material repairs that are essential to preserve or protect the Property; debt service; and costs
due to a change in law.
“Valuation Amount”
shall have the meaning provided in Section 15.1(b).
| Section 2. | Organization of the Company. |
2.1 Name.
The name of the Company shall be “BR Carroll World Gateway Orlando JV, LLC”. The business and affairs of the
Company shall be conducted under such name or such other name as the Members deem necessary or appropriate to comply with the requirements
of law in any jurisdiction in which the Company may elect to do business.
2.2 Place
of Registered Office; Registered Agent. The address of the registered office of the Company in the State of Delaware is 160
Greentree Drive, Suite 101, Dover, Delaware 19904. The name and address of the registered agent for service of process on the Company
in the State of Delaware is National Registered Agents, Inc., 160 Greentree Drive, Suite 101, Dover, Delaware 19904. The Management
Committee may at any time on five (5) days prior notice to all Members change the location of the Company’s registered office
or change the registered agent.
2.3 Principal
Office. The principal address of the Company shall be c/o Bluerock Real Estate, L.L.C., 712 Fifth Avenue, 9th Floor,
New York, New York 10019 and the principal office of Property Manager shall be c/o Carroll Organization, LLC, 3340 Peachtree Road,
Suite 1620, Atlanta, Georgia 30326, or, in each case, at such other place or places as may be determined by the Management Committee
from time to time.
2.4 Filings.
On or before execution of this Agreement, an authorized person within the meaning of the Act shall have duly filed or caused to
be filed the Certificate of Formation of the Company with the office of the Secretary of State of Delaware, as provided in Section
18-201 of the Act, and the Members hereby ratify such filing. The Manager shall use its best efforts to take such other actions
as may be reasonably necessary to perfect and maintain the status of the Company as a limited liability company under the laws
of Delaware. Notwithstanding anything contained herein to the contrary, the Company shall not do business in any jurisdiction that
would jeopardize the limitation on liability afforded to the Members under the Act or this Agreement.
2.5 Term.
The Company shall continue in existence from the date hereof until December 31, 2065, unless extended by the Members, or until
the Company is dissolved as provided in Section 13, whichever shall occur earlier.
2.6 Expenses
of the Company. Other than the reimbursement of costs and expenses as provided herein and the fees described in Section
9.7, no fees, costs or expenses shall be payable by the Company to any Member (or its Affiliates).
The purpose of the Company,
subject in each case to the terms hereof, shall be to engage, directly or through a Subsidiary, in the business of acquiring, owning,
operating, developing, renovating, repositioning, managing, leasing, selling, financing and refinancing the real estate and any
real estate related investments (or portions thereof) consisting of an approximately 252 unit multi-family complex located at 9000
Avenue Pointe Circle, Orlando, Florida 32821 and to be hereafter commonly known as World Gateway Apartments, which will be owned
by the Company or a Subsidiary of the Company (any property acquired as aforesaid shall hereinafter be referred to as the “Property”),
and all other activities reasonably necessary to carry out such purpose.
4.1 Bluerock
Conditions. The obligation of Bluerock to consummate the transactions contemplated herein and to make the initial Capital Contributions
under Section 5.1 is subject to fulfillment of all of the following conditions on or prior to the closing date under the
Purchase Agreement for the Property:
(a) Subject
to the terms of the Cost Sharing Agreement, Carroll shall deposit in the Company’s bank account or the designated escrow
account of Chicago Title Insurance Company (“Title Company”) the aggregate amount of its initial Capital Contribution
set forth on Exhibit A hereto;
(b) The
Purchase Agreement for the Property shall have been assigned to the Company (or a Subsidiary of the Company);
(c) The
Cost Sharing Agreement has been executed and Carroll and its affiliates are in full compliance with the terms thereof;
(d) The
Management Agreement shall have been executed by the Company (or a Subsidiary of the Company) and Property Manager;
(e) All
of the representations and warranties of Carroll and Property Manager contained in this Agreement and the Collateral Agreements
shall be true and correct as of the date hereof;
(f) The
Company (or a Subsidiary of the Company) shall have borrowed (or be concurrently borrowing) the Loan, as contemplated by the loan
documents (the “Loan Documents”); and
(g) The
form of Backstop Agreement shall have been approved by, and executed by, the applicable parties and delivered to Bluerock.
4.2 Carroll
Conditions. The obligation of Carroll to consummate the transactions contemplated herein and to make the initial Capital Contributions
under Section 5.1 is subject to fulfillment of all of the following conditions on or prior to the closing date under the
Purchase Agreement for the Property:
(a) Subject
to the terms of the Cost Sharing Agreement, Bluerock shall deposit into the Company’s bank account or Title Company’s
designated escrow account the amount of its aggregate initial Capital Contribution set forth on Exhibit A hereto;
(b) The
Purchase Agreement for the Property shall have been assigned to the Company (or a Subsidiary of the Company);
(c) The
Cost Sharing Agreement has been executed and Bluerock and its affiliates are in full compliance with the terms thereof;
(d) The
Company (or a Subsidiary of the Company) shall have borrowed (or be concurrently borrowing) the Loan contemplated by the Loan Documents;
(e) The
Management Agreement shall have been executed between the Company (or a Subsidiary of the Company) and Property Manager;
(f) All
of the representations and warranties of Bluerock contained in this Agreement and the Collateral Agreements shall be true and correct
as of the date hereof; and
(g) The
form of Backstop Agreement shall have been approved by, and executed by, the applicable parties and delivered to Carroll.
| Section 5. | Capital Contributions, Loans, Percentage Interests
and Capital Accounts. |
5.1 Initial
Capital Contributions. Subject to satisfaction of the conditions set forth in Section 4, upon execution of this Agreement,
Bluerock and Carroll shall each make an initial Capital Contribution to the Company of cash in an amount equal to the respective
amounts set forth in Exhibit A attached hereto; provided, however, any funds advanced by Bluerock or Carroll (or their respective
affiliates) pursuant to the terms of the Cost Sharing Agreement shall be credited against the applicable Member’s obligation
and provided, further, in the case of Carroll, its initial Capital Contribution to the Company shall be credited with $250,000
for the agreed value of certain contractual rights and intangibles contributed to the Company, including the assignment of the
purchase agreement to acquire the Property to the Company or its Subsidiary.1
The initial Capital Contribution of the Members to the Company may include amounts for working capital.
5.2 Additional
Capital Contributions.
(a) Additional
Capital Contributions may be called for from the Members (i) by either Member if the same is a Protective Capital Call, or
(ii) as reasonably determined by the Management Committee, by written notice to the Members from time to time as and to the
extent capital is necessary to effect an investment or expenditures for the Property, the Company, or its subsidiary. Except as
otherwise agreed by the Members, such additional Capital Contributions shall be in an amount for each Member equal to the product
of the amount of the aggregate Capital Contribution called multiplied by each Member’s then current Percentage Interest.
Such additional Capital Contributions shall be payable by the Members to the Company upon the earlier of (i) twenty (20) days after
written request from the Company, or (ii) the date when the Capital Contribution is required, as set forth in a written request
from the Company.
1
At closing of the acquisition of the Property, $250,000 shall be added to the required equity for closing and each Member shall
be responsible for funding its pro-rata share of such amount at the closing as part of its Initial Capital Contribution according
to its Percentage Interest; provided, Carroll’s required Initial Capital Contribution shall be net of the credit amount provided
in Section 5.1.
(b) If
a Member (a “Defaulting Member”) fails to make a Capital Contribution that is required as provided in Section
5.2(a) within the time frame required therein (the amount of the failed contribution and related loan shall be the “Default
Amount”), the other Member, provided that it has made the Capital Contribution required to be made by it, in addition
to any other remedies it may have hereunder or at law, shall have one or more of the following remedies:
(1) to
advance to the Company on behalf of, and as a loan to the Defaulting Member, an amount equal to the Default Amount to be evidenced
by a promissory note in form reasonably satisfactory to the non-failing Member (each such loan, a “Default Loan”).
The Capital Account of the Defaulting Member shall be credited with the amount of such Default Amount attributable to a Capital
Contribution and the aggregate of such amounts shall constitute a debt owed by the Defaulting Member to the non-failing Member.
Any Default Loan shall bear interest at the rate of twenty percent (20%) per annum, but in no event in excess of the highest rate
permitted by applicable laws (the “Default Loan Rate”), and shall be payable by the Defaulting Member on demand
from the non-failing Member and from any Distributions due to the Defaulting Member hereunder. Interest on a Default Loan, to the
extent unpaid, shall accrue and compound on a quarterly basis. A Default Loan shall be prepayable, in whole or in part, at any
time or from time to time without penalty. Any such Default Loans shall be with full recourse to the Defaulting Member and shall
be secured by the Defaulting Member’s interest in the Company including, without limitation, such Defaulting Member’s
right to Distributions. In furtherance thereof, upon the making of any such Default Loan, the Defaulting Member hereby pledges,
assigns and grants a security interest in its Interest to the non-failing Member and agrees to promptly execute such documents
and statements reasonably requested by the non-failing Member to further evidence and secure such security interest. Any advance
by the non-failing Member on behalf of a Defaulting Member pursuant to this Section 5.2(b)(1) shall be deemed to be a Capital
Contribution made by the Defaulting Member except as otherwise expressly provided herein. All Distributions to the Defaulting Member
hereunder shall be applied first to payment of any interest due under any Default Loan and then to principal until all amounts
due thereunder are paid in full. While any Default Loan is outstanding, the Company shall be obligated to pay directly to the non-failing
Member, for application to and until all Default Loans have been paid in full, the amount of (x) any Distributions payable to the
Defaulting Member, and (y) any proceeds of the sale of the Defaulting Member’s Interest in the Company;
(2) subject
to any applicable thin capitalization limitations on indebtedness of the Company for U.S. federal income tax purposes, to treat
the non-failing Member’s portion of such Capital Contribution as a loan to the Company (rather than a Capital Contribution)
and to advance to the Company as a loan to the Company an amount equal to the Default Amount, which loan shall be evidenced by
a promissory note in form reasonably satisfactory to the non-failing Member and which loan shall bear interest at the Default Loan
Rate and be payable on a first priority basis by the Company from available Cash Flow and prior to any Distributions made to any
Member. If each Member has loans outstanding to the Company under this provision, such loans shall be payable to each Member in
proportion to the outstanding balances of such loans to each Member at the time of payment. Any advance to the Company pursuant
to this Section 5.2(b)(2) shall not be treated as a Capital Contribution made by the Defaulting Member;
(3) to
make an additional Capital Contribution to the Company equal to the Default Amount whereupon the Percentage Interests of the Members
shall be recalculated to (i) increase the non-defaulting Member’s Percentage Interest by the percentage (“Applicable
Adjustment Percentage”) determined by dividing one hundred fifty percent (150%) of the Default Amount by the sum of the
Members’ Total Investment (taking into account the actual amount of such additional Capital Contribution) and by increasing
its Total Investment solely for purposes of determining the Member’s Percentage Interest, by one and one-half of the amount
of the Default Amount, and (ii) to reduce the Defaulting Member’s Percentage Interest by the Applicable Adjustment Percentage
and by decreasing its Total Investment solely for purposes of determining the Member’s Percentage Interest by one-half of
the amount of the Default Amount; or
(4) in
lieu of the remedies set forth in subparagraphs (1), (2) or (3), revoke its portion of such additional Capital Contribution, whereupon
the portion of the Capital Contribution made by the non-failing Member shall be returned within ten (10) days.
(c) Notwithstanding
the foregoing provisions of this Section 5.2, no additional Capital Contributions shall be required from any Member if (i)
the Company or any other Person shall be in default (or with notice or the passage of time or both, would be in default) in any
material respect under any loan, indenture, mortgage, non-residential lease, agreement or instrument to which the Company or any
of its Subsidiaries is a party or by which the Company (or any of its Subsidiaries) or any of its properties or assets is or may
be bound, (ii) any other Member, the Company or any of its Subsidiaries shall be insolvent or bankrupt or in the process of liquidation,
termination or dissolution, (iii) any other Member, the Company or any of its Subsidiaries shall be subjected to any pending litigation
(x) in which the amount in controversy exceeds $500,000, (y) which litigation is not being defended by an insurance company who
would be responsible for the payment of any judgment in such litigation, and (z) which litigation if adversely determined could
have a material adverse effect on such other Member and/or the Company or any of its Subsidiaries and/or could interfere with their
ability to perform their obligations hereunder or under any Collateral Agreement, or (iv) there has been a material adverse change
in (including, but not limited to, the financial condition of) any other Member (and/or its Affiliates) which, in such Member’s
reasonable judgment, prevents such other Member (and/or its Affiliates) from performing, or substantially interferes with their
ability to perform, their obligations hereunder or under any Collateral Agreement. If any of the foregoing events shall have occurred
and any Member elects not to make a Capital Contribution on account thereof, then any other Member which has made its pro rata
share of such Capital Contribution shall be entitled to a return of such Capital Contribution from the Company.
5.3 Percentage
Ownership Interest. The Members shall have the initial percentage ownership interests (as the same are adjusted as provided
in this Agreement, a “Percentage Interest”) in the Company set forth on Exhibit A immediately following
the Capital Contributions provided for in Section 5.1. The Percentage Interests of the Members in the Company shall be adjusted
monthly, and if appropriate to reflect any pending adjustments that have been determined but not yet effected, prior to any request
for Additional Capital Contributions pursuant to Section 5.2 or any distributions to Members pursuant to Section 6.1,
so that the respective Percentage Interests of the Members at any time shall be in proportion to their respective cumulative Total
Investment made (or deemed to be made) pursuant to Sections 5.1 and 5.2, as the same may be further adjusted pursuant
to Section 5.2(b)(3). Percentage Interests shall not be adjusted by Distributions made (or deemed made) to a Member.
5.4 Return
of Capital Contribution. Except as approved by each of the Members, no Member shall have any right to withdraw or make a demand
for withdrawal of the balance reflected in such Member’s Capital Account (as determined under Section 5.6) until the
full and complete winding up and liquidation of the business of the Company.
5.5 No
Interest on Capital. Interest earned on Company funds shall inure solely to the benefit of the Company, and no interest shall
be paid upon any Capital Contributions nor upon any undistributed or reinvested income or profits of the Company.
5.6 Capital
Accounts. A separate capital account (the “Capital Account”) shall be maintained for each Member in accordance
with Section 1.704-1(b)(2)(iv) of the Regulations. Without limiting the foregoing, the Capital Account of each Member shall be
increased by (i) the amount of any Capital Contributions made by such Member, (ii) the amount of Income allocated to such
Member and (iii) the amount of income or profits, if any, allocated to such Member not otherwise taken into account in this Section
5.6. The Capital Account of each Member shall be reduced by (i) the amount of any cash and the fair market value of any property
distributed to the Member by the Company (net of liabilities secured by such distributed property that the Member is considered
to assume or take subject to), (ii) the amount of Loss allocated to the Member and (iii) the amount of expenses or losses, if any,
allocated to such Member not otherwise taken into account in this Section 5.6. The Capital Accounts of the Members shall
not be increased or decreased pursuant to Regulations Section 1.704-1(b)(2)(iv)(f) to reflect a revaluation of the Company’s
assets on the Company’s books in connection with any contribution of money or other property to the Company pursuant to Section
5.2 by existing Members. If any property other than cash is distributed to a Member, the Capital Accounts of the Members shall
be adjusted as if such property had instead been sold by the Company for a price equal to its fair market value, the gain or loss
allocated pursuant to Section 7, and the proceeds distributed in the manner set forth in Section 6.1 or Section
13.3(d)(3). No Member shall be obligated to restore any negative balance in its Capital Account. No Member shall be compensated
for any positive balance in its Capital Account except as otherwise expressly provided herein. The foregoing provisions and the
other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with the provisions of
Regulations Section 1.704-1(b)(2) and shall be interpreted and applied in a manner consistent with such Regulations.
5.7 New
Members. Upon approval by Bluerock and Carroll, the Company may issue additional Interests and thereby admit a new Member or
Members, as the case may be, to the Company, only if such new Member (i) has delivered to the Company its Capital Contribution,
(ii) has agreed in writing to be bound by the terms of any Collateral Agreements (including the Backstop Agreement) and this Agreement
by becoming a party hereto, and (iii) has delivered such additional documentation as the Company shall reasonably require to so
admit such new Member to the Company. Without the prior written consent of each then-current Member, a new Member may not be admitted
to the Company if the Company would, or may, have in the aggregate more than one hundred (100) members. For purposes of determining
the number of members under this Section 5.7, a Person (the “beneficial owner”) indirectly owning an
interest in the Company through a partnership, grantor trust or S corporation (as such terms are used in the Code) (the “flow-through
entity”) shall be considered a member, but only if (i) substantially all of the value of the beneficial owner’s
interest in the flow-through entity is attributable to the flow-through entity’s interest (direct or indirect) in the Company
and (ii) in the sole discretion of the Management Committee, a principal purpose of the use of the flow-through entity is to permit
the Company to satisfy the 100-member limitation.
6.1 Distribution
of Distributable Funds
(a) The
Management Committee shall calculate and determine the amount of Distributable Funds for each applicable period. Except as provided
in Sections 5.2(b), 6.1 or 13.3 or otherwise provided hereunder, Distributable Funds, if any, shall be distributed
to the Members, on a monthly basis based on a calendar year, so long as the Loan is outstanding.
Thereafter, such distributions shall be made on the 15th day of each month or from time to time as determined by the
Management Committee.
(b) Any
Distributions otherwise payable to a Member under this Agreement shall be applied first to satisfy amounts due and payable on account
of the indemnity and/or contribution obligations of such Member under this Agreement and/or any other agreement delivered by such
Member to the Company or any other Member but shall be deemed distributed to such Member for purposes of this Agreement.
(c) Distributable
Funds shall be distributed in the following order and priority:
(1) First,
to the Members in proportion to their respective Percentage Interests until each Member shall realize through Distributions and
actually receive the Preferred Return; and
(2) Second,
the balance, if any, of such Distributable Funds remaining after the Distributions pursuant to (1) above shall be distributed as
follows:
| a. | if a Carroll Change Event has occurred, such Distributable
Funds shall be distributed to the Members in proportion to their Percentage Interests; and |
| b. | if a Carroll Change Event has not occurred, such Distributable
Funds shall be distributed as follows: (A) first, an amount equal to twenty-five percent (25%) of such Distributable Funds shall
be distributed to Carroll and an amount equal to seventy-five percent (75%) of such Distributable Funds shall be distributed to
Bluerock until Bluerock shall have actually realized and received through Distributions a fifteen percent (15%) Internal Rate
of Return and (B) thereafter, an amount equal to thirty-five percent (35%) of such Distributable Funds shall be distributed to
Carroll and an amount equal to sixty-five percent (65%) of such Distributable Funds shall be distributed to Bluerock. |
6.2 Distributions
in Kind. In the discretion of the Management Committee, Distributable Funds may be distributed to the Members in cash or in
kind and Members may be compelled to accept a distribution of any asset in kind even if the percentage of that asset distributed
to it exceeds a percentage of that asset that is equal to the percentage in which such Member shares in Distributions from the
Company. In the case of all assets to be distributed in kind, the amount of the Distribution shall equal the fair market value
of the asset distributed as determined by the Management Committee. In the case of a Distribution of publicly traded property,
the fair market value of such property shall be deemed to be the average closing price for such property for the thirty (30) day
period immediately prior to the Distribution, or if such property has not yet been publicly traded for thirty (30) days, the average
closing price of such property for the period prior to the Distribution in which the property has been publicly traded.
7.1 Allocation
of Net Income and Net Losses Other than in Liquidation. Except as otherwise provided in this Agreement, Net Income and Net
Losses of the Company for each Fiscal Year shall be allocated among the Members in a manner such that, as of the end of such Fiscal
Year and taking into account all prior allocations of Net Income and Net Losses of the Company and all Distributions made by the
Company through such date, the Capital Account of each Member is, as nearly as possible, equal to the Distributions that would
be made to such Member pursuant to Section 6.1 if the Company were dissolved, its affairs wound up and assets sold for cash equal
to their tax basis (or book value in the case of assets that have been revalued in accordance with Section 704(b) of the Code),
all Company liabilities were satisfied, and the net assets of the Company were distributed in accordance with Section 6.1
immediately after such allocation.
7.2 Allocation
of Net Income and Net Losses in Liquidation. Net Income and Net Losses realized by the Company in connection with the liquidation
of the Company pursuant to Section 13 shall be allocated among the Members in a manner such that, taking into account all
prior allocations of Net Income and Net Losses of the Company and all Distributions made by the Company through such date, the
Capital Account of each Member is, as nearly as possible, equal to the amount which such Member is entitled to receive pursuant
to Section 13.3(d)(3).
7.3 U.S.
Tax Allocations.
(a) Subject
to Section 704(c) of the Code, for U.S. federal and state income tax purposes, all items of Company income, gain, loss, deduction
and credit shall be allocated among the Members in the same manner as the corresponding item of income, gain, loss, deduction or
credit was allocated pursuant to the preceding paragraphs of this Section 7.
(b) In
accordance with Code Section 704(c) and the Treasury regulations promulgated thereunder, income and loss with respect to any property
contributed to the capital of the Company (including, if the property so contributed constitutes a partnership interest, the applicable
distributive share of each item of income, gain, loss, expense and other items attributable to such partnership interest whether
expressly so allocated or reflected in partnership allocations) shall, solely for U.S. federal income tax purposes, be allocated
among the Members so as to take account of any variation between the adjusted basis of such property to the Company for U.S. federal
income tax purposes and its Agreed Upon Value at the time of contribution. Such allocation shall be made in accordance with the
“traditional method” set forth in Regulations Section 1.704-3(b) unless the Members unanimously agree to another permissible
method under such Regulations.
(c) Any
elections or other decisions relating to such allocations shall be made by the Members in any manner that reasonably reflects the
purpose and intention of this Agreement. Allocations pursuant to this Section 7.3 are solely for purposes of U.S. federal,
state and local income taxes and shall not affect, or in any way be taken into account in computing, any Member’s share of
Net Income, Net Loss, other items or distributions pursuant to any provisions of this Agreement.
| Section 8. | Books, Records, Tax Matters and Bank Accounts. |
8.1 Books
and Records. The books and records of account of the Company shall be maintained in accordance with industry standards and
shall be based on the Property Manager Reports. The books and records shall be maintained at the Company’s principal office
or at a location designated by the Management Committee, and all such books and records (and the dealings and other affairs of
the Company and its Subsidiaries) shall be available to any Member at such location for review, investigation, audit and copying,
at such Member’s sole cost and expense, during normal business hours on at least twenty-four (24) hours prior notice. In
connection with such review, investigation or audit, such Member (and its representatives and agents) shall have the unfettered
right to meet and consult with any and all employees of Property Manager (or any of their respective Affiliates) and to attend
meetings and independently meet and consult with any and all third parties having dealings or any other relationship with the Company
or any of its Subsidiaries or with Property Manager in respect of the Company or any of its Subsidiaries.
8.2 Reports
and Financial Statements.
(a) Within
thirty (30) days of the end of each Fiscal Year, the Manager shall cause each Member to be furnished with two sets of the following
additional annual reports computed as of the last day of the Fiscal Year:
(1) An
unaudited balance sheet of the Company;
(2) An
unaudited statement of the Company’s profit and loss; and
(3) A
statement of the Members’ Capital Accounts and changes therein for such Fiscal Year.
(b) Within
fifteen (15) days of the end of each quarter of each Fiscal Year, and provided that any such request was made prior to the end
of the quarter, the Property Manager shall cause to be furnished to Bluerock such information as requested by Bluerock as is necessary
for any reporting requirements of the SOIFs, BR Growth, or BR Growth II (to the extent any of such affiliates of Bluerock are hereafter
a Member or direct or indirect owner of a Member of the Company) and any reporting requirements of any REIT Member (whether a direct
or indirect owner) to determine its qualification as a REIT and its compliance with REIT Requirements as shall be reasonably requested
by Bluerock. Further, the Property Manager shall cooperate in a reasonable manner at the request of any Member to work in good
faith with any designated accountants or auditors of such Member or its Affiliates so that such Member or its Affiliate is able
to comply with its public reporting, attestation, certification and other requirements under the Securities Exchange Act of 1934,
as amended, applicable to such entity, and to work in good faith with the designated accountants or auditors of the Member or any
of its Affiliates in connection therewith, including for purposes of testing internal controls and procedures of such Member or
its Affiliates.
(c) The
Members acknowledge that the Property Manager is obligated to perform Property-related accounting and furnish Property-related
accounting statements under the terms of the Management Agreement (the “Property Manager Reports”). Manager
shall be entitled to rely on the Property Manager Reports with respect to its obligations under this Section 8, and the
Members acknowledge that the reports to be furnished shall be based on the Property Manager Reports, without any duty on the part
of the Manager to further investigate the completeness, accuracy or adequacy of the Property Manager Reports.
8.3 Tax
Matters Member. Bluerock is hereby designated as the “tax matters partner” of the Company and the Subsidiaries,
as defined in Section 6231(a)(7) of the Code (the “Tax Matters Member”) and shall prepare or cause to be prepared
all income and other tax returns of the Company and its Subsidiaries pursuant to the terms and conditions of Section 8.5.
Except as otherwise provided in this Agreement, all elections required or permitted to be made by the Company and its Subsidiaries
under the Code or state tax law shall be timely determined and made by Bluerock after consultation with Carroll. The Members intend
that the Company be treated as a partnership for U.S. federal, state and local tax purposes, and the Members will not elect or
authorize any person to elect to change the status of the Company from that of a partnership for U.S. federal, state and local
income tax purposes. Bluerock agrees to consult with Carroll with respect to any written notice of any material tax elections and
any material inquiries, claims, assessments, audits, controversies or similar events received from any taxing authority. In addition,
upon the request of any Member, the Company and each of its Subsidiaries shall make an election pursuant to Code Section 754 to
adjust the basis of the Company’s property in the manner provided in Code Sections 734(b) and 743(b). The Company hereby
indemnifies and holds harmless Bluerock from and against any claim, loss, expense, liability, action or damage resulting from its
acting or its failure to take any action as the “tax matters partner” of the Company and its Subsidiaries, provided
that any such action or failure to act does not constitute gross negligence or willful misconduct by Bluerock.
8.4 Bank
Accounts. All funds of the Company are to be deposited in the Company’s name in such bank account or accounts as may
be designated by the Management Committee or in the Management Agreement and shall be withdrawn on the signature of such Person
or Persons as the Management Committee may authorize.
8.5 Tax
Returns. Bluerock shall cause to be prepared all income and other tax returns of the Company and its Subsidiaries required
by applicable law and shall submit such returns to the Management Committee for its review, comment and approval at least twenty
(20) days prior to the due date or extended due date thereof and shall thereafter cause the same to be filed in a timely manner
(including extensions). No later than the due date or extended due date, Manager shall deliver or cause to be delivered to each
Member a copy of the tax returns for the Company and such Subsidiaries with respect to such Fiscal Year, together with such information
with respect to the Company and such Subsidiaries as shall be necessary for the preparation by such Member of its U.S. federal
and state income or other tax and information returns.
8.6 Expenses.
Notwithstanding any contrary provision of this Agreement, the Members acknowledge and agree that the reasonable expenses and charges
incurred directly or indirectly by or on behalf of the Manager, Bluerock, Carroll or the Property Manager in connection with its
obligations under this Section 8 will be reimbursed by the Company to the applicable party. Further, it is expressly understood
and agreed that all reasonable expenses of Bluerock, Carroll and their principals and Affiliates associated with the Company or
the Property, along with all accounting and administrative expenses for Carroll, shall be reimbursed by the Company, including
without limitation, filing fees, tax returns, closing costs, due diligence and travel.
| Section 9. | Management and Operations. |
9.1 Management.
(a) The
Company shall be managed by Bluerock (“Manager”), who shall have the authority to exercise all of the powers
and privileges granted by the Act, any other law or this Agreement, together with any powers incidental thereto, and to take any
other action not prohibited under the Act or other applicable law, so far as such powers or actions are necessary or convenient
or related to the conduct, promotion or attainment of the business, purposes or activities of the Company. Manager shall manage
the operations and affairs of the Company, subject to the oversight of the Management Committee. To the extent that Bluerock or
a Bluerock Transferee Transfers all or a portion of its Interest in accordance with Section 12 to a Bluerock Transferee,
such Bluerock Transferee may be appointed as the Manager under this Section 9.1(a) by Bluerock or a Bluerock Transferee
then holding all or a portion of an Interest without any further action or authorization by any Member.
(b) The
Management Committee may appoint individuals to act on behalf of the Company with such titles and authority as determined from
time to time by the Management Committee.
(c) Notwithstanding
the foregoing, all Major Decisions shall require the consent of both Members.
9.2 Management
Committee.
(a) Bluerock
and Carroll hereby establish a management committee (the “Management Committee”). The Management Committee
shall consist of four (4) individuals appointed to act as “representatives” of the Member that appointed him or her
(the “Representatives”) as follows: (i) Bluerock shall be entitled to designate two (2) Representatives to
represent Bluerock; and (ii) Carroll shall be entitled to designate two (2) Representatives to represent Carroll. The initial
members of the Management Committee are set forth on Exhibit A. Bluerock and Carroll each represents, warrants and covenants
that the Representatives designated by them on Exhibit A have, and shall at all times have, the full power and authority
to make decisions and vote as a member of the Management Committee, and that such Representatives’ votes as members of the
Management Committee will be binding on each of them and any transferee of all or a portion of their Interest;
unless and until such time as Bluerock or Carroll or their transferee notifies the other Member of a change in a Representative,
after which time this sentence shall apply only with respect to the replacement Representative.
(b) Each
member of the Management Committee shall hold office until death, resignation or removal at the pleasure of the Member that appointed
him or her. If a vacancy occurs on the Management Committee, the Person with the right to appoint and remove such vacating Representative
shall appoint his or her successor. A Member shall lose its right to have Representatives on the Management Committee, and its
Representatives on the Management Committee shall be deemed to be automatically removed, as of the date on which such Member ceases
to be a Member or as otherwise provided in this Agreement. If Bluerock or a Bluerock Transferee Transfers all or a portion of its
Interest to a Bluerock Transferee pursuant to Section 12.2, such Bluerock Transferee shall automatically, and without any
further action or authorization by any Member, succeed to the rights and powers of Bluerock under this Section 9 as may
be agreed to between Bluerock or the Bluerock Transferee which is transferring the Interest, on the one hand, and the Bluerock
Transferee to which the Interest is being transferred, on the other hand, including the shared or unilateral right to appoint the
Representatives that Bluerock was theretofore entitled to appoint pursuant to Section 9.2(a).
(c) The
Management Committee shall meet once every quarter (unless waived by mutual agreement of the Members) and at such other times as
may be necessary for the conduct of the Company’s business on at least five (5) days prior written notice of the time and
place of such meeting given by any Representative. Notice of regular meetings of the Management Committee is not required. Representatives
may waive in writing the requirements for notice before, at or after a special meeting, and attendance at such a meeting without
objection by a Representative shall be deemed a waiver of such notice requirement.
(d) The
Management Committee shall have the right, but not the obligation, to elect one of the Representatives or another person to serve
as Secretary of the Management Committee. Such person shall hold office until his or her death, resignation or removal by a vote
of the Management Committee. The Secretary or a person designated by him or her shall take written minutes of the proceedings of
the meetings of the Management Committee, and such minutes shall be filed with the records of the Company.
(e) The
only Representatives required to constitute a quorum for a meeting of the Management Committee shall be one (1) Representative
appointed by Bluerock and one (1) Representative appointed by Carroll; provided, however, that if Carroll has not appointed at
least one (1) Representative to the Management Committee at the time of such meeting (for example, if each Carroll Representative
has been removed and not replaced), then a quorum for a meeting of the Management Committee shall be one (1) Representative appointed
by Bluerock. Each of the two (2) Representatives appointed by Bluerock shall be entitled to cast two (2) votes on any matter that
comes before the Management Committee and each of the Representatives appointed by Carroll shall be entitled to cast one (1) vote
on any matter that comes before the Management Committee. Approval by the Management Committee of any matter shall require the
affirmative vote (including votes cast by proxy) of at least a majority of the votes of the Representatives then in office voting
at a duly held meeting of the Management Committee.
(f) Any
meeting of the Management Committee may be held by conference telephone call, video conference or through similar communications
equipment by means of which all persons participating in the meeting can communicate with each other. Participation in a telephonic
and/or video conference meeting held pursuant to this Section 9 shall constitute presence in person at such meeting.
(g) Any
action required or permitted to be taken at a meeting of the Management Committee may be taken without a meeting, without prior
notice and without a vote if a consent or consents in writing, setting forth the action so taken, shall be signed by the Representatives
having not less than the minimum of votes that would be necessary to authorize or take such action at a meeting at which all Representatives
entitled to vote thereon were present and voted. All consents shall be filed with the minutes of the proceedings of the Management
Committee.
(h) Except
as otherwise expressly provided in this Agreement, none of the Members or their Representatives (in their capacities as members
of the Management Committee) only, shall have any duties or liabilities to the Company or any other Member (including any fiduciary
duties), whether or not such duties or liabilities otherwise arise or exist in law or in equity, and each Member hereby expressly
waives any such duties or liabilities; provided, however, that this Section 9.2(h) shall not eliminate or
limit the liability of such Representatives or the Members (A) for acts or omissions that involve fraud, intentional misconduct
or a knowing and culpable violation of law, or (B) for any transaction not permitted or authorized under or pursuant to this Agreement
from which such Representative or Member derived a personal benefit unless the Management Committee has approved in writing such
transaction in accordance with this Agreement; provided, further, however, that the duty of care of each of
such Representatives and the Members is to not act with fraud, intentional misconduct or a knowing and culpable violation of law.
Except as provided in this Agreement, whenever in this Agreement a Representative of a Member and/or a Member is permitted or required
to make a decision affecting or involving the Company, any Member or any other Person, such Representative and/or such Member shall
be entitled to consider only such interests and factors as he, she or it desires, including a particular Member’s interests,
and shall, to the fullest extent permitted by applicable law, have no duty or obligation to give any consideration to any interest
of or factors affecting the Company or any Member.
9.3 Annual
Business Plan.
(a) The
initial Annual Business Plan for the balance of calendar year 2015 is attached hereto as Exhibit D and is incorporated herein
for all intents and purposes under this Agreement (the “Initial Business Plan”).
(b) For
Annual Business Plans for calendar years 2016 and 2017, respectively, Property Manager shall prepare the Annual Business Plan for
the operation of the Property for the Owner’s review and approval, no later than by November 1 preceding each such calendar
year. If final approval of an Annual Business Plan by Owner has not been given by the beginning of the year to which such proposed
Annual Business Plan relates, Property Manager shall operate the Property on the basis of the previous year’s approved Annual
Business Plan adjusted by (i) assuming that the revenue from the Property will increase to 103% of the revenues collected in the
prior year, (ii) assuming that the Controllable Expenses will increase to 103% of the amount of the actual Controllable Expenses
incurred in the prior year, (iii) increasing all Uncontrollable Expenses by any anticipated or known increases in such Uncontrollable
Expenses, and (iv) including any Emergency Expenditure. Notwithstanding the foregoing to the contrary, if, prior to the commencement
of calendar year 2016, the parties have not agreed on the budget for capital expenditures at the Property in the Annual Business
Plan for calendar year 2016, there shall be no changes in budgeted capital expenditures for calendar year 2016; provided, however,
that any incomplete capital projects commenced in calendar year 2015 and contemplated in the Initial Business Plan shall be funded
as provided in the Initial Business Plan until such capital projects are completed.
(c) If
Property Manager and Owner agreed to the Annual Business Plan for calendar year 2017 in accordance with subsection (b) above, then
the Annual Business Plan for calendar year 2018 shall also be determined in accordance with the applicable provisions of subsection
(b) above. If, however, Property Manager and Owner were unable to agree to the Annual Business Plan for calendar year 2017, then
Owner may establish the Annual Business Plan for calendar year 2018, without Property Manager’s consent.
(d) For
Annual Business Plans for calendar years 2019 and all subsequent calendar years, if applicable, Property Manager shall have the
right to prepare and propose an Annual Business Plan for such calendar year on or prior to November 1 of the immediately preceding
year (without obligation to do so), and Owner may, regardless of the information contained in Property Manager’s proposal,
establish the Annual Business Plan for the applicable calendar year, without Property Manager’s consent.
(e) Property
Manager and the Company, on behalf of Owner, each acknowledge and agree that, in establishing the Annual Business Plans in accordance
with this Section 9.3, each shall be obligated to act reasonably and in good faith, taking into account past performance
of the Property, leasing trends and competitive properties within the market where the Property is located, the age of the Property
and the units at the time such Annual Business Plan is established, and such other factors as reasonably prudent owners and managers
of multifamily assets substantially similar to the Property would take into account in order to maximize revenue therefrom.
(f) No
Material Deviations (as defined herein) from any item in an Annual Business Plan approved in accordance with the terms herein shall
be made by Property Manager without the prior approval of the Management Committee, to the extent required hereunder. The Property
Manager shall provide quarterly updates to the Annual Business Plan, solely for informational purposes. Each Annual Business Plan
shall include the information set forth in Exhibit B. The Company, for itself and on behalf of the Owner, will consider
the proposed Annual Business Plan in accordance with the terms hereof and will consult with Property Manager prior to the commencement
of the forthcoming calendar year in order to agree on an Annual Business Plan for such calendar year. In no event shall the Company,
acting on behalf of Owner, have the right to modify the Annual Business Plan to reduce the Property Management Fee or Reimbursable
Expenses otherwise due. In no event shall Property Manager be deemed in default under the Management Agreement if such changes
by the Company, acting on behalf of Owner to the Annual Business Plan cause Property Manager to have insufficient funds to perform
its obligations thereunder. Property Manager agrees to use commercially reasonable efforts to ensure that the actual costs of maintaining
and operating the Property shall not exceed the amount reasonably necessary and, in any event, will not exceed the Annual Business
Plan either in total amount or in any one accounting category. Notwithstanding anything to the contrary, Property Manager shall
secure the Company’s, on behalf of Owner, prior written approval for any expenditure that will result in an excess of the
annual budgeted amount set forth in the Annual Business Plan in any one accounting category by more than $10,000 or $25,000.00
in the aggregate for all categories (a “Material Deviation”). Property Manager shall promptly advise and inform
the Company, acting on behalf of Owner, of any transaction, notice, event or proposal directly relating to the management and operation
of the Property which does or is likely to significantly affect, either adversely or favorably, the Property, other assets of the
Owner or cause a Material Deviation from the Annual Business Plan. Nothing contained herein shall in any way diminish the obligations
or duties of Property Manager hereunder.
(g) Notwithstanding
the terms of Section 9.3(a) through Section 9.3(f) above, (i) the Annual Business Plan may, at any time, be amended
upon unanimous approval by the Members, and (ii) failure on the part of the Members to agree on any such Annual Business Plan (or
any amendment thereto) shall not constitute the failure to obtain agreement on a Major Decision and shall not entitle either Member
to exercise the rights under Section 15 applicable to a failure to obtain agreement on Major Decisions.
(h) For
all purposes of this Section 9.3, decisions on behalf of Owner or the Company shall be made by the Management Committee.
9.4 Implementation
of Plan by Property Manager. Property
Manager shall, subject to the limitations contained herein, the availability of operating revenues and other cash flow and any
other matters outside of the reasonable control of Property Manager, implement and shall not vary or modify the then applicable
Annual Business Plan without the prior written approval of the Management Committee. Property Manager shall promptly advise and
inform the Management Committee of any transaction, notice, event or proposal directly relating to the management and operation
of the Property, other assets of the Company or the Company or any Subsidiary of the Company which does or is likely to significantly
affect, either adversely or favorably, such Property, other assets of the Company or the Company or such Subsidiary or cause a
significant deviation from the Annual Business Plan. Nothing contained herein shall in any way diminish the obligations or duties
of Property Manager hereunder.
9.5 Affiliate
Transactions. No agreement shall be entered into by the Company or any Subsidiary with a Member or any Affiliate of a Member
and no decision shall be made in respect of any such agreement (including, without limitation, the enforcement or termination thereof)
unless such agreement or related decision shall have been approved in writing by all Members. Without limiting the foregoing, any
such agreement shall be on arm’s length terms and conditions, be terminable on fifteen (15) days’ notice without penalty
and the terms and conditions of such agreement shall be disclosed to all Representatives prior to the execution and delivery thereof.
Further, the written approval of Bluerock shall be required prior to the use of the name “Bluerock” in connection with
any matter or transaction.
9.6 Other
Activities.
(a) Right
to Participation in Other Member Ventures. Neither the Company nor any Member (or any Affiliate of any Member) shall have any
right by virtue of this Agreement either to participate in or to share in any other now existing or future ventures, activities
or opportunities of any of the other Members or their Affiliates, or in the income or proceeds derived from such ventures, activities
or opportunities.
(b) Limitation
on Actions of Members; Binding Authority. No Member shall, without the prior written consent of the other Members, take any
action on behalf of, or in the name of, the Company, or enter into any contract, agreement, commitment or obligation binding upon
the Company, or, in its capacity as a Member or Manager of the Company, perform any act in any way relating to the Company or the
Company’s assets, except in a manner and to the extent consistent with the provisions of this Agreement.
9.7 Management
Agreement.
(a) Independent
Contractor. CMG, as Property Manager, has agreed to provide management services to the Company (or a Subsidiary of the Company)
with respect to the Property on the terms set forth in the Management Agreement; and it is agreed that Property Manager shall provide
such management services to the Company (or a Subsidiary of the Company) as an independent contractor.
(b) Management
and Oversight Fees. The Company (or a Subsidiary of the Company) has entered into the Management Agreement for the Property
with Property Manager (which Management Agreement shall be updated and supplemented from time to time) pursuant to which Property
Manager will provide the management services described therein to the Company (or a Subsidiary of the Company). Pursuant to the
Management Agreement and subject to the terms of the Loan Documents, Property Manager will be entitled to receive a net property
management fee equal to 2.75% of Gross Receipts (as defined in the Management Agreement) (the “Property Management Fee”).
CMG, as Property Manager, shall also be entitled to a construction management fee of five percent (5.0%) of the rehabilitation
and renovation expenses for the Property, as set forth in the Annual Business Plan. If CMG has been terminated as the Property
Manager for Cause, then Bluerock will be entitled to retain a new Property Manager and receive an oversight fee equal to 1.0%
of the Gross Receipts (the “Oversight Fee”). It is understood that if CMG is terminated as the Property Manager
without Cause, Bluerock shall not be entitled to the Oversight Fee, unless Bluerock purchases the Interest of Carroll pursuant
to Section 15 or otherwise by agreement of the parties. The foregoing shall not be deemed to imply that Bluerock will have
any unilateral right to purchase the Interest of Carroll solely on account of the termination of CMG as Property Manager.
(c) Termination
of Management Agreement.
(1) The
Management Agreement shall be terminable as provided under its terms and conditions by the Company or Bluerock or, as long as the
Property Manager is CMG, by Property Manager.
(2) Notwithstanding
anything to the contrary in this Section 9.7(c), no termination of the Management Agreement or buyout of the other party’s
Interest in the Company shall be permitted unless permitted or approved under any applicable Collateral Agreement or under the
Loan Documents.
(d) Delegation.
Any delegation of the responsibilities of Property Manager or the subcontracting for such services will be subject to the prior
written consent of the Management Committee. Separate agreements may also be entered into with Carroll, Bluerock, their respective
Affiliates, or with third parties for certain services to be provided to the Company (or a Subsidiary of the Company), including
leasing, construction management, property management, asset management, technology services, etc. Such arrangements shall be at
market rates, and shall be entered into only with the prior written approval of the Management Committee, consistent with an approved
budget and business plan for each asset. Unless otherwise agreed, all such contracts will be payable on a monthly basis and will
be terminable upon thirty (30) days’ notice for any reason or no reason.
9.8 Operation
in Accordance with REOC/REIT Requirements.
(a) The
Members acknowledge that Bluerock or one or more of its Affiliates (a “BR Affiliate”) intends or may intend
to qualify as a “real estate operating company” or “venture capital operating company” within the meaning
of U.S. Department of Labor Regulation 29 C.F.R. §2510.3-101 (a “REOC”), and agree that the Company and its Subsidiaries
shall in such case be operated in a manner that will enable Bluerock and such BR Affiliate to so qualify. Notwithstanding anything
herein to the contrary, the Company and its Subsidiaries shall not take, or refrain from taking, any action that Bluerock notifies
the Company would result in Bluerock or a BR Affiliate from failing to qualify as a REOC. The Members acknowledge and agree that
Bluerock may assign any or all of its rights or powers under this Agreement as Manager, to designate committee representatives,
to provide consents and approvals, or any other rights or powers to one or more of its BR Affiliates as it deems appropriate, and
the exercise of any such rights or powers by a BR Affiliate shall have full force and effect under this Agreement without the need
for any further consent or approval. Except as disclosed to Bluerock, Carroll (a) shall not fund any Capital Contribution "with
the 'plan assets' of any 'employee benefit plan' within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended or any 'plan' as defined by Section 4975 of the Internal Revenue Code of 1986, as amended", and (b)
shall comply with any reasonable requirements specified by Bluerock in order to ensure compliance with this Section 9.8.
(b) Except
for the Property, neither the Company nor its Subsidiaries shall hold any investment, incur any indebtedness or otherwise take
any action that would cause any Member of the Company (or any Person holding an indirect interest in the Company through an entity
or series of entities treated as partnerships for U.S. federal income tax purposes) to realize any “unrelated business taxable
income” as such term is defined in Code Sections 511 through 514, unless specifically agreed to by the Manager in writing.
No Manager or Member shall be liable for any income or other taxes, damages, costs or expenses incurred by the Company or any Member
by reason of the recognition by the Company of UBTI.
(c) The
Company (and any direct or indirect Subsidiary of the Company) may not engage in any activities or hold any assets that would constitute
or result in the occurrence of a REIT Prohibited Transaction as defined herein. Notwithstanding anything to the contrary contained
in this Agreement, during the time a REIT Member is a Member of the Company, neither the Company, any direct or indirect Subsidiary
of the Company, nor any Member of the Company shall take or refrain from taking any action which, or the effect of which, would
constitute or result in the occurrence of a REIT Prohibited Transaction by the Company or any direct or indirect Subsidiary thereof,
including without limiting the generality of the foregoing, but in amplification thereof:
(i) Entering
into any lease, license, concession or other agreement or permitting any sublease, license, concession or other agreement that
provides for rent or other payment based in whole or in part on the income or profits of any person, excluding for this purpose
a lease that provides for rent based in whole or in part on a fixed percentage or percentages of gross receipts or gross sales
of any person without reduction for any costs of the lessee (and in the case of a sublease, without reduction for any sublessor
costs);
(ii) Leasing
personal property, excluding for this purpose a lease of personal property that is entered into in connection with a lease of real
property where the rent attributable to the personal property is less than 15% of the total rent provided for under the lease;
(iii) Acquiring
or holding any debt investments, excluding for these purposes “debt” solely between wholly-owned Subsidiaries of the
Company, unless (I) the amount of interest income received or accrued by the Company under such loan does not, directly or indirectly,
depend in whole or in part on the income or profits of any person, and (II) the debt is fully secured by mortgages on real property
or on interests in real property. Notwithstanding anything to the contrary herein, in the case of debt issued to the Company by
a Subsidiary which is treated as a “taxable REIT subsidiary” of the REIT Member, such debt shall be secured by a mortgage
or similar security interest, or by a pledge of the equity ownership of a subsidiary of such taxable REIT subsidiary;
(iv) Acquiring
or holding, directly or indirectly, more than 10% of the outstanding securities of any one issuer (by vote or value) other than
an entity which either (i) is taxable as a partnership or a disregarded entity for United States federal income tax purposes, (ii)
has properly elected to be a taxable REIT subsidiary of the REIT Member by jointly filing with REIT, IRS Form 8875, or (iii) has
properly elected to be a real estate investment trust for U.S. federal income tax purposes;
(v) Entering
into any agreement where the Company receives amounts, directly or indirectly, for rendering services to the tenants of any property
that is owned, directly or indirectly, by the Company other than (i) amounts received for services that are customarily furnished
or rendered in connection with the rental of real property of a similar class in the geographic areas in which the Property is
located where such services are either provided by (A) an Independent Contractor (as defined in Section 856(d)(3) of the Code)
who is adequately compensated for such services and from which the Company or REIT Member do not, directly or indirectly, derive
revenue or (B) a taxable REIT subsidiary of REIT Member who is adequately compensated for such services or (ii) amounts received
for services that are customarily furnished or rendered in connection with the rental of space for occupancy only (as opposed to
being rendered primarily for the convenience of the Property’s tenants);
(vi) Entering
into any agreement where a material amount of income received or accrued by the Company under such agreement, directly or indirectly,
does not qualify as either (i) “rents from real property” or (ii) “interest on obligations secured by mortgages
on real property or on interests in real property,” in each case as such terms are defined in Section 856(c) of the Code;
(vii) Holding
cash of the Company available for operations or distribution in any manner other than a traditional bank checking or savings account;
(viii) Selling
or disposing of any property, subsidiary or other asset of the Company prior to (i) the completion of a two (2) year holding period
with such period to begin on the date the Company acquires a direct or indirect interest in such property and begins to hold such
property, subsidiary or asset for the production of rental income, and (ii) the satisfaction of any other requirements under Section
857 of the Code necessary for the avoidance of a prohibited transaction tax on the REIT; or
(ix) Failing
to make current cash distributions to REIT Member each year in an amount which does not at least equal the taxable income allocable
to REIT Member for such year; provided, however, any such cash distributions shall be made in accordance with the priorities set
forth in Section 6.1(c).
Notwithstanding the
foregoing provisions of this Section 9.8(c), the Company may enter into a REIT Prohibited Transaction if it receives the prior
written approval of the REIT Member specifically acknowledging that the REIT Member is approving a REIT Prohibited Transaction
pursuant to this Section 9.8(c). For purposes of this Section 9.8(c), “REIT Prohibited Transactions” shall mean any
of the actions specifically set forth in Sections 9.8(c)(i) through (c)(ix) as well as any action of which the Company receives
notice from Bluerock or a REIT Member that such action would result in a REIT Member losing its REIT status under IRC Section 856
or would cause such REIT Member to be subject to any punitive taxation pursuant to IRC Section 857(b)(6). The Loan or any loan
contemplated by Section 5.2(b) shall not be considered a REIT Prohibited Transaction.
9.9 FCPA.
(a) In
compliance with the Foreign Corrupt Practices Act, each Member will not, and will ensure that its officers, directors, employees,
shareholders, members, agents and Affiliates, acting on its behalf or on the behalf of the Company or any of its Subsidiaries or
Affiliates do not, for a corrupt purpose, offer, directly or indirectly, promise to pay, pay, promise to give, give or authorize
the paying or giving of anything of value to any official representative or employee of any government agency or instrumentality,
any political party or officer thereof or any candidate for office in any jurisdiction, except for any facilitating or expediting
payments to government officials, political parties or political party officials the purpose of which is to expedite or secure
the performance of a routine governmental action by such government officials or political parties or party officials. The term
“routine governmental action” for purposes of this provision shall mean an action which is ordinarily and commonly
performed by the applicable government official in (i) obtaining permits, licenses, or other such official documents which such
Person is otherwise legally entitled to; (ii) processing governmental papers; (iii) providing police protection, mail pick-up and
delivery or scheduling inspections associated with contract performance or inspections related to transit of goods across country;
(iv) providing phone service, power and water supply, loading and unloading of cargo, or protecting perishable products or commodities
from deterioration; or (v) actions of a similar nature.
(b) The
term routine governmental action does not include any decision by a government official whether, or on what terms, to award new
business to or to continue business with a particular party, or any action taken by an official involved in the decision making
process to encourage a decision to award new business to or continue business with a particular party.
(c) Each
Member agrees to notify immediately the other Member of any request that such Member or any of its officers, directors, employees,
shareholders, members, agents or Affiliates, acting on its behalf, receives to take any action that may constitute a violation
of the Foreign Corrupt Practices Act.
| Section 10. | Confidentiality. |
10.1 Any
information relating to a Member’s business, operation or finances which are proprietary to, or considered proprietary by,
a Member are hereinafter referred to as “Confidential Information”. All Confidential Information in tangible form (plans,
writings, drawings, computer software and programs, etc.) or provided to or conveyed orally or visually to a receiving Member,
shall be presumed to be Confidential Information at the time of delivery to the receiving Member. All such Confidential Information
shall be protected by the receiving Member from disclosure with the same degree of care with which the receiving Member protects
its own Confidential Information from disclosure. Each Member agrees: (i) not to disclose such Confidential Information to any
Person except to those of its employees or representatives who need to know such Confidential Information in connection with the
conduct of the business of the Company and who have agreed to maintain the confidentiality of such Confidential Information and
(ii) neither it nor any of its employees or representatives will use the Confidential Information for any purpose other than in
connection with the conduct of the business of the Company; provided that such restrictions shall not apply if such Confidential
Information is or hereafter becomes public, other than by breach of this Agreement; was already in the receiving Member’s
possession prior to any disclosure of the Confidential Information to the receiving Member by the divulging Member; or has been
or is hereafter obtained by the receiving Member from a third party not bound by any confidentiality obligation with respect to
the Confidential Information; provided, further, that nothing herein shall prevent any Member from disclosing any
portion of such Confidential Information (1) to the Company and allowing the Company to use such Confidential Information in connection
with the Company’s business, (2) pursuant to judicial order or in response to a governmental inquiry, by subpoena or other
legal process, but only to the extent required by such order, inquiry, subpoena or process, and only after reasonable notice to
the original divulging Member, (3) as necessary or appropriate in connection with or to prevent the audit by a governmental agency
of the accounts of Carroll or Bluerock, (4) in order to initiate, defend or otherwise pursue legal proceedings between the parties
regarding this Agreement, (5) necessary in connection with a Transfer of an Interest permitted hereunder or (6) to a Member’s
respective attorneys or accountants or other representatives.
10.2 The
Members and their Affiliates shall each act to safeguard the secrecy and confidentiality of, and any proprietary rights to, any
non-public information relating to the Company and its business, except to the extent such information is required to be disclosed
by law or reasonably necessary to be disclosed in order to carry out the business of the Company. Each Member may, from time to
time, provide the other Members written notice of its non-public information which is subject to this Section 10.2.
10.3 Without
limiting any of the other terms and provisions of this Agreement (including, without limitation, Section 9.6), to the extent
a Member (the “Pursuer”) provides the other Member with information relating to a possible investment opportunity
then being actively pursued by the Pursuer on behalf of the Company, the other Member receiving such information shall not use
such information to pursue such investment opportunity for its own account to the exclusion of the Pursuer so long as the Pursuer
is actively pursuing such opportunity on behalf of the Company and shall not disclose any Confidential Information to any Person
(except as expressly permitted hereunder) or take any other action in connection therewith that is reasonably likely to cause damage
to the Pursuer.
| Section 11. | Representations and Warranties. |
11.1 In
General. As of the date hereof, each of the Members hereby makes each of the representations and warranties applicable to such
Member as set forth in Section 11.2. Such representations and warranties shall survive the execution of this Agreement.
11.2 Representations
and Warranties. Each Member hereby represents and warrants that:
(a) Due
Incorporation or Formation; Authorization of Agreement. Such Member is a corporation duly organized or a partnership or limited
liability company duly formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or
formation and has the corporate, partnership or company power and authority to own its property and carry on its business as owned
and carried on at the date hereof and as contemplated hereby. Such Member is duly licensed or qualified to do business and in good
standing in each of the jurisdictions in which the failure to be so licensed or qualified would have a material adverse effect
on its financial condition or its ability to perform its obligations hereunder. Such Member has the corporate, partnership or company
power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and the execution, delivery
and performance of this Agreement has been duly authorized by all necessary corporate, partnership or company action. This Agreement
constitutes the legal, valid and binding obligation of such Member.
(b) No
Conflict with Restrictions; No Default. Neither the execution, delivery or performance of this Agreement nor the consummation
by such Member (or any of its Affiliates) of the transactions contemplated hereby (i) does or will conflict with, violate or result
in a breach of (or has conflicted with, violated or resulted in a breach of) any of the terms, conditions or provisions of any
law, regulation, order, writ, injunction, decree, determination or award of any court, any governmental department, board, agency
or instrumentality, domestic or foreign, or any arbitrator, applicable to such Member or any of its Affiliates, (ii) does or will
conflict with, violate, result in a breach of or constitute a default under (or has conflicted with, violated, resulted in a breach
of or constituted a default under) any of the terms, conditions or provisions of the articles of incorporation, bylaws, partnership
agreement or operating agreement of such Member or any of its Affiliates or of any material agreement or instrument to which such
Member or any of its Affiliates is a party or by which such Member or any of its Affiliates is or may be bound or to which any
of its properties or assets is subject, (iii) does or will conflict with, violate, result in (or has conflicted with, violated
or resulted in) a breach of, constitute (or has constituted) a default under (whether with notice or lapse of time or both), accelerate
or permit the acceleration of (or has accelerated) the performance required by, give (or has given) to others any material interests
or rights or require any consent, authorization or approval under any indenture, mortgage, lease, agreement or instrument to which
such Member or any of its Affiliates is a party or by which such Member or any of its Affiliates or any of their properties or
assets is or may be bound or (iv) does or will result (or has resulted) in the creation or imposition of any lien upon any of the
properties or assets of such Member or any of its Affiliates.
(c) Governmental
Authorizations. Any registration, declaration or filing with, or consent, approval, license, permit or other authorization
or order by, or exemption or other action of, any governmental, administrative or regulatory authority, domestic or foreign, that
was or is required in connection with the valid execution, delivery, acceptance and performance by such Member under this Agreement
or consummation by such Member (or any of its Affiliates) of any transaction contemplated hereby has been completed, made or obtained
on or before the date hereof.
(d) Litigation.
There are no actions, suits, proceedings or investigations pending, or, to the knowledge of such Member or any of its Affiliates,
threatened against or affecting such Member or any of its Affiliates or any of their properties, assets or businesses in any court
or before or by any governmental department, board, agency or instrumentality, domestic or foreign, or any arbitrator which could,
if adversely determined (or, in the case of an investigation could lead to any action, suit or proceeding which if adversely determined
could) reasonably be expected to materially impair such Member’s ability to perform its obligations under this Agreement
or to have a material adverse effect on the consolidated financial condition of such Member; such Member or any of its Affiliates
has not received any currently effective notice of any default, and such Member or any of its Affiliates is not in default, under
any applicable order, writ, injunction, decree, permit, determination or award of any court, any governmental department, board,
agency or instrumentality, domestic or foreign, or any arbitrator which could reasonably be expected to materially impair such
Member’s (or any of its Affiliate’s) ability to perform its obligations under this Agreement or to have a material
adverse effect on the consolidated financial condition of such Member.
(e) Investigation.
Such Member is acquiring its Interest based upon its own investigation, and the exercise by such Member of its rights and the performance
of its obligations under this Agreement will be based upon its own investigation, analysis and expertise. Such Member is a sophisticated
investor possessing an expertise in analyzing the benefits and risks associated with acquiring investments that are similar to
the acquisition of its Interest.
(f) Broker.
No broker, agent or other person acting as such on behalf of such Member was instrumental in consummating this transaction and
that no conversations or prior negotiations were had by such party with any broker, agent or other such person concerning the transaction
that is the subject of this Agreement.
(g) Investment
Company Act. Neither such Member nor any of its Affiliates is, nor will the Company as a result of such Member holding an interest
therein be, an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940,
as amended.
(h) Securities
Matters.
(1) None
of the Interests are registered under the Securities Act or any state securities laws. Such Member understands that the offering,
issuance and sale of the Interests are intended to be exempt from registration under the Securities Act, based, in part, upon the
representations, warranties and agreements contained in this Agreement. Such Member is an “accredited investor” as
such term is defined in Rule 501 of Regulation D promulgated under the Securities Act.
(2) Neither
the Securities and Exchange Commission nor any state securities commission has approved the Interests or passed upon or endorsed
the merits of the offer or sale of the Interests. Such Member is acquiring the Interests solely for such Member’s own account
for investment and not with a view to resale or distribution thereof in violation of the Securities Act.
(3) Such
Member is unaware of, and in no way relying on, any form of general solicitation or general advertising in connection with the
offer and sale of the Interests, and no Member has taken any action which could give rise to any claim by any person for brokerage
commissions, finders’ fees (without regard to any finders’ fees payable by the Company directly) or the like relating
to the transactions contemplated hereby.
(4) Such
Member is not relying on the Company or any of its officers, directors, employees, advisors or representatives with regard to the
tax and other economic considerations of an investment in the Interests, and such Member has relied on the advice of only such
Member’s advisors.
(5) Such
Member understands that the Interests may not be sold, hypothecated or otherwise disposed of unless subsequently registered under
the Securities Act and applicable state securities laws, or an exemption from registration is available. Such Member agrees that
it will not attempt to sell, transfer, assign, pledge or otherwise dispose of all or any portion of the Interests in violation
of this Agreement.
(6) Such
Member has adequate means for providing for its current financial needs and anticipated future needs and possible contingencies
and emergencies and has no need for liquidity in the investment in the Interests.
(7) Such
Member has significant prior investment experience, including investment in non-listed and non-registered securities. Such Member
is knowledgeable about investment considerations and has a sufficient net worth to sustain a loss of such Member’s entire
investment in the Company in the event such a loss should occur. Such Member’s overall commitment to investments which are
not readily marketable is not excessive in view of such Member’s net worth and financial circumstances and the purchase of
the Interests will not cause such commitment to become excessive. The investment in the Interests is suitable for such Member.
(8) Such
Member represents to the Company that the information contained in this subparagraph (h) and in all other writings, if any, furnished
to the Company with regard to such Member (to the extent such writings relate to its exemption from registration under the Securities
Act) is complete and accurate and may be relied upon by the Company in determining the availability of an exemption from registration
under federal and state securities laws in connection with the sale of the Interests.
| Section 12. | Sale, Assignment, Transfer or other Disposition. |
12.1 Prohibited
Transfers. Except as otherwise provided in this Section 12, Sections 5.2(b), 15.1 and 15.2, or
as approved by the Management Committee, no Member shall Transfer all or any part of its Interest, whether legal or beneficial,
in the Company, and any attempt to so Transfer such Interest (and such Transfer) shall be null and void and of no effect. Notwithstanding
the foregoing, either Member shall have the right, with the consent of the other Member, at any time to pledge to a lender or creditor,
directly or indirectly, all or any part of its Interest in the Company for such purposes as it deems necessary in the ordinary
course of its business and operations.
12.2 Affiliate
Transfers.
(a) Subject
to the provisions of Section 12.2(b) hereof, and subject in each case to the prior written approval of each Member (such
approval not to be unreasonably withheld), any Member may Transfer all or any portion of its Interest in the Company at any time
to an Affiliate of such Member, provided that such Affiliate shall remain an Affiliate of such Member at all times that such Affiliate
holds such Interest. If such Affiliate shall thereafter cease being an Affiliate of such Member while such Affiliate holds such
Interest, such cessation shall be a non-permitted Transfer and shall be deemed void ab initio, whereupon the Member having
made the Transfer shall, at its own and sole expense, cause such putative transferee to disgorge all economic benefits and otherwise
indemnify the Company and the other Member(s) against loss or damage under any Collateral Agreement.
(b) Notwithstanding
anything to the contrary contained in this Agreement, the following Transfers shall not require the approval set forth in Section
12.2(a):
(1) Any
Transfer by Carroll of up to one hundred percent (100%) of its Interest to any Affiliate of Carroll Parent (a “Carroll
Transferee”), it being expressly understood and agreed that transfers of ownership interests in Carroll shall not be
prohibited as long as at least one of the Key Individuals (collectively or individually) remains actively involved in the operation
and management of Carroll (to the extent that it continues to hold, or control, any interest in the Company), Carroll Parent and
any Carroll Transferee; and
(2) Any
Transfer by Bluerock or a Bluerock Transferee of up to one hundred percent (100%) of its Interest to any Affiliate of Bluerock,
including but not limited to (A) BR Growth or any Person that is directly or indirectly owned by BR Growth; (B) BR SOIF II or any
Person that is directly or indirectly owned by BR SOIF II; (C) BR SOIF III or any Person that is directly or indirectly owned by
BR SOIF III; (D) BR REIT or any Person that is directly or indirectly owned by BR REIT; or (E) BR Growth II, or any Person that
is directly or indirectly owned by BR Growth II (collectively, a “Bluerock Transferee”);
provided however, as to subparagraphs (b)(1)
and (b)(2), and as to subparagraph (a), no Transfer shall be permitted and shall be void ab initio if it shall violate any
“Transfer” provision of the Loan Documents or any applicable Collateral Agreement with third party lenders.
(c) Upon
the execution by any such Carroll Transferee or Bluerock Transferee of such documents necessary to admit such party into the Company
and to cause the Carroll Transferee or Bluerock Transferee (as applicable) to become bound by this Agreement, the Carroll Transferee
or Bluerock Transferee (as applicable) shall become a Member, without any further action or authorization by any Member.
(d) The
Transfer of any interest in Manager and any transferee of an interest in Manager shall be recognized and permitted under this Agreement
and by the Members, without any further action or authorization by any Member.
12.3 Admission
of Transferee; Partial Transfers. Notwithstanding anything in this Section 12 to the contrary and except as provided
in Section 5.2(b), no Transfer of Interests in the Company shall be permitted unless the potential transferee is admitted
as a Member under this Section 12.3:
(a) If
a Member Transfers all or any portion of its Interest in the Company, such transferee may become a Member if (i) such transferee
executes and agrees to be bound by this Agreement, (ii) the transferor and/or transferee pays all reasonable legal and other fees
and expenses incurred by the Company in connection with such assignment and substitution and (iii) the transferor and transferee
execute such documents and deliver such certificates to the Company and the remaining Members as may be required by applicable
law or otherwise advisable; and
(b) Notwithstanding
the foregoing, any Transfer or purported Transfer of any Interest, whether to another Member or to a third party, shall be of no
effect and void ab initio, and such transferee shall not become a Member or an owner of the purportedly transferred Interest,
if the Management Committee determines in its sole discretion that:
(1) the
Transfer would require registration of any Interest under, or result in a violation of, any federal or state securities laws;
(2) the
Transfer would result in a termination of the Company under Code Section 708(b); provided, however, that any such determination
under this Section 12.3(b)(2) shall require the reasonable determination and approval of at least one (1) Representative
appointed by Carroll.
(3) as
a result of such Transfer the Company would be required to register as an investment company under the Investment Company Act of
1940, as amended, or any rules or regulations promulgated thereunder;
(4) if
as a result of such Transfer the aggregate value of Interests held by “benefit plan investors” including at least one
benefit plan investor that is subject to ERISA, could be “significant” (as such terms are defined in U.S. Department
of Labor Regulation 29 C.F.R. 2510.3-101(f)(2)) with the result that the assets of the Company could be deemed to be “plan
assets” for purposes of ERISA;
(5) as
a result of such Transfer, the Company would or may have in the aggregate more than one hundred (100) members and material adverse
federal income tax consequences would result to a Member. For purposes of determining the number of members under this Section
12.3(b)(5), a Person (the “beneficial owner”) indirectly owning an interest in the Company through a partnership,
grantor trust or S corporation (as such terms are used in the Code) (the “flow-through entity”) shall be
considered a member, but only if (i) substantially all of the value of the beneficial owner’s interest in the flow-through
entity is attributable to the flow-through entity’s interest (direct or indirect) in the Company and (ii) in the sole discretion
of the Management Committee, a principal purpose of the use of the flow-through entity is to permit the Company to satisfy the
100-member limitation; or
(6) the
transferor failed to comply with the provisions of Sections 12.2(a) or (b).
The Management Committee
may require the provision of a certificate as to the legal nature and composition of a proposed transferee of an Interest of a
Member and from any Member as to its legal nature and composition and shall be entitled to rely on any such certificate in making
such determinations under this Section 12.3.
12.4 Withdrawals.
Each of the Members does hereby covenant and agree that it will not withdraw, resign, retire or disassociate from the Company,
except as a result of a Transfer of its entire Interest in the Company permitted under the terms of this Agreement and that it
will carry out its duties and responsibilities hereunder until the Company is terminated, liquidated and dissolved under Section
13. No Member shall be entitled to receive any distribution or otherwise receive the fair market value of its Interest in compensation
for any purported resignation or withdrawal not in accordance with the terms of this Agreement.
13.1 Limitations.
The Company may be dissolved, liquidated and terminated only pursuant to the provisions of this Section 13, and, to the
fullest extent permitted by law but subject to the terms of this Agreement, the parties hereto do hereby irrevocably waive any
and all other rights they may have to cause a dissolution of the Company or a sale or partition of any or all of the Company’s
assets.
13.2 Exclusive
Events Requiring Dissolution. The Company shall be dissolved only upon the earliest to occur of the following events (a “Dissolution
Event”):
(a) the
expiration of the specific term set forth in Section 2.5;
(b) at
any time at the election of all of the Members in writing;
(c) at
any time there are no Members (unless otherwise continued in accordance with the Act);
(d) the
entry of a decree of judicial dissolution pursuant to Section 18-802 of the Act; or
(e) the
Purchase Agreement has not been closed by August 24, 2015.
13.3 Liquidation.
Upon the occurrence of a Dissolution Event, the business of the Company shall be continued to the extent necessary to allow an
orderly winding up of its affairs, including the liquidation of the assets of the Company pursuant to the provisions of this Section
13.3, as promptly as practicable thereafter, and each of the following shall be accomplished:
(a) The
Management Committee shall cause to be prepared a statement setting forth the assets and liabilities of the Company as of the date
of dissolution, a copy of which statement shall be furnished to all of the Members.
(b) The
property and assets of the Company shall be liquidated or distributed in kind under the supervision of the Management Committee
as promptly as possible, but in an orderly, businesslike and commercially reasonable manner.
(c) Any
gain or loss realized by the Company upon the sale of its property shall be deemed recognized and allocated to the Members in the
manner set forth in Section 7.2. To the extent that an asset is to be distributed in kind, such asset shall be deemed to
have been sold at its fair market value on the date of distribution, the gain or loss deemed realized upon such deemed sale shall
be allocated in accordance with Section 7.2 and the amount of the distribution shall be considered to be such fair market
value of the asset.
(d) The
proceeds of sale and all other assets of the Company shall be applied and distributed as follows and in the following order of
priority:
(1) to
the satisfaction of the debts and liabilities of the Company (contingent or otherwise) and the expenses of liquidation or distribution
(whether by payment or reasonable provision for payment), other than liabilities to Members or former Members for Distributions;
(2) to
the satisfaction of loans made pursuant to Section 5.2(b) in proportion to the outstanding balances of such loans at the
time of payment;
(3) the
balance, if any, to the Members in accordance with Section 6.1.
13.4 Continuation
of the Company. Notwithstanding anything to the contrary contained herein, the death, retirement, resignation, expulsion, bankruptcy,
dissolution or removal of a Member shall not in and of itself cause the dissolution of the Company, and the Members are expressly
authorized to continue the business of the Company in such event, without any further action on the part of the Members.
| Section 14. | Indemnification. |
14.1 Exculpation
of Members. No Member, Manager, Representative or officer of the Company shall be liable to the Company or to the other Members
for damages or otherwise with respect to any actions or failures to act taken or not taken relating to the Company, except to the
extent any related loss results from fraud, gross negligence or willful or wanton misconduct on the part of such Member, Manager,
Representative or officer or the willful breach of any obligation under this Agreement.
14.2 Indemnification
by Company. The Company hereby indemnifies, holds harmless and defends the Members, the Manager, the Representatives, the officers
and each of their respective agents, officers, directors, members, managers, partners, shareholders and employees from and against
any loss, expense, damage or injury suffered or sustained by them (including but not limited to any judgment, award, settlement,
reasonable attorneys’ fees and other costs or expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim) by reason of or arising out of (i) their activities on behalf of the Company or in furtherance of
the interests of the Company, including, without limitation, the provision of guaranties to third party lenders in respect of financings
relating to the Company or any of its assets (but specifically excluding from such indemnity by the Company any so called “bad
boy” guaranties or similar agreements which provide for recourse as a result of failure to comply with covenants, willful
misconduct or gross negligence), (ii) their status as Members, Managers, Representatives, employees or officers of the Company,
or (iii) the Company’s assets, property, business or affairs (including, without limitation, the actions of any officer,
director, member, manager or employee of the Company or any of its Subsidiaries), if the acts or omissions were not performed or
omitted fraudulently or as a result of gross negligence or willful or wanton misconduct by the indemnified party or as a result
of the willful breach of any obligation under this Agreement by the indemnified party. For the purposes of this Section 14.2,
officers, directors, members, managers, employees and other representatives of Affiliates of a Member who are functioning as representatives
of such Member in connection with this Agreement shall be considered representatives of such Member for the purposes of this Section
14. Reasonable expenses incurred by the indemnified party in connection with any such proceeding relating to the foregoing
matters shall be paid or reimbursed by the Company in advance of the final disposition of such proceeding upon receipt by the Company
of (x) written affirmation by the Person requesting indemnification of its good faith belief that it has met the standard of conduct
necessary for indemnification by the Company and (y) a written undertaking by or on behalf of such Person to repay such amount
if it shall ultimately be determined by a court of competent jurisdiction that such Person has not met such standard of conduct,
which undertaking shall be an unlimited general obligation of the indemnified party but need not be secured.
14.3 Indemnification
by Members for Misconduct.
(a) Carroll
hereby indemnifies, defends and holds harmless the Company, Bluerock, each Bluerock Transferee and each of their subsidiaries and
their agents, officers, directors, members, managers, partners, shareholders and employees from and against all losses, costs,
expenses, damages, claims and liabilities (including reasonable attorneys’ fees) as a result of or arising out of any fraud,
gross negligence or willful or wanton misconduct on the part of, or by, Carroll, the Key Individual, any entity controlled directly
or indirectly by the Key Individual that directly or indirectly controls Carroll, or any Representative appointed by Carroll.
(b) Bluerock
hereby indemnifies, defends and holds harmless the Company, Carroll, each Carroll Transferee and each of their subsidiaries and
their agents, officers, directors, members, managers, partners, shareholders and employees from and against all losses, costs,
expenses, damages, claims and liabilities (including reasonable attorneys’ fees) as a result of or arising out of any fraud,
gross negligence or willful or wanton misconduct on the part of, or by, Bluerock or any entity controlled directly or indirectly
by Bluerock, or any Representative appointed by Bluerock.
14.4 General
Indemnification by the Members.
(a) Notwithstanding
any other provision contained herein, each Member (the “Indemnifying Party”) hereby indemnifies and holds harmless
the other Members, the Company and each of their subsidiaries and their agents, officers, directors, members, managers, partners,
shareholders and employees (each, an “Indemnified Party”) from and against all losses, costs, expenses, damages,
claims and liabilities (including reasonable attorneys’ fees) as a result of or arising out of (i) any breach of any obligation
of the Indemnifying Party under this Agreement, or (ii) any breach of any obligation by or any inaccuracy in or breach of any representation
or warranty made by the Indemnifying Party or its Affiliates, whether in this Agreement or in any other agreement with respect
to the conveyance, assignment, contribution or other transfer of the Property (or interests therein), assets, agreements, rights
or other interests conveyed, assigned, contributed or otherwise transferred to the Company (collectively, the “Inducement
Agreements”).
(b) Except
as otherwise provided herein or in any other agreement, recourse for the indemnity obligation of the Members under this Section
14.4 shall be limited to such Indemnifying Party’s Interest in the Company; provided, however, that recourse against
either Member under its indemnity obligations under this Agreement or otherwise shall be further limited to an aggregate amount
equal to the value of such Member’s Interest as determined by and being limited to the then current liquidation value of
such Member’s Interest assuming the Company were liquidated in an orderly fashion and all net proceeds thereof were distributed
in accordance with Section 6.
(c) The
indemnities, contributions and other obligations under this Agreement shall be in addition to any rights that any Indemnified Party
may have at law, in equity or otherwise. The terms of this Section 14 shall survive termination of this Agreement.
15.1 Push
/ Pull Rights.
(a) Availability
of Rights. If, at any time following the second anniversary of the date that the Property is initially acquired, the Members
are unable to agree on a Major Decision and such failure to agree has continued for fifteen (15) days after written notice from
one Member to the other Member indicating an intention to exercise rights under this Section 15.1, either Member may exercise
its right to initiate the provisions of this Section 15.1.
(b) Exercise.
The Member wishing to exercise its rights pursuant to this Section 15.1 (the “Offeror”) shall do so by
giving notice to the other Member (the “Offeree”) setting forth a statement of intent to invoke its rights under
this Section 15.1, stating therein the aggregate dollar amount (the “Valuation Amount”) that the Offeror
would be willing to pay for the assets of the Company as of the Closing Date (as defined below) free and clear of all liabilities,
and setting forth all oral or written offers and inquiries received by the Offeror during the previous twelve-month period relating
to the financing, disposition or leasing of any Company property (including proposals for the formation of a new entity for the
ownership and operation of the Property).
(c) Offeree
Response. After receipt of such notice, the Offeree shall elect to either (i) sell its entire Interest to the Offeror for an
amount equal to the amount the Offeree would have been entitled to receive if the Company had sold its assets for the Valuation
Amount on the Closing Date and the Company had immediately paid all Company liabilities and Imputed Closing Costs and distributed
the net proceeds of sale to the Members in satisfaction of their Interests pursuant to Section 13.3, or (ii) purchase the
entire Interest of the Offeror for an amount equal to the amount the Offeror would have been entitled to receive if the Company
had sold all of its assets for the Valuation Amount on the Closing Date and the Company had immediately paid all Company liabilities
and Imputed Closing Costs and distributed the net proceeds of the sale to the Members in satisfaction of their Interests pursuant
to Section 13.3. The Offeree shall have thirty (30) days from the giving of the Offeror’s notice in which to exercise
either of its options by giving written notice to the Offeror. If the Offeree does not elect to acquire the Offeror’s Interest
within such time period, the Offeree shall be deemed to have elected to sell its Interest to the Offeror as provided in subsection
(i) above.
(d) Earnest
Money. Within five (5) business days after an election has been made or deemed made under Section 15.1(c), the acquiring
Member shall deposit with a mutually acceptable third-party escrow agent a non-refundable earnest money deposit in the amount
of two percent (2%) of the amount the selling Member is entitled to receive for its Interest under this Section 15.1, which
amount shall be applied to the purchase price at closing. If the acquiring Member should thereafter fail to consummate the transaction
for any reason other than a default by the selling Member or a refusal by any lender of the
Company (or any Subsidiary of the Company) who has a right under its loan documents to consent to such transfer to so consent,
(i) (A) the earnest money deposit shall be distributed from escrow to the selling Member, free of all claims of the acquiring
Member, as liquidated damages and constituting the sole and exclusive remedy available to the selling Member because of a default
by the acquiring Member or (B) the selling Member may, by delivering to the acquiring Member written notice thereof, elect to
buy the acquiring Member’s entire Interest for an amount equal to the amount the acquiring Member would have been entitled
to receive if the Company had sold all of its assets for the Valuation Amount and the Company had immediately paid all Company
liabilities and Imputed Closing Costs and distributed the net proceeds of the sale to the Members in satisfaction of their Interests
pursuant to Section 13.3, in which case, the Closing Date therefor shall be the date specified in the selling Member’s
notice, and (ii) if the acquiring Member was the Offeror, the non-refundable earnest money deposit for any future election by
the acquiring Member to buy the selling Member’s Interest shall be twenty percent (20%) of the amount the selling Member
is entitled to receive for its Interest in connection with such future election.
(e) Closing.
The closing of an acquisition pursuant to this Section 15.1 shall be held on a mutually acceptable date (the “Closing
Date”) not later than sixty (60) days (or, if the Offeree is the acquiring Member, ninety (90) days) after an election
has been made or deemed made under Section 15.1(c). At such closing, the following shall occur:
(1) The
selling Member shall assign to the acquiring Member or its designee the selling Member’s Interest in accordance with the
instructions of the acquiring Member, and shall execute and deliver to the acquiring Member all documents which may be required
to give effect to the disposition and acquisition of such interests, in each case free and clear of all liens, claims, and encumbrances,
with covenants of general warranty; and
(2) The
acquiring Member shall pay to the selling Member the consideration therefor in cash.
(f) Enforcement.
It is expressly agreed that the remedy at law for breach of the obligations of the Members set forth in this Section 15.1
is inadequate in view of (i) the complexities and uncertainties in measuring the actual damage to be sustained by reason of the
failure of a Member to comply fully with such obligations, and (ii) the uniqueness of the Company’s business and the Members’
relationships. Accordingly, each of such obligations shall be, and is hereby expressly made, enforceable by an order of specific
performance.
15.2 Forced
Sale Rights.
(a) Offers.
If, at any time following the second anniversary of the date that the Property is initially acquired, either Member (i) desires
to offer the Property for sale on specified terms, or (ii) receives from an unaffiliated purchaser a bona fide written
cash offer (i.e., not seller financed) for the purchase of the Property at a price in excess of the then-pending balance due under
the Loan and otherwise on terms that such Member desires for the Company, or any Subsidiary that owns the Property (individually
or collectively, the “Ownership Entity”) to accept (such specified terms or bona fide offer being
herein called the “Offer”), then the Member desiring to make or accept the Offer (the “Initiating Member”)
shall provide written notice of the terms of such Offer (the “Sale Notice”) to the other Member (the “Non-Initiating
Member”).
(b) Response.
The Non-Initiating Member shall have thirty (30) days from the date of the Sale Notice (the “Response Period”)
to provide written notice to the Initiating Member of whether the Ownership Entity should make or accept the Offer; the failure
to timely deliver such notice shall be deemed to constitute an election to accept the Offer and sell such Property on the terms
of the Offer.
(c) Offer
Unacceptable.
(1) If
the Non-Initiating Member does not wish for the Company, or the Ownership Entity, to make or accept the Offer, the Initiating Member
may elect to sell its Interest to the Non-Initiating Member, in which case the Non-Initiating Member must purchase the Initiating
Member’s Interest for an amount equal to the amount that would be distributable to the Initiating Member if the Company had
accepted the Offer, closed the sale pursuant to such Offer and wound up its affairs pursuant to Section 13.
(2) For
purposes of the foregoing calculations, the purchase price for a sale shall be reduced by Imputed Closing Costs therefor. The Initiating
Member must exercise this option, if at all, by delivering written notice thereof to the Non-Initiating Member within twenty (20)
days after the end of the Response Period. The Non-Initiating Member shall pay the Company cash for each Ownership Entity or the
Initiating Member cash for its Interest, as the case may be. Closing shall take place on or before the date specified in the Sale
Notice, but if the Non-Initiating Member is purchasing the Initiating Member’s Interest or one or more Ownership Entities,
the Non-Initiating Member shall have until 120 days after the Sale Notice in which to close. If the Initiating Member or the Non-Initiating
Member defaults at closing, the non-defaulting party shall have the right to bring suit for damages, for specific performance,
or exercise any other remedy available at law or in equity. Upon payment at closing, the Initiating Member shall execute and deliver
all documents reasonably required to transfer the interest being sold.
(d) Offer
Acceptable. If the Non-Initiating Member consents (or is deemed to have consented) to the Company or the Ownership Entities
selling the Property on the terms of the Offer, then the Initiating Member shall be allowed to sell the Property for cash on the
terms of the Offer for a period of up to one hundred eighty (180) days following the expiration of the Response Period. If the
Initiating Member obtains a bona fide third party contract to sell the Property on the terms of the offer within
such one hundred eighty (180) day period, the Initiating Member shall have an additional period of ninety (90) days after the date
of such contract (that is, not to exceed 270 days after the expiration of the Response Period) in which to consummate the sale.
If after having received the consent (or deemed consent) of the Non-Initiating Member to the sale of such Property on the terms
of the Offer, the Initiating Member is unable to obtain a bona fide contract within such one hundred eighty (180)
day period, or if after having obtained such bona fide contract, the Initiating Member is unable to consummate such
sale within 270 days after the expiration of the Response Period, then the Initiating Member must again submit an Offer to the
Non-Initiating Member under the terms of this Section 15.2 before it may sell such Property.
| Section 16. | Miscellaneous. |
16.1 Notices.
(a) All
notices, requests, approvals, authorizations, consents and other communications required or permitted under this Agreement shall
be in writing and shall be (as elected by the Person giving such notice) hand delivered by messenger or overnight courier service,
mailed (airmail, if international) by registered or certified mail (postage prepaid), return receipt requested, or sent via facsimile
(provided such facsimile is immediately followed by the delivery of an original copy of same via one of the other foregoing delivery
methods) addressed to:
If to Bluerock:
c/o Bluerock Real Estate, L.L.C.
712 Fifth Avenue, 9th Floor
New York, New York 10019
Attention: James G. Babb, III
Facsimile No. (646) 278-4220
with copies to:
c/o Bluerock Real Estate, L.L.C.
712 Fifth Avenue, 9th Floor
New York, New York 10022
Attention: Michael Konig, Esq.
Facsimile No. (646) 278-4220
and
Kaplan, Voekler, Cunningham & Frank, PLC
1401 East Cary Street
Richmond, VA 23223
Attention: S. Edward Flanagan, Esq.
Facsimile No. (804) 823-4099
If to Carroll:
c/o Carroll Organization, LLC
3340 Peachtree Road, Suite 1620
Atlanta, Georgia 30326
Attention: M. Patrick Carroll
Facsimile No. (404) 523-9372
With a copy to:
Morris, Manning & Martin LLP
1600 Atlanta Financial Center
3343 Peachtree Road, NE
Atlanta, Georgia 30326
Attention: Corey B. May, Esq.
Facsimile: (404) 365-9532
(b) Each
such notice shall be deemed delivered (i) on the date delivered if by hand delivery or overnight courier service or facsimile,
and (ii) on the date upon which the return receipt is signed or delivery is refused or the notice is designated by the postal authorities
as not deliverable, as the case may be, if mailed (provided, however, if such actual delivery occurs after 5:00 p.m. (local time
where received), then such notice or demand shall be deemed delivered on the immediately following business day after the actual
day of delivery).
(c) By
giving to the other parties at least fifteen (15) days written notice thereof, the parties hereto and their respective successors
and assigns shall have the right from time to time and at any time during the term of this Agreement to change their respective
addresses.
16.2 Governing
Law; Forum. This Agreement and the rights of the Members hereunder shall be governed by, and interpreted in accordance with,
the laws of the State of Delaware, without regard to its conflicts of law provisions. Any legal action or other legal proceeding
relating to this Agreement or the enforcement of any provision of this Agreement shall only be brought or otherwise commenced in
any state or federal court located in the State of New York. Each of the parties hereto:
(a) Expressly
and irrevocably consents and submits to the exclusive personal jurisdiction of and venue in each state and federal court located
in the State of New York (and each appellate court located in the State of New York), in connection with any such legal proceeding;
(b) Agrees
that each state and federal court located in the State of New York shall be deemed to be a convenient forum; and
(c) Agrees
not to assert (by way of motion, as a defense or otherwise), in any such legal proceeding commenced in any state or federal court
located in the State of New York, any claim that it is not subject personally to the jurisdiction of such court, that such legal
proceeding has been brought in an inconvenient forum, that the venue for such proceeding is improper or that this Agreement or
the subject matter of this Agreement may not be enforced in or by such court.
Each of the parties hereto
designates CT Corporation System, 1633 Broadway, New York, New York 10019, as its agent for service of process in the State of
New York, which designation may only be changed on not less than ten (10) days’ prior notice to all of the other parties.
16.3 Successors.
This Agreement shall be binding upon, and inure to the benefit of, the parties and their successors and permitted assigns. Except
as otherwise provided herein, any Member who Transfers its Interest as permitted by the terms of this Agreement shall have no further
liability or obligation hereunder, except with respect to claims arising prior to such Transfer.
16.4 Pronouns.
Whenever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular
and the plural, and pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, feminine
and neuter.
16.5 Captions
Not Part of Agreement. The captions contained in this Agreement are inserted only as a matter of convenience and in no way
define, limit or extend the scope or intent of this Agreement or any provisions hereof.
16.6 Severability.
If any provision of this Agreement shall be held invalid, illegal or unenforceable in any jurisdiction or in any respect, then
the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired,
and the Members shall use their best efforts to amend or substitute such invalid, illegal or unenforceable provision with enforceable
and valid provisions which would produce as nearly as possible the rights and obligations previously intended by the Members without
renegotiation of any material terms and conditions stipulated herein.
16.7 Counterparts.
This Agreement may be executed in several counterparts, each of which shall be deemed an original but all of which shall constitute
one and the same instrument.
16.8 Entire
Agreement and Amendment. This Agreement and the other written agreements described herein between the parties hereto entered
into as of the date hereof, constitute the entire agreement between the Members relating to the subject matter hereof. In the event
of any conflict between this Agreement and such other written agreements, the terms and provisions of this Agreement shall govern
and control. No amendment or waiver by a party shall be enforceable against that party unless it is in writing and duly executed
by such party.
16.9 Further
Assurances. Each Member agrees to execute and deliver any and all additional instruments and documents and do any and all acts
and things as may be necessary or expedient to effectuate more fully this Agreement or any provisions hereof or to carry on the
business contemplated hereunder.
16.10 No
Third Party Rights. The provisions of this Agreement are for the exclusive benefit of the Members and the Company, and no other
party (including, without limitation, any creditor of the Company) shall have any right or claim against any Member by reason of
those provisions or be entitled to enforce any of those provisions against any Member.
16.11 Incorporation
by Reference. Every Exhibit and Annex attached to this Agreement is incorporated in this Agreement by reference.
16.12 Limitation
on Liability. Except as set forth in Section 14 and with respect to a Default Loan as set forth in Section 5.2(b),
the Members shall not be bound by, or be personally liable for, by reason of being a Member, a judgment, decree or order of a court
or in any other manner, for the expenses, liabilities or obligations of the Company, and the liability of each Member shall be
limited solely to the amount of its Capital Contributions as provided under Section 5. Except as set forth in Section
14.3 and with respect to a Default Loan as set forth in Section 5.2(b), any claim against any Member (the “Member
in Question”) which may arise under this Agreement shall be made only against, and shall be limited to, such Member in
Question’s Interest, the proceeds of the sale by the Member in Question of such Interest or the undivided interest in the
assets of the Company distributed to the Member in Question pursuant to Section 13.3(d) hereof. Except as set forth in Section
14.3 and with respect to a Default Loan as set forth in Section 5.2(b), any right to proceed against (i) any other assets
of the Member in Question or (ii) any agent, officer, director, member, manager, partner, shareholder or employee of the Member
in Question or the assets of any such Person, as a result of such a claim against the Member in Question arising under this Agreement
or otherwise, is hereby irrevocably and unconditionally waived.
16.13 Remedies
Cumulative. The rights and remedies given in this Agreement and by law to a Member shall be deemed cumulative, and the exercise
of one of such remedies shall not operate to bar the exercise of any other rights and remedies reserved to a Member under the provisions
of this Agreement or given to a Member by law. In the event of any dispute between the parties hereto, the prevailing party shall
be entitled to recover from the other party reasonable attorney’s fees and costs incurred in connection therewith.
16.14 No
Waiver. One or more waivers of the breach of any provision of this Agreement by any Member shall not be construed as a waiver
of a subsequent breach of the same or any other provision, nor shall any delay or omission by a Member to seek a remedy for any
breach of this Agreement or to exercise the rights accruing to a Member by reason of such breach be deemed a waiver by a Member
of its remedies and rights with respect to such breach.
16.15 Limitation
On Use of Names. Notwithstanding anything contained in this Agreement or otherwise to the contrary, each of Bluerock and Carroll
as to itself agree that neither it nor any of its Affiliates, agents, or representatives is granted a license to use or shall use
the name of the other under any circumstances whatsoever, except such name may be used in furtherance of the business of the Company
but only as and to the extent unanimously approved by the Members. Any change in the name of the Property must be approved by the
Management Committee.
16.16 Publicly
Traded Partnership Provision. Each Member hereby severally covenants and agrees with the other Members for the benefit of such
Members, that (a) it is not currently making a market in Interests in the Company and will not in the future make such a market
and (b) it will not Transfer its Interest on an established securities market, a secondary market or an over-the-counter market
or the substantial equivalent thereof within the meaning of Code Section 7704 and the Regulations, rulings and other pronouncements
of the U.S. Internal Revenue Service or the Department of the Treasury thereunder. Each Member further agrees that it will not
assign any Interest in the Company to any assignee unless such assignee agrees to be bound by this Section 16.16 and to
assign such Interest only to such Persons who agree to be similarly bound.
16.17 Uniform
Commercial Code. The interest of each Member in the Company shall be an “uncertificated security” governed by Article
8 of the Delaware UCC and the UCC as enacted in the State of New York (the “New York UCC”), including, without
limitation, (i) for purposes of the definition of a “security” thereunder, the interest of each Member in the Company
shall be a security governed by Article 8 of the Delaware UCC and the New York UCC and (ii) for purposes of the definition of an
“uncertificated security” thereunder.
16.18 Public
Announcements. Neither Carroll nor any of its Affiliates shall, without the prior approval of Bluerock, issue any press releases
or otherwise make any public statements with respect to the Company or the transactions contemplated by this Agreement, except
as may be required by applicable law or regulation or by obligations pursuant to any listing agreement with any national securities
exchange so long as Carroll or such Affiliate has used reasonable efforts to obtain the approval of Bluerock prior to issuing such
press release or making such public disclosure.
16.19 No
Construction Against Drafter. This Agreement has been negotiated and prepared by Bluerock and Carroll and their respective
attorneys and, should any provision of this Agreement require judicial interpretation, the court interpreting or construing such
provision shall not apply the rule of construction that a document is to be construed more strictly against one party.
Section
17. Insurance. During the Term, Property Manager,
pursuant to the terms of the Management Agreement, shall procure and maintain insurance as is determined to be appropriate by the
Management Committee (in form and with endorsements, waivers and deductibles and with insurance companies, designated or approved
by Bluerock) naming the Company (and the Subsidiary owning the Property), Bluerock and Carroll as insureds thereunder.
[SIGNATURES ON FOLLOWING PAGES]
IN WITNESS WHEREOF, this
Agreement is executed by the Members, effective as of the date first set forth above.
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BR WORLD GATEWAY JV MEMBER, LLC, |
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a Delaware limited liability company |
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BRG World Gateway Orlando, LLC, a Delaware limited liability company, its manager |
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Bluerock Residential Holdings, L.P., |
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a Delaware limited partnership, its sole member |
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Bluerock Residential Growth REIT, Inc., a Maryland corporation, its general partner |
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/s/ R. Ramin Kamfar |
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R. Ramin Kamfar |
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President and CEO |
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CARROLL CO-INVEST III WORLD GATEWAY, LLC, |
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a Georgia limited liability company |
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Carrroll Multi-Family Real Estate Fund III, LP, |
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a Delaware limited partnership, its sole member |
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MPC Property Holdings III, LLC, |
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a Georgia limited liability company, its general partner |
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MPC Partnership Holdings LLC, |
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a Georgia limited liability company, its sole member |
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By: |
P. Carroll Capitol Partners, LLC, |
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a Georgia limited liability company, its managing member |
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By: |
HUP Investment Company, LLC, |
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a Georgia limited liability company, its sole member |
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By: |
/s/ M. Patrick Carroll |
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Name: |
M. Patrick Carroll |
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Its: |
Sole Member |
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For purposes of Sections 8.2(b), 9.3, 9.4, 9.7 and 17 only, and only for the term Carroll Management Group, LLC is Property Manager under the Management Agreement. |
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CARROLL MANAGEMENT GROUP, LLC |
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By: |
/s/ Josh Champion |
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Name: |
Josh Champion |
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Title: |
President |
EXHIBIT A
Initial Capital Contributions and Percentage
Interests
Member Name | |
Capital Contributions | | |
Percentage Interest | |
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| | |
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BR World Gateway JV Member, LLC | |
$ | 12,981,907.34 | | |
| 95 | % |
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Carroll Co-Invest III World Gateway, LLC | |
$ | 683,258.28 | | |
| 5 | % |
Management Committee Representatives
Bluerock:
James G. Babb, III
Jordan B. Ruddy
Carroll:
Patrick Carroll
Joshua Champion
EXHIBIT B
Annual Business Plan Information
| 1. | a narrative description of any acquisitions or sales that
are planned and any other activities proposed to be undertaken; |
| 2. | a projected annual income statement (accrual basis) on
a quarter-by-quarter basis; |
| 3. | a projected balance sheet as of the end of the next Fiscal
Year; |
| 4. | a schedule of projected operating cash flow (including
itemized operating revenues, project costs and project expenses) for such Fiscal Year on a quarter-by-quarter basis, including
a schedule of projected operating deficits, if any; |
| 5. | a marketing plan indicating the portions of the Property
that Property Manager recommends be made available for sale or lease and the proposed terms and conditions relating thereto; |
| 6. | a detailed budget reflecting on a line by line basis all
projected operating expenses and any proposed construction and capital expenditures for the Property, including projected dates
for commencement and completion of the foregoing; |
| 7. | a description of the proposed investment of any funds of
the Company which are (or are expected to become) available for investment; |
| 8. | a description, including the identity of the recipient
(if known) and the amount and purpose, of all fees and other payments proposed, expected or projected to be paid for professional
services and, if a fee or payment exceeds $25,000, for other services rendered to or on behalf of the Company by third parties; |
| 9. | a projection of the amount of any anticipated additional
Capital Contributions which may be called for pursuant to Section 5.2(a) and the purposes for which such additional Capital
Contributions may be used; and |
| 10. | such other information requested from time to time by any
Member. |
EXHIBIT C
Management Agreement
Exhibit D
Initial Annual Business Plan
Exhibit 10.3
LIMITED LIABILITY COMPANY AGREEMENT
OF
BRG WORLD GATEWAY ORLANDO, LLC
THIS LIMITED LIABILITY
COMPANY AGREEMENT of BRG WORLD GATEWAY ORLANDO, LLC, a Delaware limited liability company (the “Company”),
as amended from time to time, (the "Agreement") is entered into by Bluerock Residential Holdings, LP, a Delaware
limited partnership, the sole member of the Company (the "Member").
RECITALS
A. The
Company was formed as a Delaware limited liability company in accordance with the Delaware Limited Liability Company Act, as amended
from time to time (the "Act").
B. The
undersigned desires to execute this Agreement to set forth the terms and conditions under which the management, business, and
financial affairs of the Company will be conducted.
C. Definitions
for this Agreement are set forth in Article XI.
AGREEMENT
NOW, THEREFORE, in
consideration of the foregoing recitals and the mutual promises, covenants, and conditions herein contained, the receipt and sufficiency
of which are hereby acknowledged, the undersigned party hereby covenants and agrees as follows:
ARTICLE I
PURPOSE AND POWERS OF COMP ANY
1.1 Purpose.
The Company's business and purpose shall consist solely of (x) the acquisition, ownership, operation, management, financing and
disposition of the multi-family real estate project consisting of approximately 252 units and located at 9000 Avenue Pointe Circle,
Orlando, Florida 32821 and to be hereafter commonly known as Arium at World Gateway Apartments (the "Property"),
which will be owned by a Subsidiary, (y) the ownership and management of one or more Subsidiaries in connection with the Property
and (z) such activities as are necessary, incidental or appropriate in connection therewith.
1.2 Powers.
The Company shall have all powers of a limited liability company formed under the Act and not prohibited by the Act or this Agreement.
1.3 Title
to Company Property. All property owned by the Company shall be owned by the Company as an entity and, insofar as permitted
by applicable law, no Member shall have any ownership interest in any Company property in its individual name or right, and each
Member's Membership Interest shall be personal property for all purposes.
1.4 Term.
This Agreement shall not terminate until the Company is terminated in accordance with this Agreement.
1.5 Registered
Office and Registered Agent. The Company's initial registered office and initial registered agent shall be as provided in
the Certificate of Formation. The registered office and registered agent may be changed from time to time by filing the address
of the new registered office and/or the name of the new registered agent pursuant to the Act.
1.6 Formation
and Authorized Person. On or before execution of this Agreement, an authorized person within the meaning of the Act shall
have duly filed or caused to be filed the Certificate of Formation of the Company with the office of the Secretary of State of
Delaware, as provided in Section 18-201 of the Act, and the Member hereby ratifies such filing. The Member shall use its best
efforts to take such other actions as may be reasonably necessary to perfect and maintain the status of the Company as a limited
liability company under the laws of Delaware. Notwithstanding anything contained herein to the contrary, the Company shall not
do business in any jurisdiction that would jeopardize the limitation on liability afforded to the Member and/or any subsequent
members under the Act or this Agreement.
ARTICLE II
MEMBERS
2.1 Initial
Member.
(a) The
name, address and initial Membership Interest of the initial Member is as follows:
Name
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Membership Interest |
Bluerock Residential Holdings,
LP
c/o Bluerock Real Estate, L.L.C.
712 Fifth Avenue, 9th
Floor
New York, NY 10019 |
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100% |
(b) The
Member was admitted to the Company as a member of the Company upon its execution of a counterpart signature page to this Agreement.
ARTICLE III
MANAGEMENT BY MEMBER
3.1 In
General. The powers of the Company shall be exercised by, or under the authority of, the Member. In addition, the business
and affairs of the Company shall be ·managed under the direction of the Member. Subject to the limitations set forth in
this Agreement, the Member shall be entitled to make all decisions and take all actions for the Company.
3.2 Management
by Member. Except as otherwise limited by this Agreement, the Member shall have the power to do any and all acts necessary,
convenient or incidental to or for the furtherance of the purposes described herein, including all powers, statutory or otherwise;
provided, however, that the Company may, at its election, appoint one or more officers to exercise its rights under this Agreement.
The Member shall be entitled to make all decisions and take all actions for the Company, and the Member has the authority to bind
the Company.
3.3 Required
Approval. Any provision in this Agreement that requires the approval of the Members, but does not specify the particular percentage
interests or number of Members required for such approval, shall be interpreted to require the affirmative vote of the Member
holding a majority of the total Membership Interests from time to time, and specifically shall not be interpreted to require unanimous
consent of the Member.
3.4 Action
By Member. In exercising the voting or other approval rights as provided herein, the Member may act through meetings and/or
written consents.
3.5 Authorization.
The Company shall possess and may exercise all of the powers and privileges granted by the Act, and the Company is hereby authorized
to do any act, enter into any agreement, contract or other instrument, and otherwise to engage in any activity and to do any action
not prohibited under the Act or other applicable law which is necessary, useful, desirable or convenient to the conduct, promotion
and attainment of the business and purposes of the Company.
ARTICLE IV
ARTICLE IV
[INTENTIONALLY OMITTED]
ARTICLE V
[INTENTIONALLY OMITTED]
ARTICLE VI
EFFECT OF BANKRUPTCY. DEATH OR INCOMPETENCY
OF A MEMBER
6.1 The bankruptcy,
death, dissolution, liquidation, termination or adjudication of incompetency of a Member shall not cause the termination or dissolution
of the Company and the business of the Company shall continue. Upon any such occurrence, the trustee, receiver, executor, administrator,
committee, guardian or conservator of such Member shall have all the rights of such Member for the purpose of settling or managing
its estate or property, subject to satisfying conditions precedent to the admission of such assignee as a substitute member. The
transfer by such trustee, receiver, executor, administrator, committee, guardian or conservator of any Company Interest shall
be subject to all of the restrictions hereunder to which such transfer would have been subject if such transfer had been made
by such bankrupt, deceased, dissolved, liquidated, terminated or incompetent Member. The foregoing shall apply to the extent permitted
by applicable law. Notwithstanding any other provision of the Certificate of Formation or this Agreement, no member of the Company
shall have any right under Section 18-801(b) of the Act to agree in writing to dissolve the Company upon the bankruptcy of a member
of the Company or the occurrence of any event that causes a member of the Company to cease to be a member of the Company. The
existence of the Company as a separate legal entity shall continue until the cancellation of its Certificate of Formation as provided
in the Act.
ARTICLE VII
CONTRIBUTIONS TO THE COMPANY AND DISTRIBUTIONS
7.1 Member
Capital Contributions. Upon execution of this Agreement, the Member shall contribute as the Member's initial Capital Contribution,
$100 in cash.
7.2 [Intentionally
Omitted]
7.3 Distributions
and Allocations. All distributions of cash or other property (except upon the Company's dissolution, which shall be governed
by the applicable provisions of the Act and Article IX hereof) and all allocations of income, profits, and loss shall be made
100% to the Member in accordance with its Membership Interest. All amounts withheld pursuant to the Code or any provisions of
state or local tax law with respect to any payment or distribution to the Member from the Company shall be treated as amounts
distributed to the Member pursuant to this Section 7.3. Notwithstanding any provision to the contrary contained in this Agreement,
the Company shall not be required to make a distribution to the Member on account of its interest in the Company if such distribution
would violate Section 18-607 of the Act or any other applicable law.
ARTICLE VIII
ASSIGNMENTS AND RESIGNATIONS
8.1 Assignment,
Resignation and Admission Generally.
(a) Assignments.
The Member may assign in whole or in part its Membership Interest in the Company. If the Member transfers all of its Membership
Interest pursuant to this Section 8.1, the transferee shall be admitted to the Company as a member of the Company upon its execution
of an instrument signifying its agreement to be bound by the terms and conditions of this Agreement, which instrument may be a
counterpart signature page to this Agreement. Such admission shall be deemed effective immediately prior to the transfer and,
immediately following such admission, the Member shall cease to be a member of the Company. Notwithstanding anything in this Agreement
to the contrary, any successor to the Member by merger or consolidation shall, without further act, be the Member hereunder, and
such merger or consolidation shall not constitute an assignment for purposes of this Agreement and the Company shall continue
without dissolution.
(b) Resignation.
The Member is permitted to resign. If the Member is permitted to resign pursuant to this Section 8.l(b), an additional member
of the Company shall be admitted to the Company upon its execution of an instrument signifying its agreement to be bound by the
terms and conditions of this Agreement, which instrument may be a counterpart signature page to this Agreement. Such admission
shall be deemed effective immediately prior to the resignation and, immediately following such admission, and the resigning Member
shall cease to be a member of the Company.
(c) Admission
of Additional Members. One or more additional members may be admitted to the Company with the written consent of the Member.
8.2 Absolute
Prohibition. Notwithstanding any other provision in this Article VIII, the Membership Interest of the Member, in whole or
in part, or any rights to distributions therefrom, shall not be sold, exchanged, conveyed, transferred, pledged, hypothecated,
subjected to a security interest, or otherwise assigned or encumbered, if such action would result in a violation of federal or
state securities laws in the opinion of counsel for the Company.
8.3 Additional
Requirements. In addition to all requirements imposed in this Article VIII, any admission of a member or assignment of a Membership
Interest shall be subject to all restrictions relating thereto expressly imposed by the Act.
8.4 Effect
of Prohibited Action. Any assignment in violation of this Article VIII shall be, to the fullest extent permitted by law, void
and of no force or effect whatsoever.
ARTICLE IX
DISSOLUTION AND TERMINATION
9.1 Dissolution.
Subject to the other provisions of this Agreement, the Company shall be dissolved upon the first to occur of the following: (a)
the termination of the legal existence of the last remaining member of the Company or the occurrence of any other event which
terminates the continued membership of the last remaining member of the Company unless the Company is continued without dissolution
in a manner permitted by this Agreement or the Act or (b) the entry of a decree of judicial dissolution under Section 18-802 of
the Act. Upon the occurrence of any event that causes the last remaining member of the Company to cease to be a member of the
Company or that causes the Member to cease to be a member of the Company (other than upon continuation of the Company without
dissolution upon (i) an assignment by the Member of all of its Membership Interest and the admission of the transferee pursuant
to Section 8.1, or (ii) the resignation of the Member and the admission of an additional member of the Company pursuant to Section
8.1), to the fullest extent permitted by law, the personal representative of such member is hereby authorized to, and shall, within
ninety (90) days after the occurrence of the event that terminated the continued membership of such member in the Company, agree
in writing (x) to continue the Company and (y) to admit the personal representative or its nominee or designee, as the case may
be, as a substitute member of the Company, effective as of the occurrence of the event that terminated the continued membership
of the last remaining member of the Company.
9.2 Liquidation.
Upon its dissolution, the Company shall wind up its affairs and distribute its assets in accordance with Section 9.4 below and
the Act by either or a combination of the following methods as the Member (or the Person carrying out the liquidation) shall determine:
(a) selling
the Company's assets and, after the satisfaction of Company liabilities, distributing the net proceeds therefrom to the Member;
and/or
(b) subject
to the satisfaction of Company liabilities, distributing the Company's assets to the Member in kind, with the Member accepting
an undivided interest in the Company's assets in satisfaction of its Membership Interest.
9.3 Orderly
Liquidation. A reasonable time as determined by the Member (or the Person carrying out the liquidation) shall be allowed for
the orderly liquidation of the assets of the Company and the discharge of liabilities to the creditors so as to minimize any losses
attendant upon dissolution.
9.4 Distributions.
Upon dissolution, the Company's assets (including any cash on hand) shall be distributed in the following order and in accordance
with the following priorities:
(a) first,
to the satisfaction of all debts and liabilities of the Company (whether by payment or the making of reasonable provision for
payment thereof) and the expenses of liquidation, including a sales commission to the selling agent, if any; then
(b) second,
to the Member.
9.5 Termination.
The Company shall terminate when (i) all of the assets of the Company, after payment of or due provision for all debts, liabilities
and obligations of the Company, shall have been distributed to the Member in the manner provided for in this Agreement and (ii)
the Certificate of Formation shall have been canceled in the manner required by the Act. The existence of the Company as a separate
legal entity shall continue until cancellation of the Certificate of Formation as provided in the Act.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Governing
Law. This Agreement shall be construed, enforced, and interpreted in accordance with the laws of the State of Delaware, without
regard to conflicts of law provisions and principles thereof.
10.2 Indemnity.
The Company shall indemnify and hold harmless any person who was or is a party to any proceeding, including any proceeding brought
by a member in the right of the Company or brought by or on behalf of any member of the Company, by reason of the fact that he
is or was an officer of the Company, against any liability incurred by him in connection with such proceedings unless he engaged
in willful misconduct or knowing violation of the criminal law or any federal or state securities laws. Furthermore, in any such
proceedings brought by or on behalf of the Company or bought by or on behalf of the members of the Company, no officer shall be
liable to the Company or its members for any monetary damages with respect to any transaction, occurrence, course of conduct or
otherwise, except for liability resulting from such officer's having engaged in willful misconduct or a knowing violation of the
criminal law or any federal or state securities laws.
10.3 Integrated
and Binding Agreement; Amendment. This Agreement contains the entire understanding and agreement among the parties hereto
with respect to the subject matter hereof, and there are no other agreements, understandings, representations or warranties among
the parties hereto other than those set forth herein. This Agreement may be amended only by written agreement of the Member and
only as provided in this Agreement. Notwithstanding any other provision of this Agreement, the parties hereto agree that this
Agreement constitutes a legal, valid and binding agreement, and is enforceable against each of them in accordance with its terms.
10.4 Construction.
Whenever the singular number is used in this Agreement and when required by the context, the same shall include the plural, and
the masculine gender shall include the feminine and neuter genders, and vice versa.
10.5 Headings.
The headings in this Agreement are inserted for convenience only and are in no way intended to describe, interpret, define, or
limit the scope, extent, or intent of this Agreement or any provision hereof.
10.6 Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute one
and the same instrument.
10.7 Severability.
If any provision of this Agreement or the application thereof to any Person or circumstance shall be invalid, illegal, or unenforceable
to any extent, the remainder of this Agreement and the application thereof shall not be affected and shall be enforceable to the
fullest extent permitted by law.
10.8 Notices.
All notices under this Agreement shall be in writing and shall be given to the party entitled thereto by personal service or by
mail, posted to the address maintained by the Company for such person or at such other address as he may specify in writing.
10.9 Rights
and Remedies Cumulative; Waivers. The rights and remedies provided by this Agreement are cumulative and the use of any one
right or remedy by any party shall not preclude or waive the right to use any or all other remedies, and are given in addition
to any other rights the parties may have by law, statute, ordinance, or otherwise. The failure of any party to seek redress for
violation of or to insist upon the strict performance of any covenant or condition of this Agreement shall not prevent a subsequent
act, which would have originally constituted a violation, from having the effect of an original violation.
10.10 Heirs.
Successors, and Assigns. Each and all of the covenants, terms, provisions, and agreements herein contained shall be binding
upon, and inure to the benefit of, the parties hereto and, to the extent permitted by this Agreement, their respective heirs,
legal representatives, successors, and assigns.
10.11 Partition.
Each member agrees that the assets of the Company are not and will not be suitable for partition. Accordingly, each member hereby
irrevocably waives (to the fullest extent permitted by law) any and all rights that he may have, or may obtain, to maintain any
action for partition of any of the assets of the Company.
10.12 Tax
Status. It is the intention of the Member that the Company be a disregarded entity for federal income tax purposes under Section
7701 of the Code and the Treasury Regulations promulgated pursuant thereto.
10.13 Effective
Date. Pursuant to Section 18-201(d) of the Act, this Agreement shall be effective as of the time of the filing of the Certificate
of Formation with the Office of the Delaware Secretary of State.
ARTICLE XI
DEFINITIONS
In addition to any other
defined terms herein, the following terms used in this Agreement shall have the following meanings (unless otherwise expressly
provided herein):
(a) "Affiliate"
shall mean any Person controlling or controlled by or under common control with the Company, including, without limitation (i)
any person who has a familial relationship, by blood, marriage or otherwise with any Member or employee of the Company, or any
Affiliate thereof and (ii) any Person which receives compensation for administrative, legal or accounting services from the Company,
or any of its Affiliates. For purposes of this definition, "control" when used with respect to any specified Person,
means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative
to the foregoing.
(b) "Bankruptcy"
shall mean, with respect to any Person, if such Person (i) makes an assignment for the benefit of creditors, (ii) files a voluntary
petition in bankruptcy, (iii) is adjudged a bankrupt or insolvent, or has entered against it an order for relief, in any bankruptcy
or insolvency proceedings, (iv) files a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment,
liquidation or similar relief under any statute, law or regulation, (v) files an answer or other pleading admitting or failing
to contest the material allegations of a petition filed against it in any proceeding of this nature, (vi) seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator of the Person or of all or any substantial part of its properties,
or (vii) if 120 days after the commencement of any proceeding against the Person seeking reorganization, arrangement, composition,
readjustment, liquidation or similar relief under any statute, law or regulation, if the proceeding has not been dismissed, or
if within 90 days after the appointment without such Person's consent or acquiescence of a trustee, receiver or liquidator of
such Person or of all or any substantial part of its properties, the appointment is not vacated or stayed, or within 90 days after
the expiration of any such stay, the appointment is not vacated. The foregoing definition of "Bankruptcy" is intended
to replace and shall supersede and replace the definition of "Bankruptcy" set forth in Sections 18-101(1) and 18-304
of the Act.
(c) "Capital
Contribution" shall mean any contribution to the capital of the Company by the Member in cash, property, or services, or
a binding obligation to contribute cash, property, or services, whenever made.
(d) "Certificate
of Formation" shall mean the Certificate of Formation of the Company, as amended and in force from time to time.
(e) “Company
Interest” shall mean any equity interest in the Company, direct or indirect.
(h) "Code"
shall mean the Internal Revenue Code of 1986, as amended, or corresponding provisions of subsequent superseding federal revenue
laws and the rules and regulations promulgated thereunder.
(i) “Company
shall mean BRG WORLD GATEWAY ORLANDO, LLC.
(j) "Entity"
shall mean any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business
trust, cooperative, association or other entity.
(m) "Member"
shall mean the Person identified in Article II hereof and includes any Person admitted as an additional member or a substitute
member of the Company pursuant to the provisions of this Agreement, each in its capacity as a member of the Company.
(n) "Membership
Interest" shall mean the Member's limited liability company interest in the Company and the other rights and obligations
with respect thereto as set forth in this Agreement. The Membership Interest is set forth beside the Member's name in Article
II of this Agreement.
(o) "Person"
shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company,
trust (including any beneficiary thereof), unincorporated organization, or government or any agency or political subdivision thereof.
(p) “Property”
is defined in Section 1.1 of this Agreement.
(q) “Subsidiary”
shall mean any Entity in which the Company owns, directly or indirectly, a membership or other equity interest equal to 50% or
more of the outstanding equity in that Entity.
[REMAINDER OF THIS PAGE
INTENTIONALLY LEFT BLANK]
The undersigned hereby
agrees, acknowledges, and certifies that the foregoing constitutes the sole and entire Limited Liability Company Agreement of
the Company.
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Member: |
Bluerock Residential Holdings, LP |
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a Delaware limited partnership |
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By: |
Bluerock Residential Growth REIT, Inc., a Maryland corporation, its general partner |
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By: |
/s/ R.
Ramin Kamfar |
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Name: |
Ramin
Kamfar |
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Title: |
Authorized
Signatory |
Exhibit 10.4
Freddie Mac Loan
Number: 708556663
Property Name:
Century Palms at World Gateway
MULTIFAMILY
LOAN AND SECURITY AGREEMENT
(Revised
5-20-2015)
Borrower: |
BR CARROLL WORLD GATEWAY, LLC,
a Delaware limited liability company |
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Lender: |
JONES LANG LASALLE OPERATIONS, L.L.C., an Illinois limited
liability company |
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Date: |
As of August 20, 2015 |
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Loan Amount: |
$24,999,000.00 |
Reserve
Fund Information
(See Article
IV)
Imposition
Reserves (fill in “Collect” or “Deferred” as appropriate for each item)
Collect |
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Insurance |
Collect |
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Taxes |
Deferred |
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water/sewer |
N/A |
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Ground Rents |
Deferred |
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assessments/other charges |
Repairs & Repair Reserve |
Repairs required? |
¨ Yes |
x No |
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If No, is radon testing required? |
¨ Yes |
x No |
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If Yes, is a Reserve required? |
¨ Yes |
¨ No |
If Yes to Repairs, but No Reserve, is a Letter of Credit
required? |
¨ Yes |
¨ No |
Replacement Reserve |
x Yes |
If Yes: x
Funded ¨ Deferred |
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¨ No |
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Rental Achievement Reserve |
¨ Yes |
If Yes: ¨ Cash |
¨ Letter
of Credit |
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x No |
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Cap Agreement Reserve
(Cap Collateral) |
x Yes |
¨ No |
Other Reserve(s) |
¨ Yes |
x No |
If Yes, specify:________________________________________________________________________________________
Lease-Up Transaction |
¨ Yes |
x No |
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If Yes, is a Reserve required? |
¨ Yes |
¨ No |
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If Yes, is a Letter of Credit required? |
¨ Yes |
¨ No |
Attached
Riders
(See
Article XIII)
Name of Rider |
|
Date Revised |
Rider to Multifamily Loan and Security Agreement - Replacement
Reserve Fund – Immediate Deposits |
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7-1-2014 |
Rider to Multifamily Loan and Security Agreement – Rate Cap
Agreement and Rate Cap Agreement Reserve Fund |
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6-30-2015 |
Rider to Multifamily Loan and Security Agreement – Affiliate
Transfer (MPC Partnership Holdings LLC) |
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7-1-2014 |
Rider to Multifamily Loan and Security Agreement – Affiliate
Transfer (Bluerock Residential Holdings, LP) |
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7-1-2014 |
Rider to Multifamily Loan and Security Agreement – Buy-Sell
Transfer |
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7-1-2014 |
Rider to Multifamily Loan and Security Agreement – Entity
Guarantor |
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3-1-2014 |
Exhibit
B Modifications
(See Article
XIV)
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Are any
Exhibit B modifications attached? |
x Yes |
¨ No |
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|
TABLE
OF CONTENTS
ARTICLE I DEFINED TERMS; CONSTRUCTION |
1.01 |
Defined Terms |
1.02 |
Construction |
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ARTICLE II LOAN |
2.01 |
Loan Terms |
2.02 |
Prepayment Premium |
2.03 |
Exculpation |
2.04 |
Application of Payments |
2.05 |
Usury Savings |
2.06 |
Floating Rate Mortgage - Third Party Cap Agreement |
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ARTICLE III LOAN SECURITY AND GUARANTY |
3.01 |
Security Instrument |
3.02 |
Reserve Funds |
3.03 |
Uniform Commercial Code Security Agreement |
3.04 |
Cap Agreement and Cap Collateral Assignment |
3.05 |
Guaranty |
3.06 |
Reserved |
3.07 |
Reserved |
3.08 |
Reserved |
|
|
ARTICLE IV RESERVE FUNDS AND REQUIREMENTS |
4.01 |
Reserves Generally |
4.02 |
Reserves for Taxes, Insurance and Other Charges |
4.03 |
Repairs; Repair Reserve Fund |
4.04 |
Replacement Reserve Fund |
4.05 |
Rental Achievement Provisions |
4.06 |
Debt Service Reserve |
4.07 |
Rate Cap Agreement Reserve Fund |
4.08 |
Reserved |
4.09 |
Reserved |
4.10 |
Reserved |
|
|
ARTICLE V REPRESENTATIONS AND WARRANTIES |
5.01 |
Review of Documents |
5.02 |
Condition of Mortgaged Property |
5.03 |
No Condemnation |
5.04 |
Actions; Suits; Proceedings |
5.05 |
Environmental |
5.06 |
Commencement of Work; No Labor or Materialmen’s Claims |
5.07 |
Compliance with Applicable Laws and Regulations |
5.08 |
Access; Utilities; Tax Parcels |
5.09 |
Licenses and Permits |
5.10 |
No Other Interests |
5.11 |
Term of Leases |
5.12 |
No Prior Assignment; Prepayment of Rents |
5.13 |
Illegal Activity |
5.14 |
Taxes Paid |
5.15 |
Title Exceptions |
5.16 |
No Change in Facts or Circumstances |
Multifamily Loan and Security Agreement | Page i |
5.17 |
Financial Statements |
5.18 |
ERISA – Borrower Status |
5.19 |
No Fraudulent Transfer or Preference |
5.20 |
No Insolvency or Judgment |
5.21 |
Working Capital |
5.22 |
Cap Collateral |
5.23 |
Ground Lease |
5.24 |
Purpose of Loan |
5.25 |
Through 5.39 are Reserved |
5.40 |
Recycled SPE Borrower |
5.41 |
Recycled SPE Equity Owner |
5.42 |
Through 5.50 are Reserved |
5.51 |
Survival |
5.52 |
through 5.53 are Reserved |
|
|
|
ARTICLE VI |
BORROWER COVENANTS |
6.01 |
Compliance with Laws |
6.02 |
Compliance with Organizational Documents |
6.03 |
Use of Mortgaged Property |
6.04 |
Non-Residential Leases |
6.05 |
Prepayment of Rents |
6.06 |
Inspection |
6.07 |
Books and Records; Financial Reporting |
6.08 |
Taxes; Operating Expenses; Ground Rents |
6.09 |
Preservation, Management and Maintenance of Mortgaged
Property |
6.10 |
Insurance |
6.11 |
Condemnation |
6.12 |
Environmental Hazards |
6.13 |
Single Purpose Entity Requirements |
6.14 |
Repairs and Capital Replacements |
6.15 |
Residential Leases Affecting the Mortgaged Property |
6.16 |
Litigation; Government Proceedings |
6.17 |
Further Assurances and Estoppel Certificates; Lender’s
Expenses |
6.18 |
Cap Collateral |
6.19 |
Ground Lease |
6.20 |
ERISA Requirements |
6.21 |
through 6.46 are Reserved |
|
|
|
ARTICLE VII |
TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER |
7.01 |
Permitted Transfers |
7.02 |
Prohibited Transfers |
7.03 |
Conditionally Permitted Transfers |
7.04 |
Preapproved Intrafamily Transfers |
7.05 |
Lender’s Consent to Prohibited Transfers |
7.06 |
SPE Equity Owner Requirement Following Transfer |
7.07 |
Additional Transfer Requirements - External Cap Agreement |
7.08 |
Reserved |
7.09 |
Reserved |
|
|
|
ARTICLE VIII |
SUBROGATION |
Multifamily Loan and Security Agreement | Page ii |
ARTICLE IX EVENTS OF DEFAULT AND REMEDIES |
9.01 |
Events of Default |
9.02 |
Protection of Lender’s Security; Security Instrument Secures Future Advances |
9.03 |
Remedies |
9.04 |
Forbearance |
9.05 |
Waiver of Marshalling |
|
ARTICLE X RELEASE; INDEMNITY |
10.01 |
Release |
10.02 |
Indemnity |
10.03 |
Reserved |
|
ARTICLE XI MISCELLANEOUS PROVISIONS |
11.01 |
Waiver of Statute of Limitations, Offsets and Counterclaims |
11.02 |
Governing Law; Consent to Jurisdiction and Venue |
11.03 |
Notice |
11.04 |
Successors and Assigns Bound |
11.05 |
Joint and Several (and Solidary) Liability |
11.06 |
Relationship of Parties; No Third Party Beneficiary |
11.07 |
Severability; Amendments |
11.08 |
Disclosure of Information |
11.09 |
Determinations by Lender |
11.10 |
Sale of Note; Change in Servicer; Loan Servicing |
11.11 |
Supplemental Financing |
11.12 |
Defeasance |
11.13 |
Lender’s Rights to Sell or Securitize |
11.14 |
Cooperation with Rating Agencies and Investors |
11.15 |
Letter of Credit Requirements |
11.16 |
Through 11.18 are Reserved |
11.19 |
State Specific Provisions |
11.20 |
Time is of the Essence |
|
ARTICLE XII DEFINITIONS |
|
ARTICLE XIII INCORPORATION
OF ATTACHED RIDERS |
|
ARTICLE XIV INCORPORATION OF ATTACHED EXHIBITS |
Multifamily Loan and Security Agreement | Page iii |
MULTIFAMILY
LOAN AND SECURITY AGREEMENT
THIS MULTIFAMILY
LOAN AND SECURITY AGREEMENT (“Loan Agreement”) is dated as of the 20th day of August, 2015 and is made by and
between BR CARROLL WORLD GATEWAY, LLC, a Delaware limited liability company (“Borrower”), and JONES
LANG LASALLE OPERATIONS, L.L.C., an Illinois limited liability company (together with its successors and assigns, “Lender”).
RECITAL
Lender has
agreed to make and Borrower has agreed to accept a loan in the original principal amount of $24,999,000.00 (“Loan”).
Lender is willing to make the Loan to Borrower upon the terms and subject to the conditions set forth in this Loan Agreement.
AGREEMENT
NOW, THEREFORE,
in consideration of these promises, the mutual covenants contained in this Loan Agreement and other good and valuable consideration,
the receipt and sufficiency of which are acknowledged, the parties agree as follows:
| ARTICLE
I | DEFINED
TERMS; CONSTRUCTION. |
| 1.01 | Defined
Terms. Each defined term in this Loan Agreement will have the meaning ascribed to
that term in Article XII unless otherwise defined in this Loan Agreement. |
| (a) | The
captions and headings of the Articles and Sections of this Loan Agreement are for convenience
only and will be disregarded in construing this Loan Agreement. |
| (b) | Any
reference in this Loan Agreement to an “Exhibit,” an “Article”
or a “Section” will, unless otherwise explicitly provided, be construed as
referring, respectively, to an Exhibit attached to this Loan Agreement or to an Article
or Section of this Loan Agreement. |
| (c) | All
Exhibits and Riders attached to or referred to in this Loan Agreement are incorporated
by reference in this Loan Agreement. |
| (d) | Any
reference in this Loan Agreement to a statute or regulation will be construed as referring
to that statute or regulation as amended from time to time. |
| (e) | Use
of the singular in this Loan Agreement includes the plural and use of the plural includes
the singular. |
| (f) | As used
in this Loan Agreement, the term “including” means “including, but
not limited to” and the term “includes” means “includes without
limitation.” |
| (g) | The
use of one gender includes the other gender, as the context may require. |
| (h) | Unless
the context requires otherwise, (i) any definition of or reference to any agreement,
instrument or other document in this Loan Agreement will be construed as referring to
such agreement, instrument or other document as from time to time amended, supplemented
or otherwise modified (subject to any restrictions on such amendments, supplements or
modifications set forth in this Loan Agreement), and (ii) any reference in this Loan
Agreement to any Person will be construed to include such Person’s successors and
assigns. |
Multifamily Loan and Security Agreement | Page 1 |
| (i) | Any
reference in this Loan Agreement to “Lender’s requirements,” “as
required by Lender,” or similar references will be construed, after Securitization,
to mean Lender’s requirements or standards as determined in accordance with Lender’s
and Loan Servicer’s obligations under the terms of the Securitization documents. |
| 2.01 | Loan
Terms. The Loan will be evidenced by the Note and will bear interest and be paid
in accordance with the payment terms set forth in the Note. |
| 2.02 | Prepayment
Premium. Borrower will be required to pay a prepayment premium in connection with
certain prepayments of the Indebtedness, including a payment made after Lender’s
exercise of any right of acceleration of the Indebtedness, as provided in the Note. |
| 2.03 | Exculpation.
Borrower’s personal liability for payment of the Indebtedness and for performance
of the other obligations to be performed by it under this Loan Agreement is limited in
the manner, and to the extent, provided in the Note. |
| 2.04 | Application
of Payments. If at any time Lender receives, from Borrower or otherwise, any amount
applicable to the Indebtedness which is less than all amounts due and payable at such
time, then Lender may apply that payment to amounts then due and payable in any manner
and in any order determined by Lender (unless otherwise required by applicable law),
in Lender’s sole and absolute discretion. Neither Lender’s acceptance of
an amount that is less than all amounts then due and payable, nor Lender’s application
of such payment in the manner authorized, will constitute or be deemed to constitute
either a waiver of the unpaid amounts or an accord and satisfaction. Notwithstanding
the application of any such amount to the Indebtedness, Borrower’s obligations
under this Loan Agreement, the Note and all other Loan Documents will remain unchanged. |
| 2.05 | Usury
Savings. If any applicable law limiting the amount of interest or other charges permitted
to be collected from Borrower is interpreted so that any charge provided for in any Loan
Document, whether considered separately or together with other charges levied in connection
with any other Loan Document, violates that law, and Borrower is entitled to the benefit
of that law, that charge is reduced to the extent necessary to eliminate that violation.
The amounts, if any, previously paid to Lender in excess of the permitted amounts will
be applied by Lender to reduce the principal amount of the Indebtedness. For the purpose
of determining whether any applicable law limiting the amount of interest or other charges
permitted to be collected from Borrower has been violated, all Indebtedness which constitutes
interest, as well as all other charges levied in connection with the Indebtedness which
constitute interest, will be deemed to be allocated and spread ratably over the stated
term of the Note. Unless otherwise required by applicable law, such allocation and spreading
will be effected in such a manner that the rate of interest so computed is uniform throughout
the stated term of the Note. |
| 2.06 | Floating
Rate Mortgage - Third Party Cap Agreement. If (a) the Note does not provide for interest
to accrue at a floating or variable interest rate (other than during any Extension Period,
if applicable), and (b) a third party Cap Agreement is not required, then this Section
2.06 and Section 3.04 will be of no force or effect. |
Multifamily Loan and Security Agreement | Page 2 |
| (a) | So long
as there is no Event of Default, Lender or Loan Servicer will remit to Borrower each
Cap Payment received by Lender or Loan Servicer with respect to any month for which Borrower
has paid in full the monthly installment of principal and interest or interest only,
as applicable, due under the Note. Alternatively, at Lender’s option, so long as
there is no Event of Default, Lender may apply a Cap Payment received by Lender or Loan
Servicer with respect to any month to the applicable monthly payment of accrued interest
due under the Note if Borrower has paid in full the remaining portion of such monthly
payment of principal and interest or interest only, as applicable. |
| (b) | Neither
the existence of a Cap Agreement nor anything in this Loan Agreement will relieve Borrower
of its primary obligation to timely pay in full all amounts due under the Note and otherwise
due on account of the Indebtedness. |
| ARTICLE III | LOAN
SECURITY AND GUARANTY. |
| 3.01 | Security
Instrument. Borrower will execute the Security Instrument dated of even date with
this Loan Agreement. The Security Instrument will be recorded in the applicable land
records in the Property Jurisdiction. |
| (a) | Security
Interest. To secure Borrower’s obligations under this Loan Agreement and to
further secure Borrower’s obligations under the Note and the other Loan Documents,
Borrower conveys, pledges, transfers and grants to Lender a security interest pursuant
to the Uniform Commercial Code of the Property Jurisdiction or any other applicable law
in and to all money in the Reserve Funds, as the same may increase or decrease from time
to time, all interest and dividends thereon and all proceeds thereof. |
| (b) | Supplemental
Loan. If this Loan Agreement is entered into in connection with a Supplemental Loan
and if the same Person is or becomes both Senior Lender and Supplemental Lender, then: |
| (i) | Borrower
assigns and grants to Supplemental Lender a security interest in the Reserve Funds established
in connection with the Senior Indebtedness as additional security for all of Borrower’s
obligations under the Supplemental Note. |
| (ii) | In
addition, Borrower assigns and grants to Senior Lender a security interest in the Reserve
Funds established in connection with the Supplemental Indebtedness as additional security
for all of Borrower’s obligations under the Senior Note. |
| (iii) | It
is the intention of Borrower that all amounts deposited by Borrower in connection with
either the Senior Loan Documents, the Supplemental Loan Documents, or both, constitute
collateral for the Supplemental Indebtedness secured by the Supplemental Instrument and
the Senior Indebtedness secured by the Senior Instrument, with the application of such
amounts to such Senior Indebtedness or Supplemental Indebtedness to be at the discretion
of Senior Lender and Supplemental Lender. |
| 3.03 | Uniform
Commercial Code Security Agreement. This Loan Agreement is also a security agreement
under the Uniform Commercial Code for any of the Mortgaged Property which, under applicable
law, may be subjected to a security interest under the Uniform Commercial Code, for the
purpose of securing Borrower’s obligations under this Loan Agreement and to further
secure Borrower’s obligations under the Note, Security Instrument and other Loan
Documents, whether such Mortgaged Property is owned now or acquired in the future, and
all products and cash and non-cash proceeds thereof (collectively, “UCC Collateral”),
and by this Loan Agreement, Borrower grants to Lender a security interest in the UCC
Collateral. |
Multifamily Loan and Security Agreement | Page 3 |
| 3.04 | Cap
Agreement and Cap Collateral Assignment. Reserved. |
| 3.05 | Guaranty.
Borrower will cause each Guarantor (if any) to execute a Guaranty of all or a portion
of Borrower’s obligations under the Loan Documents effective as of the date of
this Loan Agreement. |
| ARTICLE IV | RESERVE
FUNDS AND REQUIREMENTS. |
| (a) | Establishment
of Reserve Funds; Investment of Deposits. Unless otherwise provided in Section 4.03
and/or Section 4.04, each Reserve Fund will be established on the date of this Loan Agreement
and each of the following will apply: |
| (i) | All Reserve
Funds will be deposited in an Eligible Account at an Eligible Institution or invested
in “permitted investments” as then defined and required by the Rating Agencies. |
| (ii) | Lender
will not be obligated to open additional accounts or deposit Reserve Funds in additional
institutions when the amount of any Reserve Fund exceeds the maximum amount of the federal
deposit insurance or guaranty. Borrower acknowledges and agrees that it will not have
the right to direct Lender as to any specific investment of monies in any Reserve Fund.
Lender will not be responsible for any losses resulting from investment of monies in
any Reserve Fund or for obtaining any specific level or percentage of earnings on such
investment. |
| (b) | Interest
on Reserve Funds; Trust Funds. Unless applicable law requires, Lender will not be
required to pay Borrower any interest, earnings or profits on the Reserve Funds. Any
amounts deposited with Lender under this Article IV will not be trust funds, nor will
they operate to reduce the Indebtedness, unless applied by Lender for that purpose pursuant
to the terms of this Loan Agreement. |
| (c) | Use
of Reserve Funds. Each Reserve Fund will, except as otherwise provided in this Loan
Agreement, be used for the sole purpose of paying, or reimbursing Borrower for payment
of, the item(s) for which the applicable Reserve Fund was established. Borrower acknowledges
and agrees that, except as specified in this Loan Agreement, monies in one Reserve Fund
will not be used to pay, or reimburse Borrower for, matters for which another Reserve
Fund has been established. |
| (d) | Termination
of Reserve Funds. Upon the payment in full of the Indebtedness, Lender will pay to
Borrower all funds remaining in any Reserve Funds. |
Multifamily Loan and Security Agreement | Page 4 |
| 4.02 | Reserves
for Taxes, Insurance and Other Charges. |
| (a) | Deposits
to Imposition Reserve Deposits. Borrower will deposit with Lender on the day monthly
installments of principal or interest, or both, are due under the Note (or on another
day designated in writing by Lender), until the Indebtedness is paid in full, an additional
amount sufficient to accumulate with Lender the entire sum required to pay, when due,
the items marked “Collect” below. Except as provided in Section 4.02(e),
Lender will not require Borrower to make Imposition Reserve Deposits with respect to
the items marked “Deferred” below. |
[Collect] |
Property Insurance premiums or premiums for other Insurance
required by Lender under Section 6.10 |
[Collect] |
Taxes and payments in lieu of taxes |
[Deferred] |
water and sewer charges that could become a Lien on the Mortgaged
Property |
[N/A] |
Ground Rents |
[Deferred] |
assessments or other charges that could become a Lien on the Mortgaged
Property, including home owner association dues |
The
amounts deposited pursuant to this Section 4.02(a) are collectively referred to in this Loan Agreement as the “Imposition
Reserve Deposits.” The obligations of Borrower for which the Imposition Reserve Deposits are required are collectively
referred to in this Loan Agreement as “Impositions.” The amount of the Imposition Reserve Deposits must be
sufficient to enable Lender to pay each Imposition before the last date upon which such payment may be made without any penalty
or interest charge being added. Lender will maintain records indicating how much of the monthly Imposition Reserve Deposits and
how much of the aggregate Imposition Reserve Deposits held by Lender are held for the purpose of paying Taxes, Insurance premiums,
Ground Rent (if applicable) and each other Imposition.
| (b) | Disbursement
of Imposition Reserve Deposits. Lender will apply the Imposition Reserve Deposits
to pay Impositions so long as no Event of Default has occurred and is continuing. Lender
will pay all Impositions from the Imposition Reserve Deposits held by Lender upon Lender’s
receipt of a bill or invoice for an Imposition. If Borrower holds a ground lessee interest
in the Mortgaged Property and Imposition Reserve Deposits are collected for Ground Rent,
then Lender will pay the monthly or other periodic installments of Ground Rent from the
Imposition Reserve Deposits, whether or not Lender receives a bill or invoice for such
installments. Lender will have no obligation to pay any Imposition to the extent it exceeds
the amount of the Imposition Reserve Deposits then held by Lender. Lender may pay an
Imposition according to any bill, statement or estimate from the appropriate public office,
Ground Lessor (if applicable) or insurance company without inquiring into the accuracy
of the bill, statement or estimate or into the validity of the Imposition. |
| (c) | Excess
or Deficiency of Imposition Reserve Deposits. If at any time the amount of the Imposition
Reserve Deposits held by Lender for payment of a specific Imposition exceeds the amount
reasonably deemed necessary by Lender, the excess will be credited against future installments
of Imposition Reserve Deposits. If at any time the amount of the Imposition Reserve Deposits
held by Lender for payment of a specific Imposition is less than the amount reasonably
estimated by Lender to be necessary, Borrower will pay to Lender the amount of the deficiency
within 15 days after Notice from Lender. |
Multifamily Loan and Security Agreement | Page 5 |
| (d) | Delivery
of Invoices. Borrower will promptly deliver to Lender a copy of all notices of, and
invoices for, Impositions. |
| (e) | Deferral
of Collection of Any Imposition Reserve Deposits; Delivery of Receipts. If Lender
does not collect an Imposition Reserve Deposit with respect to an Imposition either marked
“Deferred” in Section 4.02(a) or pursuant to a separate written deferral
by Lender, then on or before the earlier of the date each such Imposition is due, or
the date this Loan Agreement requires each such Imposition to be paid, Borrower will
provide Lender with proof of payment of each such Imposition. Upon Notice to Borrower,
Lender may revoke its deferral and require Borrower to deposit with Lender any or all
of the Imposition Reserve Deposits listed in Section 4.02(a), regardless of whether any
such item is marked “Deferred” (i) if Borrower does not timely pay any of
the Impositions, (ii) if Borrower fails to provide timely proof to Lender of such payment,
(iii) at any time during the existence of an Event of Default or (iv) upon placement
of a Supplemental Loan in accordance with Section 11.11. |
| (f) | through
(i) are Reserved. |
| 4.03 | Repairs;
Repair Reserve Fund. Reserved. |
| 4.04 | Replacement
Reserve Fund. Reserved. |
| 4.05 | Rental
Achievement Provisions. Reserved. |
| 4.06 | Debt
Service Reserve. Reserved. |
| 4.07 | Rate
Cap Agreement Reserve Fund. Reserved. |
| ARTICLE V | REPRESENTATIONS
AND WARRANTIES. |
Borrower represents
and warrants to Lender as follows as of the date of this Loan Agreement:
| 5.01 | Review
of Documents. Borrower has reviewed: (a) the Note, (b) the Security Instrument, (c)
the Commitment Letter, and (d) all other Loan Documents. |
| 5.02 | Condition
of Mortgaged Property. Except as Borrower may have disclosed to Lender in writing
in connection with the issuance of the Commitment Letter, the Mortgaged Property has
not been damaged by fire, water, wind or other cause of loss, or any previous damage
to the Mortgaged Property has been fully restored. |
| 5.03 | No
Condemnation. No part of the Mortgaged Property has been taken in Condemnation or
other like proceeding, and, to the best of Borrower’s knowledge after due inquiry
and investigation, no such proceeding is pending or threatened for the partial or total
Condemnation or other taking of the Mortgaged Property. |
Multifamily Loan and Security Agreement | Page 6 |
| 5.04 | Actions;
Suits; Proceedings. |
| (a) | There
are no judicial, administrative, mediation or arbitration actions, suits or proceedings
pending or, to the best of Borrower’s knowledge, threatened in writing against
or affecting Borrower (and, if Borrower is a limited partnership, any of its general
partners or if Borrower is a limited liability company, any member of Borrower) or the
Mortgaged Property which, if adversely determined, would have a Material Adverse Effect. |
| 5.05 | Environmental.
Except as previously disclosed by Borrower to Lender in writing (which written disclosure
may be in certain environmental assessments and other written reports accepted by Lender
in connection with the funding of the Indebtedness and dated prior to the date of this
Loan Agreement), each of the following is true: |
| (a) | Borrower
has not at any time engaged in, caused or permitted any Prohibited Activities or Conditions
on the Mortgaged Property. |
| (b) | To the
best of Borrower’s knowledge after due inquiry and investigation, no Prohibited
Activities or Conditions exist or have existed on the Mortgaged Property. |
| (c) | The
Mortgaged Property does not now contain any underground storage tanks, and, to the best
of Borrower’s knowledge after due inquiry and investigation, the Mortgaged Property
has not contained any underground storage tanks in the past. If there is an underground
storage tank located on the Mortgaged Property that has been previously disclosed by
Borrower to Lender in writing, that tank complies with all requirements of Hazardous
Materials Laws. |
| (d) | To the
best of Borrower’s knowledge after due inquiry and investigation, Borrower has
complied with all Hazardous Materials Laws, including all requirements for notification
regarding releases of Hazardous Materials. Without limiting the generality of the foregoing,
all Environmental Permits required for the operation of the Mortgaged Property in accordance
with Hazardous Materials Laws now in effect have been obtained and all such Environmental
Permits are in full force and effect. |
| (e) | To the
best of Borrower’s knowledge after due inquiry and investigation, no event has
occurred with respect to the Mortgaged Property that constitutes, or with the passage
of time or the giving of notice, or both, would constitute, noncompliance with the terms
of any Environmental Permit. |
| (f) | There
are no actions, suits, claims or proceedings pending or, to the best of Borrower’s
knowledge after due inquiry and investigation, threatened in writing, that involve the
Mortgaged Property and allege, arise out of, or relate to any Prohibited Activity or
Condition. |
| (g) | Borrower
has received no actual or constructive notice of any written complaint, order, notice
of violation or other communication from any Governmental Authority with regard to air
emissions, water discharges, noise emissions or Hazardous Materials, or any other environmental,
health or safety matters affecting the Mortgaged Property or any property that is adjacent
to the Mortgaged Property. |
Multifamily Loan and Security Agreement | Page 7 |
| 5.06 | Commencement
of Work; No Labor or Materialmen’s Claims. Except as set forth on Exhibit
E, prior to the recordation of the Security Instrument, no work of any kind has been
or will be commenced or performed upon the Mortgaged Property, and no materials or equipment
have been or will be delivered to or upon the Mortgaged Property, for which the contractor,
subcontractor or vendor continues to have any rights including the existence of or right
to assert or file a mechanic’s or materialmen’s Lien. If any such work of
any kind has been commenced or performed upon the Mortgaged Property, or if any such
materials or equipment have been ordered or delivered to or upon the Mortgaged Property,
then prior to the execution of the Security Instrument, Borrower has satisfied each of
the following conditions: |
| (a) | Borrower
has fully disclosed in writing to the title insurance company issuing the mortgagee title
insurance policy insuring the Lien of the Security Instrument that work has been commenced
or performed on the Mortgaged Property, or materials or equipment have been ordered or
delivered to or upon the Mortgaged Property. |
| (b) | Borrower
has obtained and delivered to Lender and the title company issuing the mortgagee title
insurance policy insuring the Lien of the Security Instrument Lien waivers from all contractors,
subcontractors, suppliers or any other applicable party, pertaining to all work commenced
or performed on the Mortgaged Property, or materials or equipment ordered or delivered
to or upon the Mortgaged Property. |
Borrower
represents and warrants that all parties furnishing labor and materials for which a Lien or claim of Lien may be filed against
the Mortgaged Property have been paid in full and, except for such Liens or claims insured against by the policy of title insurance
to be issued in connection with the Loan, there are no mechanics’, laborers’ or materialmen’s Liens or claims
outstanding for work, labor or materials affecting the Mortgaged Property, whether prior to, equal with or subordinate to the
Lien of the Security Instrument.
| 5.07 | Compliance
with Applicable Laws and Regulations. |
| (a) | To
the best of Borrower’s knowledge after due inquiry and investigation, each of the
following is true: |
| (i) | All
Improvements and the use of the Mortgaged Property
comply with all applicable statutes, rules and regulations, including all applicable
statutes, rules and regulations pertaining to requirements for equal opportunity, anti-discrimination,
fair housing, environmental protection, zoning and land use (“legal, non-conforming”
status with respect to uses or structures will be considered to comply with zoning and
land use requirements for the purposes of this representation). |
| (ii) | The
Improvements comply with applicable health, fire, and
building codes. |
| (iii) | There
is no evidence of any illegal activities relating to
controlled substances on the Mortgaged Property. |
Multifamily Loan and Security Agreement | Page 8 |
| 5.08 | Access;
Utilities; Tax Parcels. The Mortgaged Property: (a) has ingress and egress via a
publicly dedicated right of way or via an irrevocable easement permitting ingress and
egress, (b) is served by public utilities and services generally available in the surrounding
community or otherwise appropriate for the use in which the Mortgaged Property is currently
being utilized, and (c) constitutes one or more separate tax parcels. |
| 5.09 | Licenses
and Permits. |
| (a) | Borrower,
any commercial tenant of the Mortgaged Property and/or any operator of the Mortgaged
Property is in possession of all material licenses, permits and authorizations required
for use of the Mortgaged Property, which are valid and in full force and effect as of
the date of this Loan Agreement. |
| (b) | Through
(i) are reserved. |
| 5.10 | No
Other Interests. To the best of Borrower’s knowledge after due inquiry and
investigation, no Person has (a) any possessory interest in the Mortgaged Property or
right to occupy the Mortgaged Property except under and pursuant to the provisions of
existing Leases by and between tenants and Borrower (a form of residential lease having
been previously provided to Lender together with the material terms of any and all Non-Residential
Leases at the Mortgaged Property), or (b) an option to purchase the Mortgaged Property
or an interest in the Mortgaged Property, except as has
been disclosed to and approved in writing by Lender. |
| 5.11 | Term
of Leases. All Leases for residential dwelling units with respect to the Mortgaged
Property satisfy the following conditions: |
| (a) | They
are on forms that are customary for similar multifamily properties in the Property Jurisdiction. |
| (b) | They
are for initial terms of at least 6 months and not more than 2 years (unless otherwise
approved in writing by Lender). |
| (c) | They
do not include any Corporate Leases (unless otherwise approved in writing by Lender). |
| (d) | They
do not include options to purchase. |
| 5.12 | No
Prior Assignment; Prepayment of Rents. Borrower has (a) not executed any prior assignment
of Rents (other than an assignment of Rents securing any prior indebtedness that is being
assigned to Lender, or that is being paid off and discharged with the proceeds of the
Loan evidenced by the Note or, if this Loan Agreement is entered into in connection with
a Supplemental Loan, other than an assignment of Rents securing any Senior Indebtedness),
and (b) not performed any acts and has not executed, and will not execute, any instrument
which would prevent Lender from exercising its rights under any Loan Document. At the
time of execution of this Loan Agreement, unless otherwise approved by Lender in writing,
there has been no prepayment of any Rents for more than 2 months prior to the due dates
of such Rents. |
| 5.13 | Illegal
Activity. No portion of the Mortgaged Property has been or will be purchased with
the proceeds of any illegal activity. |
Multifamily Loan and Security Agreement | Page 9 |
| 5.14 | Taxes
Paid. Borrower has filed all federal, state, county and municipal tax returns required
to have been filed by Borrower, and has paid all Taxes which have become due pursuant
to such returns or to any notice of assessment received by Borrower, and Borrower has
no knowledge of any basis for additional assessment with respect to such taxes. To the
best of Borrower’s knowledge after due
inquiry and investigation, there are not presently pending any special assessments
against the Mortgaged Property or any part of the Mortgaged Property. |
| 5.15 | Title
Exceptions. To the best of Borrower’s knowledge after due inquiry and investigation,
none of the items shown in the schedule of exceptions to coverage in the title policy
issued to and accepted by Lender contemporaneously with the execution of this Loan Agreement
and insuring Lender’s interest in the Mortgaged Property will have a Material Adverse
Effect on the: (a) ability of Borrower to pay the Loan in full, (b) ability of Borrower
to use all or any part of the Mortgaged Property in the manner in which the Mortgaged
Property is being used on the Closing Date, except as set forth in Section 6.03, (c)
operation of the Mortgaged Property, or (d) value of the Mortgaged Property. |
| 5.16 | No
Change in Facts or Circumstances. |
| (a) | All
information in the application for the Loan submitted to Lender, including all financial
statements for the Mortgaged Property, Borrower, and any Borrower Principal, and all
Rent Schedules, reports, certificates, and any other documents submitted in connection
with the application (collectively, “Loan Application”) is complete
and accurate in all material respects as of the date such information was submitted to
Lender. |
| (b) | There
has been no change in any fact or circumstance since the Loan Application was submitted
to Lender that would make any information submitted as part of the Loan Application materially
incomplete or inaccurate. |
| (c) | The
organizational structure of Borrower is as set forth in Exhibit H. |
| 5.17 | Financial
Statements. The financial statements of
Borrower and each Borrower Principal furnished to Lender as part of the Loan Application
reflect in each case a positive net worth as of the date of the applicable financial
statement. |
| 5.18 | ERISA
– Borrower Status. Borrower represents as follows: |
| (a) | Borrower
is not an “investment company,” or a company under the Control of an “investment
company,” as such terms are defined in the Investment Company Act of 1940, as amended. |
| (b) | Borrower
is not an “employee benefit plan,” as defined in Section 3(3) of ERISA, which
is subject to Title I of ERISA or a “plan” to which Section 4975 of the Tax
Code applies, and the assets of Borrower do not constitute “plan assets”
of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101, as modified
by Section 3(42) of ERISA. |
| (c) | Borrower
is not a "governmental plan" within the meaning of Section 3(32) of ERISA,
and is not subject to state statutes regulating investments or fiduciary obligations
with respect to governmental plans. |
Multifamily Loan and Security Agreement | Page 10 |
| 5.19 | No
Fraudulent Transfer or Preference. No Borrower or Borrower Principal (a) has made,
or is making in connection with and as security for the Loan, a transfer of an interest
in the property of Borrower or Borrower Principal to or for the benefit of Lender or
otherwise as security for any of the obligations under the Loan Documents which is or
could constitute a voidable preference under federal bankruptcy, state insolvency or
similar applicable creditors’ rights laws, or (b) has made, or is making in connection
with the Loan, a transfer (including any transfer to or for the benefit of an insider
under an employment contract) of an interest of Borrower or any Borrower Principal in
property which is or could constitute a voidable preference under federal bankruptcy,
state insolvency or similar applicable creditors’ rights laws, or (c) has incurred,
or is incurring in connection with the Loan, any obligation (including any obligation
to or for the benefit of an insider under an employment contract) which is or could constitute
a fraudulent transfer under federal bankruptcy, state insolvency, or similar applicable
creditors’ rights laws. |
| 5.20 | No
Insolvency or Judgment. |
| (a) | No
Pending Proceedings or Judgments. No Borrower or Borrower Principal is (i) the subject
of or a party to (other than as a creditor) any completed or pending bankruptcy, reorganization
or insolvency proceeding, or (ii) the subject of any judgment unsatisfied of record or
docketed in any court located in the United States. |
| (b) | Insolvency.
Borrower is not presently insolvent, and the Loan will not render Borrower insolvent.
As used in this Section, the term “insolvent” means that the total of all
of a Person’s liabilities (whether secured or unsecured, contingent or fixed, or
liquidated or unliquidated) is in excess of the value of all of the assets of the Person
that are available to satisfy claims of creditors. |
| 5.21 | Working
Capital. After the Loan is made, Borrower intends
to have sufficient working capital, including cash flow from the Mortgaged Property or
other sources, not only to adequately maintain the Mortgaged Property, but also to pay
all of Borrower’s outstanding debts as they come due (other than any balloon payment
due upon the maturity of the Loan). Lender
acknowledges that no members or partners of Borrower or any Borrower Principal will be
obligated to contribute equity to Borrower for purposes of providing working capital
to maintain the Mortgaged Property or to pay Borrower’s outstanding debts except
as may otherwise be required under their organizational documents. |
| 5.22 | Cap
Collateral. Reserved. |
| 5.23 | Ground
Lease. Reserved. |
| 5.24 | Purpose
of Loan. The purpose of the Loan is as indicated by the checked boxes below: |
| ¨ | Refinance
Loan: The Loan is a refinancing of existing indebtedness and, except to the extent
specifically required by Lender, there is to be no change in the ownership of either
the Mortgaged Property or Borrower Principals. The intended use of any cash received
by Borrower from Lender, to the extent applicable, in connection with the refinancing
has been fully disclosed to Lender. |
| x | Acquisition
Loan: All of the consideration given or received or to be given or received in connection
with the acquisition of the Mortgaged Property has been fully disclosed to Lender. The
Mortgaged Property was or will be purchased from Centennial World Gateway, LLC, a Delaware
limited liability company (“Property Seller”). No Borrower or Borrower
Principal has or had, directly or indirectly (through a family member or otherwise),
any interest in the Property Seller and the acquisition of the Mortgaged Property is
an arm’s-length transaction. To the best of Borrower’s knowledge after due
inquiry and investigation, the purchase price of the Mortgaged Property represents the
fair market value of the Mortgaged Property and Property Seller is not or will not be
insolvent subsequent to the sale of the Mortgaged Property. |
Multifamily Loan and Security Agreement | Page 11 |
| ¨ | Supplemental
Loan: The Loan is a Supplemental Loan and, except to the extent specifically required
or approved by Lender, there has been no change in the ownership of either the Mortgaged
Property or Borrower Principals since the date of the Senior Note. The intended use of
any cash received by Borrower from Lender, to the extent applicable, in connection with
the refinancing has been fully disclosed to Lender. |
| ¨ | Cross-Collateralized/Cross-Defaulted
Loan Pool: The Loan is part of a cross-collateralized/cross-defaulted pool of loans
described as follows: |
| ____ | being
simultaneously made to Borrower and/or Borrower’s Affiliates |
| ____ | made
previously to Borrower and/or Borrower’s Affiliates |
The
intended use of any cash received by Borrower from Lender, to the extent applicable, in connection with the Loan and the other
loans comprising the cross-collateralized/cross-defaulted loan pool has been fully disclosed to Lender.
| 5.25 | through
5.39 are reserved. |
| 5.40 | Recycled
SPE Borrower. Reserved. |
| 5.41 | Recycled
SPE Equity Owner. Reserved. |
| 5.42 | through
5.50 are reserved. |
| 5.51 | Survival.
The representations and warranties set forth in this Loan Agreement will survive
until the Indebtedness is paid in full; however, the representations and warranties set
forth in Section 5.05 will survive beyond repayment of the entire Indebtedness, to the
extent provided in Section 10.02(i). |
| 5.52 | through
5.53 are reserved. |
| ARTICLE VI | BORROWER
COVENANTS. |
| 6.01 | Compliance
with Laws. Borrower will comply with all laws, ordinances, rules, regulations and
requirements of any Governmental Authority having jurisdiction over the Mortgaged Property
and all licenses and permits and all recorded covenants and agreements relating to or
affecting the Mortgaged Property, including all laws, ordinances, regulations, requirements
and covenants pertaining to health and safety, construction of improvements on the Mortgaged
Property, Repairs, Capital Replacements, fair housing, disability accommodation, zoning
and land use, applicable building codes, special use permits and environmental regulations,
Leases and the maintenance and disposition of tenant security deposits. Borrower will
take appropriate measures to prevent, and will not engage in or knowingly permit, any
illegal activities at the Mortgaged Property, including those that could endanger tenants
or visitors, result in damage to the Mortgaged Property, result in forfeiture of the
Mortgaged Property, or otherwise materially impair the Lien created by the Security Instrument
or Lender’s interest in the Mortgaged Property. Borrower will at all times maintain
records sufficient to demonstrate compliance with the provisions of this Section 6.01. |
Multifamily Loan and Security Agreement | Page 12 |
| 6.02 | Compliance
with Organizational Documents. Borrower will at all times comply with all laws, regulations
and requirements of any Governmental Authority relating to Borrower’s formation,
continued existence and good standing in its state of formation and, if different, in
the Property Jurisdiction. Borrower will at all times comply with its organizational
documents, including its partnership agreement (if Borrower is a partnership), its by-laws
(if Borrower is a corporation or housing cooperative corporation or association) or its
operating agreement (if Borrower is a limited liability company or tenancy-in-common).
If Borrower is a housing cooperative corporation or association, Borrower will at all
times maintain its status as a “cooperative housing corporation” as such
term is defined in Section 216(b) of the Internal Revenue Code of 1986, as amended, or
any successor statute thereto. |
| 6.03 | Use
of Mortgaged Property. |
| (a) | Unless
required by applicable law, without the prior written consent of Lender, Borrower will
not take any of the following actions: |
| (i) | Allow
changes in the use for which all or any part of the Mortgaged Property is being used
at the time this Loan Agreement is executed. |
| (ii) | Convert
any individual dwelling units or common areas to commercial use. |
| (iii) | Initiate
a change in the zoning classification of the Mortgaged Property or acquiesce to a change
in the zoning classification of the Mortgaged Property. |
| (iv) | Establish
any condominium or cooperative regime with respect to the Mortgaged Property beyond any
which may be in existence on the date of this Loan Agreement. |
| (v) | Combine
all or any part of the Mortgaged Property with all or any part of a tax parcel which
is not part of the Mortgaged Property. |
| (vi) | Subdivide
or otherwise split any tax parcel constituting all or any part of the Mortgaged Property. |
| (vii) | Add
to or change any location at which any of the Mortgaged Property is stored, held or located
unless Borrower (A) gives Notice to Lender within 30 days after the occurrence of such
addition or change, (B) executes and delivers to Lender any modifications of or supplements
to this Loan Agreement that Lender may require, and (C) authorizes the filing of any
financing statement which may be filed in connection with this Loan Agreement, as Lender
may require. |
| (c) | Notwithstanding
anything contained in this Section to the contrary, if Borrower is a housing cooperative
corporation or association, Lender acknowledges and consents to Borrower’s use
of the Mortgaged Property as a housing cooperative. |
| 6.04 | Non-Residential
Leases. |
| (a) | Prohibited
New Non-Residential Leases or Modified Non-Residential Leases. Except as set forth
in Section 6.04(b), Borrower will not enter into any New Non-Residential Lease, enter
into any Modified Non-Residential Lease or terminate any Non-Residential Lease (including
any Non-Residential Lease in existence on the date of this Loan Agreement) without the
prior written consent of Lender. |
Multifamily Loan and Security Agreement | Page 13 |
| (b) | New
Non-Residential Leases or Modified Non-Residential Leases for which Lender’s Consent
is Not Required. Lender’s consent will not be required for Borrower to enter
into a Modified Non-Residential Lease or a New Non-Residential Lease, provided that the
Modified Non-Residential Lease or New Non-Residential Lease satisfies each of the following
requirements: |
| (i) | The
tenant under the New Non-Residential Lease or Modified Non-Residential Lease is not an
Affiliate of Borrower or any Guarantor. |
| (ii) | The
terms of the New Non-Residential Lease or Modified Non-Residential Lease are at least
as favorable to Borrower as those customary in the applicable market at the time Borrower
enters into the New Non-Residential Lease or Modified Non-Residential Lease. |
| (iii) | The
Rents paid to Borrower pursuant to the New Non-Residential Lease or Modified Non-Residential
Lease are not less than 90% of the rents paid to Borrower pursuant to the Non-Residential
Lease, if any, for that portion of the Mortgaged Property that was in effect prior to
the New Non-Residential Lease or Modified Non-Residential Lease. |
| (iv) | The
term of the New Non-Residential Lease or Modified Non-Residential Lease, including any
option to extend, is 10 years or less. |
| (v) | Any
New Non-Residential Lease must provide that the space may not be used or operated, in
whole or in part, for any of the following: |
| (A) | The
operation of a so-called “head shop” or other business devoted to the sale
of articles or merchandise normally used or associated with illegal or unlawful activities
such as, but not limited to, the sale of paraphernalia used in connection with marijuana
or controlled drugs or substances. |
| (B) | A gun
shop, shooting gallery or firearms range. |
| (C) | A so-called
massage parlor or any business which sells, rents or permits the viewing of so-called
“adult” or pornographic materials such as, but not limited to, adult magazines,
books, movies, photographs, sexual aids, sexual articles and sex paraphernalia. |
| (D) | Any
use involving the sale or distribution of any flammable liquids, gases or other Hazardous
Materials. |
| (E) | An off-track
betting parlor or arcade. |
| (F) | A liquor
store or other establishment whose primary business is the sale of alcoholic beverages
for off-site consumption. |
| (G) | A burlesque
or strip club. |
Multifamily Loan and Security Agreement | Page 14 |
| (vi) | The aggregate
of the income derived from the space leased pursuant to the New Non-Residential Lease
accounts for less than 20% of the gross income of the Mortgaged Property on the date
that Borrower enters into the New Non-Residential Lease. |
| (vii) | Such
New Non-Residential Lease is not an oil or gas lease, pipeline agreement or other instrument
related to the production or sale of oil or natural gas. |
| (c) | Executed
Copies of Non-Residential Leases. Borrower will, without request by Lender, deliver
a fully executed copy of each Non-Residential Lease to Lender promptly after such Non-Residential
Lease is signed. |
| (d) | Subordination
and Attornment Requirements. All Non-Residential Leases, regardless of whether Lender’s
consent or approval is required, will specifically include the following provisions: |
| (i) | The Lease
is subordinate to the Lien of the Security Instrument, with such subordination to be
self-executing. |
| (ii) | The tenant
will attorn to Lender and any purchaser at a foreclosure sale, such attornment to be
self-executing and effective upon acquisition of title to the Mortgaged Property by any
purchaser at a foreclosure sale or by Lender in any manner. |
| (iii) | The
tenant agrees to execute such further evidences of attornment as Lender or any purchaser
at a foreclosure sale may from time to time request. |
| (iv) | The tenant
will, upon receipt of a written request from Lender following the occurrence of and during
the continuance of an Event of Default, pay all Rents payable under the Lease to Lender. |
| 6.05 | Prepayment
of Rents. Borrower will not receive or accept Rent under any Lease (whether a residential
Lease or a Non-Residential Lease) for more than 2 months in advance. |
| (a) | Right
of Entry. Borrower will permit Lender, its agents, representatives and designees
and any interested Governmental Authority to make or cause to be made entries upon and
inspections of the Mortgaged Property to inspect, among other things: (i) Repairs, (ii)
Capital Replacements, (iii) Restorations, (iv) Property Improvement Alterations, and
(v) any other Improvements, both in process and upon completion (including environmental
inspections and tests performed by professional inspection engineers) during normal business
hours, or at any other reasonable time, upon reasonable Notice to Borrower if the inspection
is to include occupied residential units (which Notice need not be in writing). During
normal business hours, or at any other reasonable time, Borrower will also permit Lender
to examine all books and records and contracts and bills pertaining to the foregoing.
Notice to Borrower will not be required in the case of an emergency, as determined in
Lender’s Discretion, or when an Event of Default has occurred and is continuing. |
Multifamily Loan and Security Agreement | Page 15 |
| (b) | Inspection
of Mold. If Lender determines that Mold has or may have developed as a result of
a water intrusion event or leak, Lender, at Lender’s Discretion, may require that
a professional inspector inspect the Mortgaged Property to confirm whether Mold has developed
and, if so, thereafter as frequently as Lender determines is necessary until any issue
with Mold and its cause(s) are resolved to Lender’s satisfaction. Such inspection
will be limited to a visual and olfactory inspection of the area that has experienced
the Mold, water intrusion event or leak. Borrower will be responsible for the cost of
each such professional inspection and any remediation deemed to be necessary as a result
of the professional inspection. After any issue with Mold is remedied to Lender’s
satisfaction, Lender will not require a professional inspection any more frequently than
once every 3 years unless Lender otherwise becomes aware of Mold as a result of a subsequent
water intrusion event or leak. |
| (c) | Certification
in Lieu of Inspection. If Lender or Loan Servicer determines not to conduct an annual
inspection of the Mortgaged Property, and in lieu thereof Lender requests a certification,
Borrower will provide to Lender a factually correct certification, each year that the
annual inspection is waived, to the following effect: |
Borrower
has not received any written complaint, notice, letter or other written communication from any tenant, Property Manager or governmental
authority regarding mold, fungus, microbial contamination or pathogenic organisms (“Mold”) or any activity, condition,
event or omission that causes or facilitates the growth of Mold on or in any part of the Mortgaged Property or, if Borrower has
received any such written complaint, notice, letter or other written communication, that Borrower has investigated and determined
that no Mold activity, condition or event exists or alternatively has fully and properly remediated such activity, condition,
event or omission in compliance with the Moisture Management Plan for the Mortgaged Property.
If
Borrower is unwilling or unable to provide such certification, Lender may require a professional inspection of the Mortgaged Property
at Borrower’s expense.
| 6.07 | Books
and Records; Financial Reporting. |
| (a) | Delivery
of Books and Records. Borrower will keep and maintain at all times at the Mortgaged
Property or the Property Manager’s office, and upon Lender’s request will
make available at the Mortgaged Property (or, at Borrower’s option, at the Property
Manager’s office), complete and accurate books of account and records (including
copies of supporting bills and invoices) adequate to reflect correctly the operation
of the Mortgaged Property, in accordance with GAAP consistently applied (or such other
method which is reasonably acceptable to Lender), and copies of all written contracts,
Leases, and other instruments which affect the Mortgaged Property. The books, records,
contracts, Leases and other instruments will be subject to examination and inspection
by Lender at any reasonable time. |
Multifamily Loan and Security Agreement | Page 16 |
| (b) | Delivery
of Statement of Income and Expenses; Rent Schedule and Other Statements. Borrower
will furnish to Lender each of the following: |
| (i) | Within
25 days after the end of each calendar quarter prior to Securitization and within 35
days after each calendar quarter after Securitization, each of the following: |
| (A) | A Rent
Schedule dated no earlier than the date that is 5 days prior to the end of such quarter. |
| (B) | A statement
of income and expenses for Borrower’s operation of the Mortgaged Property that
is either of the following: |
| (1) | For
the 12 month period ending on the last day of such quarter. |
| (2) | If
at the end of such quarter Borrower or any Affiliate of Borrower has owned the Mortgaged
Property for less than 12 months, for the period commencing with the acquisition of the
Mortgaged Property by Borrower or its Affiliate, and ending on the last day of such quarter. |
| (C) | When
requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating
to the Mortgaged Property as of the end of that fiscal quarter. |
| (ii) | Within
90 days after the end of each fiscal year of Borrower, each of the following: |
| (A) | An annual
statement of income and expenses for Borrower’s operation of the Mortgaged Property
for that fiscal year. |
| (B) | A balance
sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property
as of the end of that fiscal year and a profit and loss statement for Borrower. |
| (C) | An accounting
of all security deposits held pursuant to all Leases, including the name of the institution
(if any) and the names and identification numbers of the accounts (if any) in which such
security deposits are held and the name of the person to contact at such financial institution,
along with any authority or release necessary for Lender to access information regarding
such accounts. |
| (iii) | Within
30 days after the date of filing, copies of all tax returns filed by Borrower. |
| (c) | Delivery
of Borrower Financial Statements Upon Request. Borrower will furnish to Lender each
of the following: |
| (i) | Upon Lender’s
request, in Lender’s sole and absolute discretion prior to a Securitization, and
thereafter upon Lender’s request in Lender’s Discretion, a monthly Rent Schedule
and a monthly statement of income and expenses for Borrower’s operation of the
Mortgaged Property, in each case within 25 days after the end of each month. |
Multifamily Loan and Security Agreement | Page 17 |
| (ii) | Upon
Lender’s request in Lender’s sole and absolute discretion prior to a Securitization,
and thereafter upon Lender’s request in Lender’s Discretion, a statement
that identifies all owners of any interest in Borrower and any Designated Entity for
Transfers and the interest held by each (unless Borrower or any Designated Entity for
Transfers is a publicly-traded entity in which case such statement of ownership will
not be required), and if Borrower or a Designated Entity for Transfers is a corporation
then all officers and directors of Borrower and the Designated Entity for Transfers,
and if Borrower or a Designated Entity for Transfers is a limited liability company then
all Managers who are not members, in each case within 10 days after such request. |
| (iii) | Upon
Lender’s request in Lender’s Discretion, such other financial information
or property management information (including information on tenants under Leases to
the extent such information is available to Borrower, copies of bank account statements
from financial institutions where funds owned or controlled by Borrower are maintained,
and an accounting of security deposits) as may be required by Lender from time to time,
in each case within 30 days after such request. |
| (iv) | Upon
Lender’s request in Lender’s Discretion, a monthly property management report
for the Mortgaged Property, showing the number of inquiries made and rental applications
received from tenants or prospective tenants and deposits received from tenants and any
other information requested by Lender within 30 days after such request. However, Lender
will not require the foregoing more frequently than quarterly except when there has been
an Event of Default and such Event of Default is continuing, in which case Lender may
require Borrower to furnish the foregoing more frequently. |
| (d) | Form
of Statements; Audited Financials. A natural person having authority to bind Borrower
(or the SPE Equity Owner or Guarantor, as applicable) will certify each of the statements,
schedules and reports required by Sections 6.07(b), 6.07(c) and 6.07(f) to be complete
and accurate. Each of the statements, schedules and reports required by Sections 6.07(b),
6.07(c) and 6.07(f) will be in such form and contain such detail as Lender may reasonably
require. Lender also may require that any of the statements, schedules or reports listed
in Sections 6.07(b), 6.07(c) and 6.07(f) be audited at Borrower’s expense by independent
certified public accountants acceptable to Lender, at any time when an Event of Default
has occurred and is continuing or at any time that Lender, in its reasonable judgment,
determines that audited financial statements are required for an accurate assessment
of the financial condition of Borrower or of the Mortgaged Property. |
| (e) | Failure
to Timely Provide Financial Statements. If Borrower fails to provide in a timely
manner the statements, schedules and reports required by Sections 6.07(b), 6.07(c) and
6.07(f), Lender will give Notice to Borrower specifying the statements, schedules and
reports required by Sections 6.07(b), 6.07(c) and 6.07(f) that Borrower has failed to
provide. If Borrower has not provided the required statements, schedules and reports
within 10 Business Days following such Notice, then (i) Borrower will pay a late fee
of $500 for each late statement, schedule or report, plus an additional $500 per month
that any such statement, schedule or report continues to be late, and (ii) Lender will
have the right to have Borrower’s books and records audited, at Borrower’s
expense, by independent certified public accountants selected by Lender in order to obtain
such statements, schedules and reports, and all related costs and expenses of Lender
will become immediately due and payable and will become an additional part of the Indebtedness
as provided in Section 9.02. Notice to Borrower of Lender’s exercise of its rights
to require an audit will not be required in the case of an emergency, as determined in
Lender’s Discretion, or when an Event of Default has occurred and is continuing. |
Multifamily Loan and Security Agreement | Page 18 |
| (f) | Delivery
of Guarantor and SPE Equity Owner Financial Statements Upon Request. Borrower will
cause each Guarantor and, at Lender’s request in Lender’s Discretion, any
SPE Equity Owner, to provide to Lender (i) within 90 days after the close of such party’s
fiscal year, such party’s balance sheet and profit and loss statement (or if such
party is a natural person, within 90 days after the close of each calendar year, such
party’s personal financial statements) in form reasonably satisfactory to Lender
and certified by such party to be accurate and complete, and (ii) such additional financial
information (including copies of state and federal tax returns with respect to any SPE
Equity Owner but Lender will only require copies of such tax returns with respect to
each Guarantor if an Event of Default has occurred and is continuing) as Lender may reasonably
require from time to time and in such detail as reasonably required by Lender. |
| (g) | Reporting
Upon Event of Default. If an Event of Default has occurred and is continuing, Borrower
will deliver to Lender upon written demand all books and records relating to the Mortgaged
Property or its operation. |
| (h) | Credit
Reports. Borrower authorizes Lender to obtain a credit report on Borrower at any
time. |
| 6.08 | Taxes;
Operating Expenses; Ground Rents. |
| (a) | Payment
of Taxes and Ground Rent. Subject to the provisions of Sections 6.08(c) and (d),
Borrower will pay or cause to be paid (i) all Taxes when due and before the addition
of any interest, fine, penalty or cost for nonpayment, and (ii) if Borrower’s interest
in the Mortgaged Property is as a Ground Lessee, then the monthly or other periodic installments
of Ground Rent before the last date upon which each such installment may be made without
penalty or interest charges being added. |
| (b) | Payment
of Operating Expenses. Subject to the provisions of Section 6.08(c), Borrower will
(i) pay the expenses of operating, managing, maintaining and repairing the Mortgaged
Property (including utilities, Repairs and Capital Replacements) before the last date
upon which each such payment may be made without any penalty or interest charge being
added, and (ii) pay Insurance premiums at least 30 days prior to the expiration date
of each policy of Insurance, unless applicable law specifies some lesser period. |
| (c) | Payment
of Impositions and Reserve Funds. If Lender is collecting Imposition Reserve Deposits
pursuant to Article IV, then so long as no Event of Default exists, Borrower will not
be obligated to pay any Imposition for which Imposition Reserve Deposits are being collected,
whether Taxes, Insurance premiums, Ground Rent (if applicable) or any other individual
Impositions, but only to the extent that sufficient Imposition Reserve Deposits are held
by Lender for the purpose of paying that specific Imposition and Borrower has timely
delivered to Lender any bills or premium notices that it has received with respect to
that specific Imposition (other than Ground Rent). Lender will have no liability to Borrower
for failing to pay any Impositions to the extent that: (i) any Event of Default has occurred
and is continuing, (ii) insufficient Imposition Reserve Deposits are held by Lender at
the time an Imposition becomes due and payable, or (iii) Borrower has failed to provide
Lender with bills and premium notices as provided in this Section. |
Multifamily Loan and Security Agreement | Page 19 |
| (d) | Right
to Contest. Borrower, at its own expense, may contest by appropriate legal proceedings,
conducted diligently and in good faith, the amount or validity of any Imposition other
than Insurance premiums and Ground Rent (if applicable), if: (i) Borrower notifies Lender
of the commencement or expected commencement of such proceedings, (ii) the Mortgaged
Property is not in danger of being sold or forfeited, (iii) if Borrower has not already
paid the Imposition, Borrower deposits with Lender reserves sufficient to pay the contested
Imposition, if requested by Lender, and (iv) Borrower furnishes whatever additional security
is required in the proceedings or is reasonably requested by Lender, which may include
the delivery to Lender of reserves established by Borrower to pay the contested Imposition. |
| 6.09 | Preservation,
Management and Maintenance of Mortgaged Property. |
| (a) | Maintenance
of Mortgaged Property; No Waste. Borrower will keep the Mortgaged Property in good
repair, including the replacement of Personalty and Fixtures with items of equal or better
function and quality. Borrower will not commit waste or permit impairment or deterioration
of the Mortgaged Property. |
| (b) | Abandonment
of Mortgaged Property. Borrower will not abandon the Mortgaged Property. |
| (c) | Preservation
of Mortgaged Property. Borrower will restore or repair promptly, in a good and workmanlike
manner, any damaged part of the Mortgaged Property to the equivalent of its original
condition, or such other condition as Lender may approve in writing, whether or not Insurance
proceeds or Condemnation awards are available to cover any costs of such Restoration
or repair; provided, however, that Borrower will not be obligated to perform such Restoration
or repair if (i) no Event of Default has occurred and is continuing, and (ii) Lender
has elected to apply any available Insurance proceeds and/or Condemnation awards to the
payment of Indebtedness pursuant to Section 6.10(l) or Section 6.11(d). |
| (d) | Property
Management. Borrower will provide for professional management of the Mortgaged Property
by the Property Manager at all times under a property management agreement approved by
Lender in writing. Borrower will not surrender, terminate, cancel, modify, renew or extend
its property management agreement, or enter into any other agreement relating to the
management or operation of the Mortgaged Property with Property Manager or any other
Person, or consent to the assignment by the Property Manager of its interest under such
property management agreement, in each case without the consent of Lender, which consent
will not be unreasonably withheld. |
| (i) | If at
any time Lender consents to the appointment of a new Property Manager, such new Property
Manager and Borrower will, as a condition of Lender’s consent, execute an Assignment
of Management Agreement in a form acceptable to Lender. |
Multifamily Loan and Security Agreement | Page 20 |
| (ii) | If any
such replacement Property Manager is an Affiliate of Borrower, and if a nonconsolidation
opinion was delivered on the Closing Date, Borrower will deliver to Lender an updated
nonconsolidation opinion in form and substance satisfactory to Lender with regard to
nonconsolidation. |
| (e) | Alteration
of Mortgaged Property. Borrower will give Notice to Lender of and, unless otherwise
directed in writing by Lender, will appear in and defend any action or proceeding purporting
to affect the Mortgaged Property, Lender’s security or Lender’s rights under
this Loan Agreement. Borrower will not (and will not permit any tenant or other Person
to) remove, demolish or alter the Mortgaged Property or any part of the Mortgaged Property,
including any removal, demolition or alteration occurring in connection with a rehabilitation
of all or part of the Mortgaged Property, except that each of the following is permitted: |
| (i) | Repairs
or Capital Replacements pursuant to Sections 4.03 or 4.04. |
| (ii) | Repairs
or Capital Replacements made in connection with the replacement of tangible Personalty. |
| (iii) | If Borrower
is a cooperative housing corporation or association, Repairs or Capital Replacements
to the extent permitted with respect to individual dwelling units under the form of a
proprietary lease or occupancy agreement. |
| (iv) | Repairs
or Capital Replacements in connection with making an individual unit ready for a new
occupant or pursuant to Sections 6.09(a) and (c). |
| (v) | Property
Improvement Alterations, provided that each of the following conditions is satisfied: |
| (A) | At least
30 days prior to the commencement of any Property Improvement Alterations, Borrower must
submit to Lender a Property Improvement Notice. The Property Improvement Notice must
include all of the following information: |
| (1) | The expected
start date and completion date of the Property Improvement Alterations. |
| (2) | A description
of the anticipated Property Improvement Alterations to be made. |
| (3) | The projected
budget of the Property Improvement Alterations and the source of funding. |
In
the event any changes to Property Improvement Alterations as described in the Property Improvement Notice are made that extend
beyond the overall scope and intent of the Property Improvement Alterations set forth in the Property Improvement Notice (e.g.,
renovations changed to renovate common areas but Property Improvement Notice only described renovations to the residential
dwelling unit bathrooms), Borrower must submit a new Property Improvement Notice to Lender in accordance with this subsection
6.09(e)(v)(A).
Multifamily Loan and Security Agreement | Page 21 |
| (B) | The
Property Improvement Alterations may not be commenced within 12 months prior to the Maturity
Date without prior written consent of the Lender and must be completed at least 6 months
prior to the Maturity Date. |
| (C) | Neither
the performance nor completion of the Property Improvement Alterations may result in
any of the following: |
| (1) | An
adverse effect on any Major Building System. |
| (2) | A change
in residential dwelling unit configurations on a permanent basis. |
| (3) | An increase
or decrease in the total number of residential dwelling units. |
| (4) | The demolition
of any existing Improvements. |
| (5) | A permanent
obstruction of tenants’ access to units or a temporary obstruction of tenants’
access to units without a reasonable alternative access provided during the period of
renovation which causes the obstruction. |
| (D) | The
cost of the Property Improvement Alterations made to residential dwelling units during
the term of the Mortgage must not exceed the Property Improvement Total Amount. |
| (E) | The
Leases used to calculate Minimum Occupancy for use in Section 6.09(e)(v)(I) must meet
all of the following conditions: |
| (1) | The Leases
are with tenants that are not Affiliates of Borrower or Guarantor (except as otherwise
expressly agreed by Lender in writing). |
| (2) | The Leases
are on arms’ length terms and conditions. |
| (3) | The Leases
otherwise satisfy the requirements of the Loan Documents. |
| (F) | The
Property Improvement Alterations must be completed in accordance with Section 6.14 and
any reference to Repairs in Sections 6.06 and 6.14 will be deemed to include Property
Improvement Alterations. |
| (G) | Upon
completion of the applicable Property Improvement Alterations, Borrower must provide
all of the following to the Lender: |
| (1) | Borrower’s
Certificate of Property Improvement Alterations Completion, in the form attached as Exhibit
O (“Certificate of Completion”). |
Multifamily Loan and Security Agreement | Page 22 |
| (2) | Any other
certificates or approval, acceptance or compliance required by Lender, including certificates
of occupancy, from any Governmental Authority having jurisdiction over the Mortgaged
Property and the Property Improvement Alterations and professional engineers certifications. |
| (H) | Borrower
must deliver to Lender within 10 days of Lender’s request a written status update
on the Property Improvement Alterations. |
| (I) | While
Property Improvement Alterations that result in individual residential dwelling units
not being available for leasing are ongoing, if a Rent Schedule shows that the occupancy
of the Mortgaged Property has decreased to less than the Minimum Occupancy, Borrower
must take each of the following actions: |
| (1) | Complete
all pending Property Improvement Alterations to such individual residential dwelling
units in a timely manner until the Mortgaged Property satisfies the Minimum Occupancy
requirement. |
| (2) | Suspend
any additional Property Improvement Alterations which would cause residential dwelling
units to be unavailable for leasing until the Mortgaged Property satisfies the Minimum
Occupancy requirement. |
| (J) | In the
event Property Improvement Alterations have commenced on the Mortgaged Property, Borrower
will deliver to Lender, upon Lender’s request, the Certificate of Completion together
with such additional information as Lender may request within a timely manner. |
| (f) | Establishment
of MMP. Unless otherwise waived by Lender in writing, Borrower will have or will
establish and will adhere to the MMP. If Borrower is required to have an MMP, Borrower
will keep all MMP documentation at the Mortgaged Property or at the Property Manager’s
office and available for review by Lender or the Loan Servicer during any annual assessment
or other inspection of the Mortgaged Property that is required by Lender. At a minimum,
the MMP must contain a provision for: (i) staff training, (ii) information to be provided
to tenants, (iii) documentation of the plan, (iv) the appropriate protocol for incident
response and remediation, and (v) routine, scheduled inspections of common space and
unit interiors. |
| (g) | No
Reduction of Housing Cooperative Charges. If Borrower is a housing cooperative corporation
or association, until the Indebtedness is paid in full, Borrower will not reduce the
maintenance fees, charges or assessments payable by shareholders or residents under proprietary
leases or occupancy agreements below a level which is sufficient to pay all expenses
of Borrower, including all operating and other expenses for the Mortgaged Property and
all payments due pursuant to the terms of the Note and any Loan Documents. |
Multifamily Loan and Security Agreement | Page 23 |
| (h) | through
(k) are reserved. |
| 6.10 | Insurance.
At all times during the term of this Loan Agreement, Borrower will maintain at its
sole cost and expense, for the mutual benefit of Borrower and Lender, all of the Insurance
specified in this Section 6.10, as required by Lender and applicable law, and in
such amounts and with such maximum deductibles as Lender may require, as those requirements
may change: |
| (a) | Property
Insurance. Borrower will keep the Improvements insured at all times against relevant
physical hazards that may cause damage to the Mortgaged Property as Lender may require
(“Property Insurance”). Required Property Insurance coverage may include
any or all of the following: |
| (i) | All
Risks of Physical Loss. Insurance against loss or damage from fire, wind, hail, and
other related perils within the scope of a “Special Causes of Loss” or “All
Risk” policy, in an amount not less than the Replacement Cost of the Mortgaged
Property. |
| (ii) | Ordinance
and Law. If any part of the Mortgaged Property is legal non-conforming under current
building, zoning or land use laws or ordinances, then “Ordinance and Law Coverage”
in the amount required by Lender. |
| (iii) | Flood.
If any of the Improvements are located in an area identified by the Federal Emergency
Management Agency (or any successor to that agency) as a “Special Flood Hazard
Area,” flood Insurance in the amount required by Lender. |
| (iv) | Windstorm.
If windstorm and/or windstorm related perils and/or “named storm” are excluded
from the “Special Causes of Loss” policy required under Section 6.10(a)(i),
then separate coverage for such risks (“Windstorm Coverage”), either
through an endorsement or a separate policy. Windstorm Coverage will be written in an
amount not less than the Replacement Cost of the Mortgaged Property. |
| (v) | Boiler
and Machinery/Equipment Breakdown. If the Mortgaged Property contains a central heating,
ventilation and cooling system (“HVAC System”) where steam boilers
and/or other pressurized systems are in operation and are regulated by the Property Jurisdiction,
Insurance providing coverage in the amount required by Lender. |
| (vi) | Builder’s
Risk. During any period of construction or Restoration, builder’s risk Insurance
(including fire and other perils within the scope of a policy known as “Causes
of Loss – Special Form” or “All Risk” policy) in an amount not
less than the sum of the related contractual arrangements. |
| (vii) | Other.
Insurance for other physical perils applicable to the Mortgaged Property as may be required
by Lender including earthquake, sinkhole, mine subsidence, avalanche, mudslides, and
volcanic eruption. If Lender reasonably requires any updated reports or other documentation
to determine whether additional Insurance is necessary or prudent, Borrower will pay
for the updated reports or other documentation at its sole cost and expense. |
Multifamily Loan and Security Agreement | Page 24 |
| (b) | Business
Income/Rental Value. Business income/rental value Insurance for all relevant perils
to be covered in the amount required by Lender, but in no case less than the effective
gross income attributable to the Mortgaged Property for the preceding 12 months, as determined
by Lender in Lender’s Discretion. |
| (c) | Commercial
General Liability Insurance. Commercial general liability Insurance against legal
liability claims for personal and bodily injury, property damage and contractual liability
in such amounts and with such maximum deductibles as Lender may require, but not less
than $1,000,000 per occurrence and $2,000,000 in the general aggregate on a per-location
basis, plus excess and/or umbrella liability coverage in such amounts as Lender may require. |
| (d) | Terrorism
Insurance. Insurance required under Section 6.10(a)(i) and (ii) and Section
6.10(b) will provide coverage for acts of terrorism. Terrorism coverage may be provided
through one or more separate policies, which will be on terms (including amounts) consistent
with those required under Section 6.10(a)(i) and (ii) and Section 6.10(b). If Insurance
against acts of terrorism is not available at commercially reasonable rates and if the
related hazards are not at the time commonly insured against for properties similar to
the Mortgaged Property and located in or around the region in which the Mortgaged Property
is located, then Lender may opt to temporarily suspend, cap or otherwise limit the requirement
to have such terrorism insurance for a period not to exceed one year, unless such suspension
or cap is renewed by Lender for additional one year increments. |
| (e) | Payment
of Premiums. All Property Insurance premiums and premiums for other Insurance required
under this Section 6.10 will be paid in the manner provided in Article IV, unless
Lender has designated in writing another method of payment. |
| (f) | Policy
Requirements. The following requirements apply with respect to all Insurance required
by this Section 6.10: |
| (i) | All Insurance
policies will be in a form approved by Lender. |
| (ii) | All Insurance
policies will be issued by Insurance companies authorized to do business in the Property
Jurisdiction and/or acting as eligible surplus insurers in the Property Jurisdiction,
which have a general policyholder’s rating satisfactory to Lender. |
| (iii) | All
Property Insurance policies will contain a standard mortgagee or mortgage holder’s
clause and a loss payable clause, in favor of, and in a form approved by, Lender. |
| (iv) | If any
Insurance policy contains a coinsurance clause, the coinsurance clause will be offset
by an agreed amount endorsement in an amount not less than the Replacement Cost. |
| (v) | All commercial
general liability and excess/umbrella liability policies will name Lender, its successors
and/or assigns, as additional insured. |
| (vi) | Professional
liability policies will not include Lender, its successors and/or assigns, as additional
insured. |
Multifamily Loan and Security Agreement | Page 25 |
| (vii) | All
Insurance policies will provide that the insurer will notify Lender in writing of cancelation
of policies at least 10 days before the cancelation of the policy by the insurer for
nonpayment of the premium or nonrenewal and at least 30 days before cancelation by the
insurer for any other reason. |
| (g) | Evidence
of Insurance; Insurance Policy Renewals. Borrower will deliver to Lender a legible
copy of each Insurance policy, and Borrower will promptly deliver to Lender a copy of
all renewal and other notices received by Borrower with respect to the policies. Borrower
will ensure that the Mortgaged Property is continuously covered by the required Insurance.
At least 15 days prior to the expiration date of each Insurance policy, Borrower
will deliver to Lender evidence acceptable to Lender in Lender’s Discretion that
each policy has been renewed. If the evidence of a renewal does not include a legible
copy of the renewal policy, Borrower will deliver a legible copy of such renewal no later
than the earlier of the following: |
| (i) | 60
days after the expiration date of the original policy. |
| (ii) | The date
of any Notice of an insured loss given to Lender under Section 6.10(i). |
| (h) | Compliance
With Insurance Requirements. Borrower will comply with all Insurance requirements
and will not permit any condition to exist on the Mortgaged Property that would invalidate
any part of any Insurance coverage required under this Loan Agreement. |
| (i) | Obligations
Upon Casualty; Proof of Loss. |
| (i) | If an
insured loss occurs, then Borrower will give immediate written notice to the Insurance
carrier and to Lender. |
| (ii) | Borrower
authorizes and appoints Lender as attorney in fact for Borrower to make proof of loss,
to adjust and compromise any claims under policies of Property Insurance, to appear in
and prosecute any action arising from such Property Insurance policies, to collect and
receive the proceeds of Property Insurance, to hold the proceeds of Property Insurance,
and to deduct from such proceeds Lender’s expenses incurred in the collection of
such proceeds. This power of attorney is coupled with an interest and therefore is irrevocable.
However, nothing contained in this Section 6.10 will require Lender to incur any
expense or take any action. |
| (j) | Lender’s
Options Following a Casualty. Lender may, at Lender’s option, take one of the
following actions: |
| (i) | Require
a “repair or replacement” settlement, in which case the proceeds will be
used to reimburse Borrower for the cost of restoring and repairing the Mortgaged Property
to the equivalent of its original condition or to a condition approved by Lender (“Restoration”).
If Lender determines to require a repair or replacement settlement and to apply Insurance
proceeds to Restoration, Lender will apply the proceeds in accordance with Lender’s
then-current policies relating to the Restoration of casualty damage on similar multifamily
properties. If Lender, in Lender’s Discretion, retains a professional inspection
engineer or other qualified third party to inspect any Restoration items, Lender may
charge Borrower an amount sufficient to pay all reasonable costs and expenses charged
by such third party inspector. |
Multifamily Loan and Security Agreement | Page 26 |
| (ii) | Require
an “actual cash value” settlement in which case the proceeds may be applied
to the payment of the Indebtedness, whether or not then due. |
| (k) | Borrower’s
Options Following a Casualty. Subject to Section 6.10(l), Borrower may take
the following actions: |
| (i) | If a casualty
results in damage to the Mortgaged Property for which the cost of Repairs will be less
than the Borrower Proof of Loss Threshold, Borrower will have the sole right to make
proof of loss, adjust and compromise the claim and collect and receive any proceeds directly
without the approval or prior consent of Lender so long as the Insurance proceeds are
used solely for the Restoration of the Mortgaged Property. |
| (ii) | If a
casualty results in damage to the Mortgaged Property for which the cost of Repairs will
be more than the Borrower Proof of Loss Threshold, but less than the Borrower Proof of
Loss Maximum, Borrower is authorized to make proof of loss and adjust and compromise
the claim without the prior consent of Lender, and Lender will hold the applicable Insurance
proceeds to be used to reimburse Borrower for the cost of Restoration of the Mortgaged
Property and will not apply such proceeds to the payment of the Indebtedness. |
| (l) | Lender’s
Right to Apply Insurance Proceeds to Indebtedness. Lender will have the right to
apply Insurance proceeds to the payment of the Indebtedness if Lender determines, in
Lender’s Discretion, that any of the following conditions are met: |
| (i) | An Event
of Default (or any event, which, with the giving of Notice or the passage of time, or
both, would constitute an Event of Default) has occurred and is continuing. |
| (ii) | There
will not be sufficient funds from Insurance proceeds, anticipated contributions of Borrower
of its own funds or other sources acceptable to Lender to complete the Restoration. |
| (iii) | The
rental income from the Mortgaged Property after completion of the Restoration will not
be sufficient to meet all operating costs and other expenses, deposits to Reserve Funds
and Loan repayment obligations relating to the Mortgaged Property. |
| (iv) | The Restoration
will be completed less than (A) 6 months prior to the Maturity Date if re-leasing
will be completed prior to the Maturity Date, or (B) 12 months prior to the Maturity
Date if re-leasing will not be completed prior to the Maturity Date. |
| (v) | The Restoration
will not be completed within one year after the date of the loss or casualty. |
| (vi) | The casualty
involved an actual or constructive loss of more than 30% of the fair market value of
the Mortgaged Property, and rendered untenantable more than 30% of the residential units
of the Mortgaged Property. |
Multifamily Loan and Security Agreement | Page 27 |
| (vii) | After
completion of the Restoration the fair market value of the Mortgaged Property is expected
to be less than the fair market value of the Mortgaged Property immediately prior to
such casualty (assuming the affected portion of the Mortgaged Property is re-let within
a reasonable period after the date of such casualty). |
| (viii) | Leases
covering less than 35% of the residential units of the Mortgaged Property will remain
in full force and effect during and after the completion of Restoration. |
| (m) | Lender’s
Succession to Insurance Policies. If the Mortgaged Property is sold at a foreclosure
sale or Lender acquires title to the Mortgaged Property, Lender will automatically succeed
to all rights of Borrower in and to any Insurance policies and unearned Insurance premiums
and in and to the proceeds resulting from any damage to the Mortgaged Property prior
to such sale or acquisition. |
| (n) | Payment
of Installments After Application of Insurance Proceeds. Unless Lender otherwise
agrees in writing, any application of any Insurance proceeds to the Indebtedness will
not extend or postpone the due date of any monthly installments referred to in the Note,
Article IV of this Loan Agreement or change the amount of such installments. |
| (o) | Assignment
of Insurance Proceeds. Borrower agrees to execute such further evidence of assignment
of any Insurance proceeds as Lender may require. |
| (p) | Borrower
Acknowledgment of Lender’s Right to Change Insurance Requirements. Borrower
acknowledges and agrees that Lender’s Insurance requirements may change from time
to time throughout the term of the Indebtedness to include coverage for the kind of risks
customarily insured against and in such minimum coverage amounts and maximum deductibles
as are generally required by institutional lenders for properties comparable to the Mortgaged
Property. |
| (a) | Rights
Generally. Borrower will promptly notify Lender in writing of any action or proceeding
or notice relating to any proposed or actual condemnation or other taking, or conveyance
in lieu thereof, of all or any part of the Mortgaged Property, whether direct or indirect
(“Condemnation”). Borrower will appear in and prosecute or defend
any action or proceeding relating to any Condemnation unless otherwise directed by Lender
in writing. Borrower authorizes and appoints Lender as attorney in fact for Borrower
to commence, appear in and prosecute, in Lender’s or Borrower’s name, any
action or proceeding relating to any Condemnation and to settle or compromise any claim
in connection with any Condemnation, after consultation with Borrower and consistent
with commercially reasonable standards of a prudent lender. This power of attorney is
coupled with an interest and therefore is irrevocable. However, nothing contained in
this Section 6.11(a) will require Lender to incur any expense or take any action. Borrower
transfers and assigns to Lender all right, title and interest of Borrower in and to any
award or payment with respect to (i) any Condemnation, or any conveyance in lieu of Condemnation,
and (ii) any damage to the Mortgaged Property caused by governmental action that does
not result in a Condemnation. |
Multifamily Loan and Security Agreement | Page 28 |
| (b) | Application
of Award. Lender may hold such awards or proceeds and apply such awards or
proceeds, after the deduction of Lender’s expenses incurred in the collection of
such amounts (including Attorneys’ Fees and Costs) at Lender’s option, to
the Restoration or repair of the Mortgaged Property or to the payment of the Indebtedness,
with the balance, if any, to Borrower. Unless Lender otherwise agrees in writing, any
application of any awards or proceeds to the Indebtedness will not extend or postpone
the due date of any monthly installments referred to in the Note or Article IV of this
Loan Agreement, or change the amount of such installments. Borrower agrees to execute
such further evidence of assignment of any Condemnation awards or proceeds as Lender
may require. |
| (c) | Borrower’s
Right to Condemnation Proceeds. Notwithstanding any provision to the contrary in
this Section 6.11, but subject to Section 6.11(e), in the event of a partial Condemnation
of the Mortgaged Property, as long as no Event of Default, or any event which, with the
giving of Notice or the passage of time, or both, would constitute an Event of Default,
has occurred and is continuing, in the event of a partial Condemnation resulting in proceeds
or awards in the amount of less than $100,000, Borrower will have the sole right to make
proof of loss, adjust and compromise the claim and collect and receive any proceeds directly
without the approval or prior consent of Lender so long as the proceeds or awards are
used solely for the Restoration of the Mortgaged Property. |
| (d) | Right
to Apply Condemnation Proceeds to Indebtedness. In the event of a partial Condemnation
of the Mortgaged Property resulting in proceeds or awards in the amount of $100,000 or
more and subject to Section 6.11(e), Lender will have the right to exercise its option
to apply Condemnation proceeds to the payment of the Indebtedness only if Lender, in
Lender’s Discretion, determines that at least one of the following conditions is
met: |
| (i) | An Event
of Default (or any event, which, with the giving of Notice or the passage of time, or
both, would constitute an Event of Default) has occurred and is continuing. |
| (ii) | There
will not be sufficient funds from Condemnation proceeds, anticipated contributions of
Borrower of its own funds or other sources acceptable to Lender to complete the Restoration. |
| (iii) | The
rental income from the Mortgaged Property after completion of the Restoration will not
be sufficient to meet all operating costs and other expenses, deposits to Reserve Funds
and Loan repayment obligations relating to the Mortgaged Property. |
| (iv) | The Restoration
will not be completed at least one year before the Maturity Date (or 6 months before
the Maturity Date if re-leasing of the Mortgaged Property will be completed within such
6 month period). |
| (v) | The Restoration
will not be completed within one year after the date of the Condemnation. |
| (vi) | The Condemnation
involved an actual or constructive loss of more than 15% of the fair market value of
the Mortgaged Property, and rendered untenantable more than 25% of the residential units
of the Mortgaged Property. |
| (vii) | After
Restoration the fair market value of the Mortgaged Property is expected to be less than
the fair market value of the Mortgaged Property immediately prior to the Condemnation
(assuming the affected portion of the Mortgaged Property is re-let within a reasonable
period after the date of the Condemnation). |
Multifamily Loan and Security Agreement | Page 29 |
| (viii) | Leases
covering less than 35% of residential units of the Mortgaged Property will remain in
full force and effect during and after the completion of Restoration. |
| (e) | Right
to Apply Condemnation Proceeds in Connection with a Partial Release. Notwithstanding
anything to the contrary set forth in this Loan Agreement, including this Section 6.11,
for so long as the Loan or any portion of the Loan is included in a Securitization in
which the Note is assigned to a REMIC trust, then each of the following will apply: |
| (i) | If any
portion of the Mortgaged Property is released from the Lien of the Loan in connection
with a Condemnation and if the ratio of (A) the unpaid principal balance of the Loan
to (B) the value of the Mortgaged Property (with the value of the Mortgaged Property
first being reduced by the outstanding principal balance of any Senior Indebtedness or
any indebtedness secured by the Mortgaged Property that is at the same level of priority
with the Indebtedness and taking into account only the related land and buildings and
not any personal property or going-concern value), as determined by Lender in its sole
and absolute discretion based on a commercially reasonable valuation method permitted
in connection with a Securitization, is greater than 125% immediately after such Condemnation
and before any Restoration or repair of the Mortgaged Property (but taking into account
any planned Restoration or repair of the Mortgaged Property as if such planned Restoration
or repair were completed), then Lender will apply any net proceeds or awards from such
Condemnation, in full, to the payment of the principal of the Indebtedness whether or
not then due and payable, unless Lender has received an opinion of counsel (acceptable
to Lender if such opinion is provided by Borrower) that a different application of the
net proceeds or awards will not cause such Securitization to fail to meet applicable
federal income tax qualification requirements or subject such Securitization to any tax,
and the net proceeds or awards are applied in the manner specified in such opinion.. |
| (ii) | If (A)
neither Borrower nor Lender has the right to receive any or all net proceeds or awards
as a result of the provisions of any agreement affecting the Mortgaged Property (including
any Ground Lease (if applicable), condominium document, or reciprocal easement agreement)
and, therefore cannot apply the net proceeds or awards to the payment of the principal
of the Indebtedness as set forth above, or (B) Borrower receives any or all of the proceeds
or awards described in Section 6.11(e)(ii)(A) and fails to apply the proceeds in accordance
with Section 6.11(e)(i), then Borrower will prepay the Indebtedness in an amount which
Lender, in its sole and absolute discretion, deems necessary to ensure that the Securitization
will not fail to meet applicable federal income tax qualification requirements or be
subject to any tax as a result of the Condemnation, unless Lender has received an opinion
of counsel (acceptable to Lender if such opinion is provided by Borrower) that a different
application of the net proceeds or awards will not cause such Securitization to fail
to meet applicable federal income tax qualification requirements or subject such Securitization
to any tax, and the net proceeds or awards are applied in the manner specified in such
opinion. |
Multifamily Loan and Security Agreement | Page 30 |
| (f) | Succession
to Condemnation Proceeds. If the Mortgaged Property is sold at a foreclosure sale
or Lender acquires title to the Mortgaged Property, Lender will automatically succeed
to all rights of Borrower in and to any Condemnation proceeds and awards prior to such
sale or acquisition. |
| 6.12 | Environmental
Hazards. |
| (a) | Prohibited
Activities and Conditions. Except for matters described in this Section 6.12, Borrower
will not cause or permit Prohibited Activities or Conditions. Borrower will comply with
all Hazardous Materials Laws applicable to the Mortgaged Property. Without limiting the
generality of the previous sentence, Borrower will: (i) obtain and maintain all Environmental
Permits required by Hazardous Materials Laws and comply with all conditions of such Environmental
Permits, (ii) cooperate with any inquiry by any Governmental Authority, and (iii) comply
with any governmental or judicial order that arises from any alleged Prohibited Activity
or Condition. |
| (b) | Employees,
Tenants and Contractors. Borrower will take all commercially reasonable actions (including
the inclusion of appropriate provisions in any Leases executed after the date of this
Loan Agreement) to prevent its employees, agents and contractors, and all tenants and
other occupants from causing or permitting any Prohibited Activities or Conditions. Borrower
will not lease or allow the sublease or use of all or any portion of the Mortgaged Property
to any tenant or subtenant for nonresidential use by any user that, in the ordinary course
of its business, would cause or permit any Prohibited Activity or Condition. |
| (c) | O&M
Programs. As required by Lender, Borrower will also have established a written operations
and maintenance program with respect to certain Hazardous Materials. Each such operations
and maintenance program and any additional or revised operations and maintenance programs
established for the Mortgaged Property pursuant to this Section 6.12 must be approved
by Lender and will be referred to in this Loan Agreement as an “O&M Program.”
Borrower will comply in a timely manner with, and cause all employees, agents, and contractors
of Borrower and any other Persons present on the Mortgaged Property to comply with each
O&M Program. Borrower will pay all costs of performance of Borrower’s obligations
under any O&M Program, and Lender’s out of pocket costs incurred in connection
with the monitoring and review of each O&M Program must be paid by Borrower upon
demand by Lender. Any such out-of-pocket costs of Lender that Borrower fails to pay promptly
will become an additional part of the Indebtedness as provided in Section 9.02. |
| (d) | Notice
to Lender. Borrower will promptly give Notice to Lender upon the occurrence of any
of the following events: |
| (i) | Borrower’s
discovery of any Prohibited Activity or Condition. |
| (ii) | Borrower’s
receipt of or knowledge of any written complaint, order, notice of violation or other
communication from any tenant, Property Manager, Governmental Authority or other Person
with regard to present or future alleged Prohibited Activities or Conditions, or any
other environmental, health or safety matters affecting the Mortgaged Property. |
| (iii) | Borrower’s
breach of any of its obligations under this Section 6.12. |
Multifamily Loan and Security Agreement | Page 31 |
Any
such Notice given by Borrower will not relieve Borrower of, or result in a waiver of, any obligation under this Loan Agreement,
the Note or any other Loan Document.
| (e) | Environmental
Inspections, Tests and Audits. Borrower will pay promptly the costs of any environmental
inspections, tests or audits, a purpose of which is to identify the extent or cause of
or potential for a Prohibited Activity or Condition (“Environmental Inspections”),
required by Lender in connection with any foreclosure or deed in lieu of foreclosure,
or as a condition of Lender’s consent to any Transfer under Article VII, or required
by Lender following a reasonable determination by Lender that Prohibited Activities or
Conditions may exist. Any such costs incurred by Lender (including Attorneys’ Fees
and Costs and the costs of technical consultants whether incurred in connection with
any judicial or administrative process or otherwise) that Borrower fails to pay promptly
will become an additional part of the Indebtedness as provided in Section 9.02. As long
as: (i) no Event of Default has occurred and is continuing, (ii) Borrower has actually
paid for or reimbursed Lender for all costs of any such Environmental Inspections performed
or required by Lender, and (iii) Lender is not prohibited by law, contract or otherwise
from doing so, Lender will make available to Borrower, without representation of any
kind, copies of Environmental Inspections prepared by third parties and delivered to
Lender. Lender reserves the right, and Borrower expressly authorizes Lender, to make
available to any party, including any prospective bidder at a foreclosure sale of the
Mortgaged Property, the results of any Environmental Inspections made by or for Lender
with respect to the Mortgaged Property. Borrower consents to Lender notifying any party
(either as part of a notice of sale or otherwise) of the results of any Environmental
Inspections made by or for Lender. Borrower acknowledges that Lender cannot control or
otherwise ensure the truthfulness or accuracy of the results of any Environmental Inspections
and that the release of such results to prospective bidders at a foreclosure sale of
the Mortgaged Property may have a material and adverse effect upon the amount that a
party may bid at such sale. Borrower agrees that Lender will have no liability whatsoever
as a result of delivering the results of any Environmental Inspections made by or for
Lender to any third party, and Borrower releases and forever discharges Lender from any
and all claims, damages or causes of action arising out of, connected with or incidental
to the results of the delivery of any Environmental Inspections made by or for Lender. |
| (f) | Remedial
Work. If any investigation, site monitoring, containment, clean-up, Restoration or
other remedial work (“Remedial Work”) is necessary to comply with
any Hazardous Materials Law or order of any Governmental Authority that has or acquires
jurisdiction over the Mortgaged Property or the use, operation or improvement of the
Mortgaged Property, or is otherwise required by Lender as a consequence of any Prohibited
Activity or Condition or to prevent the occurrence of a Prohibited Activity or Condition,
Borrower will, by the earlier of (i) the applicable deadline required by Hazardous Materials
Law, or (ii) 30 days after Notice from Lender demanding such action, begin performing
the Remedial Work, and thereafter diligently prosecute it to completion, and must in
any event complete the work by the time required by applicable Hazardous Materials Law.
If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial
Work, Lender may, at its option, cause the Remedial Work to be completed, in which case
Borrower will reimburse Lender on demand for the cost of doing so. Any reimbursement
due from Borrower to Lender will become part of the Indebtedness as provided in Section
9.02. |
Multifamily Loan and Security Agreement | Page 32 |
| 6.13 | Single
Purpose Entity Requirements. |
| (a) | Single
Purpose Entity Requirements. Until the Indebtedness is paid in full, each Borrower
and any SPE Equity Owner will remain a “Single Purpose Entity,” which
means at all times since its formation and thereafter it will satisfy each of the following
conditions: |
| (i) | It will
not engage in any business or activity, other than the ownership, operation and maintenance
of the Mortgaged Property and activities incidental thereto. |
| (ii) | It will
not acquire, own, hold, lease, operate, manage, maintain, develop or improve any assets
other than the Mortgaged Property and such Personalty as may be necessary for the operation
of the Mortgaged Property and will conduct and operate its business as presently conducted
and operated. |
| (iii) | It will
preserve its existence as an entity duly organized, validly existing and in good standing
(if applicable) under the laws of the jurisdiction of its formation or organization and
will do all things necessary to observe organizational formalities. |
| (iv) | It will
not merge or consolidate with any other Person. |
| (v) | It will
not take any action to dissolve, wind-up, terminate or liquidate in whole or in part;
to sell, transfer or otherwise dispose of all or substantially all of its assets; to
change its legal structure; transfer or permit the direct or indirect transfer of any
partnership, membership or other equity interests, as applicable, other than Transfers
permitted under this Loan Agreement; issue additional partnership, membership or other
equity interests, as applicable, or seek to accomplish any of the foregoing. |
| (vi) | It will
not, without the prior unanimous written consent of all of Borrower’s partners,
members, or shareholders, as applicable, and, if applicable, the prior unanimous written
consent of 100% of the members of the board of directors or of the board of Managers
of Borrower or the SPE Equity Owner, take any of the following actions: |
| (A) | File
any insolvency, or reorganization case or proceeding, to institute proceedings to have
Borrower or any SPE Equity Owner be adjudicated bankrupt or insolvent. |
| (B) | Institute
proceedings under any applicable insolvency law. |
| (C) | Seek
any relief under any law relating to relief from debts or the protection of debtors. |
| (D) | Consent
to the filing or institution of bankruptcy or insolvency proceedings against Borrower
or any SPE Equity Owner. |
| (E) | File
a petition seeking, or consent to, reorganization or relief with respect to Borrower
or any SPE Equity Owner under any applicable federal or state law relating to bankruptcy
or insolvency. |
| (F) | Seek
or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator,
custodian, or any similar official for Borrower or a substantial part of its property
or for any SPE Equity Owner or a substantial part of its property. |
Multifamily Loan and Security Agreement | Page 33 |
| (G) | Make
any assignment for the benefit of creditors of Borrower or any SPE Equity Owner. |
| (H) | Admit
in writing Borrower’s or any SPE Equity Owner’s inability to pay its debts
generally as they become due. |
| (I) | Take
action in furtherance of any of the foregoing. |
| (vii) | It will
not amend or restate its organizational documents if such change would cause the provisions
set forth in those organizational documents not to comply with the requirements set forth
in this Section 6.13. |
| (viii) | It
will not own any subsidiary or make any investment in, any other Person. |
| (ix) | It will
not commingle its assets with the assets of any other Person and will hold all of its
assets in its own name. |
| (x) | It will
not incur any debt, secured or unsecured, direct or contingent (including guaranteeing
any obligation), other than the following: |
| (A) | The
Indebtedness and any further indebtedness as described in Section 11.11 with regard to
Supplemental Instruments. |
| (B) | Customary
unsecured trade payables incurred in the ordinary course of owning and operating the
Mortgaged Property provided the same are not evidenced by a promissory note, do not exceed,
in the aggregate, at any time a maximum amount of 2% of the original principal amount
of the Indebtedness and are paid within 60 days of the date incurred. |
| (C) | through
(F) are reserved. |
| (xi) | It will
maintain its records, books of account, bank accounts, financial statements, accounting
records and other entity documents separate and apart from those of any other Person
and will not list its assets as assets on the financial statement of any other Person;
provided, however, that Borrower’s assets may be included in a consolidated financial
statement of its Affiliate provided that (A) appropriate notation will be made on such
consolidated financial statements to indicate the separateness of Borrower from such
Affiliate and to indicate that Borrower’s assets and credit are not available to
satisfy the debts and other obligations of such Affiliate or any other Person, and (B)
such assets will also be listed on Borrower’s own separate balance sheet. |
| (xii) | Except
for capital contributions or capital distributions permitted under the terms and conditions
of its organizational documents, it will only enter into any contract or agreement with
any general partner, member, shareholder, principal or Affiliate of Borrower or any Guarantor,
or any general partner, member, principal or Affiliate thereof, upon terms and conditions
that are commercially reasonable and substantially similar to those that would be available
on an arm’s-length basis with third parties. |
Multifamily Loan and Security Agreement | Page 34 |
| (xiii) | It
will not maintain its assets in such a manner that will be costly or difficult to segregate,
ascertain or identify its individual assets from those of any other Person. |
| (xiv) | It will
not assume or guaranty (excluding any guaranty that has been executed and delivered in
connection with the Note) the debts or obligations of any other Person, hold itself out
to be responsible for the debts of another Person, pledge its assets to secure the obligations
of any other Person or otherwise pledge its assets for the benefit of any other Person,
or hold out its credit as being available to satisfy the obligations of any other Person. |
| (xv) | It will
not make or permit to remain outstanding any loans or advances to any other Person except
for those investments permitted under the Loan Documents and will not buy or hold evidence
of indebtedness issued by any other Person (other than cash or investment-grade securities). |
| (xvi) | It will
file its own tax returns separate from those of any other Person, except to the extent
that Borrower is treated as a “disregarded entity” for tax purposes and is
not required to file tax returns under applicable law, and will pay any taxes required
to be paid under applicable law. |
| (xvii) | It
will hold itself out to the public as a legal entity separate and distinct from any other
Person and conduct its business solely in its own name, will correct any known misunderstanding
regarding its separate identity and will not identify itself or any of its Affiliates
as a division or department of any other Person. |
| (xviii) | It
will maintain adequate capital for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business operations
and will pay its debts and liabilities from its own assets as the same become due. |
| (xix) | It will
allocate fairly and reasonably shared expenses with Affiliates (including shared office
space) and use separate stationery, invoices and checks bearing its own name. |
| (xx) | It will
pay (or cause the Property Manager to pay on behalf of Borrower from Borrower’s
funds) its own liabilities (including salaries of its own employees) from its own funds. |
| (xxi) | It will
not acquire obligations or securities of its partners, members, shareholders, or Affiliates,
as applicable. |
| (xxii) | Except
as contemplated or permitted by the property management agreement with respect to the
Property Manager, it will not permit any Affiliate or constituent party independent access
to its bank accounts. |
| (xxiii) | It
will maintain a sufficient number of employees (if any) in light of its contemplated
business operations and pay the salaries of its own employees, if any, only from its
own funds. |
| (xxiv) | If
such entity is a single member limited liability company, such entity will satisfy each
of the following conditions: |
Multifamily Loan and Security Agreement | Page 35 |
| (A) | Be formed
and organized under Delaware law. |
| (B) | Have
either one springing member that is a corporation or two springing members who are natural
persons. If there is more than one springing member, only one springing member will be
the sole member of Borrower or SPE Equity Owner (as applicable) at any one time, and
the second springing member will become the sole member only upon the first springing
member ceasing to be a member. |
| (C) | Otherwise
comply with all Rating Agencies’ criteria for single member limited liability companies
(including the delivery of Delaware single member limited liability company opinions
acceptable in all respects to Lender). |
| (D) | At all
times Borrower or SPE Equity Owner (as applicable) will have one and only one member. |
| (xxv) | If such
entity is a single member limited liability company that is board-managed, such entity
will have a board of Managers separate from that of Guarantor and any other Person and
will cause its board of Managers to keep minutes of board meetings and actions and observe
all other Delaware limited liability company required formalities. |
| (xxvi) | If
an SPE Equity Owner is required pursuant to this Loan Agreement, if Borrower is (A) a
limited liability company with more than one member, then Borrower has and will have
at least one member that is an SPE Equity Owner that has satisfied and will satisfy the
requirements of Section 6.13(b) and such member is its managing member, or (B) a limited
partnership, then all of its general partners are SPE Equity Owners that have satisfied
and will satisfy the requirements set forth in Section 6.13(b). |
| (b) | SPE
Equity Owner Requirements. The SPE Equity Owner, if applicable, will at all times
since its formation and thereafter comply in its own right (subject to the modifications
set forth below), and will cause Borrower to comply, with each of the requirements of
a Single Purpose Entity. Upon the withdrawal or the disassociation of an SPE Equity Owner
from Borrower, Borrower will immediately appoint a new SPE Equity Owner, whose organizational
documents are substantially similar to those of the withdrawn or disassociated SPE Equity
Owner, and deliver a new nonconsolidation opinion to Lender in form and substance satisfactory
to Lender with regard to nonconsolidation by a bankruptcy court of the assets of each
of Borrower and SPE Equity Owner with those of its Affiliates. |
| (i) | With respect
to Section 6.13(a)(i), the SPE Equity Owner will not engage in any business or activity
other than being the managing member or general partner, as the case may be, of Borrower
and owning at least 0.5% equity interest in Borrower. |
Multifamily Loan and Security Agreement | Page 36 |
| (ii) | With
respect to Section 6.13(a)(ii), the SPE Equity Owner has not and will not acquire or
own any assets other than its equity interest in Borrower and personal property related
thereto. |
| (iii) | With
respect to Section 6.13(a)(viii), the SPE Equity Owner will not own any subsidiary or
make any investment in any other Person, except for Borrower. |
| (iv) | With
respect to Section 6.13(a)(x), the SPE Equity Owner has not and will not incur any debt,
secured or unsecured, direct or contingent (including guaranteeing any obligation), other
than (A) customary unsecured payables incurred in the ordinary course of owning Borrower
provided the same are not evidenced by a promissory note, do not exceed, in the aggregate,
at any time a maximum amount of $10,000 and are paid within 60 days of the date incurred,
and (B) in its capacity as general partner of Borrower (if applicable). |
| (v) | With respect
to Section 6.13(a)(xiv), the SPE Equity Owner will not assume or guaranty the debts or
obligations of any other Person, hold itself out to be responsible for the debts of another
Person, pledge its assets to secure the obligations of any other Person or otherwise
pledge its assets for the benefit of any other Person, or hold out its credit as being
available to satisfy the obligations of any other Person, except for in its capacity
as general partner of Borrower (if applicable). |
| (c) | Effect
of Transfer on Special Purpose Entity Requirements. Notwithstanding anything to the
contrary in this Loan Agreement, no Transfer will be permitted under Article VII unless
the provisions of this Section 6.13 are satisfied at all times. |
| 6.14 | Repairs
and Capital Replacements. |
| (a) | Completion
of Repairs. Borrower will commence any Repairs as soon as practicable after the date
of this Loan Agreement and will diligently proceed with and complete such Repairs on
or before the Completion Date. All Repairs and Capital Replacements will be completed
in a good and workmanlike manner, with suitable materials, and in accordance with good
building practices and all applicable laws, ordinances, rules, regulations, building
setback lines and restrictions applicable to the Mortgaged Property. Borrower agrees
to cause the replacement of any material or work that is defective, unworkmanlike or
that does not comply with the requirements of this Loan Agreement, as determined by Lender. |
| (b) | Purchases.
Without the prior written consent of Lender, no materials, machinery, equipment, fixtures
or any other part of the Repairs or Capital Replacements will be purchased or installed
under conditional sale contracts or lease agreements, or any other arrangement wherein
title to such Repairs or Capital Replacements is retained or subjected to a purchase
money security interest, or the right is reserved or accrues to anyone to remove or repossess
any such Repairs or Capital Replacements, or to consider them as personal property. |
| (c) | Lien
Protection. Borrower will promptly pay or cause to be paid, when due, all costs,
charges and expenses incurred in connection with the construction and completion of the
Repairs or Capital Replacements, and will keep the Mortgaged Property free and clear
of any and all Liens other than the Lien of the Security Instrument and any other junior
Lien to which Lender has consented. |
Multifamily Loan and Security Agreement | Page 37 |
| (d) | Adverse
Claims. Borrower will promptly advise Lender in writing of any litigation, Liens
or claims affecting the Mortgaged Property and of all complaints and charges made by
any Governmental Authority that may delay or adversely affect the Repairs or Capital
Replacements. |
| 6.15 | Residential
Leases Affecting the Mortgaged Property. |
| (a) | Borrower
will, promptly upon Lender’s request, deliver to Lender an executed copy of each
residential Lease then in effect. |
| (b) | All
Leases for residential dwelling units will satisfy the following conditions: |
| (i) | They will
be on forms that are customary for similar multifamily properties in the Property Jurisdiction. |
| (ii) | They
will be for initial terms of at least 6 months and not more than 2 years (unless otherwise
approved in writing by Lender). |
| (iii) | They
will not include any Corporate Leases (unless otherwise approved in writing by Lender). |
| (iv) | They
will not include options to purchase. |
| (c) | If Borrower
is a cooperative housing corporation or association, notwithstanding anything to the
contrary contained in this Loan Agreement, so long as Borrower remains a cooperative
housing corporation or association and is not in breach of any covenant of this Loan
Agreement, Lender consents to each of the following: |
| (i) | The execution
of Leases for terms in excess of 2 years to a tenant shareholder of Borrower, so long
as such Leases, including proprietary Leases, are and will remain subordinate to the
Lien of the Security Instrument. |
| (ii) | The surrender
or termination of such Leases where the surrendered or terminated Lease is immediately
replaced or where Borrower makes its best efforts to secure such immediate replacement
by a newly-executed Lease of the same apartment to a tenant shareholder of Borrower.
However, no consent is given by Lender to any execution, surrender, termination or assignment
of a Lease under terms that would waive or reduce the obligation of the resulting tenant
shareholder under such Lease to pay cooperative assessments in full when due or the obligation
of the former tenant shareholder to pay any unpaid portion of such assessments. |
| 6.16 | Litigation;
Government Proceedings. Borrower will give prompt Notice to Lender of any litigation
or governmental proceedings pending or, to the best of Borrower’s knowledge, threatened
in writing against Borrower or any Borrower Principal which might have a Material Adverse
Effect. As and when requested by Lender, Borrower will provide Lender with written updates
on the status of all litigation proceedings affecting Borrower or any Borrower Principal. |
Multifamily Loan and Security Agreement | Page 38 |
| 6.17 | Further
Assurances and Estoppel Certificates; Lender’s Expenses. Within 10 days after
a request from Lender, in Lender’s Discretion, Borrower will take each of the following
actions: |
| (a) | Deliver
to Lender a written statement, signed and acknowledged by Borrower, certifying to Lender
or any Person designated by Lender, as of the date of such statement: (i) that the Loan
Documents are unmodified and in full force and effect (or, if there have been modifications,
that the Loan Documents are in full force and effect as modified and setting forth such
modifications), (ii) the unpaid principal balance of the Note, (iii) the date to which
interest under the Note has been paid, (iv) that Borrower is not in default in paying
the Indebtedness or in performing or observing any of the covenants or agreements contained
in this Loan Agreement or any of the other Loan Documents (or, if Borrower is in default,
describing such default in reasonable detail), (v) whether there are any then-existing
setoffs or defenses known to Borrower against the enforcement of any right or remedy
of Lender under the Loan Documents, and (vi) any additional facts requested by Lender. |
| (b) | Execute,
acknowledge and/or deliver, at its sole cost and expense, all further acts, deeds, conveyances,
assignments, estoppel certificates, financing statements or amendments, transfers and
assurances as Lender may require from time to time in order to better assure, grant and
convey to Lender the rights intended to be granted, now or in the future, to Lender under
this Loan Agreement and the Loan Documents or in connection with Lender’s consent
rights under Article VII. |
Borrower
acknowledges and agrees that, in connection with each request by Borrower under this Loan Agreement or any Loan Document, Borrower
will pay all reasonable Attorneys’ Fees and Costs and expenses incurred by Lender and Loan Servicer, including any fees
charged by the Rating Agencies, if applicable, regardless of whether the matter is approved, denied or withdrawn. Any amounts
payable by Borrower under this Loan Agreement will be deemed a part of the Indebtedness, will be secured by the Security Instrument
and will bear interest at the Default Rate if not fully paid within 10 days of written demand for payment.
| 6.18 | Cap
Collateral. Reserved. |
| 6.19 | Ground
Lease. Reserved. |
| (a) | Borrower
will not engage in any transaction which would cause an obligation, or action taken or
to be taken under this Loan Agreement (or the exercise by Lender of any of its rights
under the Note, this Loan Agreement or any of the other Loan Documents) to be a non-exempt
prohibited transaction under ERISA or Section 4975 of the Tax Code. |
| (b) | Borrower
will deliver to Lender such certifications or other evidence from time to time throughout
the term of this Loan Agreement, as requested by Lender in Lender’s Discretion,
confirming each of the following: |
| (i) | Borrower
is not an “employee benefit plan” as defined in Section 3(3) of ERISA, which
is subject to Title I of ERISA, a “plan” to which Section 4975 of the Tax
Code applies, or an entity whose underlying assets constitute “plan assets”
of one or more of such plans. |
Multifamily Loan and Security Agreement | Page 39 |
| (ii) | Borrower
is not a “governmental plan” within the meaning of Section 3(32) of ERISA. |
| (iii) | Borrower
is not subject to state statutes regulating investments or fiduciary obligations with
respect to governmental plans. |
| (iv) | One or
more of the following circumstances is true: |
| (A) | Equity
interests in Borrower are publicly offered securities within the meaning of 29 C.F.R.
Section 2510.3-101(b)(2), as amended from time to time or any successor provision. |
| (B) | Less
than 25% of each outstanding class of equity interests in Borrower are held by “benefit
plan investors” within the meaning of Section 3(42) of ERISA, as amended from time
to time or any successor provision. |
| (C) | Borrower
qualifies as either an “operating company” or a “real estate operating
company” within the meaning of 29 C.F.R. Section 2510.3-101(c) or (e), as
either may be amended from time to time or any successor provisions, or is an investment
company registered under the Investment Company Act of 1940. |
| 6.21 | through
6.46 are reserved. |
| ARTICLE VII | TRANSFERS
OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER. |
Upon the occurrence
of a Transfer prohibited by or requiring Lender’s approval (if applicable) under this Article VII, Lender may, in Lender’s
Discretion, by Notice to Borrower and the proposed transferee(s), modify or render void, any or all of the negotiated modifications
to the Loan Documents (and/or deferral of deposits to Reserve Funds) as a condition to Lender’s consent to the proposed
Transfer.
| 7.01 | Permitted
Transfers. The occurrence of any of the following Transfers will not constitute an
Event of Default under this Loan Agreement, notwithstanding any provision of Section
7.02 to the contrary: |
| (a) | A Transfer
to which Lender has consented. |
| (b) | A Transfer
that is not a prohibited Transfer pursuant to Section 7.02. |
| (c) | A Transfer
that is conditionally permitted pursuant to Section 7.03 upon the satisfaction of all
applicable conditions. |
| (d) | The
grant of a leasehold interest in an individual dwelling unit for a term of 2 years or
less (or longer if approved by Lender in writing) not containing an option to purchase. |
| (e) | Entering
into any New Non-Residential Lease, or modifying or terminating any Non-Residential Lease,
in each case in compliance with Section 6.04. |
| (f) | A Condemnation
with respect to which Borrower satisfies the requirements of Section 6.11. |
Multifamily Loan and Security Agreement | Page 40 |
| (g) | A Transfer
of obsolete or worn out Personalty or Fixtures that are contemporaneously replaced by
items of equal or better function and quality, which are free of Liens, encumbrances
and security interests other than those created by the Loan Documents or consented to
by Lender. |
| (h) | The
creation of a mechanic’s, materialmen’s, or judgment Lien against the Mortgaged
Property, which is released of record, bonded, or otherwise remedied to Lender’s
satisfaction within 60 days of the date of creation; provided, however, if Borrower is
diligently prosecuting such release or other remedy and advises Lender that such release
or remedy cannot be consummated within such 60-day period, Borrower will have an additional
period of time (not exceeding 120 days from the date of creation or such earlier time
as may be required by applicable law in which the lienor must act to enforce the Lien)
within which to obtain such release of record or consummate such other remedy. |
| (i) | If Borrower
is a housing cooperative corporation or association, the Transfer of the shares in the
housing cooperative or the assignment of the occupancy agreements or Leases relating
thereto to tenant shareholders of the housing cooperative or association. |
| (j) | A Supplemental
Instrument that complies with Section 11.11(if applicable) or Defeasance that complies
with Section 11.12(if applicable). |
| (k) | If applicable,
a Preapproved Intrafamily Transfer that satisfies the requirements of Section 7.04. |
| 7.02 | Prohibited
Transfers. The occurrence of any of the following Transfers will constitute an Event
of Default under this Loan Agreement: |
| (a) | A Transfer
of all or any part of the Mortgaged Property or any interest in the Mortgaged Property,
including the grant, creation or existence of any Lien on the Mortgaged Property, whether
voluntary, involuntary or by operation of law, and whether or not such Lien has priority
over the Lien of the Security Instrument, other than the Lien of the Security Instrument
or, if this Loan Agreement is entered into in connection with a Supplemental Loan, the
Lien of the Senior Instrument, or any other Lien to which Lender has consented. |
| (b) | A Transfer
or series of Transfers of any legal or equitable interest of any Guarantor which owns
a direct or indirect interest in Borrower that result(s) in such Guarantor no longer
owning any direct or indirect interest in Borrower. |
| (c) | A Transfer
or series of Transfers of any legal or equitable interest since the Closing Date that
result(s) in a change of more than 50% of the ownership interests (or beneficial interests,
if the applicable entity is a trust) in Borrower or any Designated Entity for Transfers. |
| (d) | A Transfer
of any general partnership interest in a partnership, or any manager interest (whether
a member manager or nonmember manager) in a limited liability company, or a change in
the trustee of a trust other than as permitted in Section 7.04, if such partnership,
limited liability company, or trust, as applicable, is Borrower or a Designated Entity
for Transfers. |
| (e) | If Borrower
or any Designated Entity for Transfers is a corporation whose outstanding voting stock
is held by 100 or more shareholders, one or more Transfers by a single transferor within
a 12-month period affecting an aggregate of 10% or more of that stock. |
Multifamily Loan and Security Agreement | Page 41 |
| (f) | The
grant, creation or existence of any Lien, whether voluntary, involuntary or by operation
of law, and whether or not such Lien has priority over the Lien of the Security Instrument,
on any ownership interest in Borrower or any Designated Entity for Transfers, if the
foreclosure of such Lien would result in a Transfer prohibited under Sections 7.02(b),
(c), (d), or (e). |
| (g) | If Borrower
is a trust (i) the termination or revocation of the trust, or (ii) the removal, appointment
or substitution of a trustee of the trust. |
| 7.03 | Conditionally
Permitted Transfers. The occurrence of any of the following Transfers will not constitute
a prohibited Transfer under Section 7.02, provided that Borrower has complied with all
applicable specified conditions in this Section. |
| (a) | Transfer
by Devise, Descent or Operation of Law. Upon the death of a natural person, a Transfer
which occurs by devise, descent, or by operation of law to one or more Immediate Family
Members of such natural person or to a trust or family conservatorship established for
the benefit of such Immediate Family Members (each a “Beneficiary”),
provided that each of the following conditions is satisfied: |
| (i) | The Property
Manager continues to be responsible for the management of the Mortgaged Property, and
such Transfer will not result in a change in the day-to-day operations of the Mortgaged
Property. |
| (ii) | Lender
receives confirmation acceptable to Lender, in Lender’s Discretion, that Borrower
continues to satisfy the requirements of Section 6.13. |
| (iii) | Each
Guarantor executes such documents and agreements as Lender requires in Lender’s
Discretion to evidence and effect the ratification of each Guaranty, or in the event
of the death of any Guarantor, Borrower causes one of the following to occur: |
| (A) | One
or more Persons acceptable to Lender, in Lender’s Discretion, execute(s) and deliver(s)
to Lender a guaranty in a form acceptable to Lender and in substantially the same form
as the Guaranty executed on the Closing Date, without any cost or expense to Lender. |
| (B) | The
estate of the deceased Guarantor immediately ratifies the Guaranty in writing, and within
6 months after the date of the death of the deceased Guarantor one or more Persons, acceptable
to Lender in Lender’s Discretion, execute(s) and deliver(s) to Lender a guaranty
in a form acceptable to Lender and in substantially the same form as the Guaranty executed
on the Closing Date, without any cost or expense to Lender. |
Multifamily Loan and Security Agreement | Page 42 |
| (iv) | Borrower
gives Lender Notice of such Transfer together with copies of all documents effecting
such Transfer not more than 30 calendar days after the date of such Transfer, and contemporaneously
with the Notice, takes each of the following additional actions: |
| (A) | Borrower
reaffirms the representations and warranties under Article V. |
| (B) | Borrower
satisfies Lender, in Lender’s Discretion, that the Beneficiary’s organization,
credit and experience in the management of similar properties are appropriate to the
overall structure and documentation of the existing financing. |
| (v) | Borrower
or Beneficiary causes to be delivered to Lender such legal opinions as Lender deems necessary,
in Lender’s Discretion, including a nonconsolidation opinion (if a nonconsolidation
opinion was delivered on the Closing Date and if required by Lender), an opinion that
the ratification of the Loan Documents and Guaranty (if applicable) have been duly authorized,
executed, and delivered and that the ratification documents and Guaranty (if applicable)
are enforceable as the obligations of Borrower, Beneficiary or Guarantor, as applicable. |
| (vi) | Borrower
(A) pays the Transfer Processing Fee to Lender, and (B) pays or reimburses Lender, upon
demand, for all costs and expenses including all Attorneys’ Fees and Costs, incurred
by Lender in connection with such Transfer; provided, however, that Lender will not be
entitled to collect a Transfer Fee. |
| (b) | Easement,
Restrictive Covenant or Other Encumbrance. The grant of an easement, restrictive
covenant or other encumbrance, provided that each of the following conditions is satisfied: |
| (i) | Borrower
provides Lender with at least 30 days prior Notice of the proposed grant. |
| (ii) | Prior
to the grant, Lender determines, in Lender’s Discretion, that the easement, restrictive
covenant or other encumbrance will not materially affect the operation or value of the
Mortgaged Property or Lender’s interest in the Mortgaged Property. |
| (iii) | Borrower
pays or reimburses Lender, upon demand, for all costs and expenses, including all Attorneys’
Fees and Costs, incurred by Lender in connection with reviewing Borrower’s request
for Lender’s review of such grant of easement, restrictive covenant or other encumbrance;
provided, however, that Lender will not be entitled to collect a Transfer Fee. |
| (iv) | If the
Note is held by a REMIC trust, Lender may require an opinion of counsel which meets each
of the following requirements: |
| (A) | The
counsel providing the opinion is acceptable to Lender. |
| (B) | The
opinion is addressed to Lender. |
| (C) | The
opinion is paid for by Borrower. |
Multifamily Loan and Security Agreement | Page 43 |
| (D) | The
opinion is in form and substance satisfactory to Lender in its sole and absolute discretion. |
| (E) | The
opinion confirms each of the following: |
| (1) | The grant
of such easement has been effected in accordance with the requirements of Treasury Regulation
Section 1.860G-2(a)(8) (as such regulation may be modified, amended or replaced from
time to time). |
| (2) | The qualification
and status of the REMIC trust as a REMIC will not be adversely affected or impaired as
a result of such grant. |
| (3) | The REMIC
trust will not incur a tax under Section 860G(d) of the Tax Code as a result of such
grant. |
| (c) | Publicly-Held
Fund or Publicly-Held Real Estate Investment Trust. If a Designated Entity for Transfers
is a publicly-held fund or a publicly-held real estate investment trust, either of the
following: |
| (i) | The public
issuance of common stock, convertible debt, equity or other similar securities (“Public
Fund/REIT Securities”) and the subsequent Transfer of such Public Fund/REIT
Securities. |
| (ii) | The acquisition
by a single Public Fund/REIT Securities holder of an ownership percentage of 10% or more
in the Designated Entity for Transfers, if Borrower provides notice of that acquisition
to Lender within 30 days following the acquisition. |
| (d) | Transaction
Specific Transfers. |
| (i) | through
(v) are reserved. |
| (vi) | Limited
Partner or Non-Managing Member Transfer. A Transfer that results in the cumulative
Transfer of more than 50% and up to 100% of the non-managing membership interests in
or the limited partnership interests in Borrower or any Designated Entity for Transfer
(“Investor Interests”) to third party transferees (“Investor
Interest Transfer”), provided that each of the following conditions is satisfied: |
| (A) | Borrower
provides Lender with at least 30 days prior Notice of the proposed Investor Interest
Transfer. |
| (B) | At the
time of the proposed Investor Interest Transfer, no Event of Default has occurred and
is continuing and no event or condition has occurred and is continuing that, with the
giving of Notice or the passage of time, or both, would become an Event of Default. |
| (C) | Following
the Investor Interest Transfer, Control and management of the day-to-day operations of
Borrower continue to be held by the Person exercising such Control and management immediately
prior to the Investor Interest Transfer and there is no change in the Guarantor, if applicable. |
Multifamily Loan and Security Agreement | Page 44 |
| (D) | The
Investor Interest Transfer does not result in a Transfer of the type described in Section
7.02(b). |
| (E) | At any
time that one Person acquires 25% or more of the aggregate of direct or indirect Investor
Interests as a result of the Investor Interest Transfer, Borrower must meet the following
additional requirements: |
| (1) | Borrower
pays to Lender the Transfer Processing Fee at the time the Borrower provides Lender with
the Notice set forth in Section 7.03(d)(vi)(A). |
| (2) | Borrower
pays or reimburses Lender, upon demand, for all costs and expenses, including all Attorneys’
Fees and Costs, incurred by Lender in connection with the Investor Interest Transfer. |
| (3) | Lender
receives confirmation acceptable to Lender that (X) the requirements of Section 6.13
continue to be satisfied, and (Y) the term of existence of the holder of 25% or more
of the Investor Interests after the Investor Interest Transfer (exclusive of any unexercised
extension options or rights) does not expire prior to the Maturity Date. |
| (4) | Lender
receives organizational charts reflecting the structure of Borrower prior to and after
the Investor Interest Transfer and copies of the then-current organizational documents
of Borrower and the entity in which Investor Interests were transferred, if different
from Borrower, including any amendments. |
| (5) | Each transferee
with an interest of 25% or more delivers to Lender a certification that each of the following
is true: |
| (X) | He/she/it
has not been convicted of fraud or a crime involving moral turpitude (or if an entity,
then no principal of such entity has been convicted of fraud or a crime involving moral
turpitude). |
| (Y) | He/she/it
has not been involved in a bankruptcy or reorganization within the ten years preceding
the date of the Investor Interest Transfer. |
| (6) | Borrower
delivers to Lender searches confirming that no transferee with an interest of 25% or
more is on the list of Specially Designated Nationals or other blocked persons published
by the U.S. Office of Foreign Assets Control, or on the list of persons or entities prohibited
from doing business with the Department of Housing and Urban Development. |
Multifamily Loan and Security Agreement | Page 45 |
| (7) | If a nonconsolidation
opinion was delivered on the Closing Date and if, after giving effect to the Investor
Interest Transfer and all prior Transfers, 50% or more in the aggregate of direct or
indirect interests in Borrower are owned by any Person and its Affiliates that owned
less than a 50% direct or indirect interest in Borrower as of the Closing Date, Borrower
delivers to Lender an opinion of counsel for Borrower, in form and substance satisfactory
to Lender, with regard to nonconsolidation. |
| (vii) | through
(ix) are reserved. |
| (e) | through
(i) are reserved. |
| 7.04 | Preapproved
Intrafamily Transfers. The occurrence of a Transfer of more than a 50% interest
in Borrower or a Designated Entity for Transfers as set forth in this Section will be
considered to be a “Preapproved Intrafamily Transfer” provided
that each of the conditions set forth in Sections 7.04(a) and (b) is satisfied: |
| (a) | Type
of Transfer. The Transfer is one of the following: |
| (i) | A sale
or transfer to one or more of the transferor’s Immediate Family Members. |
| (ii) | A sale
or transfer to any trust having as its sole beneficiaries the transferor and/or one or
more of the transferor’s Immediate Family Members. |
| (iii) | A sale
or transfer from a trust to any one or more of its beneficiaries who are the settlor
and/or Immediate Family Members of the settlor of the trust. |
| (iv) | The substitution
or replacement of the trustee of any trust with a trustee who is an Immediate Family
Member of the settlor of the trust. |
| (v) | A sale
or transfer from a natural person to an entity owned and under the Control of the transferor
or the transferor’s Immediate Family Members. |
| (b) | Conditions.
The Preapproved Intrafamily Transfer satisfies each of the following conditions: |
| (i) | Borrower
must provide Lender with 30 days prior Notice of the proposed Preapproved Intrafamily
Transfer. |
| (ii) | Following
the Transfer, Control and management of the day-to-day operations of Borrower continue
to be held by the Person exercising such Control and management immediately prior to
the Transfer and there is no change in the Guarantor, if applicable. |
| (iii) | At the
time of the Preapproved Intrafamily Transfer, no Event of Default has occurred and is
continuing and no event or condition has occurred and is continuing that, with the giving
of Notice or the passage of time, or both, would become an Event of Default. |
| (iv) | At any
time that one Person acquires 25% or more of the aggregate of direct or indirect interests
in Borrower or a Designated Entity for Transfers as a result of the Preapproved Intrafamily
Transfer, Borrower must meet the following additional requirements: |
Multifamily Loan and Security Agreement | Page 46 |
| (A) | Borrower
must pay to Lender the Transfer Processing Fee at the time the Borrower provides Lender
with the Notice set forth in Section 7.04(b)(i). |
| (B) | Borrower
must pay or reimburse Lender, upon demand, for all costs and expenses, including all
Attorneys’ Fees and Costs, incurred by Lender in connection with the Preapproved
Intrafamily Transfer. |
| (C) | Borrower
must deliver to Lender organizational charts reflecting the structure of Borrower prior
to and after the Preapproved Intrafamily Transfer, together with copies of the then-current
organizational documents of Borrower and any other entity in which interests were transferred,
including any amendments made in connection with the Preapproved Intrafamily Transfer. |
| (D) | Each
transferee with an interest of 25% or more must deliver to Lender a certification that
each of the following is true: |
| (1) | He/she/it
has not been convicted of fraud or a crime involving moral turpitude (or if an entity,
then no principal of such entity has been convicted of fraud or a crime involving moral
turpitude). |
| (2) | He/she/it
has not been involved in a bankruptcy or reorganization within the 10 years preceding
the date of the Preapproved Intrafamily Transfer. |
| (E) | Borrower
must deliver to Lender searches confirming that no transferee with an interest of 25%
or more is on the list of Specially Designated Nationals or other blocked persons published
by the U.S. Office of Foreign Assets Control, or on the list of persons or entities prohibited
from doing business with the Department of Housing and Urban Development. |
| (F) | If a
nonconsolidation opinion was delivered on the Closing Date and if, after giving effect
to the Preapproved Intrafamily Transfer and all prior Transfers, 50% or more in the aggregate
of direct or indirect interests in Borrower are owned by any Person and its Affiliates
that owned less than a 50% direct or indirect interest in Borrower as of the Closing
Date, Borrower must deliver to Lender an opinion of counsel for Borrower, in form and
substance satisfactory to Lender, with regard to nonconsolidation. |
| 7.05 | Lender’s
Consent to Prohibited Transfers. |
| (a) | Conditions
for Lender’s Consent. With respect to a Transfer that would otherwise constitute
an Event of Default under this Article VII, Lender will consent, without any adjustment
to the rate at which the Indebtedness bears interest or to any other economic terms of
the Indebtedness set forth in the Note, provided that, prior to such Transfer, each of
the following requirements is satisfied: |
| (i) | Borrower
has submitted to Lender all information required by Lender to make the determination
required by this Section along with the Transfer Processing Fee. |
Multifamily Loan and Security Agreement | Page 47 |
| (ii) | No Event
of Default has occurred and is continuing and no event or condition has occurred and
is continuing that, with the giving of Notice or the passage of time, or both, would
become an Event of Default unless such Transfer would cure the Event of Default. |
| (iii) | Lender
in Lender’s Discretion has determined that the transferee meets Lender’s
eligibility, credit, management and other standards (including any standards with respect
to previous relationships between Lender and the transferee). |
| (iv) | Lender
in Lender’s Discretion has determined that the transferee’s organization,
credit and experience in the management of similar properties to be appropriate to the
overall structure and documentation of the Loan. |
| (v) | Lender
in Lender’s Discretion has determined that the Mortgaged Property will be managed
by a Property Manager meeting the requirements of Section 6.09(d). |
| (vi) | Lender
in Lender’s Discretion has determined that the Mortgaged Property, at the time
of the proposed Transfer, meets all of Lender’s standards as to its physical condition,
occupancy, net operating income and the accumulation of reserves. |
| (vii) | Lender
in Lender’s Discretion has determined that the transferee and any SPE Equity Owner
of such transferee meet the requirements of Section 6.13. |
| (viii) | If
any Supplemental Instrument is outstanding, Borrower has obtained the consent of each
Supplemental Lender, if different from Lender. |
| (ix) | In the
case of a Transfer of all or any part of the Mortgaged Property, each of the following
conditions is satisfied: |
| (A) | The
transferee executes Lender’s then-standard assumption agreement that, among other
things, requires the transferee to perform all obligations of Borrower set forth in the
Note, the Security Instrument, this Loan Agreement and any other Loan Document, and may
require that the transferee comply with any provisions of this Loan Agreement or any
other Loan Document which previously may have been waived or modified by Lender. |
| (B) | If Lender
requires, the transferee causes one or more Persons acceptable to Lender, in Lender’s
Discretion, to execute and deliver to Lender a Guaranty in a form acceptable to Lender. |
| (C) | The
transferee executes such additional documentation (including filing financing statements,
as applicable) as Lender may require. |
| (x) | In the
case of a Transfer of any interest in Borrower or a Designated Entity for Transfers,
if a Guarantor requests that Lender release the Guarantor from its obligations under
a Guaranty executed and delivered in connection with the Note, this Loan Agreement or
any of the other Loan Documents, then Borrower causes one or more Persons acceptable
to Lender, in Lender’s Discretion, to execute and deliver to Lender a Guaranty
in a form acceptable to Lender. |
Multifamily Loan and Security Agreement | Page 48 |
| (xi) | Lender
has received such legal opinions as Lender deems necessary, including a nonconsolidation
opinion (if a nonconsolidation opinion was delivered on the Closing Date and if required
by Lender), an opinion that the assignment and assumption of the Loan Documents has been
duly authorized, executed, and delivered and that the assignment documents and the Loan
Documents are enforceable as the obligations of Borrower, transferee and Guarantor, as
applicable. |
| (xii) | Lender
collects all costs, including the cost of all title searches, title insurance and recording
costs, and all Attorneys’ Fees and Costs incurred in reviewing the Transfer request
and any fees charged by the Rating Agencies, if applicable. |
| (xiii) | At
the time of the Transfer, Borrower pays the Transfer Fee to Lender. |
| (xiv) | The
Transfer will not occur during any Extension Period, if applicable. |
| (b) | Continuing
Liability of Borrower. If Borrower requests a release of its liability under the
Loan Documents in connection with a Transfer of all of Borrower’s interest in the
Mortgaged Property, and Lender approves the Transfer pursuant to Section 7.05(a), then
one of the following will apply: |
| (i) | If Borrower
delivers to Lender a current Site Assessment which (A) is dated within 90 days prior
to the date of the proposed Transfer, and (B) evidences no presence of Hazardous Materials
on the Mortgaged Property and no other Prohibited Activities or Conditions with respect
to the Mortgaged Property (“Clean Site Assessment”), then Lender will
release Borrower from all of Borrower’s obligations under the Loan Documents except
for any liability under Section 6.12 or Section 10.02(b) with respect to any loss, liability,
damage, claim, cost or expense which directly or indirectly arises from or relates to
any Prohibited Activities or Conditions existing prior to the date of the Transfer. |
| (ii) | If Borrower
does not deliver a Clean Site Assessment as described in Section 7.05(b)(i), then Lender
will release Borrower from all of Borrower’s obligations under the Loan Documents
except for liability under Section 6.12 or Section 10.02(b). |
| (c) | Continuing
Liability of Guarantor. If Guarantor requests a release of its liability under the
Guaranty in connection with a Transfer which is permitted, preapproved, or approved by
Lender pursuant to this Article VII, and Borrower has provided a replacement Guarantor
acceptable to Lender under the terms of Section 7.05(a)(ix)(B), then one of the
following will apply: |
| (i) | If Borrower
delivers to Lender a Clean Site Assessment, then Lender will release Guarantor from all
of Guarantor’s obligations except Guarantor’s obligation to guaranty Borrower’s
liability under Section 6.12 or Section 10.02(b) with respect to any loss, liability,
damage, claim, cost or expense which directly or indirectly arises from or relates to
any Prohibited Activities or Conditions existing prior to the date of the Transfer. |
Multifamily Loan and Security Agreement | Page 49 |
| (ii) | If Borrower
does not deliver a Clean Site Assessment as described in Section 7.05(b)(i), then Lender
will release Guarantor from all of Guarantor’s obligations except for Guarantor’s
obligation to guaranty Borrower’s liability under Section 6.12 or Section 10.02(b). |
| 7.06 | SPE
Equity Owner Requirement Following Transfer. Following any Transfer pursuant to this
Article VII, Borrower must satisfy the applicable conditions regarding an SPE Equity
Owner set forth in Section 6.13(a)(xxvi) of this Loan Agreement. |
| 7.07 | Additional
Transfer Requirements - External Cap Agreement. |
| (a) | Continuation
of Cap Agreement. If a Transfer of all or part of the Mortgaged Property permitted
by this Loan Agreement occurs, Borrower will ensure that any third-party Cap Agreement
is transferred to the applicable transferee or, if the Cap Agreement is not transferable,
Borrower will replace the third-party Cap Agreement in accordance with Lender’s
then-current requirements. |
| (b) | Establishment
or Modification of Rate Cap Agreement Reserve Fund |
| (i) | If the
third-party Cap Agreement which will be in place immediately following the Transfer is
scheduled to expire prior to the Maturity Date, Lender may require Borrower to establish
a Rate Cap Agreement Reserve Fund. |
| (ii) | If Borrower
has previously established a Rate Cap Agreement Reserve Fund, then Lender will determine
whether the balance of any existing Rate Cap Agreement Reserve Fund is sufficient under
then-current market conditions to purchase a Replacement Cap Agreement, and may then
take any of the following actions: |
| (A) | Lender
may require Borrower to make an additional deposit into the Rate Cap Agreement Reserve
Fund. |
| (B) | If funding
of the Rate Cap Agreement Reserve Fund has been deferred, Lender may require Borrower
to begin making monthly deposits into the Rate Cap Agreement Reserve Fund. |
| (C) | Lender
may require Borrower to increase the amount of monthly deposits to the Rate Cap Agreement
Reserve Fund. |
If, and to
the extent that, the proceeds of the Loan, or subsequent advances under Section 9.02, are used to pay, satisfy or discharge a
Prior Lien, such Loan proceeds or advances will be deemed to have been advanced by Lender at Borrower’s request, and Lender
will automatically, and without further action on its part, be subrogated to the rights, including Lien priority, of the owner
or holder of the obligation secured by the Prior Lien, whether or not the Prior Lien is released.
Multifamily Loan and Security Agreement | Page 50 |
| ARTICLE IX | EVENTS
OF DEFAULT AND REMEDIES. |
| 9.01 | Events
of Default. The occurrence of any one or more of the following will constitute an
Event of Default under this Loan Agreement: |
| (a) | Borrower
fails to pay or deposit when due any amount required by the Note, this Loan Agreement
or any other Loan Document. |
| (b) | Borrower
fails to maintain the Insurance coverage required by Section 6.10. |
| (c) | Borrower
or any SPE Equity Owner fails to comply with the provisions of Section 6.13 or if any
of the assumptions contained in any nonconsolidation opinions delivered to Lender at
any time is or becomes untrue in any material respect. |
| (d) | Borrower
or any SPE Equity Owner, any of its officers, directors, trustees, general partners or
managers or any Guarantor commits fraud or a material misrepresentation or material omission
in connection with: (i) the application for or creation of the Indebtedness, (ii) any
financial statement, Rent Schedule, or other report or information provided to Lender
during the term of the Indebtedness, or (iii) any request for Lender’s consent
to any proposed action, including a request for disbursement of funds under this Loan
Agreement. |
| (e) | Borrower
fails to comply with the Condemnation provisions of Section 6.11. |
| (f) | A Transfer
occurs that violates the provisions of Article VII, whether or not any actual impairment
of Lender’s security results from such Transfer. |
| (g) | A forfeiture
action or proceeding, whether civil or criminal, is commenced which could result in a
forfeiture of the Mortgaged Property or otherwise materially impair the Lien created
by the Security Instrument or Lender’s interest in the Mortgaged Property. |
| (h) | Borrower
fails to perform any of its obligations under this Loan Agreement (other than those specified
in Section 9.01), as and when required, which failure continues for a period of 30 days
after Notice of such failure by Lender to Borrower. However, if Borrower’s failure
to perform its obligations as described in this Section 9.01(h) is of the nature that
it cannot be cured within the 30 day cure period after such Notice from Lender but reasonably
could be cured within 90 days, then Borrower will have additional time as determined
by Lender in Lender’s Discretion, not to exceed an additional 60 days, in which
to cure such default, provided that Borrower has diligently commenced to cure such default
during the initial 30 day cure period and diligently pursues the cure of such default.
However, no such Notice or cure periods will apply in the case of any such failure which
could, in Lender’s judgment, absent immediate exercise by Lender of a right or
remedy under this Loan Agreement, result in harm to Lender, danger to tenants or third
parties, or impairment of the Note, the Security Instrument or this Loan Agreement or
any other security given under any other Loan Document. |
| (i) | Borrower
fails to perform any of its obligations as and when required under any Loan Document
other than this Loan Agreement which failure continues beyond the applicable cure period,
if any, specified in that Loan Document. |
Multifamily Loan and Security Agreement | Page 51 |
| (j) | The
holder of any other debt instrument secured by a mortgage, deed of trust or deed to secure
debt on the Mortgaged Property exercises any right to declare all amounts due under that
debt instrument immediately due and payable. |
| (k) | Any
of the following occurs: |
| (i) | Borrower
or any SPE Equity Owner commences any case, Proceeding or other action under any existing
or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship or relief of debtors (A) seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debt, or (B) seeking appointment
of a receiver, trustee, custodian, conservator or other similar official for it or for
all or any substantial part of its assets. |
| (ii) | Any party
other than Lender commences any case, Proceeding, or other action of a nature referred
to in Section 9.01(k)(i) against Borrower or any SPE Equity Owner which (A) results in
the entry of an order for relief or any such adjudication or appointment, or (B) has
not been dismissed, discharged or bonded for a period of 90 days. |
| (iii) | Any
case, Proceeding or other action is commenced against Borrower or any SPE Equity Owner
seeking issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets which results in the entry of any order
by a court of competent jurisdiction for any such relief which is not vacated, discharged,
or stayed or bonded pending appeal within 90 days from the entry thereof. |
| (iv) | Borrower
or any SPE Equity Owner takes any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts set forth in Section 9.01(k)(i),
(ii) or (iii). |
| (l) | Borrower
or any SPE Equity Owner has made any representation or warranty in Article V or any other
Section of this Loan Agreement that is false or misleading in any material respect. |
| (m) | If the
Loan is secured by an interest under a Ground Lease, Borrower fails to comply with the
provisions of Section 6.19. |
| (n) | If the
Loan is a Supplemental Loan, any Event of Default occurs under (i) the Senior Note, the
Senior Instrument or any other Senior Loan Document, or (ii) any loan document related
to another loan in connection with the Mortgaged Property, regardless of whether Borrower
has obtained Supplemental Lender’s approval of the placement of such Lien on the
Mortgaged Property. In addition, if the Loan is a Supplemental Loan, as Borrower under
both the Supplemental Instrument and the Senior Instrument, Borrower acknowledges and
agrees that if there is an Event of Default under the Supplemental Note, the Supplemental
Instrument or any other Supplemental Loan Document, such Event of Default will be an
Event of Default under the terms of the Senior Instrument and will entitle Senior Lender
to invoke any and all remedies permitted to Senior Lender by applicable law, the Senior
Note, the Senior Instrument or any of the other Senior Loan Documents. |
Multifamily Loan and Security Agreement | Page 52 |
| (o) | If the
Mortgaged Property is subject to any covenants, conditions and/or restrictions, land
use restriction agreements or similar agreements, Borrower fails to perform any of its
obligations under any such agreement as and when required, and such failure continues
beyond any applicable cure period. |
| (p) | A Guarantor
files for bankruptcy protection under the Bankruptcy Code or a Guarantor voluntarily
becomes subject to any reorganization, receivership, insolvency proceeding or other similar
proceeding pursuant to any other federal or state law affecting debtor and creditor rights,
or any creditor (other than Lender) of a Guarantor commences any involuntary case against
a Guarantor pursuant to the Bankruptcy Code or other federal or state law affecting debtor
and creditor rights, unless each of the following conditions is satisfied: |
| (i) | Borrower
or Guarantor provides Notice of such action to Lender within 30 days after the filing
of such action. |
| (ii) | Either
(A) the case is dismissed or discharged within 90 days after filing, or (B) within 90
days following the date of such filing or commencement, the affected Guarantor is replaced
with one or more other Persons acceptable to Lender, in Lender’s Discretion, each
of whom executes and delivers to Lender a replacement Guaranty in form and content acceptable
to Lender, together with such legal opinions as Lender deems necessary. |
| (iii) | If Borrower
must provide a replacement Guarantor pursuant to Section 9.01(p)(ii), then Borrower
pays the Transfer Processing Fee to Lender. |
| (q) | With
respect to a Guarantor, either of the following occurs: |
| (i) | The death
of any Guarantor who is a natural person, unless within 30 days following the Guarantor’s
death, Borrower causes one of the following to occur: |
| (A) | One
or more Persons acceptable to Lender, in Lender’s Discretion, execute(s) and deliver(s)
to Lender a guaranty in a form acceptable to Lender and in substantially the same form
as the Guaranty executed on the Closing Date, without any cost or expense to Lender. |
| (B) | The
estate of the deceased Guarantor immediately ratifies the Guaranty in writing, and within
6 months after the date of the death of the deceased Guarantor one or more Persons, acceptable
to Lender in Lender’s Discretion, execute(s) and deliver(s) to Lender a guaranty
in a form acceptable to Lender and in substantially the same form as the Guaranty executed
on the Closing Date, without any cost or expense to Lender. |
| (ii) | The dissolution
of any Guarantor who is an entity, unless each of the following conditions is satisfied: |
| (A) | Within
30 days following the dissolution of the Guarantor, Borrower causes one or more Persons
acceptable to Lender, in Lender’s Discretion, to execute and deliver to Lender
a guaranty in a form acceptable to Lender and in substantially the same form as the Guaranty
executed on the Closing Date, without any cost or expense to Lender. |
Multifamily Loan and Security Agreement | Page 53 |
| (B) | Borrower
pays the Transfer Processing Fee to Lender. |
| (r) | If a
Cap Agreement is required, Borrower fails to provide Lender with a Replacement Cap Agreement
prior to the expiration of the then-existing Cap Agreement. |
| (s) | through
(rr) are reserved. |
| 9.02 | Protection
of Lender’s Security; Security Instrument Secures Future Advances. |
| (a) | If Borrower
fails to perform any of its obligations under this Loan Agreement or any other Loan Document,
or if any action or proceeding is commenced which purports to affect the Mortgaged Property,
Lender’s security or Lender’s rights under this Loan Agreement, including
eminent domain, insolvency, code enforcement, civil or criminal forfeiture, enforcement
of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings
involving a bankrupt or decedent, then Lender, in Lender’s Discretion, may make
such appearances, file such documents, disburse such sums and take such actions as Lender
reasonably deems necessary to perform such obligations of Borrower and to protect Lender’s
interest, including: (i) payment of Attorneys’ Fees and Costs, (ii) payment of
fees and out-of-pocket expenses of accountants, inspectors and consultants, (iii) entry
upon the Mortgaged Property to make Repairs or secure the Mortgaged Property, (iv) procurement
of the Insurance required by Section 6.10, (v) payment of amounts which Borrower has
failed to pay under Section 6.08, (vi) performance of Borrower’s obligations under
Section 6.09, and (vii) advances made by Lender to pay, satisfy or discharge any obligation
of Borrower for the payment of money that is secured by a Prior Lien. |
| (b) | Any
amounts disbursed by Lender under this Section 9.02, or under any other provision of
this Loan Agreement that treats such disbursement as being made under this Section 9.02,
will be secured by the Security Instrument, will be added to, and become part of, the
principal component of the Indebtedness, will be immediately due and payable and will
bear interest from the date of disbursement until paid at the Default Rate. |
| (c) | Nothing
in this Section 9.02 will require Lender to incur any expense or take any action. |
| (a) | Upon
an Event of Default, Lender may exercise any or all of its rights and remedies provided
under the Loan Documents and Borrower will pay all costs associated therewith, including
Attorneys’ Fees and Costs. |
| (b) | Each
right and remedy provided in this Loan Agreement is distinct from all other rights or
remedies under this Loan Agreement or any other Loan Document or afforded by applicable
law or equity, and each will be cumulative and may be exercised concurrently, independently
or successively, in any order. Lender’s exercise of any particular right or remedy
will not in any way prevent Lender from exercising any other right or remedy available
to Lender. Lender may exercise any such remedies from time to time and as often as Lender
chooses. |
Multifamily Loan and Security Agreement | Page 54 |
| (c) | Lender
will have all remedies available to Lender under Revised Article 9 of the Uniform Commercial
Code of the Property Jurisdiction, the Loan Documents and under applicable law. |
| (d) | Lender
may also retain (i) all money in the Reserve Funds, including interest, and (ii) any
Cap Payment, and in Lender’s sole and absolute discretion, may apply such amounts,
without restriction and without any specific order of priority, to the payment of any
and all Indebtedness. |
| (e) | If a
claim or adjudication is made that Lender has acted unreasonably or unreasonably delayed
acting in any case where, by law or under this Loan Agreement or the other Loan Documents,
Lender has an obligation to act reasonably or promptly, then Lender will not be liable
for any monetary damages, and Borrower’s sole remedy will be limited to commencing
an action seeking injunctive relief or declaratory judgment. Any action or proceeding
to determine whether Lender has acted reasonably will be determined by an action seeking
declaratory judgment. |
| (a) | Lender
may (but will not be obligated to) agree with Borrower, from time to time, and without
giving Notice to, or obtaining the consent of, or having any effect upon the obligations
of, any Guarantor or other third party obligor, to take any of the following actions: |
| (i) | Extend
the time for payment of all or any part of the Indebtedness. |
| (ii) | Reduce
the payments due under this Loan Agreement, the Note or any other Loan Document. |
| (iii) | Release
anyone liable for the payment of any amounts under this Loan Agreement, the Note or any
other Loan Document. |
| (iv) | Accept
a renewal of the Note. |
| (v) | Modify
the terms and time of payment of the Indebtedness. |
| (vi) | Join
in any extension or subordination agreement. |
| (vii) | Release
any portion of the Mortgaged Property. |
| (viii) | Take
or release other or additional security. |
| (ix) | Modify
the rate of interest or period of amortization of the Note or change the amount of the
monthly installments payable under the Note. |
| (x) | Otherwise
modify this Loan Agreement, the Note or any other Loan Document. |
Multifamily Loan and Security Agreement | Page 55 |
| (b) | Any
forbearance by Lender in exercising any right or remedy under the Note, this Loan Agreement
or any other Loan Document or otherwise afforded by applicable law, will not be a waiver
of or preclude the exercise of any other right or remedy, or the subsequent exercise
of any right or remedy. The acceptance by Lender of payment of all or any part of the
Indebtedness after the due date of such payment, or in an amount which is less than the
required payment, will not be a waiver of Lender’s right to require prompt payment
when due of all other payments on account of the Indebtedness or to exercise any remedies
for any failure to make prompt payment. Enforcement by Lender of any security for the
Indebtedness will not constitute an election by Lender of remedies so as to preclude
the exercise of any other right available to Lender. Lender’s receipt of any awards
or proceeds under Sections 6.10 and 6.11 will not operate to cure or waive any Event
of Default. |
| 9.05 | Waiver
of Marshalling. Notwithstanding the existence of any other security interests in
the Mortgaged Property held by Lender or by any other party, Lender will have the right
to determine the order in which any or all of the Mortgaged Property will be subjected
to the remedies provided in this Loan Agreement or any other Loan Document or applicable
law. Lender will have the right to determine the order in which any or all portions of
the Indebtedness are satisfied from the proceeds realized upon the exercise of such remedies.
Borrower and any party who now or in the future acquires a security interest in the Mortgaged
Property and who has actual or constructive notice of the Security Instrument waives
any and all right to require the marshalling of assets or to require that any of the
Mortgaged Property be sold in the inverse order of alienation or that any of the Mortgaged
Property be sold in parcels or as an entirety in connection with the exercise of any
of the remedies permitted by applicable law or provided in this Loan Agreement. |
| ARTICLE X | RELEASE;
INDEMNITY. |
| 10.01 | Release.
Borrower covenants and agrees that, in performing any of its duties under this Loan
Agreement, none of Lender, Loan Servicer or any of their respective agents or employees
will be liable for any losses, claims, damages, liabilities and expenses that may be
incurred by any of them as a result of such performance, except that no party will be
released from liability for any losses, claims, damages, liabilities or expenses arising
out of the willful misconduct or gross negligence of such party. |
| (a) | General
Indemnity. Borrower agrees to indemnify, hold harmless and defend Lender, including
any custodian, trustee and other fiduciaries who hold or have held a full or partial
interest in the Loan for the benefit of third parties, any prior owner or holder
of the Note, the Loan Servicer, any prior Loan Servicer, the officers, directors, shareholders,
partners, employees and trustees of each of the foregoing, and the heirs, legal representatives,
successors and assigns of each of the foregoing (collectively, “Indemnitees”)
against any and all losses, claims, damages, liabilities and expenses including Attorneys’
Fees and Costs, which may be imposed or incurred by any of them directly or indirectly
arising out of, or in any way relating to, or as a result of: (i) any failure of the
Mortgaged Property to comply with the laws, regulations, ordinance, code or decree of
any Governmental Authority, including those pertaining to the Americans with Disabilities
Act, zoning, occupancy and subdivision of real property, (ii) any obligation of Borrower
under any Lease, and (iii) any accident, injury or death to any natural person on the
Mortgaged Property or any damage to personal property located on the Mortgaged Property,
except that no such party will be indemnified from liability for any losses, claims,
damages, liabilities or expenses arising out of the willful misconduct or gross negligence
of such party. |
Multifamily Loan and Security Agreement | Page 56 |
| (b) | Environmental
Indemnity. Borrower agrees to indemnify, hold harmless and defend Indemnitees from
and against all proceedings, claims, damages, penalties and costs (whether initiated
or sought by Governmental Authorities or private parties), including Attorneys’
Fees and Costs and remediation costs, whether incurred in connection with any judicial
or administrative process or otherwise, arising directly or indirectly from any of the
following: |
| (i) | Any breach
of any representation or warranty of Borrower in Section 5.05. |
| (ii) | Any failure
by Borrower to perform any of its obligations under Section 6.12. |
| (iii) | The
existence or alleged existence of any Prohibited Activity or Condition. |
| (iv) | The presence
or alleged presence of Hazardous Materials on or under the Mortgaged Property or in any
of the Improvements. |
| (v) | The actual
or alleged violation of any Hazardous Materials Law. |
| (c) | Indemnification
Regarding ERISA Covenants. BORROWER WILL INDEMNIFY LENDER AND DEFEND AND HOLD
LENDER HARMLESS FROM AND AGAINST ALL CIVIL PENALTIES, EXCISE TAXES, OR OTHER LOSS, COST,
DAMAGE AND EXPENSE (INCLUDING REASONABLE ATTORNEYS’ FEES AND COSTS INCURRED IN
THE INVESTIGATION, DEFENSE AND SETTLEMENT OF CLAIMS AND LOSSES INCURRED IN CORRECTING
ANY PROHIBITED TRANSACTION OR IN THE SALE OF A PROHIBITED LOAN, AND IN OBTAINING ANY
INDIVIDUAL PROHIBITED TRANSACTION EXEMPTION UNDER ERISA THAT MAY BE REQUIRED, IN LENDER’S
SOLE AND ABSOLUTE DISCRETION) THAT LENDER MAY INCUR, DIRECTLY OR INDIRECTLY, AS A RESULT
OF DEFAULT UNDER SECTION 6.20. THIS INDEMNITY WILL SURVIVE ANY TERMINATION, SATISFACTION
OR FORECLOSURE OF THE SECURITY INSTRUMENT. |
| (d) | Securitization
Indemnification. |
| (i) | Borrower
agrees to indemnify, hold harmless and defend the Indemnified Parties from and against
any and all proceedings, losses, claims, damages, liabilities, penalties, costs and expenses
(whether initiated or sought by Governmental Authorities or private parties), including
Attorneys’ Fees and Costs, which may be incurred by any Indemnified Party (either
directly or indirectly), which arise out of, are in any way related to, or are as a result
of a claim that the Borrower Information contains an untrue statement of any material
fact or the Borrower Information omits to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which they are made,
not misleading (collectively, the “Securitization
Indemnification”). |
| (ii) | Borrower
will not be liable under the Securitization Indemnification if the claim is based on
Borrower Information which Lender has materially misstated or materially misrepresented
in the Disclosure Document. |
| (iii) | For
purposes of this Section 10.02(d): |
Multifamily Loan and Security Agreement | Page 57 |
| (A) | “Borrower
Information” includes any information provided
at any time to Lender or Loan Servicer by Borrower, any SPE Equity Owner, any Guarantor,
any Property Manager or any Affiliates of the foregoing with respect to any of the following: |
| (1) | Any
Person listed in Section 10.02(d)(iii)(A). |
| (3) | The
Mortgaged Property. |
Borrower
Information includes: (i) representations and warranties made in the Loan Documents, (ii) financial statements of Borrower, any
SPE Equity Owner, any Designated Entity for Transfers or any Guarantor, and (iii) operating statements and rent rolls with respect
to the Mortgaged Property. Borrower Information does not include any information provided directly to Lender or Loan Servicer
by a third party such as an appraiser or an environmental consultant.
| (B) | The
term “Lender”
includes its officers and directors. |
| (C) | An
“Issuer Person”
includes all of the following: |
| (1) | Any
Person that has filed the registration statement, if any, relating to the Securitization,
and any Affiliate of such Person. |
| (2) | Any
Person acting as issuer, depositor, sponsor and/or in a similar capacity with respect
to the Securitization, and any Affiliate of such Person. |
| (D) | The
“Issuer Group”
includes all of the following: |
| (1) | Each
director and officer of any Issuer Person. |
| (2) | Each
entity that Controls any Issuer Person within the meaning of Section 15 of the Securities
Act or Section 20 of the Securities Exchange Act. |
| (E) | The
“Underwriter Group”
includes all of the following: |
| (1) | Each
entity which is acting as an underwriter, manager, placement agent, initial purchaser
or in a similar capacity with respect to the Securitization. |
| (2) | Each
of its directors and officers. |
| (3) | Each
entity that Controls any such entity within the meaning of Section 15 of the Securities
Act or Section 20 of the Securities Exchange Act and is acting as an underwriter, manager,
placement agent, initial purchaser or in a similar capacity with respect to the Securitization. |
Multifamily Loan and Security Agreement | Page 58 |
| (4) | The
directors and officers of such entity described in Section 10.02(d)(iii)(E)(1). |
| (F) | “Indemnified
Party” or “Indemnified Parties”
means one or more of Lender, Issuer Person, Issuer Group, and Underwriter Group. |
| (e) | Selection
and Direction of Counsel. Counsel selected by Borrower to defend Indemnitees will
be subject to the approval of those Indemnitees. In any circumstances in which the indemnity
under this Article X applies, Lender may employ its own legal counsel and consultants
to prosecute, defend or negotiate any claim or legal or administrative proceeding and
Lender, with the prior written consent of Borrower (which will not be unreasonably withheld,
delayed or conditioned) may settle or compromise any action or legal or administrative
proceeding. However, unless an Event of Default has occurred and is continuing, or the
interests of Borrower and Lender are in conflict, as determined by Lender in Lender’s
Discretion, Lender will permit Borrower to undertake the actions referenced in this Article
X so long as Lender approves such action, which approval will not be unreasonably withheld
or delayed. Borrower will reimburse Lender upon demand for all costs and expenses incurred
by Lender, including all costs of settlements entered into in good faith, consultants’
fees and Attorneys’ Fees and Costs. |
| (f) | Settlement
or Compromise of Claims. Borrower will not, without the prior written consent of
those Indemnitees who are named as parties to a claim or legal or administrative proceeding
(“Claim”), settle or compromise the Claim if the settlement (i) results
in the entry of any judgment that does not include as an unconditional term the delivery
by the claimant or plaintiff to Lender of a written release of those Indemnitees, satisfactory
in form and substance to Lender, or (ii) may materially and adversely affect Lender,
as determined by Lender in Lender’s Discretion. |
| (g) | Effect
of Changes to Loan on Indemnification Obligations. Borrower’s obligation to
indemnify the Indemnitees will not be limited or impaired by any of the following, or
by any failure of Borrower or any Guarantor to receive notice of or consideration for
any of the following: |
| (i) | Any amendment
or modification of any Loan Document. |
| (ii) | Any extensions
of time for performance required by any Loan Document. |
| (iii) | Any
provision in any of the Loan Documents limiting Lender’s recourse to property securing
the Indebtedness, or limiting the personal liability of Borrower or any other party for
payment of all or any part of the Indebtedness. |
| (iv) | The accuracy
or inaccuracy of any representations and warranties made by Borrower under this Loan
Agreement or any other Loan Document. |
| (v) | The release
of Borrower or any other Person, by Lender or by operation of law, from performance of
any obligation under any Loan Document. |
| (vi) | The release
or substitution in whole or in part of any security for the Indebtedness. |
Multifamily Loan and Security Agreement | Page 59 |
| (vii) | Lender’s
failure to properly perfect any Lien or security interest given as security for the Indebtedness. |
| (h) | Payments
by Borrower. Borrower will, at its own cost and expense, do all of the following: |
| (i) | Pay or
satisfy any judgment or decree that may be entered against any Indemnitee or Indemnitees
in any legal or administrative proceeding incident to any matters against which Indemnitees
are entitled to be indemnified under this Article X. |
| (ii) | Reimburse
Indemnitees for any expenses paid or incurred in connection with any matters against
which Indemnitees are entitled to be indemnified under this Article X. |
| (iii) | Reimburse
Indemnitees for any and all expenses, including Attorneys’ Fees and Costs, paid
or incurred in connection with the enforcement by Indemnitees of their rights under this
Article X, or in monitoring and participating in any legal or administrative proceeding. |
| (i) | Other
Obligations. The provisions of this Article X will be in addition to any and all
other obligations and liabilities that Borrower may have under applicable law or under
other Loan Documents, and each Indemnitee will be entitled to indemnification under this
Article X without regard to whether Lender or that Indemnitee has exercised any rights
against the Mortgaged Property or any other security, pursued any rights against any
Guarantor, or pursued any other rights available under the Loan Documents or applicable
law. If Borrower consists of more than one Person, the obligation of those Persons to
indemnify the Indemnitees under this Article X will be joint and several. The obligation
of Borrower to indemnify the Indemnitees under this Article X will survive any repayment
or discharge of the Indebtedness, any foreclosure proceeding, any foreclosure sale, any
delivery of any deed in lieu of foreclosure, and any release of record of the Lien of
the Security Instrument. Notwithstanding the foregoing, if Lender has never been a mortgagee-in-possession
of, or held title to, the Mortgaged Property, Borrower will have no obligation to indemnify
the Indemnitees under this Article X after the date of the release of record of the Lien
of the Security Instrument by payment in full at the Maturity Date or by voluntary prepayment
in full. |
| ARTICLE XI | MISCELLANEOUS
PROVISIONS. |
| 11.01 | Waiver
of Statute of Limitations, Offsets and Counterclaims. Borrower waives the right to
assert any statute of limitations as a bar to the enforcement of this Loan Agreement
or the Lien of the Security Instrument or to any action brought to enforce any Loan Document.
Borrower waives the right to assert a counterclaim, other than a compulsory counterclaim,
in any action or proceeding brought against it by Lender or otherwise to offset any obligations
to make the payments required by the Loan Documents. No failure by Lender to perform
any of its obligations under the Loan Documents will be a valid defense to, or result
in any offset against, any payments that Borrower is obligated to make under any of the
Loan Documents. |
Multifamily Loan and Security Agreement | Page 60 |
| 11.02 | Governing
Law; Consent to Jurisdiction and Venue. |
| (a) | This
Loan Agreement, and any Loan Document which does not itself expressly identify the law
which is to apply to it, will be governed by the laws of the Property Jurisdiction. |
| (b) | Borrower
agrees that any controversy arising under or in relation to the Note, the Security Instrument,
this Loan Agreement or any other Loan Document may be litigated in the Property Jurisdiction.
The state and federal courts and authorities with jurisdiction in the Property Jurisdiction
will have jurisdiction over all controversies that may arise under or in relation to
the Note, any security for the Indebtedness or any other Loan Document. Borrower irrevocably
consents to service, jurisdiction and venue of such courts for any such litigation and
waives any other venue to which it might be entitled by virtue of domicile, habitual
residence or otherwise. However, nothing in this Section 11.02 is intended to limit Lender’s
right to bring any suit, action or proceeding relating to matters under this Loan Agreement
in any court of any other jurisdiction. |
| (a) | All
Notices under or concerning this Loan Agreement will be in writing. Each Notice will
be deemed given on the earliest to occur of: (i) the date when the Notice is received
by the addressee, (ii) the first Business Day after the Notice is delivered to a recognized
overnight courier service, with arrangements made for payment of charges for next Business
Day delivery, or (iii) the third Business Day after the Notice is deposited in the United
States mail with postage prepaid, certified mail, return receipt requested. Addresses
for Notice are as follows: |
If to Lender: |
Jones Lang LaSalle Operations, L.L.C.
3344 Peachtree Road NE, Suite 1100
Atlanta, Georgia 30326
Attention: Servicing Department |
|
|
If to Borrower: |
BR Carroll
World Gateway, LLC
c/o Carroll Organization, LLC
3340 Peachtree
Road, Suite 1620
Atlanta,
Georgia 30326
Attention:
Josh Champion |
| (b) | Any
party to this Loan Agreement may change the address to which Notices intended for it
are to be directed by means of Notice given to the other party in accordance with this
Section 11.03. Each party agrees that it will not refuse or reject delivery of any Notice
given in accordance with this Section 11.03, that it will acknowledge, in writing, the
receipt of any Notice upon request by the other party and that any Notice rejected or
refused by it will be deemed for purposes of this Section 11.03 to have been received
by the rejecting party on the date so refused or rejected, as conclusively established
by the records of the U.S. Postal Service or the courier service. |
| (c) | Any
Notice under the Note and any other Loan Document that does not specify how Notices are
to be given will be given in accordance with this Section 11.03. |
Multifamily Loan and Security Agreement | Page 61 |
| 11.04 | Successors
and Assigns Bound. This Loan Agreement will bind the respective successors and assigns
of Borrower and Lender, and the rights granted by this Loan Agreement will inure to Lender’s
successors and assigns. |
| 11.05 | Joint
and Several (and Solidary) Liability. If more than one Person signs this Loan Agreement
as Borrower, the obligations of such Persons will be joint and several. For a Mortgaged
Property located in Louisiana, if more than one Person signs this Loan Agreement as Borrower,
the obligations of such Persons with be joint and several and solidary, and wherever
the phrase “joint and several” appears in this Loan Agreement, the phrase
is amended to read “joint, several, and solidary.” |
| 11.06 | Relationship
of Parties; No Third Party Beneficiary. |
| (a) | The
relationship between Lender and Borrower will be solely that of creditor and debtor,
respectively, and nothing contained in this Loan Agreement will create any other relationship
between Lender and Borrower. Nothing contained in this Loan Agreement will constitute
Lender as a joint venturer, partner or agent of Borrower, or render Lender liable for
any debts, obligations, acts, omissions, representations or contracts of Borrower. |
| (b) | No creditor
of any party to this Loan Agreement and no other Person will be a third party beneficiary
of this Loan Agreement or any other Loan Document. Without limiting the generality of
the preceding sentence: (i) any arrangement (“Servicing Arrangement”)
between Lender and any Loan Servicer for loss sharing or interim advancement of funds
will constitute a contractual obligation of such Loan Servicer that is independent of
the obligation of Borrower for the payment of the Indebtedness, (ii) Borrower will not
be a third party beneficiary of any Servicing Arrangement, and (iii) no payment by the
Loan Servicer under any Servicing Arrangement will reduce the amount of the Indebtedness. |
| 11.07 | Severability;
Amendments. |
| (a) | The
invalidity or unenforceability of any provision of this Loan Agreement will not affect
the validity or enforceability of any other provision, and all other provisions will
remain in full force and effect. This Loan Agreement contains the entire agreement among
the parties as to the rights granted and the obligations assumed in this Loan Agreement. |
| (b) | This
Loan Agreement may not be amended or modified except by a writing signed by the party
against whom enforcement is sought. |
| 11.08 | Disclosure
of Information. Borrower acknowledges that Lender may provide to third parties with
an existing or prospective interest in the servicing, enforcement, evaluation, performance,
ownership, purchase, participation or Securitization of the Loan, including any of the
Rating Agencies, any entity maintaining databases on the underwriting and performance
of commercial mortgage loans, as well as governmental regulatory agencies having regulatory
authority over Lender, any and all information which Lender now has or may hereafter
acquire relating to the Loan, the Mortgaged Property, Borrower, any SPE Equity Owner
or any Guarantor, as Lender determines necessary or desirable and that such information
may be included in disclosure documents in connection with a Securitization or syndication
of participation interests, including a prospectus, prospectus supplement, offering memorandum,
private placement memorandum or similar document (each, a “Disclosure Document”)
and also may be included in any filing with the Securities and Exchange Commission pursuant
to the Securities Act or the Securities Exchange Act. To the fullest extent permitted
under applicable law, Borrower irrevocably waives all rights, if any, to prohibit such
disclosure, including any right of privacy. |
Multifamily Loan and Security Agreement | Page 62 |
| 11.09 | Determinations
by Lender. Unless otherwise provided in this Loan Agreement, in any instance where
the consent or approval of Lender may be given or is required, or where any determination,
judgment or decision is to be rendered by Lender under this Loan Agreement, the granting,
withholding or denial of such consent or approval and the rendering of such determination,
judgment or decision will be made or exercised by Lender (or its designated representative)
at its sole and exclusive option and in its sole and absolute discretion. |
| 11.10 | Sale
of Note; Change in Servicer; Loan Servicing. The Note or a partial interest in the
Note (together with this Loan Agreement and the other Loan Documents) may be sold one
or more times without prior Notice to Borrower. A sale may result in a change of the
Loan Servicer. There also may be one or more changes of the Loan Servicer unrelated to
a sale of the Note. If there is a change of the Loan Servicer, Borrower will be given
Notice of the change. All actions regarding the servicing of the Loan evidenced by the
Note, including the collection of payments, the giving and receipt of Notice, inspections
of the Mortgaged Property, inspections of books and records, and the granting of consents
and approvals, may be taken by the Loan Servicer unless Borrower receives Notice to the
contrary. If Borrower receives conflicting Notices regarding the identity of the Loan
Servicer or any other subject, any such Notice from Lender will govern. |
| 11.11 | Supplemental
Financing. |
| (a) | This
Section will apply only if at the time of any application referred to in Section 11.11(b),
Freddie Mac has in effect a product described in its Multifamily Seller/Servicer Guide
under which it purchases supplemental mortgages on multifamily properties that meet
specified criteria (“Supplemental Mortgage Product”). For purposes
of this Section 11.11 only, the term “Freddie Mac” will include any affiliate
or subsidiary of Freddie Mac. |
| (b) | After
the first anniversary of the date of the most recently incurred Senior Indebtedness,
Freddie Mac will consider an application from an originating lender that is generally
approved by Freddie Mac to sell mortgages to Freddie Mac under the Supplemental Mortgage
Product (“Approved Seller/Servicer”) for the purchase by Freddie Mac
of a proposed indebtedness of Borrower to the Approved Seller/Servicer to be secured
by one or more Supplemental Instruments on the Mortgaged Property. Freddie Mac will purchase
each Supplemental Loan secured by the Mortgaged Property if each of the following conditions
is satisfied: |
| (i) | At the
time of the proposed Supplemental Loan, no Event of Default may have occurred and be
continuing and no event or condition may have occurred and be continuing that, with the
giving of Notice or the passage of time, or both, would become an Event of Default. |
| (ii) | Borrower
and the Mortgaged Property must be acceptable to Freddie Mac under its Supplemental Mortgage
Product. |
| (iii) | New
loan documents must be entered into to reflect each Supplemental Loan, such documents
to be acceptable to Freddie Mac in its discretion. |
| (iv) | No Supplemental
Loan may cause the combined debt service coverage ratio of the Mortgaged Property after
the making of that Supplemental Loan to be less than the Minimum DSCR. As used in this
Section, the term “combined debt service coverage ratio” means, with respect
to the Mortgaged Property, the ratio of: |
Multifamily Loan and Security Agreement | Page 63 |
| (A) | the
annual net operating income from the operations of the Mortgaged Property at the time
of the proposed Supplemental Loan, |
to
| (B) | the
aggregate of the annual principal and interest payable on all of the following: |
| (I) | the Indebtedness
under this Loan Agreement (using a 30 year amortization schedule), |
| (II) | any “Indebtedness”
as defined in any security instruments recorded against the Mortgaged Property (using
a 30 year amortization schedule for any Supplemental Loans), and |
| (III) | the
proposed “Indebtedness” for any Supplemental Loan (using a 30 year amortization
schedule). |
As
used in this Section, “annual principal and interest” with respect to a floating rate loan will be calculated by Freddie
Mac using an interest rate equal to one of the following:
| (X) | If the
loan has an internal interest rate cap, the Capped Interest Rate. |
| (Y) | If the
loan has an external interest rate cap, the Strike Rate plus the Margin. |
| (Z) | If the
loan has no interest rate cap, the greater of (I) 7%, or (II) the then-current LIBOR
Index Rate plus the Margin plus 300 basis points. |
The
annual net operating income of the Mortgaged Property will be as determined by Freddie Mac in its discretion considering factors
such as income in place at the time of the proposed Supplemental Loan and income during the preceding 12 months, and actual, historical
and anticipated operating expenses. Freddie Mac will determine the combined debt service coverage ratio of the Mortgaged Property
based on its underwriting. Borrower will provide Freddie Mac such financial statements and other information Freddie Mac may require
to make these determinations.
| (v) | No Supplemental
Loan may cause the combined loan to value ratio of the Mortgaged Property after the making
of that Supplemental Loan to exceed the Maximum Combined LTV, as determined by Freddie
Mac. As used in this Section, “combined loan to value ratio” means, with
respect to the Mortgaged Property, the ratio, expressed as a percentage, of: |
| (A) | the
aggregate outstanding principal balances of all of the following: |
Multifamily Loan and Security Agreement | Page 64 |
| (I) | the Indebtedness
under this Loan Agreement, |
| (II) | any “Indebtedness”
as defined in any security instruments recorded against the Mortgaged Property, and |
| (III) | the
proposed “Indebtedness” for any Supplemental Loan, |
to
| (B) | the
value of the Mortgaged Property. |
Freddie
Mac will determine the combined loan to value ratio of the Mortgaged Property based on its underwriting. Borrower will provide
Freddie Mac such financial statements and other information Freddie Mac may require to make these determinations. In addition,
Freddie Mac, at Borrower’s expense, may obtain MAI appraisals of the Mortgaged Property in order to assist Freddie Mac in
making the determinations under this Section. If Freddie Mac requires an appraisal, then the value of the Mortgaged Property that
will be used to determine whether the Maximum Combined LTV has been met will be the lesser of the appraised value set forth in
such appraisal or the value of the Mortgaged Property as determined by Freddie Mac.
| (vi) | Borrower’s
organizational documents are amended to permit Borrower to incur additional debt in the
form of Supplemental Loans (Lender will consent to such amendment(s)). |
| (vii) | One
or more Persons acceptable to Freddie Mac executes and delivers to the Approved Seller/Servicer
a Guaranty in a form acceptable to Freddie Mac with respect to the exceptions to non-recourse
liability described in Freddie Mac’s form promissory note, unless Freddie Mac has
elected to waive its requirement for a Guaranty. |
| (viii) | The
loan term of each Supplemental Loan will be coterminous with the Senior Indebtedness
or longer than the Senior Indebtedness, in Freddie Mac’s discretion. |
| (ix) | The Prepayment
Premium Period of each Supplemental Loan will be coterminous with the Prepayment Premium
Period or the combined Lockout Period and Defeasance Period, as applicable, of the Senior
Indebtedness. |
| (x) | The interest
rate of each Supplemental Loan will be determined by Freddie Mac in its discretion. |
| (xi) | Lender
enters into an intercreditor agreement (“Intercreditor Agreement”)
acceptable to Freddie Mac and to Lender for each Supplemental Loan. |
| (xii) | Borrower’s
payment of fees and other expenses charged by Lender, Freddie Mac, the Approved Seller/Servicer,
and the Rating Agencies (including reasonable Attorneys’ Fees and Costs) in connection
with reviewing and originating each Supplemental Loan. |
Multifamily Loan and Security Agreement | Page 65 |
| (xiii) | Commencing
on the date that the first Supplemental Loan is originated and continuing for so long
as any Supplemental Loan is outstanding, the first lien Senior Lender will begin collection
of any deferred Monthly Deposit or Revised Monthly Deposit for Capital Replacements in
accordance with Section 4.04(e) (if applicable) as well as Imposition Deposits for any
of the following Impositions marked ‘Deferred’ in Section 4.02(a): |
| (A) | Property
Insurance premiums or premiums for other Insurance required by Lender under Section 6.10. |
(B) Taxes
and payments in lieu of taxes
(C) Ground
Rents
Such
deposits will be credited to the payment of any such required Imposition deposits under any Supplemental Loan.
| (xiv) | If any
covenants, conditions and restrictions affecting the Mortgaged Property provide for a
lien for any assessments or other unpaid amounts, Borrower will provide satisfactory
evidence that such lien will be subordinate to the lien of the Supplemental Instrument. |
| (xv) | All other
requirements of the Supplemental Mortgage Product must be met, unless Freddie Mac has
elected to waive one or more of its requirements. |
| (c) | No later
than 5 Business Days after Lender’s receipt of a written request from Borrower,
Lender will provide the following information to an Approved Seller/Servicer: |
| (i) | The then-current
outstanding principal balance of the Senior Indebtedness. |
| (ii) | Payment
history of the Senior Indebtedness. |
| (iii) | Whether
any Reserve Funds are being collected on the Senior Indebtedness and the amount of each
such Reserve Fund deposit as of the date of the request. |
| (iv) | Whether
any Repairs, Capital Replacements or improvements or rental achievement or burn-off guaranty
requirements are existing or outstanding under the terms of the Senior Indebtedness. |
| (v) | A copy
of the most recent inspection report for the Mortgaged Property. |
| (vi) | Whether
any modifications or amendments have been made to the Loan Documents for the Senior Indebtedness
since origination of the Senior Indebtedness and, if applicable, a copy of such modifications
and amendments. |
Multifamily Loan and Security Agreement | Page 66 |
| (vii) | Whether
to Lender’s knowledge any Event of Default exists under the Senior Indebtedness. |
Lender
will only be obligated to provide this information in connection with Borrower’s request for a Supplemental Loan from an
Approved Seller/Servicer. Notwithstanding anything in this Section to the contrary, if Freddie Mac is the owner of the Note, this
Section 11.11(c) is not applicable.
| (d) | Lender
will have no obligation to consent to any mortgage or Lien on the Mortgaged Property
that secures any indebtedness other than the Indebtedness, except as set forth in this
Loan Agreement. |
| (e) | If a
Supplemental Loan is made to Borrower, Borrower agrees that the terms of the Intercreditor
Agreement will govern with respect to any distributions of excess proceeds by Lender
to the Supplemental Lender, and Borrower agrees that Lender may distribute any excess
proceeds received by Lender pursuant to the Loan Documents to Supplemental Lender pursuant
to the Intercreditor Agreement. |
| 11.12 | Defeasance.
(Section Applies if Loan is Assigned to REMIC Trust Prior to the Cut-off Date and if
the Note provides for Defeasance). This Section 11.12 will apply only if the Note
is assigned to a REMIC trust prior to the Cut-off Date, and if the Note provides for
Defeasance. If both of these conditions are met, then, subject to Section 11.12(a) and
(c), Borrower will have the right to defease the Loan in whole (“Defeasance”)
and obtain the release of the Mortgaged Property from the Lien of the Security Instrument
upon the satisfaction of each of the following conditions: |
| (a) | Borrower
will not have the right to obtain Defeasance at any of the following times: |
| (i) | If the
Loan is not assigned to a REMIC trust. |
| (ii) | During
the Lockout Period. |
| (iii) | After
the expiration of the Defeasance Period. |
| (iv) | After
Lender has accelerated the maturity of the unpaid principal balance of, accrued interest
on, and other amounts payable under, the Note pursuant to Section 11 of the Note. |
| (b) | Borrower
will give Lender Notice (“Defeasance Notice”) specifying a Business
Day (“Defeasance Closing Date”) on which Borrower desires to close
the Defeasance. The Defeasance Closing Date specified by Borrower may not be more than
60 calendar days, nor less than 30 calendar days, after the date on which Lender receives
the Defeasance Notice. Lender will acknowledge receipt of the Defeasance Notice and will
notify Borrower of the identity of the accommodation borrower (“Successor Borrower”). |
| (c) | The
Defeasance Notice must be accompanied by a $10,000 non-refundable fee (“Defeasance
Fee”) for Lender’s processing of the Defeasance. If Lender does not receive
the Defeasance Fee, then Borrower’s right to obtain Defeasance pursuant to that
Defeasance Notice will terminate. |
Multifamily Loan and Security Agreement | Page 67 |
(d) | (i) | If
Borrower timely pays the Defeasance Fee, but Borrower fails to perform its other obligations
under this Section, Lender will have the right to retain the Defeasance Fee as liquidated
damages for Borrower’s default and, except as provided in Section 11.12(d)(ii),
Borrower will be released from all further obligations under this Section 11.12. Borrower
acknowledges that Lender will incur financing costs in arranging and preparing for the
release of the Mortgaged Property from the Lien of the Security Instrument in reliance
on the executed Defeasance Notice. Borrower agrees that the Defeasance Fee represents
a fair and reasonable estimate, taking into account all circumstances existing on the
date of this Loan Agreement, of the damages Lender will incur by reason of Borrower’s
default. |
| (ii) | If the
Defeasance is not consummated on the Defeasance Closing Date for any reason, Borrower
agrees to reimburse Lender for all third party costs and expenses (other than financing
costs covered by Section 11.12(d)(i)) incurred by Lender in reliance on the executed
Defeasance Notice, within 5 Business Days after Borrower receives a written demand for
payment, accompanied by a statement, in reasonable detail, of Lender’s third party
costs and expenses. |
| (iii) | All
payments required to be made by Borrower to Lender pursuant to this Section 11.12 will
be made by wire transfer of immediately available funds to the account(s) designated
by Lender in its acknowledgement of the Defeasance Notice. |
| (e) | No Event
of Default has occurred and is continuing. |
| (f) | Borrower
will deliver each of the following documents to Lender, in form and substance satisfactory
to Lender, on or prior to the Defeasance Closing Date, unless Lender has issued a written
waiver of its right to receive any such document: |
| (i) | One or
more opinions of counsel for Borrower confirming each of the following: |
| (A) | Lender
has a valid and perfected first Lien and first priority security interest in the Defeasance
Collateral and the proceeds of the Defeasance Collateral. |
| (B) | The
Pledge Agreement is duly authorized, executed, delivered and enforceable against Borrower
in accordance with its terms. |
| (C) | If,
as of the Defeasance Closing Date, the Note is held by a REMIC trust, then each of the
following is correct: |
| (1) | The Defeasance
has been effected in accordance with the requirements of Treasury Regulation Section
1.860G-2(a)(8) (as such regulation may be modified, amended or replaced from time to
time). |
| (2) | The qualification
and status of the REMIC trust as a REMIC will not be adversely affected or impaired as
a result of the Defeasance. |
| (3) | The REMIC
trust will not incur a tax under Section 860G(d) of the Tax Code as a result of the Defeasance. |
Multifamily Loan and Security Agreement | Page 68 |
| (D) | The
Defeasance will not result in a “sale or exchange” of the Note within the
meaning of Section 1001(c) of the Tax Code and the temporary and final regulations promulgated
thereunder. |
| (ii) | A written
certificate from an independent certified public accounting firm (reasonably acceptable
to Lender), confirming that the Defeasance Collateral will generate cash sufficient to
make all Scheduled Debt Payments as they fall due under the Note, including full payment
due on the Note on the Maturity Date. |
| (iii) | Lender’s
form of a pledge and security agreement (“Pledge Agreement”) and financing
statements which pledge and create a first priority security interest in the Defeasance
Collateral in favor of Lender. |
| (iv) | Lender’s
form of a transfer and assumption agreement (“Transfer and Assumption Agreement”),
pursuant to which Borrower and any Guarantor (in each case, subject to satisfaction of
all requirements under this Loan Agreement) will be relieved from liability in
connection with the Loan to the extent described in Sections 7.05(b) and 7.05(c), respectively,
and Successor Borrower will assume all remaining obligations. |
| (v) | Forms
of all documents necessary to release the Mortgaged Property from the Liens created by
the Security Instrument and related UCC financing statements (collectively, “Release
Instruments”), each in appropriate form required by the Property Jurisdiction. |
| (vi) | Any other
opinions, certificates, documents or instruments that Lender may reasonably request. |
| (g) | Borrower
will deliver to Lender, on or prior to the Defeasance Closing Date, each of the following: |
| (i) | The Defeasance
Collateral, which meets all of the following requirements: |
| (A) | It is
owned by Borrower, free and clear of all Liens and claims of third-parties. |
| (B) | It is
in an amount sufficient to provide for (1) redemption payments to occur prior, but as
close as possible, to all successive Installment Due Dates occurring under the Note after
the Defeasance Closing Date, and (2) delivery of redemption proceeds at least equal to
the amount of principal and interest due on the Note on each Installment Due Date including
full payment due on the Note on the Maturity Date (“Scheduled Debt Payments”). |
| (C) | All
redemption payments received from the Defeasance Collateral will be paid directly to
Lender to be applied on account of the Scheduled Debt Payments occurring after the Defeasance
Closing Date. |
| (D) | The
pledge of the Defeasance Collateral will be effected through the book-entry facilities
of a qualified securities intermediary designated by Lender in conformity with all applicable
laws. |
Multifamily Loan and Security Agreement | Page 69 |
| (ii) | All accrued
and unpaid interest and all other sums due under the Note, this Loan Agreement and under
the other Loan Documents, including all amounts due under Section 11.12(i), up to the
Defeasance Closing Date. |
| (i) | Borrower
will pay all reasonable costs and expenses incurred by Lender in connection with the
Defeasance in full on or prior to the Defeasance Closing Date, which payment is required
prior to Lender’s issuance of the Release Instruments and whether or not Defeasance
is completed. Such expenses include all fees, costs and expenses incurred by Lender and
its agents in connection with the Defeasance (including Attorneys’ Fees and Costs
for the review and preparation of the Pledge Agreement and of the other materials described
in this Loan Agreement and any related documentation, Rating Agencies’ fees, or
other costs related to the Defeasance). |
Lender
reserves the right to require that Borrower post a deposit to cover costs which Lender reasonably anticipates that Lender will
incur in connection with the Defeasance.
| (j) | No Transfer
Fee will be payable to Lender upon a Defeasance made in accordance with this Section
11.12. |
| 11.13 | Lender’s
Rights to Sell or Securitize. Borrower acknowledges that Lender, and each successor
to Lender’s interest, may (without prior Notice to Borrower or Borrower’s
prior consent), sell or grant participations in the Loan (or any part of the Loan), sell
or subcontract the servicing rights related to the Loan, securitize the Loan or place
the Loan in a trust. Borrower agrees to cooperate with all reasonable requests of Lender
in connection with any of the foregoing including taking the following actions: |
| (a) | Executing
any financing statements or other documents deemed necessary by Lender or its transferee
to create, perfect or preserve the rights and interest to be acquired by such transferee. |
| (b) | Delivering
revised organizational documents, counsel opinions, and executed amendments to the Loan
Documents satisfactory to the Rating Agencies. |
| (c) | Providing
updated financial information with appropriate verification through auditors’ letters,
if required by Lender. (If Lender requires that Borrower’s updated financial information
be accompanied by appropriate verification through auditors’ letters, then Lender
will reimburse Borrower for the costs which Borrower reasonably incurs in connection
with obtaining such auditors’ letters.) |
| (d) | Providing
updated information on all litigation proceedings affecting Borrower or any Borrower
Principal as required in Section 6.16. |
| (e) | Reviewing
information contained in any Disclosure Document and providing a mortgagor estoppel certificate,
written confirmation of Borrower’s indemnification obligations under this Loan
Agreement, and such other information about Borrower, any SPE Equity Owner, any Guarantor,
any Property Manager or the Mortgaged Property as Lender may require for Lender’s
offering materials. |
Multifamily Loan and Security Agreement | Page 70 |
| 11.14 | Cooperation
with Rating Agencies and Investors. Borrower covenants and agrees that if Lender
decides to include the Loan as an asset of a Secondary Market Transaction, Borrower will
do all of the following: |
| (a) | At Lender’s
request, meet with representatives of the Rating Agencies and/or investors to discuss
the business and operations of the Mortgaged Property. |
| (b) | Permit
Lender or its representatives to provide related information to the Rating Agencies and/or
investors. |
| (c) | Cooperate
with the reasonable requests of the Rating Agencies and/or investors in connection with
all of the foregoing. |
| 11.15 | Letter
of Credit Requirements. |
| (a) | Any
Letter of Credit required under this Loan Agreement must satisfy the following conditions: |
| (i) | It must
be a clean, irrevocable, unconditional standby letter of credit. |
| (ii) | It must
name Lender as the sole beneficiary and permit Lender to assign the Letter of Credit
without further consent from Issuer. |
| (iii) | It must
have an initial term of not less than 12 months. |
| (iv) | It must
be in the form required by Lender. |
| (v) | It must
provide that it may be drawn on by Lender or Loan Servicer, in whole or in part, by presentation
to Issuer of a sight draft without any other restrictions on the right to draw. |
| (vi) | It must
be issued by an Issuer meeting Lender’s requirements, which Issuer (i) must be
an Eligible Institution, and (ii) may not, unless Lender agrees in writing, be an affiliate
of Borrower or Lender. |
| (vii) | It must
be obtained on behalf of Borrower by a Person other than Borrower’s general partners
or managing members if Borrower is a general or limited partnership or limited liability
company. Neither Borrower nor the general partners or managing members, if applicable,
may have any liability or other obligations under any reimbursement agreement with respect
to the Letter of Credit. |
| (viii) | It
may not be secured by a lien on all or any part of the Mortgaged Property or related
Personalty. |
| (ix) | When
delivered to Lender, it must be accompanied by an opinion acceptable to Lender in Lender’s
Discretion issued by counsel to the Issuer that includes opinions as to Issuer’s
power and authority to issue the Letter of Credit and the enforceability of the Letter
of Credit against Issuer and an updated nonconsolidation opinion with regard to any such
Letter of Credit in form and substance satisfactory to Lender. |
| (b) | If at
any time the Issuer of a Letter of Credit held by Lender ceases to be an Eligible Institution,
Lender will have the right to immediately draw down the Letter of Credit in full and
hold the Proceeds in an escrow account in accordance with the terms of this Loan Agreement. |
Multifamily Loan and Security Agreement | Page 71 |
| (c) | Each
Letter of Credit held by Lender pursuant to this Loan Agreement provides additional collateral
for the Indebtedness in addition to the lien of the Security Instrument. |
| 11.19 | State
Specific Provisions. Reserved. |
| 11.20 | Time
is of the Essence. Time is of the essence with respect to each covenant of this Loan
Agreement. |
The following
terms, when used in this Loan Agreement (including when used in the recitals), will have the following meanings:
“Affiliate”
of any Person means:
| (i) | Any
other individual or entity that is, directly or indirectly, one of the following: |
| (A) | In Control
of the applicable Person. |
| (B) | Under
the Control of the applicable Person. |
| (C) | Under
common Control with the applicable Person. |
| (ii) | Any individual
that is a director or officer of the applicable Person. |
| (iii) | Any individual
that is a director or officer of any entity described in clause (i) of this definition. |
“Approved
Seller/Servicer” is defined in Section 11.11(b).
“Assignment
of Management Agreement” means the Assignment of Management Agreement and Subordination of Management Fees, dated the
same date as this Loan Agreement, among Borrower, Lender and Property Manager, including all schedules, riders, allonges and addenda,
as such Assignment of Management Agreement may be amended from time to time, and any future Assignment of Management Agreement
and Subordination of Management Fees executed in accordance with Section 6.09(d).
“Attorneys’
Fees and Costs” means: (i) fees and out of pocket costs of Lender’s and Loan Servicer’s attorneys, as applicable,
including costs of Lender’s and Loan Servicer’s in-house counsel, support staff costs, costs of preparing for litigation,
computerized research, telephone and facsimile transmission expenses, mileage, deposition costs, postage, duplicating, process
service, videotaping and similar costs and expenses; (ii) costs and fees of expert witnesses, including appraisers; (iii) investigatory
fees; and (iv) costs for any opinion required by Lender pursuant to the terms of the Loan Documents.
Multifamily Loan and Security Agreement | Page 72 |
“Bankruptcy
Code” means the United States Bankruptcy Code, 11 U.S.C. Section 101 et seq., as amended from time to time.
“Borrower”
means all Persons identified as “Borrower” in the first paragraph of this Loan Agreement, together with their successors
and assigns.
“Borrower
Information” is defined in Section 10.02(d).
“Borrower
Principal” means any of the following:
| (i) | Any
general partner of Borrower
(if Borrower is a partnership). |
| (ii) | Any
manager or managing member of Borrower (if Borrower is a limited liability company). |
| (iii) | Any
Person (limited partner, member or shareholder) with a collective direct or indirect
equity interest in Borrower equal to or greater than 25%. |
| (iv) | Any
Guarantor of all or any portion of the Loan or of any obligations of Borrower under the
Loan Documents. |
“Borrower
Proof of Loss Threshold” means $125,000.00.
“Borrower
Proof of Loss Maximum” means $500,000.00.
“Business
Day” means any day other than a Saturday, a Sunday, or any other day on which Lender or the national banking associations
are not open for business.
“Cap
Agreement” means any interest rate cap agreement, interest rate swap agreement or other interest rate-hedging contract
or agreement, in a form acceptable to Lender, obtained by Borrower from a Cap Provider as a requirement of any Loan Document or
as a condition of Lender’s making the Loan.
“Cap
Collateral” means all of the following:
| (iii) | All
rights of Borrower under any Cap Agreement and all rights of Borrower to all Cap Payments,
including contract rights and general intangibles, whether existing now or arising after
the date of this Loan Agreement. |
| (iv) | All
rights, liens and security interests or guaranties granted by a Cap Provider or any other
Person to secure or guaranty payment of any Cap Payments whether existing now or granted
after the date of this Loan Agreement. |
| (v) | All
documents, writings, books, files, records and other documents arising from or relating
to any of the foregoing, whether existing now or created after the date of this Loan
Agreement. |
| (vi) | All
cash and non-cash proceeds and products of (ii) through (v) of this definition. |
“Cap
Payment(s)” means any and all monies payable pursuant to any Cap Agreement by a Cap Provider.
Multifamily Loan and Security Agreement | Page 73 |
“Cap
Provider” means the third-party financial institution approved by Lender that is the counterparty under any Cap Agreement
or Replacement Cap Agreement.
“Capital
Replacement” means the replacement of those items listed on Exhibit F.
“Capped
Interest Rate” is defined in the Note, if applicable.
“Claim”
is defined in Section 10.02(f).
“Clean
Site Assessment” is defined in Section 7.05(b)(i).
“Closing
Date” means the date on which Lender disburses the proceeds of the Loan to or for the account of Borrower.
“Commitment
Letter” means the fully executed commitment letter or early rate lock application between Lender and Borrower issued
in connection with the Loan, as such document may have been modified, amended or extended.
“Completion
Date” means, with respect to any Repair, the date specified for that Repair in the Repair Schedule of Work (Exhibit
C), as such date may be extended.
“Condemnation”
is defined in Section 6.11(a).
“Control”
means to possess, directly or indirectly, the power to direct or cause the direction of the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise, including the power to elect a majority of the directors
or trustees of a corporation or trust, as the case may be.
“Corporate
Lease” means a Lease for one or more residential units under which one entity will rent all such units from Borrower
and will have the right to sublease such units to individual subtenants.
“Cut-off
Date” is defined in the Note, if applicable.
“Default
Rate” is defined in the Note.
“Defeasance”
is defined in Section 11.12.
“Defeasance
Closing Date” is defined in Section 11.12(b).
“Defeasance
Collateral” means: (i) a Freddie Mac Debt Security, (ii) a Fannie Mae Debt Security, (iii) U.S. Treasury Obligations,
or (iv) FHLB Obligations.
“Defeasance
Fee” is defined in Section 11.12(c).
“Defeasance
Notice” is defined in Section 11.12(b).
“Defeasance
Period” is defined in the Note, if applicable.
“Designated
Entity for Transfers” means each entity so identified in Exhibit I, and that entity’s successors and permitted
assigns.
“Disclosure
Document” is defined in Section 11.08.
Multifamily Loan and Security Agreement | Page 74 |
“Eligible
Account” means an identifiable account which is separate from all other funds held by the holding institution that is
either (i) an account or accounts maintained with the corporate trust department of a federal or state-chartered depository institution
or trust company which complies with the definition of Eligible Institution, or (ii) a segregated trust account or accounts maintained
with the corporate trust department of a federal or state chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution or trust company is subject to regulations substantially
similar to 12 C.F.R. §9.10(b), having in either case a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by federal and state authority. An Eligible Account will not be evidenced by a certificate of deposit,
passbook or other instrument.
“Eligible
Institution” means a federal or state chartered depository institution or trust company insured by the Federal Deposit
Insurance Corporation, the short term unsecured debt obligations or commercial paper of which are rated at least A-1 by Standard
& Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., P-1 by Moody’s Investors Service, Inc.
and F-3 by Fitch, Inc. in the case of accounts in which funds are held for 30 days or less or, in the case of letters of credit
or accounts in which funds are held for more than 30 days, the long term unsecured debt obligations of which are rated at least
“A” by Fitch, Inc. and Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.,
and “A2” by Moody’s Investors Service, Inc. If at any time an Eligible Institution does not meet the required
rating, the Loan Servicer must move the Eligible Account within 30 days of such event to an appropriately rated Eligible
Institution.
“Environmental
Inspections” is defined in Section 6.12(e).
“Environmental
Permit” means any permit, license, or other authorization issued under any Hazardous Materials Law with respect to any
activities or businesses conducted on or in relation to the Mortgaged Property.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended.
“Event
of Default” means the occurrence of any event listed in Section 9.01.
“Extension
Period” is defined in the Note, if applicable.
“Fannie
Mae Debt Security” means any non-callable bond, debenture, note, or other similar debt obligation issued by the Federal
National Mortgage Association.
“FHLB
Obligations” mean direct, non-callable and non-redeemable securities issued, or fully insured as to payment, by the
Federal Home Loan Bank.
“Fixtures”
means all property owned by Borrower which is attached to the Land or the Improvements so as to constitute a fixture under applicable
law, including: machinery, equipment, engines, boilers, incinerators and installed building materials; systems and equipment for
the purpose of supplying or distributing heating, cooling, electricity, gas, water, air or light; antennas, cable, wiring and
conduits used in connection with radio, television, security, fire prevention or fire detection or otherwise used to carry electronic
signals; telephone systems and equipment; elevators and related machinery and equipment; fire detection, prevention and extinguishing
systems and apparatus; security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves, microwave
ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances; light fixtures, awnings, storm windows
and storm doors; pictures, screens, blinds, shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor and
wall coverings; fences, trees and plants; swimming pools; and exercise equipment.
Multifamily Loan and Security Agreement | Page 75 |
“Freddie
Mac” means the Federal Home Loan Mortgage Corporation.
“Freddie
Mac Debt Security” means any non-callable bond, debenture, note, or other similar debt obligation issued by Freddie
Mac.
“Freddie
Mac Web Site” means the web site of Freddie Mac, located at www.freddiemac.com.
“GAAP”
means generally accepted accounting principles.
“Governmental
Authority” means any board, commission, department, agency or body of any municipal, county, state or federal governmental
unit, or any subdivision of any of them, that has or acquires jurisdiction over the Mortgaged Property, or the use, operation
or improvement of the Mortgaged Property, or over Borrower.
“Guarantor”
means the Person(s) required by Lender to guaranty all or a portion of Borrower’s obligations under the Loan Documents,
as set forth in the Guaranty. The required Guarantors as of the date of this Loan Agreement are set forth in Exhibit I.
“Guaranty”
means the Guaranty executed by Guarantor and/or any replacement or supplemental guaranty executed pursuant to the terms of this
Loan Agreement.
“Hazardous
Materials” means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and
oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls (PCBs) and compounds containing them; lead
and lead-based paint; asbestos or asbestos containing materials in any form that is or could become friable; underground or above-ground
storage tanks, whether empty or containing any substance; any substance the presence of which on the Mortgaged Property is prohibited
by any Governmental Authority; any substance that requires special handling and any other material or substance now or in the
future that (i) is defined as a “hazardous substance,” “hazardous material,” “hazardous waste,”
“toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant” by or within
the meaning of any Hazardous Materials Law, or (ii) is regulated in any way by or within the meaning of any Hazardous Materials
Law.
“Hazardous
Materials Law” and “Hazardous Materials Laws” means any and all federal, state and local laws, ordinances,
regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and
decrees in effect now or in the future, including all amendments, that relate to Hazardous Materials or the protection of human
health or the environment and apply to Borrower or to the Mortgaged Property. Hazardous Materials Laws include the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery
Act of 1976, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water
Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101 et seq., and their
state analogs.
“HVAC
System” is defined in Section 6.10(a)(v).
“Immediate
Family Members” means a Person’s spouse, parent, child (including stepchild), grandchild (including step-grandchild)
or sibling.
“Imposition
Reserve Deposits” is defined in Section 4.02(a).
“Impositions”
is defined in Section 4.02(a).
Multifamily Loan and Security Agreement | Page 76 |
“Improvements”
means the buildings, structures and improvements now constructed or at any time in the future constructed or placed upon the Land,
including any future alterations, replacements and additions.
“Indebtedness”
means the principal of, interest at the fixed or variable rate set forth in the Note on, and all other amounts due at any time
under, the Note, this Loan Agreement or any other Loan Document, including prepayment premiums, late charges, default interest,
and advances as provided in Section 9.02 to protect the security of the Security Instrument.
“Indemnified
Party/ies” is defined in Section 10.02(d).
“Indemnitees”
is defined in Section 10.02(a).
“Installment
Due Date” is defined in the Note.
“Insurance”
means Property Insurance, liability insurance and all other insurance that Lender requires Borrower to maintain pursuant to this
Loan Agreement.
“Intercreditor
Agreement” is defined in Section 11.11(b).
“Investor
Interest Transfer” is defined in Section 7.03(d)(vi).
“Investor
Interests” is defined in Section 7.03(d)(vi).
“Issuer”
means the issuer of any Letter of Credit.
“Issuer
Group” is defined in Section 10.02(d).
“Issuer
Person” is defined in Section 10.02(d).
“Land”
means the land described in Exhibit A.
“Leases”
means all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter
in force, whether oral or written, covering or affecting the Mortgaged Property, or any portion of the Mortgaged Property (including
proprietary leases or occupancy agreements if Borrower is a cooperative housing corporation), and all modifications, extensions
or renewals.
“Lender”
means the entity identified as “Lender” in the first paragraph of this Loan Agreement, or any subsequent holder of
the Note.
“Lender’s
Discretion” means Lender’s reasonable discretion unless otherwise set forth in this Loan Agreement.
“Letter
of Credit” means any letter of credit required under the terms of this Loan Agreement or any other Loan Document.
“LIBOR
Index Rate” is defined in the Note, if applicable.
“Lien”
means any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance on the Mortgaged Property.
“Loan”
is defined on Page 1 of this Loan Agreement.
“Loan
Agreement” means this Multifamily Loan and Security Agreement.
Multifamily Loan and Security Agreement | Page 77 |
“Loan
Application” is defined in Section 5.16(a).
“Loan
Documents” means the Note, the Security Instrument, this Loan Agreement, all guaranties, all indemnity agreements, all
collateral agreements, UCC filings, O&M Programs, the MMP and any other documents now or in the future executed by Borrower,
any Guarantor or any other Person in connection with the Loan evidenced by the Note, as such documents may be amended from time
to time.
“Loan
Servicer” means the entity that from time to time is designated by Lender to collect payments and deposits and receive
Notices under the Note, the Security Instrument, this Loan Agreement and any other Loan Document, and otherwise to service the
Loan evidenced by the Note for the benefit of Lender.
“Lockout
Period,” if applicable, is defined in the Note.
“Major
Building System” means one that is integral to the Improvements, providing basic services to the tenants and other occupants
of the Improvements including:
| · | Electrical
(electrical lines or power upgrades, excluding fixture replacement). |
| · | HVAC
(central and unit systems, excluding replacement of in kind unit systems). |
| · | Plumbing
(supply and waste lines, excluding fixture replacement). |
| · | Structural
(foundation, framing, and all building support elements). |
“Manager”
or “Managers” means a Person who is named or designated as a manager or managing member or otherwise
acts in the capacity of a manager or managing member of a limited liability company in a limited liability company agreement or
similar instrument under which the limited liability company is formed or operated.
“Margin”
is defined in the Note, if applicable.
“Material
Adverse Effect” means a significant detrimental effect on: (i) the Mortgaged Property, (ii) the business, prospects,
profits, operations or condition (financial or otherwise) of Borrower, (iii) the enforceability, validity, perfection or priority
of the Lien of any Loan Document, or (iv) the ability of Borrower to perform any obligations under any Loan Document.
“Maturity
Date” means the Scheduled Maturity Date, as defined in the Note.
“Maximum
Combined LTV” means 70%.
“Minimum
DSCR” means, with respect to a Supplemental Loan, (i) if the Senior Indebtedness bears interest at a fixed rate, 1.25:1,
or (ii) if the Senior Indebtedness bears interest at a floating rate, 1.10:1.
“Minimum
Occupancy” means 85% of units at the Mortgaged Property with leases that comply with Section 5.11, Section 6.09(e)(v)(E),
and Section 6.15.
“MMP”
means a moisture management plan to control water intrusion and prevent the development of Mold or moisture at the Mortgaged Property
throughout the term of this Loan Agreement.
“Modified
Non-Residential Lease” means an extension or modification of any Non-Residential Lease, which Non-Residential Lease
was in existence as of the date of this Loan Agreement.
Multifamily Loan and Security Agreement | Page 78 |
“Mold”
means mold, fungus, microbial contamination or pathogenic organisms.
“Mortgaged
Property” means all of Borrower’s present and future right, title and interest in and to all of the following:
| (i) | The
Land, or, if Borrower’s interest in the Land is pursuant to a Ground Lease, the
Ground Lease and the Leasehold Estate. |
| (v) | All
current and future rights, including air rights, development rights, zoning rights and
other similar rights or interests, easements, tenements, rights of way, strips and gores
of land, streets, alleys, roads, sewer rights, waters, watercourses and appurtenances
related to or benefiting the Land or the Improvements, or both, and all rights-of-way,
streets, alleys and roads which may have been or may in the future be vacated. |
| (vi) | All
proceeds paid or to be paid by any insurer of the Land, the Improvements, the Fixtures,
the Personalty or any other part of the Mortgaged Property, whether or not Borrower obtained
the Insurance pursuant to Lender’s requirement. |
| (vii) | All
awards, payments and other compensation made or to be made by any municipal, state or
federal authority with respect to the Land or the Leasehold Estate, as applicable, the
Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property,
including any awards or settlements resulting from Condemnation proceedings or the total
or partial taking of the Land, the Improvements, the Fixtures, the Personalty or any
other part of the Mortgaged Property under the power of eminent domain or otherwise and
including any conveyance in lieu thereof. |
| (viii) | All
contracts, options and other agreements for the sale of the Land, or the Leasehold Estate,
as applicable, the Improvements, the Fixtures, the Personalty or any other part of the
Mortgaged Property entered into by Borrower now or in the future, including cash or securities
deposited to secure performance by parties of their obligations. |
| (ix) | All
proceeds from the conversion, voluntary or involuntary, of any of the items described
in items (i) through (viii) of this definition, into cash or liquidated claims, and the
right to collect such proceeds. |
| (xi) | All
earnings, royalties, accounts receivable, issues and profits from the Land, the Improvements
or any other part of the Mortgaged Property, and all undisbursed proceeds of the Loan. |
| (xii) | All
Imposition Reserve Deposits. |
| (xiii) | All
refunds or rebates of Impositions by any Governmental Authority or insurance company
(other than refunds applicable to periods before the real property tax year in which
this Loan Agreement is dated). |
Multifamily Loan and Security Agreement | Page 79 |
| (xiv) | All
tenant security deposits which have not been forfeited by any tenant under any Lease
and any bond or other security in lieu of such deposits. |
| (xv) | All
names under or by which any of the Mortgaged Property may be operated or known, and all
trademarks, trade names and goodwill relating to any of the Mortgaged Property. |
| (xvi) | If
required by the terms of Section 4.05 or elsewhere in this Loan Agreement, all rights
under any Letter of Credit and the Proceeds, as such Proceeds may increase or decrease
from time to time. |
| (xvii) | If
the Note provides for interest to accrue at a floating or variable rate and there is
a Cap Agreement, the Cap Collateral. |
| (xviii) | through
(xxv) are Reserved. |
“New
Non-Residential Lease” is any Non-Residential Lease not in existence as of the date of this Loan Agreement.
“Non-Residential
Lease” is a Lease of a portion of the Mortgaged Property to be used for non-residential purposes.
“Note”
means the Multifamily Note (including any Amended and Restated Note, Consolidated, Amended and Restated Note, or Extended and
Restated Note) executed by Borrower in favor of Lender and dated as of the date of this Loan Agreement, including all schedules,
riders, allonges and addenda, as such Multifamily Note may be amended, modified and/or restated from time to time.
“Notice”
or “Notices” means all notices, demands and other communication required under the Loan Documents, provided
in accordance with the requirements of Section 11.03.
“O&M
Program” is defined in Section 6.12(c) and consists of the following: Asbestos.
“Person”
means any natural person, sole proprietorship, corporation, general partnership, limited partnership, limited liability company,
limited liability partnership, limited liability limited partnership, joint venture, association, joint stock company, bank, trust,
estate, unincorporated organization, any federal, state, county or municipal government (or any agency or political subdivision
thereof), endowment fund or any other form of entity.
“Personalty”
means all of the following:
| (i) | Accounts
(including deposit accounts) of Borrower related to the Mortgaged Property. |
| (ii) | Equipment
and inventory owned by Borrower, which are used now or in the future in connection with
the ownership, management or operation of the Land or Improvements or are located on
the Land or Improvements, including furniture, furnishings, machinery, building materials,
goods, supplies, tools, books, records (whether in written or electronic form) and computer
equipment (hardware and software). |
| (iii) | Other
tangible personal property owned by Borrower which is used now or in the future in connection
with the ownership, management or operation of the Land or Improvements or is located
on the Land or in the Improvements, including ranges, stoves, microwave ovens, refrigerators,
dishwashers, garbage disposers, washers, dryers and other appliances (other than Fixtures). |
Multifamily Loan and Security Agreement | Page 80 |
| (iv) | Any
operating agreements relating to the Land or the Improvements. |
| (v) | Any
surveys, plans and specifications and contracts for architectural, engineering and construction
services relating to the Land or the Improvements. |
| (vi) | All
other intangible property, general intangibles and rights relating to the operation of,
or used in connection with, the Land or the Improvements, including all governmental
permits relating to any activities on the Land and including subsidy or similar payments
received from any sources, including a Governmental Authority. |
| (vii) | Any
rights of Borrower in or under any Letter of Credit. |
“Pledge
Agreement” is defined in Section 11.12(f)(iii).
“Preapproved
Intrafamily Transfer” is defined in Section 7.04.
“Prepayment
Premium Period” is defined in the Note.
“Prior
Lien” means a pre-existing mortgage, deed of trust or other Lien encumbering the Mortgaged Property.
“Proceeding”
means, whether voluntary or involuntary, any case, proceeding or other action against Borrower or any SPE Equity Owner under any
existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of debtors.
“Proceeds”
means the cash obtained by a draw on a Letter of Credit.
“Prohibited
Activity or Condition” means each of the following:
| (i) | The
presence, use, generation, release, treatment, processing, storage (including storage
in above-ground and underground storage tanks), handling or disposal of any Hazardous
Materials on or under the Mortgaged Property. |
| (ii) | The
transportation of any Hazardous Materials to, from or across the Mortgaged Property. |
| (iii) | Any
occurrence or condition on the Mortgaged Property, which occurrence or condition is or
may be in violation of Hazardous Materials Laws. |
| (iv) | Any
violation of or noncompliance with the terms of any Environmental Permit with respect
to the Mortgaged Property. |
| (v) | Any
violation or noncompliance with the terms of any O&M Program. |
However,
the term “Prohibited Activity or Condition” expressly excludes lawful conditions permitted by an O&M Program or
the safe and lawful use and storage of quantities of: (i) pre-packaged supplies, cleaning materials and petroleum products customarily
used in the operation and maintenance of comparable multifamily properties, (ii) cleaning materials, personal grooming items and
other items sold in pre-packaged containers for consumer use and used by tenants and occupants of residential dwelling units in
the Mortgaged Property, and (iii) petroleum products used in the operation and maintenance of motor vehicles from time to time
located on the Mortgaged Property’s parking areas, so long as all of the foregoing are used, stored, handled, transported
and disposed of in compliance with Hazardous Materials Laws.
Multifamily Loan and Security Agreement | Page 81 |
“Property
Improvement Alterations” means alterations and additions to the Improvements existing at or upon the Mortgaged Property
as of the date of this Loan Agreement, which are being made to renovate or upgrade the Mortgaged Property and are not otherwise
permitted under Section 6.09(e). Repairs, Capital Replacements, Restoration or other work required to be performed at the Mortgaged
Property pursuant to Sections 6.10 or 6.11 will not constitute Property Improvement Alterations.
“Property
Improvement Notice” means a Notice to Lender that Borrower intends to begin the Property Improvement Alterations identified
in the Property Improvement Notice.
“Property
Improvement Total Amount” means the aggregate of $7,560,000.00 during the term of the Mortgage.
“Property
Insurance” is defined in Section 6.10(a).
“Property
Jurisdiction” means the jurisdiction in which the Land is located.
“Property
Manager” means Carroll Management Group, LLC, a Georgia limited liability company, or another residential rental property
manager which is approved by Lender in writing.
“Property
Seller” is defined in Section 5.24.
“Public
Fund/REIT Securities” is defined in Section 7.03(c).
“Rate
Cap Agreement Reserve Fund” means the account established pursuant to Section 4.07, if applicable, to pay for the cost
of a Replacement Cap Agreement.
“Rating
Agencies” means Fitch, Inc., Moody’s Investors Service, Inc., or Standard & Poor’s Ratings Services,
a division of The McGraw-Hill Companies, Inc., or any successor entity of the foregoing, or any other nationally recognized statistical
rating organization.
“Release
Instruments” is defined in Section 11.12(f).
“Remedial
Work” is defined in Section 6.12(f).
“Rent(s)”
means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements,
parking fees, laundry and vending machine income and fees and charges for food, health care and other services provided at the
Mortgaged Property, whether now due, past due or to become due, and deposits forfeited by tenants, and, if Borrower is a cooperative
housing corporation or association, maintenance fees, charges or assessments payable by shareholders or residents under proprietary
leases or occupancy agreements, whether now due, past due or to become due.
“Rent
Schedule” means a written schedule for the Mortgaged Property showing the name of each tenant, and for each tenant,
the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid,
and any related information requested by Lender.
“Repairs”
means the repairs to be made to the Mortgaged Property, as described on the Repair Schedule of Work (Exhibit C) or as otherwise
required by Lender in accordance with this Loan Agreement.
Multifamily Loan and Security Agreement | Page 82 |
“Replacement
Cap Agreement” means any Cap Agreement satisfying the provisions of this Loan Agreement, using documentation approved
by Lender, and purchased by Borrower to replace any initial Cap Agreement or subsequent Cap Agreement.
“Replacement
Cost” means the estimated replacement cost of the Improvements, Fixtures, and Personalty (or, when used in reference
to a property that is not the Mortgaged Property, all improvements, fixtures, and personalty located on such property), excluding
any deduction for depreciation, all as determined annually by Borrower using customary methodology and sources of information
acceptable to Lender in Lender’s Discretion. Replacement Cost will not include the cost to reconstruct foundations or site
improvements, such as driveways, parking lots, sidewalks, and landscaping.
“Reserve
Fund” means each account established for Imposition Reserve Deposits, the Replacement Reserve Fund, the Repair Reserve
Fund (if any), the Rate Cap Agreement Reserve Fund (if any), the Rental Achievement Reserve Fund (if any), and any other account
established pursuant to Article IV of this Loan Agreement.
“Restoration”
is defined in Section 6.10(j)(i).
“Scheduled
Debt Payments” is defined in Section 11.12(g)(i)(B).
“Secondary
Market Transaction” means: (i) any sale or assignment of this Loan Agreement, the Note and the other Loan Documents
to one or more investors as a whole loan, (ii) a participation of the Loan to one or more investors, (iii) any deposit of this
Loan Agreement, the Note and the other Loan Documents with a trust or other entity which may sell certificates or other instruments
to investors evidencing an ownership interest in the assets of such trust or other entity, or (iv) any other sale, assignment
or transfer of the Loan or any interest in the Loan to one or more investors.
“Securitization”
means when the Note or any portion of the Note is assigned to a REMIC or grantor trust.
“Securitization
Indemnification” is defined in Section 10.02(d).
“Security
Instrument” means the mortgage, deed of trust, deed to secure debt or other similar security instrument encumbering
the Mortgaged Property and securing Borrower’s performance of its Loan obligations, including Borrower’s obligations
under the Note and this Loan Agreement (including any Amended and Restated Security Instrument, Consolidation, Modification and
Extension Agreement, Extension and Modification Agreement or similar agreement or instrument amending and restating existing security
instruments).
“Senior
Indebtedness” means, for a Supplemental Loan, if any, the Indebtedness evidenced by each Senior Note and secured by
each Senior Instrument for the benefit of each Senior Lender.
“Senior
Instrument” – Not applicable.
“Senior
Lender” means each holder of a Senior Note.
“Senior
Loan Documents” means, for a Supplemental Loan, if any, all documents relating to each loan evidenced by a Senior Note.
“Senior
Note” means, for a Supplemental Loan, if any, each Multifamily Note secured by a Senior Instrument.
“Servicing
Arrangement” is defined in Section 11.06(b).
Multifamily Loan and Security Agreement | Page 83 |
“Single
Purpose Entity” is defined in Section 6.13(a).
“Site
Assessment” means an environmental assessment report for the Mortgaged Property prepared at Borrower’s expense
by a qualified environmental consultant engaged by Borrower, or by Lender on behalf of Borrower, and approved by Lender, and in
a manner reasonably satisfactory to Lender, based upon an investigation relating to and making appropriate inquiries to evaluate
the risks associated with Mold and any existence of Hazardous Materials on or about the Mortgaged Property, and the past or present
discharge, disposal, release or escape of any such substances, all consistent with the most current version of the ASTM 1527 standard
(or any successor standard published by ASTM) and good customary and commercial practice.
“SPE
Equity Owner” is not applicable. Borrower will not be required to maintain an SPE Equity Owner in its organizational
structure during the term of the Loan and all references to SPE Equity Owner in this Loan Agreement and in the Note will be of
no force or effect.
“Successor
Borrower” is defined in Section 11.12(b).
“Supplemental
Indebtedness” the Indebtedness evidenced by the Supplemental Note(s) and secured by the Supplemental Instrument(s) for
the benefit of Supplemental Lender(s), if any.
“Supplemental
Instrument” means, for each Supplemental Loan (whether one or more), if any, the Security Instrument executed to secure
the Supplemental Note for that Supplemental Loan.
“Supplemental
Lender” means, for each Supplemental Loan (whether one or more), if any, the lender named in the Supplemental Instrument
for that Supplemental Loan and its successors and/or assigns.
“Supplemental
Loan” means any loan that is subordinate to the Senior Indebtedness.
“Supplemental
Loan Documents” means, for each Supplemental Loan (whether one or more), if any, all documents relating to the loan
evidenced by the Supplemental Note for that Supplemental Loan.
“Supplemental
Mortgage Product” is defined in Section 11.11(a).
“Supplemental
Note” means, for each Supplemental Loan (whether one or more), if any, the Multifamily Note secured by the Supplemental
Instrument for that Supplemental Loan.
“Tax
Code” means the Internal Revenue Code of the United States, 26 U.S.C. Section 1 et seq., as amended from time to time.
“Taxes”
means all taxes, assessments, vault rentals and other charges, if any, whether general, special or otherwise, including all assessments
for schools, public betterments and general or local improvements, which are levied, assessed or imposed by any public authority
or quasi-public authority, and which, if not paid, will become a Lien on the Land or the Improvements.
“Total
Insurable Value” means the sum of the Replacement Cost, business income/rental value Insurance and the value of any
business personal property.
“Transfer”
means any of the following:
| (i) | A sale,
assignment, transfer or other disposition or divestment of any interest in Borrower,
a Designated Entity for Transfers, or the Mortgaged Property (whether voluntary, involuntary
or by operation of law). |
Multifamily Loan and Security Agreement | Page 84 |
| (ii) | The
granting, creating or attachment of a Lien, encumbrance or security interest (whether
voluntary, involuntary or by operation of law). |
| (iii) | The
issuance or other creation of an ownership interest in a legal entity, including a partnership
interest, interest in a limited liability company or corporate stock. |
| (iv) | The
withdrawal, retirement, removal or involuntary resignation of a partner in a partnership
or a member or Manager in a limited liability company. |
| (v) | The
merger, dissolution, liquidation, or consolidation of a legal entity or the reconstitution
of one type of legal entity into another type of legal entity. |
| (vi) | A change
of the Guarantor. |
For
purposes of defining the term “Transfer,” the term “partnership” means a general partnership, a limited
partnership, a joint venture, a limited liability partnership, or a limited liability limited partnership and the term “partner”
means a general partner, a limited partner, or a joint venturer.
“Transfer”
does not include any of the following:
| (i) | A conveyance
of the Mortgaged Property at a judicial or non-judicial foreclosure sale under the Security
Instrument. |
| (ii) | The
Mortgaged Property becoming part of a bankruptcy estate by operation of law under the
Bankruptcy Code. |
| (iii) | The
filing or recording of a Lien against the Mortgaged Property for local taxes and/or assessments
not then due and payable. |
“Transfer
and Assumption Agreement” is defined in Section 11.12(f)(iv).
“Transfer
Fee” means a fee paid when the Transfer is completed. Unless otherwise specified, the Transfer Fee will be equal to
the lesser of the following:
| (i) | 1% of
the outstanding principal balance of the Indebtedness as of the date of the Transfer. |
“Transfer
Processing Fee” means a nonrefundable fee of $15,000 for Lender’s review of a proposed or completed Transfer.
“U.S.
Treasury Obligations” means direct, non-callable and non-redeemable securities issued, or fully insured as to payment,
by the United States of America.
“UCC
Collateral” is defined in Section 3.03.
“Underwriter
Group” is defined in Section 10.02(d).
“Uniform
Commercial Code” means the Uniform Commercial Code as promulgated in the applicable jurisdiction.
“Windstorm
Coverage” is defined in Section 6.10(a)(iv).
Multifamily Loan and Security Agreement | Page 85 |
ARTICLE
XIII INCORPORATION OF ATTACHED RIDERS.
The Riders listed
on Page ii are attached to and incorporated into this Loan Agreement.
ARTICLE
XIV INCORPORATION OF ATTACHED EXHIBITS.
The following
Exhibits, if marked with an “X” in the space provided, are attached to this Loan Agreement:
x |
Exhibit A |
Description of the Land (required) |
|
|
|
x |
Exhibit B |
Modifications to Multifamily Loan and Security Agreement |
|
|
|
x |
Exhibit C |
Repair Schedule of Work |
|
|
|
x |
Exhibit D |
Repair Disbursement Request (required) |
|
|
|
x |
Exhibit E |
Work Commenced at Mortgaged Property |
|
|
|
x |
Exhibit F |
Capital Replacements (required) |
|
|
|
x |
Exhibit G |
Description of Ground Lease |
|
|
|
x |
Exhibit H |
Organizational Chart of Borrower as of the Closing Date (required) |
|
|
|
x |
Exhibit I |
Designated Entities for Transfers and Guarantor(s) (required) |
|
|
|
x |
Exhibit J |
Description of Release Parcel |
|
|
|
¨ |
Exhibit K |
Reserved |
|
|
|
¨ |
Exhibit L |
Reserved |
|
|
|
¨ |
Exhibit M |
Reserved |
|
|
|
¨ |
Exhibit N |
Reserved |
|
|
|
x |
Exhibit O |
Borrower’s Certificate of Property Improvement Alterations Completion
(required) |
REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURES ON FOLLOWING PAGES
Multifamily Loan and Security Agreement | Page 86 |
|
BORROWER: |
|
|
|
BR CARROLL
WORLD GATEWAY, LLC, a Delaware limited liability company |
|
|
|
By: |
/s/ Jordan Ruddy |
|
|
Jordan Ruddy |
|
|
Chief Executive Officer |
SIGNATURES
CONTINUE ON FOLLOWING PAGE
Multifamily Loan and Security Agreement | S-1 |
|
LENDER: |
|
|
|
JONES LANG
LASALLE OPERATIONS, L.L.C., an Illinois limited liability company |
|
|
|
By: |
/s/ Faron G. Thompson |
|
|
Faron G. Thompson |
|
|
Managing Director, Capital Markets-Real Estate Investment Banking |
Multifamily Loan and Security Agreement | S-2 |
RIDER TO
MULTIFAMILY LOAN AND SECURITY AGREEMENT
REPLACEMENT
RESERVE FUND – IMMEDIATE DEPOSITS
(Revised
7-1-2014)
The following
changes are made to the Loan Agreement which precedes this Rider:
| A. | Section
4.04 is deleted and replaced with the following: |
| 4.04 | Replacement
Reserve Fund. |
| (a) | Deposits
to Replacement Reserve Fund. On the Closing Date, the parties will establish the
Replacement Reserve Fund and Borrower will pay the Initial Deposit to Lender for deposit
into the Replacement Reserve Fund. Commencing on the date the first installment of principal
and/or interest is due under the Note and continuing on the same day of each successive
month until the Loan is paid in full, Borrower will pay the Monthly Deposit to Lender
for deposit into the Replacement Reserve Fund, together with its regular monthly payments
of principal and/or interest as required by the Note. A transfer of funds into the Replacement
Reserve Fund from the Repair Reserve Fund, pursuant to the terms of Section 4.03(e),
if applicable, will not alter or reduce the amount of any deposits to the Replacement
Reserve Fund. |
| (b) | Costs
Charged by Lender. |
| (i) | If Lender,
in Lender’s Discretion, retains a professional inspection engineer or other qualified
third party to inspect any Capital Replacements pursuant to the terms of Section 6.06,
Lender may charge Borrower an amount sufficient to pay all reasonable costs and expenses
charged by such third party inspector. |
| (ii) | If
there are sufficient funds in Replacement Reserve Fund, Lender will be entitled, but
not obligated, to deduct from the Replacement Reserve Fund the costs and expenses set
forth in Section 4.04(b)(i). Lender will be entitled to charge Borrower for such
costs and expenses and Borrower will pay the amount of such item(s) to Lender immediately
after Notice from Lender to Borrower of such charge(s). |
| (iii) | If
there are insufficient funds in the Replacement Reserve Fund, then Lender will be entitled
to charge Borrower for the costs and expenses specified in Section 4.04(b)(i), and
Borrower will pay the amount of such item(s) to Lender immediately after Notice from
Lender to Borrower of such charge(s). |
| (c) | Adjustments
to Replacement Reserve Fund. If the initial term of the Loan is greater than 120
months, then the following provisions will apply: |
| (i) | Lender
reserves the right to adjust the amount of the Monthly Deposit based on Lender’s
assessment of the physical condition of the Mortgaged Property, however, Lender will
not make such an adjustment prior to the date that is 120 months after the first installment
due date, nor more frequently than every 10 years thereafter during the term of the Loan. |
Rider to Multifamily Loan and Security Agreement Replacement Reserve Fund – Immediate Deposits | Page 1 |
| (ii) | Borrower
will pay the cost of any assessment required by Lender pursuant to Section 4.04(c)(i)
to Lender immediately after Notice from Lender to Borrower of such charge. |
| (iii) | Upon
Notice from Lender or Loan Servicer, Borrower will begin paying the Revised Monthly Deposit
on the first monthly payment date that is at least 30 days after the date of Lender’s
or Loan Servicer’s Notice. If Lender or Loan Servicer does not provide Borrower
with Notice of a Revised Monthly Deposit, Borrower will continue to pay the Monthly Deposit
or the Revised Monthly Deposit then in effect. |
| (d) | Insufficient
Amount in Replacement Reserve Fund. If Borrower requests disbursement from the Replacement
Reserve Fund for a Capital Replacement in accordance with this Loan Agreement in an amount
which exceeds the amount on deposit in the Replacement Reserve Fund, Lender will disburse
to Borrower only the amount on deposit in the Replacement Reserve Fund. Borrower will
pay all additional amounts required in connection with any such Capital Replacement from
Borrower’s own funds. |
| (g) | Disbursements
from Replacement Reserve Fund. |
| (i) | Requests
for Disbursement. Lender will disburse funds from the Replacement Reserve Fund as
follows: |
| (A) | Borrower’s
Request. If Borrower determines, at any time or from time to time, that a Capital
Replacement is necessary or desirable, Borrower will perform such Capital Replacement
and request from Lender, in writing, reimbursement for such Capital Replacement. Borrower’s
request for reimbursement will include (1) a detailed description of the Capital Replacement
performed, together with evidence, satisfactory to Lender, that the cost of such Capital
Replacement has been paid, and (2) if required by Lender, lien waivers from each contractor
and material supplier supplying labor or materials for such Capital Replacement. |
| (B) | Lender’s
Request. If Lender reasonably determines at any time or from time to time, that a
Capital Replacement is necessary for the proper maintenance of the Mortgaged Property,
it will so notify Borrower, in writing, requesting that Borrower obtain and submit to
Lender bids for all labor and materials required in connection with such Capital Replacement.
Borrower will submit such bids and a time schedule for completing each Capital Replacement
to Lender within 30 days after Borrower’s receipt of Lender’s Notice. Borrower
will perform such Capital Replacement and request from Lender, in writing, reimbursement
for such Capital Replacement. Borrower’s request for reimbursement will include
(1) a detailed description of the Capital Replacement performed, together with evidence,
satisfactory to Lender, that the cost of such Capital Replacement has been paid, and
(2) if required by Lender, lien waivers from each contractor and material supplier supplying
labor or materials for such Capital Replacement. |
Rider to Multifamily Loan and Security Agreement Replacement Reserve Fund – Immediate Deposits | Page 2 |
| (ii) | Conditions
Precedent. Disbursement from the Replacement Reserve Fund will be made no more frequently
than once every Replacement Reserve Disbursement Period and, except for the final disbursement,
no disbursement will be made in an amount less than the Minimum Replacement Disbursement
Request Amount. Disbursements will be made only if the following conditions precedent
have been satisfied, as determined by Lender in Lender’s Discretion: |
| (A) | Each Capital
Replacement has been performed and/or installed on the Mortgaged Property in a good and
workmanlike manner with suitable materials (or in the case of a partial disbursement,
performed and/or installed on the Mortgaged Property to an acceptable stage), in accordance
with good building practices and all applicable laws, ordinances, rules and regulations,
building setback lines and restrictions applicable to the Mortgaged Property, and has
been paid for by Borrower as evidenced by copies of all applicable paid invoices or bills
submitted to Lender by Borrower at the time Borrower requests disbursement from the Replacement
Reserve Fund. |
| (B) | There
is no condition, event or act that would constitute a default (with or without Notice
and/or lapse of time). |
| (C) | No Lien
or claim based on furnishing labor or materials has been recorded, filed or asserted
against the Mortgaged Property, unless Borrower has properly provided a bond or other
security against loss in accordance with applicable law. |
| (D) | All licenses,
permits and approvals of any Governmental Authority required for the Capital Replacement
as completed to the applicable stage have been obtained and submitted to Lender upon
Lender’s request. |
| (h) | Right
to Complete Capital Replacements. If Borrower abandons or fails to proceed diligently
with any Capital Replacement in a timely fashion or an Event of Default occurs and continues
under this Loan Agreement for 30 days after Notice of such failure by Lender to Borrower,
Lender will have the right (but not the obligation) to enter upon the Mortgaged Property
and take over and cause the completion of such Capital Replacement. However, no such
Notice or cure period will apply in the case of such failure which could, in Lender’s
sole and absolute discretion, absent immediate exercise by Lender of a right or remedy
under this Loan Agreement, result in harm to Lender, tenants or third parties or impairment
of the security given under this Loan Agreement, the Security Instrument or any other
Loan Document. Any contracts entered into or indebtedness incurred upon the exercise
of such right may be in the name of Borrower, and Lender is irrevocably appointed the
attorney in fact for Borrower, such appointment being coupled with an interest, to enter
into such contracts, incur such obligations, enforce any contracts or agreements made
by or on behalf of Borrower (including the prosecution and defense of all actions and
proceedings in connection with the Capital Replacement and the payment, settlement or
compromise of all bills and claims for materials and work performed in connection with
the Capital Replacement) and do any and all things necessary or proper to complete any
Capital Replacement, including signing Borrower’s name to any contracts and documents
as may be deemed necessary by Lender. In no event will Lender be required to expend its
own funds to complete any Capital Replacement, but Lender may, in Lender’s Discretion,
advance such funds. Any funds advanced will be added to the Indebtedness, secured by
the Security Instrument and payable to Lender by Borrower in accordance with the provisions
of the Note, this Loan Agreement, the Security Instrument and any other Loan Document
pertaining to the protection of Lender’s security and advances made by Lender. |
Rider to Multifamily Loan and Security Agreement Replacement Reserve Fund – Immediate Deposits | Page 3 |
| (i) | Completion
of Capital Replacements. Lender’s disbursement of monies from the Replacement
Reserve Fund or other acknowledgment of completion of any Capital Replacement in a manner
satisfactory to Lender in Lender’s Discretion will not be deemed a certification
by Lender that the Capital Replacement has been completed in accordance with applicable
building, zoning or other codes, ordinances, statutes, laws, regulations or requirements
of any Governmental Authority. Borrower will at all times have the sole responsibility
for ensuring that all Capital Replacements are completed in accordance with all such
requirements of any Governmental Authority. |
| B. | The
following definitions are added to Article XII: |
“Initial
Deposit” means $0.00.
“Minimum
Replacement Disbursement Request Amount” means $2,000.00.
“Monthly
Deposit” means $6,258.00.
“Replacement
Reserve Deposit” means the Initial Deposit, the Monthly Deposit and/or the Revised Monthly Deposit, as appropriate.
“Replacement
Reserve Disbursement Period” means the interval between disbursements from the Replacement Reserve Fund, which interval
will be no shorter than once a month.
Rider to Multifamily Loan and Security Agreement Replacement Reserve Fund – Immediate Deposits | Page 4 |
“Replacement
Reserve Fund” means the account established pursuant to this Loan Agreement to defray the costs of Capital Replacements.
“Revised
Monthly Deposit” means the adjusted amount per month that Lender determines Borrower must deposit in the Replacement
Reserve Fund following any adjustment determination by Lender pursuant to Section 4.04(c).
Rider to Multifamily Loan and Security Agreement Replacement Reserve Fund – Immediate Deposits | Page 5 |
RIDER
TO MULTIFAMILY LOAN AND SECURITY AGREEMENT
RATE
CAP AGREEMENT AND RATE CAP AGREEMENT RESERVE FUND
(Revised
6-30-2015)
The following
changes are made to the Loan Agreement which precedes this Rider:
| A. | Section 3.04
is deleted and replaced with the following: |
| 3.04 | Cap
Agreement and Cap Collateral Assignment. |
| (a) | Cap
Agreement. To protect against fluctuations in interest rates, Borrower must obtain
and maintain a Cap Agreement at all times so long as the Loan is outstanding. The initial
Cap Agreement must be successfully bid no later than the Closing Date and be effective
for an initial term ending not earlier than the third anniversary of the Closing Date.
The initial Cap Agreement must be in a Notional Amount equal to the principal amount
of the Loan on the Closing Date and have a Strike Rate that does not exceed the Original
Strike Rate. The Cap Agreement, including any Replacement Cap Agreement, must obligate
the Cap Provider to make monthly payments directly to Lender or to Loan Servicer on behalf
of Lender in an amount equal to the excess of (i) the interest on the Notional Amount
at the Index Rate over (ii) interest on the Notional Amount at the Strike Rate. |
| (b) | Replacement
Cap Agreement. At least 60 days prior to the date on which an existing Cap Agreement
terminates, Borrower must give Notice to and provide evidence satisfactory to Lender
that Borrower will deliver a Replacement Cap Agreement. Borrower must ensure that the
Replacement Cap Agreement is in full force and effect not later than the day immediately
following the expiration of the then-existing Cap Agreement. Any Replacement Cap Agreement
must (i) have a term not earlier than one year from its effective date, (ii) have a Strike
Rate that does not exceed the Original Strike Rate, and (iii) be in a Notional Amount
equal to the outstanding principal balance due under the Note on the effective date of
the Replacement Cap Agreement. |
| (c) | Attorneys’
Fees and Costs. Borrower must pay or reimburse Lender, upon demand, for all costs
and expenses in connection with any Replacement Cap Agreement, including (i) all Attorneys’
Fees and Costs, incurred by Lender, and (ii) the cost of the cap broker, if any. |
| (d) | Cap
Collateral. To secure Borrower’s payment obligations under the Loan, Borrower
grants to Lender a security interest in the Cap Collateral, including any Replacement
Cap Agreement. |
| B. | Section 4.07
is deleted and replaced with the following: |
| 4.07 | Rate
Cap Agreement Reserve Fund. |
| (a) | Deposits
to Rate Cap Agreement Reserve Fund. If the initial Cap Agreement terminates prior
to the Maturity Date, Lender will establish the Rate Cap Agreement Reserve Fund on the
Closing Date. Commencing on the date the first installment of principal and/or interest
is due under the Note and continuing on the same day for each successive month until
the purchase of the last Replacement Cap Agreement, Borrower must pay to Lender an amount
equal to the Rate Cap Reserve Deposit. |
Rider to Multifamily Loan and Security Agreement Rate Cap Agreement and Rate Cap Agreement Reserve Fund | Page 1 |
| (b) | Adjustments
to Rate Cap Reserve Deposit. Lender will recompute the amount of the Rate Cap Reserve
Deposit every 6 months based on the outstanding principal balance due under the Note
at the time Lender recomputes the amount of the Rate Cap Reserve Deposit. Lender will
provide Notice to Borrower of any revised Rate Cap Reserve Deposit. |
| (c) | Disbursements
from Rate Cap Agreement Reserve Fund. Lender will apply the funds in the Rate Cap
Agreement Reserve Fund to the cost of the Replacement Cap Agreement, unless an Event
of Default has occurred and is continuing, in which case Lender at its option may apply
such funds to the Indebtedness in any amount and in any order as Lender determines in
Lender’s Discretion. To the extent there are funds in the Rate Cap Agreement Reserve
Fund in excess of the cost of the Replacement Cap Agreement, such funds may be applied
to pay Attorneys’ Fees and Costs related to the Replacement Cap Agreement and to
pay the cap broker, if any. In the event that, for any reason, there are insufficient
funds in the Rate Cap Agreement Reserve Fund to purchase a Replacement Cap Agreement,
Borrower must fund the amount of any such deficiency, including amounts necessary to
pay Attorneys’ Fees and Costs and the cost of the cap broker, if any. |
| (d) | Termination
of Rate Cap Agreement Reserve Fund. Upon purchase by Borrower of a Replacement Cap
Agreement with an expiration date on or after the Maturity Date, Borrower will no longer
be required to make Rate Cap Reserve Deposits. Any funds remaining in the Rate Cap Agreement
Reserve Fund will be returned to Borrower upon the earlier to occur of (i) purchase of
a Replacement Cap Agreement with a termination date not earlier that the Maturity Date,
or (ii) payment in full of the Indebtedness. |
| C. | Section 5.22
is deleted and replaced with the following: |
| (a) | Obligation
to Make Cap Payments. Borrower has instructed each Cap Provider and any guarantor
of a Cap Provider’s obligations to make Cap Payments directly to Lender or to Loan
Servicer on behalf of Lender. |
| (b) | Dodd-Frank
Act. Borrower has complied with the applicable requirements of the Dodd-Frank Act
in purchasing the initial Cap Agreement. |
| D. | Section 6.18
is deleted and replaced with the following: |
| (a) | Obligation
to Make Payments. Borrower will instruct each Cap Provider and any guarantor of a
Cap Provider’s obligations to make Cap Payments directly to Lender or to Loan Servicer
on behalf of Lender. |
| (b) | Dodd-Frank
Act. Borrower will comply with the applicable requirements of the Dodd-Frank Act
in purchasing any Replacement Cap Agreement. |
Rider to Multifamily Loan and Security Agreement Rate Cap Agreement and Rate Cap Agreement Reserve Fund | Page 2 |
| E. | The following
definitions are added to Article XII: |
“Dodd
Frank Act” means the Dodd-Frank Wall Street Reform and Consumer Protection Act.
“Index
Rate” means the published variable rate index designated in the Cap Agreement as the “Floating Rate Option,”
which Index Rate must be 1-month LIBOR.
“Notional
Amount” means the dollar amount designated in the Cap Agreement as the “Notional Amount” which must be (i)
with respect to the initial Cap Agreement, an amount equal to the principal amount of the Loan on the Closing Date, and (ii) with
respect to any Replacement Cap Agreement, an amount equal to the outstanding principal balance due under the Note on the commencement
date of the Replacement Cap Agreement.
“Original
Strike Rate” means 3.53%.
“Rate
Cap Reserve Deposit” means a monthly amount payable by Borrower sufficient to accumulate funds in an amount equal to
125% of the amount estimated by Lender to be sufficient to purchase, immediately prior to termination of the then-existing Cap
Agreement, a Replacement Cap Agreement (i) expiring on the earlier of the date that is two years after the termination date of
the then-existing Cap Agreement or the Maturity Date, (ii) having a Notional Amount equal to the outstanding principal balance
due under the Note on the commencement date of the Replacement Cap Agreement, and (iii) having a Strike Rate equal to the Original
Strike Rate.
“Strike
Rate” means a fixed rate of interest under the Cap Agreement that does not exceed the Original Strike Rate.
Rider to Multifamily Loan and Security Agreement Rate Cap Agreement and Rate Cap Agreement Reserve Fund | Page 3 |
MULTIFAMILY
LOAN AND SECURITY AGREEMENT
RIDER
TO MULTIFAMILY LOAN AND SECURITY AGREEMENT
AFFILIATE
TRANSFER
(MPC
Partnership Holdings LLC)
(Revised
7-1-2014)
The following
changes are made to the Loan Agreement which precedes this Rider:
| A. | Section
7.03(d)(i) is deleted and replaced with the following: |
| (i) | Affiliate
Transfer. A Transfer of any direct or indirect interests in Borrower held by, or by an
entity owned and Controlled by, Carroll Multifamily Real Estate Fund III, LP (“Affiliate
Transferor”) to one or more of Affiliate Transferor’s Affiliates (“Affiliate
Transfer”) provided that each of the following conditions is satisfied: |
| (A) | Borrower
provides Lender with at least 30 days prior Notice of the proposed Affiliate Transfer
and pays to Lender the Transfer Processing Fee. |
| (B) | At the
time of the proposed Affiliate Transfer, no Event of Default has occurred and is continuing
and no event or condition has occurred and is continuing that, with the giving of Notice
or the passage of time, or both, would become an Event of Default. |
| (C) | Borrower
pays or reimburses Lender, upon demand, for all costs and expenses including all Attorneys’
Fees and Costs, incurred by Lender in connection with the Affiliate Transfer. |
| (D) | Lender
determines, in Lender’s Discretion, that the Affiliate meets Lender’s eligibility,
credit, management and other standards. |
| (E) | After
the Affiliate Transfer, MPC Partnership Holdings LLC maintains direct or indirect Control
of the Affiliate transferee, and Control and management of the day-to-day operations
of Borrower continue to be held by the Person exercising such Control and management
immediately prior to the Affiliate Transfer and there is no change in the Guarantor,
if applicable. |
| (F) | Lender
receives organizational charts reflecting the structure of Borrower prior to and after
the Affiliate Transfer. |
| (G) | Lender
will not be entitled to collect a Transfer Fee as the result of the Affiliate Transfer. |
| (H) | Lender
receives confirmation acceptable to Lender that (1) the requirements of Section 6.13
continue to be satisfied, and (2) the term of existence of the Affiliate (exclusive of
any unexercised extension options or rights) does not expire prior to the Maturity Date. |
Rider to Multifamily Loan and Security Agreement Affiliate Transfer (MPC Partnership Holdings LLC) | Page 1 |
| (I) | Borrower
delivers to Lender a search confirming that the Affiliate is not on the list of Specially
Designated Nationals or other blocked persons published by the U.S. Office of Foreign
Assets Control, or on the list of persons or entities prohibited from doing business
with the Department of Housing and Urban Development. |
| (J) | If a nonconsolidation
opinion was delivered on the Closing Date and if, after giving effect to the Affiliate
Transfer and all prior Transfers, 50% or more in the aggregate of direct or indirect
interests in Borrower are owned by any Person and its Affiliates that owned less than
a 50% direct or indirect interest in Borrower as of the Closing Date, Borrower delivers
to Lender an opinion of counsel for Borrower, in form and substance satisfactory to Lender,
with regard to nonconsolidation. |
| (K) | At
Lender’s request, Borrower executes a reaffirmation of its obligations under the
Loan Documents in a form acceptable to Lender. |
| (L) | In
the event of a Transfer prohibited by or requiring Lender’s approval under this
Section 7.03, the provisions of this Section 7.03(d)(i) may be modified or rendered void
by Lender at Lender’s sole option by Notice to Borrower and the transferee(s) as
a condition to Lender’s consent. |
| B. | The following
definition is added to Article XII: |
“Affiliate
Transfer” is defined in Section 7.03(d)(i).
“Affiliate
Transferor” is defined in Section 7.03(d)(i).
Rider to Multifamily Loan and Security Agreement Affiliate Transfer (MPC Partnership Holdings LLC) | Page 2 |
RIDER
TO MULTIFAMILY LOAN AND SECURITY AGREEMENT
AFFILIATE
TRANSFER
(Bluerock
Residential Holdings, LP)
(Revised
7-1-2014)
The following
changes are made to the Loan Agreement which precedes this Rider:
| A. | Section
7.03(d)(ii) is deleted and replaced with the following: |
| (ii) | Affiliate
Transfer. A Transfer of any direct or indirect interests in Borrower held by an entity
directly or indirectly owned and Controlled by Bluerock Residential Growth REIT, Inc.
(“Bluerock Affiliate Transferor”) to one or more “Bluerock Affiliate
Transferor’s Affiliates” (“Bluerock Affiliate Transfer”) provided
that each of the following conditions is satisfied: |
| (A) | Borrower
provides Lender with at least 30 days prior Notice of the proposed Bluerock Affiliate
Transfer and pays to Lender the Transfer Processing Fee. |
| (B) | At
the time of the proposed Bluerock Affiliate Transfer, no Event of Default has occurred
and is continuing and no event or condition has occurred and is continuing that, with
the giving of Notice or the passage of time, or both, would become an Event of Default. |
| (C) | Borrower
pays or reimburses Lender, upon demand, for all costs and expenses including all Attorneys’
Fees and Costs, incurred by Lender in connection with the Bluerock Affiliate Transfer. |
| (D) | Lender
determines, in Lender’s Discretion, that the Bluerock Affiliate Transferor’s
Affiliate meets Lender’s eligibility, credit, management and other standards. |
| (E) | After
the Bluerock Affiliate Transfer, Control and management of the day-to-day operations
of Borrower and the Facility continue to be held by the Person exercising such Control
and management immediately prior to the Bluerock Affiliate Transfer and there is no change
in the Guarantor, if applicable. |
| (F) | Lender
receives organizational charts reflecting the structure of Borrower prior to and after
the Bluerock Affiliate Transfer. |
| (G) | Lender
will not be entitled to collect a Transfer Fee as the result of the Bluerock Affiliate
Transfer. |
| (H) | Lender
receives confirmation acceptable to Lender that (1) the requirements of Section 6.13
continue to be satisfied, and (2) the term of existence of the Bluerock Affiliate Transferor’s
Affiliate (exclusive of any unexercised extension options or rights) does not expire
prior to the Maturity Date. |
Rider to Multifamily Loan and Security Agreement Affiliate Transfer (Bluerock Residential Holdings, LP) | Page 1 |
| (I) | Borrower
delivers to Lender a search confirming that the Bluerock Affiliate Transferor’s
Affiliate is not on the list of Specially Designated Nationals or other blocked persons
published by the U.S. Office of Foreign Assets Control, or on the list of persons or
entities prohibited from doing business with the Department of Housing and Urban Development. |
| (J) | If
a nonconsolidation opinion was delivered on the Closing Date and if, after giving effect
to the Bluerock Affiliate Transfer and all prior Transfers, 50% or more in the aggregate
of direct or indirect interests in Borrower are owned by any Person and its Affiliates
that owned less than a 50% direct or indirect interest in Borrower as of the Closing
Date, Borrower delivers to Lender an opinion of counsel for Borrower, in form and substance
satisfactory to Lender, with regard to nonconsolidation. |
| B. | The following
definition is added to Article XII: |
“Bluerock
Affiliate Transfer” is defined in Section 7.03(d)(ii).
“Bluerock
Affiliate Transferor” is defined in Section 7.03(d)(ii).
“Bluerock
Affiliate Transferor’s Affiliates” is defined as any entity that is, directly or indirectly, owned or otherwise controlled
by, or under common control with, Bluerock Residential Growth REIT , Inc. For purposes hereof, Bluerock Residential Growth REIT,
Inc will be deemed controlled by Ramin Kamfar, its current Chief Executive Officer, President and Board Chairman as well as the
majority owner of its advisor.
Rider to Multifamily Loan and Security Agreement Affiliate Transfer (Bluerock Residential Holdings, LP) | Page 2 |
RIDER
TO MULTIFAMILY LOAN AND SECURITY AGREEMENT
BUY-SELL
TRANSFER
(Revised
7-1-2014)
The following
changes are made to the Loan Agreement which precedes this Rider:
| A. | Section
7.03(d)(iii) is deleted and replaced with the following: |
| (iii) | Buy-Sell
Transfer. A one-time Transfer (“Buy-Sell Transfer”) pursuant to a buy-sell
agreement, operating agreement, joint venture agreement or similar agreement of the interests
in BR Carroll World Gateway Orlando JV, LLC, the sole member of Borrower. |
| (A) | The Buy-Sell
Transfer may consist of either of the following Transfers: |
| (1) | The
Transfer of the interests of BR World Gateway JV Member, LLC, a Delaware limited liability
company (for convenience, referred to herein as “Manager”) to Carroll Co-Invest
III World Gateway, LLC, a Delaware limited liability company or to its Affiliate (for
convenience, referred to herein as “Equity”) (either by purchase of the ownership
interest of the Manager or replacement of the Manager as the general partner, manager
or managing member). |
| (2) | The Transfer of the Equity’s ownership to the Manager or to
a Affiliate of Manager (either by purchase of the ownership interest of the Equity or replacement of the Equity as a
participant in any management committee). |
| (B) | The Buy-Sell
Transfer will be a permitted Transfer if each of the following conditions is satisfied: |
| (1) | Borrower
provides Lender with at least 30 days prior Notice of the proposed Buy-Sell Transfer
and pays to Lender the Transfer Processing Fee. |
| (2) | At the
time of the proposed Buy-Sell Transfer, no Event of Default has occurred and is continuing
and no event or condition has occurred and is continuing that, with the giving of Notice
or the passage of time, or both, would become an Event of Default; provided, however,
if the Buy-Sell Transfer would cure the Event of Default, the Buy-Sell Transfer must
occur within 60 days after all conditions in this Section have been met to Lender’s
satisfaction. |
| (3) | Borrower
pays or reimburses Lender, upon demand, for all costs and expenses, including all Attorneys’
Fees and Costs, incurred by Lender in connection with the Buy-Sell Transfer. |
| (4) | For
the purposes of this Section 7.03(d)(iii), Bluerock Residential Growth REIT, Inc. will
be referred to as the “Bluerock Guarantor,” and MPC Partnership Holdings
LLC will be referred to as the “Carroll Guarantor.” |
Rider to Multifamily Loan and Security Agreement Buy-Sell Transfer | Page 1 |
| (I) | At
the time of the Buy-Sell Transfer, if the Manager is the transferor, the Carroll Guarantor
has a net worth of at least $15,000,000, and liquid assets of at least $2,500,000. |
| (II) | At
the time of the Buy-Sell Transfer, if the Equity is the transferor, the Bluerock Guarantor
has a net worth of at least $15,000,000, and liquid assets of at least $2,500,000. |
| (III) | The
Bluerock Guarantor (if the Equity is the transferor) or the Carroll Guarantor (if the
Manager is the transferor) executes a ratification of its Guaranty in a form acceptable
to Lender and the following condition will be applicable: |
| (X) | The
ratification of the Guaranty will confirm that the ratifying Guarantor alone must satisfy
the requirements of the Rider to Guaranty – Material Adverse Change, or the Rider
to Guaranty – Minimum Net Worth/Liquidity, as applicable, during the entire remaining
term of the Loan. |
| (IV) | Following
the Buy-Sell Transfer, Control and management of the day-to-day operations of the Equity
(if the Manager is the transferor) or of the Manager (if the Equity is the transferor)
continues to be held by the Person exercising such Control and management immediately
prior to the Buy-Sell Transfer. |
| (5) | The
Mortgaged Property continues to be managed by the initial Property Manager or a successor
Property Manager satisfactory to Lender pursuant to a property management agreement approved
by Lender in writing; which approval will not be unreasonably withheld, provided that
such successor Property Manager and Borrower execute an assignment of the management
agreement in form acceptable to Lender. |
Rider to Multifamily Loan and Security Agreement Buy-Sell Transfer | Page 2 |
| (7) | At
the time of the proposed Buy-Sell Transfer, the Equity (if the Manager is the transferor)
or the Manager (if the Equity is the transferor), certifies to Lender that its net worth
and liquidity are substantially the same as or better than its net worth and liquidity
as of the date of this Loan Agreement and there is not any pending bankruptcy, reorganization
or litigation which would substantially negatively affect such net worth and/or liquidity. |
| (8) | Lender
receives organizational charts reflecting the structure of Borrower prior to and after
the Buy-Sell Transfer. |
| (9) | Lender
receives confirmation acceptable to Lender that (1) the requirements of Section 6.13
continue to be satisfied, and (2) the term of existence of each of the Equity and the
Manager (exclusive of any unexercised extension options or rights) does not expire prior
to the Maturity Date. |
| (10) | If the Transfer is to a Affiliate of either the Equity or Manager,
Borrower must deliver to Lender a search confirming that the transferee Affiliate is not on the list of Specially Designated
Nationals or other blocked persons published by the U.S. Office of Foreign Assets Control or on the list of persons or
entities prohibited from doing business with the Department of Housing and Urban Development. |
| (11) | If
a nonconsolidation opinion was delivered on the Closing Date and if, after giving effect
to the Buy-Sell Transfer and all prior Transfers, 50% or more in the aggregate of direct
or indirect interests in Borrower are owned by any Person and its Affiliates that owned
less than a 50% direct or indirect interest in Borrower as of the Closing Date, Borrower
delivers to Lender an opinion of counsel for Borrower, in form and substance satisfactory
to Lender with regard to nonconsolidation. |
| (12) | If
the requirements of Section 7.03(d)(iii)(B)(4) have been satisfied, the Bluerock Guarantor
(if the Manager is the transferor) or the Carroll Guarantor (if the Equity is the transferor),
will be deemed automatically to have requested a release of its liability under the Guaranty
in accordance with Section 7.05(c) of this Loan Agreement. |
| B. | The following
definitions are added to Article XII: |
“Buy-Sell
Transfer” is defined in Section 7.03(d)(iii).
“Equity”
is defined in Section 7.03(d)(iii)(A)(1).
Rider to Multifamily Loan and Security Agreement Buy-Sell Transfer | Page 3 |
“Manager”
is defined in Section 7.03(d)(iii)(A)(1).
Rider to Multifamily Loan and Security Agreement Buy-Sell Transfer | Page 4 |
RIDER
TO MULTIFAMILY LOAN AND SECURITY AGREEMENT
ENTITY
GUARANTOR
(Revised
3-1-2014)
The following
changes are made to the Loan Agreement which precedes this Rider:
| A. | Section
9.01(dd) is deleted and replaced with the following: |
| (dd) | Guarantor
fails to comply with the provisions of the Section of the Guaranty entitled “Material
Adverse Change” or “Minimum Net Worth/Liquidity Requirements”, as
applicable. |
Rider to Multifamily Loan and Security Agreement Entity Guarantor | Page 1 |
EXHIBIT
A
DESCRIPTION
OF THE LAND
Century
Palms at World Gateway
PARCEL 1 (FEE
ESTATE)
PARCEL A-2 OF
WORLD GATEWAY PHASE 3, ACCORDING TO THE PLAT THEREOF AS RECORDED IN PLAT BOOK 46, PAGES 10 THROUGH 12, INCLUSIVE OF THE PUBLIC
RECORDS OF ORANGE COUNTY, FLORIDA.
PARCEL 2 (EASEMENT
ESTATE)
NON-EXCLUSIVE
EASEMENT RIGHTS ARISING UNDER THAT CERTAIN GRANT OF SIGNAGE EASEMENT EXECUTED BY WORLD GATEWAY PROPERTY OWNERS ASSOCIATION, INC.,
IN FAVOR OF GCB ASSOCIATES, LTD., AND ORLANDO GATEWAY, LLC, DATED DECEMBER 29, 2000 AND RECORDED DECEMBER 29, 2000 IN OFFICIAL
RECORDS BOOK 6161, PAGE 5064, OF THE PUBLIC RECORDS OF ORANGE COUNTY, FLORIDA.
AND
THOSE CERTAIN
EASEMENTS CREATED IN ARTICLE VI OF THE DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS FOR THE GREEN PROJECT, ORANGE COUNTY,
FLORIDA, RECORDED JANUARY 12, 1995 IN OFFICIAL RECORDS BOOK 4843, PAGE 1448; SUPPLEMENTAL DECLARATION RECORDED JUNE 5, 1997 IN
OFFICIAL RECORDS BOOK 5266, PAGE 4882 AND RECORDED SEPTEMBER 17, 1997 IN OFFICIAL RECORDS BOOK 5328, PAGE 1945; FIRST AMENDMENT
RECORDED NOVEMBER 26, 1997 IN OFFICIAL RECORDS BOOK 5371, PAGE 1159; SUPPLEMENTAL DECLARATION RECORDED IN OFFICIAL RECORDS BOOK
5816, PAGE 4379, AND SECOND AMENDMENT RECORDED IN OFFICIAL RECORDS BOOK 5847, PAGE 3397, OF THE PUBLIC RECORDS OF ORANGE COUNTY,
FLORIDA; THIRD AMENDMENT RECORDED IN OFFICIAL RECORDS BOOK 6600, PAGE 2868; FOURTH AMENDMENT RECORDED IN OFFICIAL RECORDS BOOK
7656, PAGE 3988; FIFTH AMENDMENT RECORDED IN OFFICIAL RECORDS BOOK 9934, PAGE 2784; FIFTH AMENDMENT RECORDED IN OFFICIAL RECORDS
BOOK 10010, PAGE 3690 AND SIXTH AMENDMENT RECORDED IN OFFICIAL RECORDS BOOK 10377, PAGE 4396, ALL OF THE PUBLIC RECORDS OF ORANGE
COUNTY, FLORIDA.
AND
TOGETHER WITH
AN UNDIVIDED INTEREST IN AND TO EASEMENT FOR COMMON AREA PURSUANT TO ARTICLE VIII OF THE DECLARATION OF COVENANTS, CONDITIONS
AND RESTRICTIONS AS RECORDED IN O.R. BOOK 4843, PAGE 1448.
AND
TOGETHER WITH
THE BENEFIT OF EASEMENT FOR INGRESS AND EGRESS OVER AND ACROSS TRACT D (SATAY DRIVE) AS PROVIDED FOR AND SET FORTH ON THE PLAT
OF WORLD GATEWAY PHASE 3 ACCORDING TO THE PLAT THEREOF AS RECORDED IN PLAT BOOK 46, PAGES 10 THROUGH 12, AND AFFECTED BY THAT
CERTAIN QUIT CLAIM DEED DATED DECEMBER 29, 2000 AND RECORDED DECEMBER 29, 2000 IN OFFICIAL RECORDS BOOK 6161, PAGE 4998.
AND
TOGETHER WITH
THAT CERTAIN SLOPE EASEMENT AGREEMENT RECORDED IN O.R. BOOK 8089, PAGE 4987, ALL OF THE PUBLIC RECORDS OF ORANGE COUNTY, FLORIDA.
Multifamily Loan and Security Agreement | Page A-1 |
EXHIBIT
B
MODIFICATIONS
TO Multifamily Loan and security AGREEMENT
The following
modifications are made to the text of the Loan Agreement that precedes this Exhibit.
| 1. | Section 6.06(a)
is modified as follows: |
| (a) | Right
of Entry. Borrower will permit Lender, its agents, representatives and designees
and any interested Governmental Authority to make or cause to be made entries upon and
inspections of the Mortgaged Property to inspect, among other things: (i) Repairs, (ii)
Capital Replacements, (iii) Restorations, (iv) Property Improvement Alterations, and
(v) any other Improvements, both in process and upon completion (including environmental
inspections and tests performed by professional inspection engineers) during normal business
hours, or at any other reasonable time, upon reasonable Notice to Borrower if the inspection
is to include occupied residential units (which Notice need not be in writing). During
normal business hours, or at any other reasonable time, Borrower will also permit Lender
to examine all books and records and contracts and bills pertaining to the foregoing.
Notice to Borrower will not be required in the case of an emergency, as determined in
Lender’s Discretion, or when an Event of Default has occurred and is continuing.
Lender will make reasonable efforts not to unreasonably disturb tenants at the Mortgaged
Property while conducting inspections hereunder. |
| 2. | Section 6.12(f)
is modified as follows: |
| (f) | Remedial
Work. If any investigation, site monitoring, containment, clean-up, Restoration or
other remedial work (“Remedial Work”) is necessary to comply with
any Hazardous Materials Law or order of any Governmental Authority that has or acquires
jurisdiction over the Mortgaged Property or the use, operation or improvement of the
Mortgaged Property, or is otherwise required by Lender as a consequence of any Prohibited
Activity or Condition or to prevent the occurrence of a Prohibited Activity or Condition,
Borrower will, by the earlier of (i) the applicable deadline required by Hazardous Materials
Law, or (ii) 30 days after Notice from Lender demanding such action (or such longer
period of time as is specifically allowed under any insurance policy covering such issue
with a risk carrier that has accepted coverage responsibility for same subject to the
requirements of Hazardous Materials Law and so long as Lender has determined that immediate
action is not required to protect the residents of, or the value of, the Mortgaged Property),
begin performing the Remedial Work, and thereafter diligently prosecute it to completion,
and must in any event complete the work by the time required by applicable Hazardous
Materials Law. If Borrower fails to begin on a timely basis or diligently prosecute any
required Remedial Work, Lender may, at its option, cause the Remedial Work to be completed,
in which case Borrower will reimburse Lender on demand for the cost of doing so. Any
reimbursement due from Borrower to Lender will become part of the Indebtedness as provided
in Section 9.02. |
| 3. | Section 6.13(a)(x)
is modified as follows: |
| (x) | It
will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing
any obligation), other than the following; provided that no member of Borrower will be
required to contribute any capital in excess of that required by Borrower’s organizational
documents to satisfy this covenant, but provided further that this qualification will
not be deemed to amend or modify the obligations under the Guaranty of any member of
Borrower who is a Guarantor, if applicable: |
Multifamily Loan and Security Agreement | Page B-1 |
| (A) | The
Indebtedness and any further indebtedness as described in Section 11.11 with regard to
Supplemental Instruments. |
| (B) | Customary
unsecured trade payables incurred in the ordinary course of owning and operating the
Mortgaged Property provided the same are not evidenced by a promissory note, do not exceed,
in the aggregate, at any time a maximum amount of 2% of the original principal amount
of the Indebtedness and are paid within 60 days of the date incurred. |
| (C) | through
(F) are reserved. |
| 4. | Section 6.13(a)(xviii)
is modified as follows: |
| (xviii) | It
will maintain adequate capital for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business operations
and will pay its debts and liabilities from its own assets as the same become due; provided
that no member of Borrower will be required to contribute any capital in excess of that
required by Borrower’s organizational documents to satisfy this covenant, but provided
further that this qualification will not be deemed to amend or modify the obligations
under the Guaranty of any member of Borrower who is a Guarantor, if applicable. |
| 5. | Section 6.13(a)(xx)
is modified as follows: |
| (xx) | It
will pay (or cause the Property Manager to pay on behalf of Borrower from Borrower’s
funds) its own liabilities (including salaries of its own employees) from its own funds;
provided that no member of Borrower will be required to contribute any capital in excess
of that required by Borrower’s organizational documents to satisfy this covenant,
but provided further that this qualification will not be deemed to amend or modify the
obligations under the Guaranty of any member of Borrower who is a Guarantor, if applicable |
| 6. | Section 7.03(c)
is modified as follows: |
| (c) | Publicly-Held
Fund or Publicly-Held Real Estate Investment Trust. If a Designated Entity for Transfers
is a publicly-held fund or a publicly-held real estate investment trust, either of the
following: |
| (i) | The
issuance of common stock, convertible debt, equity or other similar securities (“Public
Fund/REIT Securities”) and the subsequent Transfer of such Public Fund/REIT
Securities. In the case of Bluerock Residential Growth REIT, Inc (“BR Reit”)
such permitted Transfers shall expressly include Transfers arising out of (A) the sale
of the Public Fund/REIT Securities to another publicly traded real estate investment
trust (or an affiliate thereof controlled by the publicly traded real estate investment
trust), (B) the merger, roll up, or other consolidation of BR Reit with another entity
so long as Bluerock Reit or another publicly traded real estate investment trust (or
an affiliate thereof controlled by the publicly traded real estate investment trust)
is the surviving entity and (C) the issuance of put options in Bluerock Reit as
part of an UPREIT or downREIT transaction. |
Multifamily Loan and Security Agreement | Page B-2 |
| (ii) | The acquisition
by a single Public Fund/REIT Securities holder of an ownership percentage of 10% or more
in the Designated Entity for Transfers, if Borrower provides notice of that acquisition
to Lender within 30 days following the acquisition. |
| 7. | New Section
7.03(e) is added as follows: |
| (e) | Additional
Bluerock Transfer Provisions. Transfers of interests in any Designated Entity for
Transfers not otherwise permitted or conditionally permitted by the terms of this Loan
Agreement resulting from a Transfer (including by merger or other consolidation) of all
of the assets of or interests in Bluerock Residential Holdings, LP or Bluerock REIT Holdings,
LLC (a “Bluerock Entity Transfer”) provided that each of the
following conditions is satisfied: |
| (A) | Borrower
provides Lender with at least 30 days prior Notice of the proposed Bluerock Entity Transfer
and pays to Lender the Transfer Processing Fee. |
| (B) | At the
time of the proposed Bluerock Entity Transfer, no Event of Default has occurred and is
continuing and no event or condition has occurred and is continuing that, with the giving
of Notice or the passage of time, or both, would become an Event of Default. |
| (C) | Borrower
pays or reimburses Lender, upon demand, for all costs and expenses including all Attorneys’
Fees and Costs, incurred by Lender in connection with the Bluerock Entity Transfer. |
| (D) | After
the Bluerock Entity Transfer, Control and management of the day-to-day operations of
Borrower continue to be held, directly or indirectly, by (i) Bluerock REIT, (ii) MPC
Partnership Holdings LLC, or (iii) a publicly held real estate investment trust which
is (or to whose Affiliate is) the transferee of the Bluerock Entity Transfer. |
| (E) | Lender
receives organizational charts reflecting the structure of Borrower prior to and after
the Bluerock Entity Transfer. |
| (F) | Lender
will not be entitled to collect a Transfer Fee as the result of the Bluerock Entity Transfer. |
| (G) | Lender
receives confirmation acceptable to Lender that (1) the requirements of Section 6.13
continue to be satisfied, and (2) the term of existence of the Bluerock Entity Transfer
transferee and of the “Replacement Bluerock Guarantor” described below (exclusive
of any unexercised extension options or rights) does not expire prior to the Maturity
Date. |
Multifamily Loan and Security Agreement | Page B-3 |
| (H) | Borrower
delivers to Lender a search confirming that the Bluerock Entity Transfer transferee is
not on the list of Specially Designated Nationals or other blocked persons published
by the U.S. Office of Foreign Assets Control, or on the list of persons or entities prohibited
from doing business with the Department of Housing and Urban Development. |
| (I) | At Lender’s
request, Borrower executes a reaffirmation of its obligations under the Loan Documents
in a form acceptable to Lender. |
| (J) | Borrower
provides a replacement Guarantor (“Replacement Guarantor”) acceptable
to Lender in Lender’s Discretion, and each of the following requirements is met
(collectively, the “Replacement Requirements”): |
| (I) | At the
time of the Bluerock Entity Transfer, Replacement Guarantor and the Carroll Guarantor
(provided the Carroll Guarantor is a Guarantor at the time of the Bluerock Entity Transfer)
collectively have a net worth of at least $15,000,000, and liquid assets of at least
$2,500,000. |
| (II) | Lender
has received all information and organizational documents requested by Lender in Lender’s
Discretion, with respect to Replacement Guarantor. |
| (III) | Replacement
Guarantor executes a Guaranty in a form acceptable to Lender and in substantially the
same form as the Guaranty executed on the Closing Date, and the Carroll Guarantor executes
a ratification of its Guaranty executed on the Closing Date. |
| (K) | The
Mortgaged Property continues to be managed by the initial Property Manager or a successor
Property Manager satisfactory to Lender pursuant to a property management agreement approved
by Lender in writing; which approval will not be unreasonably withheld, provided that
such successor Property Manager and Borrower execute an assignment of the management
agreement in form acceptable to Lender. |
| 8. | Section 11.03
is hereby modified by adding a new subsection (d) as follows: |
| (d) | Lender
shall endeavor to give the individuals or entities listed below courtesy copies of any
Notice given to Borrower or any guarantor by Lender, at the addresses set forth below;
provided, however, that failure to provide such courtesy copies of Notices shall not
affect the validity or sufficiency of any Notice to Borrower or any guarantor, shall
not affect Lender’s rights and remedies hereunder or under any other Loan Documents
and shall not subject Lender to any claims by or liability to Borrower, any guarantor
or any other individual or entity. It is acknowledged and agreed that no individual or
entity listed below is a third-party beneficiary to any of the Loan Documents. |
Multifamily Loan and Security Agreement | Page B-4 |
Bluerock Residential |
with
a copy to: |
Growth
REIT, Inc.
712 Fifth
Avenue
9th
Floor
New York,
New York 10019
Attention:
Michael Konig, Esq.
Telephone:
(212) 843-1601
Email:
mkonig@bluerockre.com |
Kaplan
Voekler Cunningham & Frank PLC
1401 E.
Cary St.
Richmond, VA 23219
Attention:
S. Edward Flanagan
Telephone:
(804) 823-4000
Email:
eflanagan@kv-legal.com |
Multifamily Loan and Security Agreement | Page B-5 |
EXHIBIT
c
REPAIR
SCHEDULE OF WORK
None.
Multifamily Loan and Security Agreement | Page C-1 |
EXHIBIT
d
REPAIR
DISBURSEMENT REQUEST
The undersigned
requests from
(“Lender”) the disbursement of funds in the amount of $_________________ (“Disbursement Request”)
from the Repair Reserve Fund established pursuant to the Multifamily Loan and Security Agreement dated ,
20 by and between Lender and the undersigned ( “Loan Agreement”) to pay for repairs
to the multifamily apartment project known as
and located in .
The undersigned
represents and warrants to Lender that the following information and certifications provided in connection with this Disbursement
Request are true and correct as of the date hereof:
| 1. | Purpose for
which disbursement is requested: |
| 2. | To whom the
disbursement will be made (may be the undersigned in the case of reimbursement for advances
and payments made or cost incurred for work done by the undersigned): |
| 3. | Estimated
costs of completing the uncompleted Repairs as of the date of this Disbursement Request:
|
| 4. | The undersigned
certifies that each of the following is true: |
| (a) | The
disbursement requested pursuant to this Disbursement Request will be used solely to pay
a cost or costs allowable under the Loan Agreement. |
| (b) | None
of the items for which disbursement is requested pursuant to this Disbursement Request
has formed the basis for any disbursement previously made from the Repair Reserve Fund. |
| (c) | All
labor and materials for which disbursements have been requested have been incorporated
into the Improvements or suitably stored upon the Mortgaged Property in accordance with
reasonable and standard building practices, the Loan Agreement and all applicable laws,
ordinances, rules and regulations of any governmental authority having jurisdiction over
the Mortgaged Property. |
| (d) | The
materials, supplies and equipment furnished or installed for the Repairs are not subject
to any Lien or security interest or that the funds to be disbursed pursuant to this Disbursement
Request are to be used to satisfy any such Lien or security interest. |
| 5. | All capitalized
terms used in this Disbursement Request without definition will have the meanings ascribed
to them in the Loan Agreement. |
Multifamily Loan and Security Agreement | Page D-1 |
IN WITNESS
WHEREOF, the undersigned has executed this Disbursement Request as of the day and date first above written.
Multifamily Loan and Security Agreement | Page D-2 |
EXHIBIT
e
WORK
COMMENCED AT MORTGAGED PROPERTY
NONE
Multifamily Loan and Security Agreement | Page E-1 |
EXHIBIT
F
CAPITAL
REPLACEMENTS
| · | Paint
exteriors/maintenance |
| · | Seal/stripe
asphalt parking |
| · | Other
items that Lender may approve subject to any conditions that Lender may require, all
in Lender’s sole and absolute discretion. |
Multifamily Loan and Security Agreement | Page F-1 |
EXHIBIT
G
DESCRIPTION
OF GROUND LEASE
Not Applicable
Multifamily Loan and Security Agreement | Page G-1 |
EXHIBIT
H
ORGANIZATIONAL
CHART of borrower as of the closing date
![](http://www.sec.gov/Archives/edgar/data/1442626/000114420415064744/tex10-4pg123.jpg)
| * | The General
Partner is Bluerock Residential Growth REIT, Inc. In addition to the limited partnership
interests held by Bluerock REIT Holdings, LLC in Bluerock Residential Holdings, LP (the
“LP”), BRG Manager, LLC, Bluerock Special Opportunity & Income
Fund II, LLC, Bluerock Special Opportunity & Income Fund III, LLC, BR-NPT Springing
Entity, LLC, Bluerock Multifamily Advisor, LLC, and Bluerock Property Management, LLC,
all affiliates of Bluerock Real Estate, LLC, hold less than 10% limited partnership in
the LP. |
| ** | Bluerock Residential
Growth REIT, Inc. is owned by multiple REIT shareholders/preferred stockholders for REIT
purposes, have of which own more than 25%. |
Multifamily Loan and Security Agreement | Page H-1 |
EXHIBIT
I
DESIGNATED ENTITIES
FOR TRANSFERS AND GUARANTOR(S)
Designated
Entities for Transfers
| · | BR
Carroll World Gateway Orlando JV, LLC |
| · | BR
World Gateway JV Member, LLC |
| · | BRG
World Gateway Orlando, LLC |
| · | Bluerock
Residential Holdings, LP |
| · | Bluerock
Residential Growth REIT, Inc. |
| · | Carroll
Co-Invest III World Gateway LLC |
| · | Carroll
Multifamily Real Estate Fund III, LP |
| · | MPC
Partnership Holdings LLC |
| · | P.
Carroll Capital Partners, LLC |
| · | HUP
Investment Company, LLC |
Guarantor(s)
| · | Bluerock
Residential Growth REIT, Inc. |
| · | MPC
Partnership Holdings, LLC |
Multifamily Loan and Security Agreement | Page I-1 |
EXHIBIT
J
DESCRIPTION
OF RELEASE PARCEL
Not Applicable
Multifamily Loan and Security Agreement | Page J-1 |
EXHIBIT
O
BORROWER’S
CERTIFICATE OF
PROPERTY
IMPROVEMENT ALTERATIONS COMPLETION
THIS BORROWER’S
CERTIFICATE OF PROPERTY IMPROVEMENT ALTERATIONS COMPLETION (“Certificate”) is made as of __________, 20___,
by ______________, a ________________ (“Borrower”) for the benefit of ________________, a ________________,
and it successors and assigns (collectively, “Lender”).
In connection
with Section 6.09(e)(v)(G) of the Loan Agreement, Borrower certifies to Lender as follows:
[INSERT
THE APPLICABLE SECTION (a) AND DELETE THE OTHER:]
[USE THE
FOLLOWING IF ALL PROPERTY IMPROVEMENT ALTERATIONS THAT WERE COMMENCED HAVE BEEN COMPLETED]
| (a) | All Property
Improvement Alterations described in the Property Improvement Notice that were commenced
have been completed. The completed Property Improvement Alterations and their completion
dates are as follows: |
Description
of Property Improvement
Alteration Commenced |
|
Completion
Date |
|
|
|
|
|
|
[OR]
[USE THE
FOLLOWING IF MINIMUM OCCUPANCY HAS DECREASED BELOW THE MINIMUM OCCUPANCY REQUIREMENT AND NOT ALL THE PROPERTY IMPROVEMENT ALTERATIONS
THAT WERE COMMENCED HAD BEEN COMPLETED AT SUCH TIME]
| (a) | All Property
Improvement Alterations described in the Property Improvement Notice that resulted in
individual residential dwelling units not being available for leasing that were commenced
have been or will be completed in a timely manner. Such Property Improvement Alterations
that were commenced and their completion dates and/or, if applicable, anticipated completion
dates, are as follows: |
Description
of Property
Improvement Alteration
Commenced |
|
Completion
Date |
|
Anticipated
Completion
Date |
|
Comments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multifamily Loan and Security Agreement | Page O-1 |
[FOR ALL
LOANS:]
| (b) | The completed
Property Improvement Alterations were completed in a good and workmanlike manner and
in compliance with all laws (including, without limitation, any and all life safety laws,
environmental laws, building codes, zoning ordinances and laws for the handicapped and/or
disabled) |
| (c) | Should Borrower
intend to contest any claim or claims for labor, materials or other costs, Borrower agrees
to give Lender notice within 30 days of the existence of such claim or claims and certifies
to Lender that payment of the full amount which might in any event be payable in order
to satisfy such claim or claims will be made. |
[INSERT
THE FOLLOWING IF MINIMUM OCCUPANCY HAS DECREASED BELOW THE MINIMUM OCCUPANCY REQUIREMENT]
| (d) | Any additional
Property Improvement Alterations not yet commenced which would cause residential dwelling
units to be unavailable for leasing have been suspended. |
Multifamily Loan and Security Agreement | Page O-2 |
Exhibit 10.5
Freddie Mac Loan Number: 708556663
Property Name: Century Palms at World Gateway
GUARANTY
MULTISTATE
(Revised 5-20-2015)
THIS GUARANTY
(“Guaranty”) is entered into to be effective as of August 20, 2015, by BLUEROCK RESIDENTIAL GROWTH REIT,
INC., a Maryland corporation and MPC PARTNERSHIP HOLDINGS LLC, a Georgia limited liability company (“Guarantor”,
collectively if more than one), for the benefit of JONES LANG LASALLE OPERATIONS, L.L.C., an Illinois limited liability
company (“Lender”).
RECITALS
| A. | Pursuant to the terms of a Multifamily Loan and Security Agreement dated the same date as this
Guaranty (as amended, modified or supplemented from time to time, the "Loan Agreement"), BR Carroll World Gateway,
LLC, a Delaware limited liability company (“Borrower”) has requested that Lender make a loan to Borrower in
the amount of $24,999,000.00 (“Loan”). The Loan will be evidenced by an Amended and Restated Multifamily Note
from Borrower to Lender dated effective as of the effective date of this Guaranty (as amended, modified or supplemented from time
to time, the “Note”). The Note will be secured by an Amended and Restated Multifamily Mortgage, Assignment of
Rents and Security Agreement dated effective as of the effective date of the Note (as amended, modified or supplemented from time
to time, the “Security Instrument”), encumbering the Mortgaged Property described in the Loan Agreement. |
| B. | As a condition to making the Loan to Borrower, Lender requires that Guarantor execute this Guaranty. |
| C. | Guarantor has a direct or indirect ownership or other financial interest in Borrower and/or will
otherwise derive a material benefit from the making of the Loan. |
AGREEMENT
NOW, THEREFORE,
in order to induce Lender to make the Loan to Borrower, and in consideration thereof and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Guarantor agrees as follows:
| 1. | Defined Terms. The terms “Indebtedness”, “Loan Documents”,
and “Property Jurisdiction”, and other capitalized terms used but not defined in this Guaranty, will have the meanings
assigned to them in the Loan Agreement. |
| (a) | Guarantor hereby absolutely, unconditionally and irrevocably guarantees to Lender each of the following: |
| (i) | Guarantor guarantees the full and prompt payment when due, whether at the Maturity Date or earlier,
by reason of acceleration or otherwise, and at all times thereafter, of each of the following: |
| (A) | Guarantor guarantees a portion of the Indebtedness equal to 0% of the original principal balance
of the Note (“Base Guaranty”). |
| (B) | In addition to the Base Guaranty, Guarantor guarantees all other amounts for which Borrower is
personally liable under Sections 9(c), 9(d) and 9(f) of the Note (provided, however, that Guarantor will have no liability
for failure of Borrower or SPE Equity Owner to comply with (I) Section 6.13(a)(xviii) of the Loan Agreement, and (II) the requirement
in Section 6.13(a)(x)(B) of the Loan Agreement as to payment of trade payables within 60 days of the date incurred). |
| (C) | Guarantor guarantees all costs and expenses, including reasonable Attorneys’ Fees and Costs
incurred by Lender in enforcing its rights under this Guaranty. |
| (ii) | Guarantor guarantees the full and prompt payment and performance of, and compliance with, all of
Borrower’s obligations under Sections 6.12, 10.02(b) and 10.02(d) of the Loan Agreement when due and the accuracy of Borrower’s
representations and warranties under Section 5.05 of the Loan Agreement. |
| (iii) | Guarantor guarantees the full and prompt payment and performance of, and compliance with, Borrower’s
obligations under Section 6.09(e)(v) of the Loan Agreement to the extent Property Improvement Alterations have commenced and remain
uncompleted. |
| (b) | If the Base Guaranty stated in Section 2(a)(i)(A) is 100% of the original principal balance
of the Note, then the following will be applicable: |
| (i) | The Base Guaranty will mean and include, and Guarantor hereby absolutely, unconditionally and irrevocably
guarantees to Lender, the full and complete prompt payment of the entire Indebtedness, the performance of and/or compliance with
all of Borrower’s obligations under the Loan Documents when due, and the accuracy of Borrower’s representations and
warranties contained in the Loan Documents. |
| (ii) | For so long as the Base Guaranty remains in effect (there being no limit to the duration of the
Base Guaranty unless otherwise expressly provided in this Guaranty), the obligations guaranteed pursuant to Sections 2(a)(i)(B)
and 2(a)(i)(C) will be part of, and not in addition to or in limitation of, the Base Guaranty. |
| (c) | If the Base Guaranty stated in Section 2(a)(i)(A) is less than 100% of the original principal
balance of the Note, then Section 2(b) will be completely inapplicable. |
Guaranty - Multistate | | Page 2 |
| (d) | If Guarantor is not liable for the entire Indebtedness, then all payments made by Borrower with
respect to the Indebtedness and all amounts received by Lender from the enforcement of its rights under the Loan Agreement and
the other Loan Documents (except this Guaranty) will be applied first to the portion of the Indebtedness for which neither Borrower
nor Guarantor has personal liability. |
| 3. | Additional Guaranty Relating to Bankruptcy. |
| (a) | Notwithstanding any limitation on liability provided for elsewhere in this Guaranty, Guarantor
hereby absolutely, unconditionally and irrevocably guarantees to Lender the full and prompt payment when due, whether at the Maturity
Date or earlier, by reason of acceleration or otherwise, and at all times thereafter, the entire Indebtedness, in the event that: |
| (i) | Borrower or any SPE Equity Owner voluntarily files for bankruptcy protection under the Bankruptcy
Code. |
| (ii) | Borrower or any SPE Equity Owner voluntarily becomes subject to any reorganization, receivership,
insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights. |
| (iii) | The Mortgaged Property or any part of the Mortgaged Property becomes an asset in a voluntary bankruptcy
or becomes subject to any voluntary reorganization, receivership, insolvency proceeding, or other similar voluntary proceeding
pursuant to any other federal or state law affecting debtor and creditor rights. |
| (iv) | An order of relief is entered against Borrower or any SPE Equity Owner pursuant to the Bankruptcy
Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined
in by a Related Party. |
| (v) | An involuntary bankruptcy or other involuntary insolvency proceeding is commenced against Borrower
or any SPE Equity Owner (by a party other than Lender) but only if Borrower or such SPE Equity Owner has failed to use commercially
reasonable efforts to dismiss such proceeding or has consented to such proceeding. “Commercially reasonable efforts”
will not require any direct or indirect interest holders in Borrower or any SPE Equity Owner to contribute or cause the contribution
of additional capital to Borrower or any SPE Equity Owner. |
| (b) | For purposes of Section 3(a) the term “Related Party” will include all
of the following: |
(i) Borrower,
any Guarantor or any SPE Equity Owner.
| (ii) | Any Person that holds, directly or indirectly, any ownership interest (including any shareholder,
member or partner) in Borrower, any Guarantor or any SPE Equity Owner or any Person that has a right to manage Borrower, any Guarantor
or any SPE Equity Owner. |
| (iii) | Any Person in which Borrower, any Guarantor or any SPE Equity Owner has any ownership interest
(direct or indirect) or right to manage. |
Guaranty - Multistate | | Page 3 |
| (iv) | Any Person in which any partner, shareholder or member of Borrower, any Guarantor or any SPE Equity
Owner has an ownership interest or right to manage. |
| (v) | Any Person in which any Person holding an interest in Borrower, any Guarantor or any SPE Equity
Owner also has any ownership interest. |
| (vi) | Any creditor (as defined in the Bankruptcy Code) of Borrower that is related by blood, marriage
or adoption to Borrower, any Guarantor or any SPE Equity Owner. |
| (vii) | Any creditor (as defined in the Bankruptcy Code) of Borrower that is related to any partner, shareholder
or member of, or any other Person holding an interest in, Borrower, any Guarantor or any SPE Equity Owner. |
| (c) | If Borrower, any Guarantor, any SPE Equity Owner or any Related Party has solicited creditors to
initiate or participate in any proceeding referred to in Section 3(a), regardless of whether any of the creditors solicited
actually initiates or participates in the proceeding, then such proceeding will be considered as having been initiated by a Related
Party. |
| 4. | Guarantor’s Obligations Survive Foreclosure. The obligations of Guarantor under this
Guaranty will survive any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any
release of record of the Security Instrument, and, in addition, the obligations of Guarantor relating to Borrower’s representations
and warranties under Section 5.05 of the Loan Agreement, and Borrower’s obligations under Sections 6.12 and 10.02(b)
of the Loan Agreement will survive any repayment or discharge of the Indebtedness. Notwithstanding the foregoing, if Lender
has never been a mortgagee-in-possession of or held title to the Mortgaged Property, Guarantor will have no obligation under this
Guaranty relating to Borrower’s representations and warranties under Section 5.05 of the Loan Agreement or Borrower’s
obligations relating to environmental matters under Sections 6.12 and 10.02(b) of the Loan Agreement after the date of the release
of record of the lien of the Security Instrument as a result of the payment in full of the Indebtedness on the Maturity Date or
by voluntary prepayment in full. |
| 5. | Guaranty of Payment and Performance. Guarantor’s obligations under this Guaranty constitute
an unconditional guaranty of payment and performance and not merely a guaranty of collection. |
| 6. | No Demand by Lender Necessary; Waivers by Guarantor – All States Except California. The
obligations of Guarantor under this Guaranty must be performed without demand by Lender and will be unconditional regardless of
the genuineness, validity, regularity or enforceability of the Note, the Loan Agreement, or any other Loan Document, and without
regard to any other circumstance which might otherwise constitute a legal or equitable discharge of a surety, a guarantor, a borrower
or a mortgagor. Guarantor hereby waives, to the fullest extent permitted by applicable law, all of the following: |
| (a) | The benefit of all principles or provisions of law, statutory or otherwise, which are or might
be in conflict with the terms of this Guaranty and agrees that Guarantor’s obligations will not be affected by any circumstances,
whether or not referred to in this Guaranty, which might otherwise constitute a legal or equitable discharge of a surety, a guarantor,
a borrower or a mortgagor. |
Guaranty - Multistate | | Page 4 |
| (b) | The benefits of any right of discharge under any and all statutes or other laws relating to a guarantor,
a surety, a borrower or a mortgagor, and any other rights of a surety, a guarantor, a borrower or a mortgagor under such statutes
or laws. |
| (c) | Diligence in collecting the Indebtedness, presentment, demand for payment, protest, all notices
with respect to the Note and this Guaranty which may be required by statute, rule of law or otherwise to preserve Lender’s
rights against Guarantor under this Guaranty, including notice of acceptance, notice of any amendment of the Loan Documents, notice
of the occurrence of any default or Event of Default, notice of intent to accelerate, notice of acceleration, notice of dishonor,
notice of foreclosure, notice of protest, and notice of the incurring by Borrower of any obligation or indebtedness. |
| (d) | All rights to cause a marshalling of the Borrower’s assets or to require Lender to do any
of the following: |
| (i) | Proceed against Borrower or any other guarantor of Borrower’s payment or performance under
the Loan Documents (an “Other Guarantor”). |
| (ii) | Proceed against any general partner of Borrower or any Other Guarantor if Borrower or any Other
Guarantor is a partnership. |
| (iii) | Proceed against or exhaust any collateral held by Lender to secure the repayment of the Indebtedness. |
| (iv) | Pursue any other remedy it may now or hereafter have against Borrower, or, if Borrower is a partnership,
any general partner of Borrower. |
| (e) | Any right to object to the timing, manner or conduct of Lender’s enforcement of its rights
under any of the Loan Documents. |
| (f) | Any right to revoke this Guaranty as to any future advances by Lender under the terms of the Loan
Agreement to protect Lender’s interest in the Mortgaged Property. |
| 7. | Modification of Loan Documents. At any time or from time to time and any number of times,
without notice to Guarantor and without affecting the liability of Guarantor, all of the following will apply: |
| (a) | Lender may extend the time for payment of the principal of or interest on the Indebtedness or renew
the Indebtedness in whole or in part. |
| (b) | Lender may extend the time for Borrower’s performance of or compliance with any covenant
or agreement contained in the Note, the Loan Agreement or any other Loan Document, whether presently existing or entered into after
the date of this Guaranty, or waive such performance or compliance. |
| (c) | Lender may accelerate the Maturity Date of the Indebtedness as provided in the Note, the Loan Agreement,
or any other Loan Document. |
| (d) | Lender and Borrower may modify or amend the Note, the Loan Agreement, or any other Loan Document
in any respect, including an increase in the principal amount. |
Guaranty - Multistate | | Page 5 |
| (e) | Lender may modify, exchange, surrender or otherwise deal with any security for the Indebtedness
or accept additional security that is pledged or mortgaged for the Indebtedness. |
| 8. | Joint and Several Liability. The obligations of Guarantor (and each party named as a Guarantor
in this Guaranty) and any Other Guarantor will be joint and several. Lender, in its sole and absolute discretion, may take any
of the following actions: |
| (a) | Lender may bring suit against Guarantor, or any one or more of the parties named as a Guarantor
in this Guaranty, and any Other Guarantor, jointly and severally, or against any one or more of them. |
| (b) | Lender may compromise or settle with Guarantor, any one or more of the parties named as a Guarantor
in this Guaranty, or any Other Guarantor, for such consideration as Lender may deem proper. |
| (c) | Lender may release one or more of the parties named as a Guarantor in this Guaranty, or any Other
Guarantor, from liability. |
| (d) | Lender may otherwise deal with Guarantor and any Other Guarantor, or any one or more of them, in
any manner. |
No action
of Lender described in this Section 8 will affect or impair the rights of Lender to collect from any one or more of the parties
named as a Guarantor under this Guaranty any amount guaranteed by Guarantor under this Guaranty.
| 9. | Limited Release of Guarantor Upon Transfer of Mortgaged Property. If Guarantor requests
a release of its liability under this Guaranty in connection with a Transfer which Lender has approved pursuant to Section 7.05(a)
of the Loan Agreement, and Borrower has provided a replacement Guarantor acceptable to Lender, then one of the following will apply: |
| (a) | If Borrower delivers to Lender a Clean Site Assessment, then Lender will release Guarantor from
all of Guarantor’s obligations except Guarantor’s obligation to guaranty Borrower’s liability under Section 6.12
(Environmental Hazards) or Section 10.02(b) (Environmental Indemnification) of the Loan Agreement with respect to any loss,
liability, damage, claim, cost or expense which directly or indirectly arises from or relates to any Prohibited Activities or Conditions
existing prior to the date of the Transfer. |
| (b) | If Borrower does not deliver a Clean Site Assessment as described in Section 7.05(b)(i) of
the Loan Agreement, then Lender will release Guarantor from all of Guarantor’s obligations except for Guarantor’s obligation
to guaranty Borrower’s liability under Section 6.12 (Environmental Hazards) or Section 10.02(b) (Environmental Indemnification)
of the Loan Agreement. |
| 10. | Subordination of Borrower’s Indebtedness to Guarantor. Any indebtedness of Borrower
held by Guarantor now or in the future is and will be subordinated to the Indebtedness and Guarantor will collect, enforce and
receive any such indebtedness of Borrower as trustee for Lender, but without reducing or affecting in any manner the liability
of Guarantor under the other provisions of this Guaranty. |
| 11. | Waiver of Subrogation. Guarantor will have no right of, and hereby waives any claim for,
subrogation or reimbursement against Borrower or any general partner of Borrower by reason of any payment by Guarantor under this
Guaranty, whether such right or claim arises at law or in equity or under any contract or statute, until the Indebtedness has been
paid in full and there has expired the maximum possible period thereafter during which any payment made by Borrower to Lender with
respect to the Indebtedness could be deemed a preference under the United States Bankruptcy Code. |
Guaranty - Multistate | | Page 6 |
| 12. | Preference. If any payment by Borrower is held to constitute a preference under any applicable
bankruptcy, insolvency, or similar laws, or if for any other reason Lender is required to refund any sums to Borrower, such refund
will not constitute a release of any liability of Guarantor under this Guaranty. It is the intention of Lender and Guarantor that
Guarantor’s obligations under this Guaranty will not be discharged except by Guarantor’s performance of such obligations
and then only to the extent of such performance. |
| 13. | Financial Information and Litigation. Guarantor, from time to time upon written request
by Lender, will deliver to Lender (a) such financial statements as Lender may reasonably require and (b) written updates on the
status of all litigation proceedings that were disclosed or should have been disclosed by Guarantor to Lender as of the date of
this Guaranty. If an Event of Default has occurred and is continuing, Guarantor will deliver to Lender upon written request copies
of its state and federal tax returns. |
| 14. | Assignment. Lender may assign its rights under this Guaranty in whole or in part and upon
any such assignment, all the terms and provisions of this Guaranty will inure to the benefit of such assignee to the extent so
assigned. The terms used to designate any of the parties in this Guaranty will be deemed to include the heirs, legal representatives,
successors and assigns of such parties, and the term “Lender” will also include any lawful owner, holder or pledgee
of the Note. |
| 15. | Complete and Final Agreement. This Guaranty and the other Loan Documents represent the final
agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements.
There are no unwritten oral agreements between the parties. All prior or contemporaneous agreements, understandings, representations,
and statements, oral or written, are merged into this Guaranty and the other Loan Documents. Guarantor acknowledges that Guarantor
has received a copy of the Note and all other Loan Documents. Neither this Guaranty nor any of its provisions may be waived, modified,
amended, discharged, or terminated except by a writing signed by the party against which the enforcement of the waiver, modification,
amendment, discharge, or termination is sought, and then only to the extent set forth in that writing. |
| 16. | Governing Law. This Guaranty will be governed by and enforced in accordance with the laws
of the Property Jurisdiction, without giving effect to the choice of law principles of the Property Jurisdiction that would require
the application of the laws of a jurisdiction other than the Property Jurisdiction. |
| 17. | Jurisdiction; Venue. Guarantor agrees that any controversy arising under or in relation
to this Guaranty may be litigated in the Property Jurisdiction, and that the state and federal courts and authorities with jurisdiction
in the Property Jurisdiction will have jurisdiction over all controversies which will arise under or in relation to this Guaranty.
Guarantor irrevocably consents to service, jurisdiction and venue of such courts for any such litigation and waives any other venue
to which it might be entitled by virtue of domicile, habitual residence or otherwise. However, nothing in this Guaranty is intended
to limit Lender’s right to bring any suit, action or proceeding relating to matters arising under this Guaranty against Guarantor
or any of Guarantor’s assets in any court of any other jurisdiction. |
Guaranty - Multistate | | Page 7 |
| 18. | Guarantor’s Interest in Borrower. Guarantor represents to Lender that Guarantor has
a direct or indirect ownership or other financial interest in Borrower and/or will otherwise derive a material financial benefit
from the making of the Loan. |
| 25. | State-Specific Provisions. N/A. |
| 26. | Community Property Provision. Not applicable. |
| 27. | WAIVER OF TRIAL BY JURY. |
| (a) | GUARANTOR AND LENDER EACH COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO
ANY ISSUE ARISING OUT OF THIS GUARANTY OR THE RELATIONSHIP BETWEEN THE PARTIES AS GUARANTOR AND LENDER THAT IS TRIABLE OF RIGHT
BY A JURY. |
| (b) | GUARANTOR AND LENDER EACH WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT
THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY
AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL. |
| 28. | Attached Riders. The following Riders, if marked with an “X” in the space provided,
are attached to this Guaranty: |
¨ |
|
None |
|
|
|
¨ |
|
Material Adverse Change Rider |
|
|
|
x |
|
Minimum Net Worth/Liquidity Rider |
|
|
|
¨ |
|
Other: |
| 29. | Attached Exhibit. The following Exhibit, if marked with an “X” in the space
provided, is attached to this Guaranty: |
¨ |
|
Exhibit A |
Modifications to Guaranty |
Guaranty - Multistate | | Page 8 |
IN WITNESS WHEREOF, Guarantor has signed
and delivered this Guaranty under seal or has caused this Guaranty to be signed and delivered under seal by its duly authorized
representative. Guarantor intends that this Guaranty will be deemed to be signed and delivered as a sealed instrument.
(Remainder of
page intentionally left blank; signature pages follow.)
Guaranty - Multistate | | Page 9 |
WITNESS: |
|
BLUEROCK RESIDENTIAL GROWTH
REIT, |
|
|
INC., a Maryland corporation |
/s/ Natalie Murphy |
|
|
|
Print Name: |
Natalie Murphy |
|
By: |
/s/ R. Ramin Kamfar |
|
|
|
|
Name: R. Ramin Kamfar |
/s/ Jordan Ruddy |
|
|
Title: CEO |
Print Name: |
Jordan Ruddy |
|
|
|
STATE OF New York
CITY/COUNTY OF New York
, ss:
I HEREBY CERTIFY that
on this day, before me, an officer duly authorized in the state aforesaid and in the county aforesaid to take acknowledgments,
personally appeared R. Ramin Kamfar , to me known to be the person
described in and who executed the foregoing instrument as the CEO of Bluerock Residential Growth REIT, Inc., a Maryland
corporation, and acknowledged to me that he/she as such officer of the corporation, being authorized to do so, executed the foregoing
instrument for the purposes therein contained in the name of such a corporation by himself/herself as CEO of the corporation.
Witness my hand and official
seal in the county and state aforesaid, this 14 day of August, 2015.
|
/s/ Dale Pozzi |
|
Notary Public |
My Commission Expires: January 28, 2017
|
DALE POZZI |
|
NOTARY PUBLIC – STATE OF NEW YORK |
|
No. 01PO6275397 |
|
Qualified in New York County |
|
My Commission Expires January 28, 2017 |
Guaranty - Multistate | | Page 10 |
WITNESS: |
|
MPC PARTNERSHIP HOLDINGS, LLC, a |
|
|
Georgia limited liability company |
/s/ Erin Buglione |
|
|
|
Print Name: |
Erin Buglione |
|
By: |
/s/ M. Patrick Carroll |
|
|
|
|
M. Patrick Carroll |
/s/ Treniece C. Holmes |
|
|
President |
Print Name: |
Treniece C. Holmes |
|
|
|
STATE OF Georgia
CITY/COUNTY OF Fulton ,
ss:
I HEREBY CERTIFY that
on this day, before me, an officer duly authorized in the state aforesaid and in the county aforesaid to take acknowledgments,
personally appeared M. Patrick Carroll, to me known to be the person described in and who executed the foregoing instrument as
the President of MPC Partnership Holdings, LLC, a Georgia limited liability company, and acknowledged to me that he/she as such
officer of the limited liability company, being authorized to do so, executed the foregoing instrument for the purposes therein
contained in the name of such a limited liability company by himself/herself as President of the limited liability company.
Witness my hand and official
seal in the county and state aforesaid, this 18 day of August, 2015.
|
/s/ Kristin Uzzell |
|
Notary Public |
My Commission Expires: 7/6/2019
|
KRISTIN UZZELL |
|
NOTARY PUBLIC |
|
FULTON COUNTY, GEORGIA |
|
My Commission Expires July 6, 2019 |
Guaranty - Multistate | | Page 11 |
| (a) | Name and Address of Guarantor: |
| Name: | Bluerock Residential Growth REIT, Inc. |
| Address: | c/o Bluerock Real Estate, LLC |
712 Fifth Avenue, 9th Floor
New York, New York 10019
Attention: Michael Konig
| Name: | MPC Partnership Holdings, LLC |
| Address: | c/o Carroll Organization, LLC |
3340 Peachtree Road, Suite 1620
Atlanta, Georgia 30326
Attention: Josh Champion
| (b) | Guarantor represents and warrants that Guarantor is: |
| (c) | Guarantor represents and
warrants that Guarantor’s state of residence is N/A. |
Guaranty - Multistate | | Page 12 |
RIDER TO GUARANTY
MINIMUM NET
WORTH/LIQUIDITY
(Revised 5-1-2015)
The following
changes are made to the Guaranty which precedes this Rider:
| A. | Section 20 is deleted and replaced with the following: |
| 20. | Minimum Net Worth/Liquidity Requirements. |
| (a) | Guarantor must maintain a minimum net worth of $15,000,000.00 with liquid assets of at least $2,500,000.00
(collectively, “Minimum Net Worth Requirement”). |
| (b) | In addition to the financial information that Guarantor is required to provide pursuant to Section 13
of this Guaranty, annually within 90 days after the end of each fiscal year of Guarantor, Guarantor must provide Lender with
a written certification (“Guarantor Certification”) of the net worth and liquid assets of Guarantor, derived
in accordance with customarily acceptable accounting practices. The Guarantor must certify the Guarantor Certification under penalty
of perjury as true and complete. |
| (c) | Within 30 days of receipt of Notice from Lender that Guarantor has failed to maintain the
Minimum Net Worth Requirement, Guarantor must either: |
| (i) | cause one or more natural persons or entities who individually or collectively, as applicable,
meet the Minimum Net Worth Requirement and is/are acceptable to Lender, in its sole discretion, to execute and deliver to Lender
a guaranty in the same form as this Guaranty, without any cost or expense to Lender; or |
| (ii) | deliver to Lender a letter of credit or other collateral acceptable to Lender in its discretion
meeting the following conditions, as applicable: |
| (A) | If Guarantor supplies a letter of credit, the letter of credit must be in the form required by
Lender and satisfy the requirements for Letters of Credit set forth in Section 11.15 of the Loan Agreement, except that an updated
nonconsolidation opinion will not be required. |
| (B) | The letter of credit or other collateral must be in an amount equal to the greatest of: |
| (X) | the positive difference, if any, obtained by subtracting the net worth identified in the Guarantor
Certification from the minimum net worth required under the Minimum Net Worth Requirement, |
| (Y) | the positive difference, if any, obtained by subtracting the liquid assets identified in the Guarantor
Certification from the minimum liquid assets required under the Minimum Net Worth Requirement, and |
Rider To Guaranty Minimum Net Worth/Liquidity | | Page 1 |
| (d) | Lender will hold the letter of credit or other collateral until one of the following occurs: |
| (i) | Lender has a claim against the Guarantor, in which case Lender will be entitled to draw on the
letter of credit and apply the proceeds or the other collateral to such claim(s), in Lender’s sole discretion. |
| (ii) | Lender returns the letter of credit or other collateral to Guarantor pursuant to Section (e). |
| (e) | Provided no Event of Default then exists, Guarantor will be entitled to request a return of the
unused portion, if any, of the letter of credit or other collateral in the event it delivers to Lender evidence in form and substance
satisfactory to Lender, including a Guarantor Certification, that Guarantor has satisfied the Minimum Net Worth Requirement. |
Rider To Guaranty Minimum Net Worth/Liquidity | | Page 2 |
Exhibit 10.6
Florida documentary stamp taxes in the
amount of $71,400.00 were paid on the Mortgage recorded in Official Records Book 10098, at Page 4833, as amended in Official Records
Book 10120, at Page 3259, of the Public Records of Orange County, Florida (the “Original Mortgage”) and were also paid
in the amount of $87,496.50 on the Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement dated
concurrently herewith and contemporaneously recorded in the Public Records of Orange County, Florida (the “Amended and Restated
Mortgage”). Florida non-recurring intangibles taxes in the amount of $40,800.00 were paid on the Original Mortgage. Additional
non-recurring intangibles taxes in the amount of $10,888.91 are due and have been paid on the recordation of the Amended and Restated
Mortgage.
Freddie Mac Loan Number: 708556663
Property Name: Century Palms at World Gateway
FLORIDA
AMENDED AND RESTATED
MULTIFAMILY NOTE
(Revised 7-17-2014)
THIS FLORIDA AMENDED
AND RESTATED MULTIFAMILY NOTE ("Note") is made and entered into as of the 20th day of August, 2015, from BR
CARROLL WORLD GATEWAY, LLC, a Delaware limited liability company ("Borrower") to JONES LANG LASALLE OPERATIONS,
L.L.C., an Illinois limited liability company (“Lender”).
PRELIMINARY STATEMENTS
| A. | A loan was made to Centennial World Gateway, LLC, a Delaware limited liability company (“Original
Borrower”) in the original principal amount of $20,400,000.00, the repayment of which is evidenced by a Multifamily Note-CME,
Multistate - Fixed Rate, dated as of August 31, 2010 (“Original Note”) from Original Borrower, as maker, to
Primary Capital Advisors LC, a Georgia limited liability company (“Original Payee”), as payee. |
| B. | The Original Note is secured by a Multifamily Mortgage, Assignment of Rents and Security Agreement,
dated as of August 31, 2010, from Original Borrower to the Original Payee, recorded among the Public Records of Orange County,
Florida (the “Public Records”) in Official Records Book 10098, at Page 4833, as amended by that certain First
Amendment to Multifamily Mortgage, Assignment of Rents and Security Agreement, dated as of October 12, 2010, recorded in the Public
Records in Official Records Book 10120, at Page 3259 (“Original Mortgage”) on certain improved real property
located in Orange County, Florida. |
| C. | The Original Note was sold and assigned (i) by the Original
Payee to the Federal Home Loan Mortgage Corporation (“Freddie Mac”), and (ii) by Freddie Mac to U.S. Bank National
Association, a national banking association, as trustee for the registered holders of Deutsche Mortgage & Asset Receiving
Corporation, Multifamily Mortgage Pass-Through Certificates, Series 2011-K11 (the “Trustee”). |
Florida Amended and Restated Multifamily Note Floating Rate | |
| D. | Lender has purchased the Original Note from the Trustee, and Lender is now the holder of the Original
Note. |
| E. | Borrower has assumed the obligations of Original Borrower under the Original Note and Original
Mortgage, and Borrower has confirmed to Lender that Borrower has no defenses or offsets of any kind against any of the indebtedness
due under the Original Note. |
| F. | Borrower has requested and Lender has agreed to make certain amendments to the Original Note, including
changing the interest rate and the terms of payment and increasing the unpaid principal amount to $24,999,000.00 to evidence an
additional advance in the amount of $5,444,453.40 made by Lender to Borrower on the date of this Note. The Original Note is consolidated,
amended and restated in its entirety to reflect these amendments. |
| G. | Borrower has represented to Lender that State of Florida documentary stamp taxes and were paid
in full on the Original Mortgage and are payable on this Note to the extent of the full principal amount of this Note. Borrower
has represented to Lender that State of Florida nonrecurring intangible taxes were paid in full on the Original Mortgage and are
payable on this Note to the extent that the original principal amount of this Note exceeds the $19,554,546.60 current outstanding
principal balance of the Original Note. |
| H. | The Original Mortgage is concurrently being consolidated, amended and restated pursuant to the
terms of an Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement dated the same date as this Note
(“Security Instrument”). |
NOW, THEREFORE, in consideration of these
promises, the mutual covenants contained in this Note and other good and valuable consideration, the receipt and sufficiency of
which are acknowledged, the parties agree that the Original Note is consolidated, amended and restated in this Note in its entirety
as follows:
Florida Amended and Restated Multifamily Note Floating Rate | Page 2 |
Freddie Mac Loan Number: 708556663
Property Name: Century Palms at World Gateway
MULTIFAMILY NOTE
FLOATING RATE
(Revised 5-20-2015)
US $24,999,000.00 |
Effective Date: As of August 20, 2015 |
FOR VALUE RECEIVED, BR CARROLL WORLD
GATEWAY, LLC, a Delaware limited liability company (together with such party’s or parties’ successors and assigns,
“Borrower”) jointly and severally (if more than one), promises to pay to the order of JONES LANG LASALLE
OPERATIONS, L.L.C., an Illinois limited liability company, the principal sum of $24,999,000.00, with interest on the unpaid
principal balance, as hereinafter provided.
“Amortization Period”
means a period of 360 full consecutive calendar months.
“Base Recourse”
means a portion of the Indebtedness equal to 0% of the original principal balance of this Note.
“Business Day”
means any day other than a Saturday, a Sunday, or any other day on which Lender or the national banking associations are not open
for business.
“Capped Interest Rate”
is not applicable, there is no Capped Interest Rate for the Loan.
“Default Rate”
means a variable annual interest rate equal to 4 percentage points above the Floating Interest Rate in effect from time to time.
However, at no time will the Default Rate exceed the Maximum Interest Rate.
“First Installment Due
Date” means October 1, 2015.
“First Principal and Interest
Installment Due Date” means October 1, 2019.
“Floating Interest Rate”
means the variable annual interest rate calculated for each Interest Adjustment Period so as to equal the Index Rate for such Interest
Adjustment Period (truncated at the 5th decimal place if necessary) plus the Margin. However, in no event will the Floating
Interest Rate exceed the Capped Interest Rate.
“Freddie Mac”
means the Federal Home Loan Mortgage Corporation.
“ICE” means ICE Benchmark Administration
Limited.
Florida Amended and Restated Multifamily Note Floating Rate | Page 3 |
“Index Rate”
means, for any Interest Adjustment Period, the LIBOR Index Rate for such Interest Adjustment Period.
“Installment Due Date”
means, for any monthly installment of interest-only or principal and interest, the date on which such monthly installment is due
and payable pursuant to Section 3 of this Note.
“Interest Adjustment Period”
means each successive one (1) calendar month period until the entire Indebtedness is paid in full, except that the first Interest
Adjustment Period is the period from the date of this Note through August 31, 2015. Therefore, the second Interest Adjustment Period
will be the period from September 1, 2015 through September 30, 2015, and so on until the entire Indebtedness is paid in full.
“Lender” means
the holder from time to time of this Note.
“LIBOR” means
the London Interbank Offered Rate.
“LIBOR Index”
means ICE’s one (1) month LIBOR rate for United States Dollar deposits, as displayed on the LIBOR Index Page used to establish
the LIBOR Index Rate.
“LIBOR Index Rate”
means, for any Interest Adjustment Period after the first Interest Adjustment Period, ICE’s LIBOR rate for the LIBOR Index
released by ICE most recently preceding the first day of such Interest Adjustment Period, as such LIBOR rate is displayed on the
LIBOR Index Page. The LIBOR Index Rate for the first Interest Adjustment Period means ICE’s LIBOR rate for the LIBOR Index
released by ICE most recently preceding the first day of the month in which the first Interest Adjustment Period begins, as such
LIBOR rate is displayed on the LIBOR Index Page; provided, however, that if at any time the LIBOR Index Rate is less than zero,
the LIBOR Index Rate shall be deemed to be zero for all purposes of this Note and the Loan Agreement.
“LIBOR Index Page”
is the Bloomberg L.P., page “BBAM”, or such other page for the LIBOR Index as may replace page BBAM on that service,
or at the option of Lender (i) the applicable page for the LIBOR Index on another service which electronically transmits or displays
ICE LIBOR rates, or (ii) any publication of LIBOR rates available from ICE. In the event ICE ceases to set or publish a LIBOR rate/interest
settlement rate for the LIBOR Index, Lender will designate an alternative index, and such alternative index will constitute the
LIBOR Index Page.
“Loan” means
the loan evidenced by this Note.
“Loan Agreement”
means the Multifamily Loan and Security Agreement entered into by and between Borrower and Lender, effective as of the effective
date of this Note, as amended, modified, or supplemented from time to time.
“Lockout Period”
means the period from the date of this Note through the day preceding the 12th Installment Due Date under this Note.
“Margin” means
two and twenty two hundredths percentage points (222 basis points).
Florida Amended and Restated Multifamily Note Floating Rate | Page 4 |
“Maturity Date”
means the earlier of (i) September 1, 2022 (“Scheduled Maturity Date”) and
(ii) the date on which the unpaid principal balance of this Note becomes due and payable by acceleration or otherwise pursuant
to the Loan Documents or the exercise by Lender of any right or remedy under any Loan Document; provided, however, that if the
unpaid principal balance of this Note becomes due and payable by acceleration but such acceleration is rendered null and void and
of no further force and effect by operation of law or agreement by Lender, such acceleration will have no effect on the Maturity
Date.
“Maximum Interest Rate”
means the rate of interest which results in the maximum amount of interest allowed by applicable law.
“Prepayment Premium Period”
means the period during which, if a prepayment of principal occurs, a prepayment premium will be payable by Borrower to Lender.
The Prepayment Premium Period is the period from and including the date of this Note until but not including the first day of the
Window Period.
“Program Plus® Seller/Servicer”
means an institution approved to sell multifamily mortgages to Freddie Mac as a Program Plus Seller/Servicer.
“Remaining Amortization
Period” means, at any point in time, the number of consecutive calendar months equal to the number of months in the Amortization
Period minus the number of scheduled monthly installments of principal and interest that have elapsed since the date of this Note.
“Security Instrument”
means the multifamily mortgage, deed to secure debt or deed of trust effective as of the effective date of this Note, from Borrower
to or for the benefit of Lender and securing this Note, as amended, modified or supplemented from time to time.
“Window Period”
means the 3 consecutive calendar month period prior to the Scheduled Maturity Date.
| (b) | Other capitalized terms used but not defined in this Note will have the meanings given to such
terms in the Loan Agreement. |
| 2. | Address for Payment. All payments due under this Note will be payable at 3344 Peachtree
Road NE, Suite 1100, Atlanta, Georgia 30326, or such other place as may be designated by Notice to Borrower from or on behalf of
Lender. |
| (a) | Interest will accrue on the outstanding principal balance of this Note at the Floating Interest
Rate, subject to the provisions of Section 8 of this Note. |
| (b) | Interest under this Note will be computed, payable and allocated on the basis of an actual/360
interest calculation schedule (interest is payable for the actual number of days in each month, and each month’s interest
is calculated by multiplying the unpaid principal amount of this Note as of the first day of the month for which interest is being
calculated by the applicable Floating Interest Rate, dividing the product by 360, and multiplying the quotient by the number of
days in the month for which interest is being calculated). For convenience in determining the amount of a monthly installment of
principal and interest under this Note, Lender will use a 30/360 interest calculation payment schedule (each year is treated as
consisting of twelve 30-day months). However, as provided above, the portion of the monthly installment actually payable as and
allocated to interest will be based upon an actual/360 interest calculation schedule, and the amount of each installment attributable
to principal and the amount attributable to interest will vary based upon the number of days in the month for which such installment
is paid. Each monthly payment of principal and interest will first be applied to pay in full interest due, and the balance of the
monthly payment paid by Borrower will be credited to principal. |
Florida Amended and Restated Multifamily Note Floating Rate | Page 5 |
| (c) | Unless disbursement of principal is made by Lender to Borrower on the first day of a calendar month,
interest for the period beginning on the date of disbursement and ending on and including the last day of such calendar month will
be payable by Borrower simultaneously with the execution of this Note. If disbursement of principal is made by Lender to Borrower
on the first day of a calendar month, then no payment will be due from Borrower at the time of the execution of this Note. The
Installment Due Date for the first monthly installment payment under Section 3(d) of interest-only or principal and interest, as
applicable, will be the First Installment Due Date set forth in Section 1(a) of this Note. Except as provided in this Section 3(c)
and Section 10, accrued interest will be payable in arrears. |
|
(d) | (i) | Beginning on the First Installment Due Date, and
continuing until and including the Installment Due Date immediately prior to the First Principal and Interest Installment Due
Date, accrued interest-only will be payable by Borrower in consecutive monthly installments due and payable on the first day of
each calendar month. The amount of the monthly installment of interest-only payable pursuant to this Section 3(d)(i) on an Installment
Due Date will equal the product of (A) annual interest on the unpaid principal balance of this Note as of the first day of the
Interest Adjustment Period immediately preceding the Installment Due Date at the Floating Interest Rate in effect for such Interest
Adjustment Period, divided by 360, multiplied by (B) the number of days in such Interest Adjustment Period. |
| (ii) | Beginning on the First Principal and Interest Installment Due Date, and continuing until and including
the monthly installment due on the Maturity Date, principal and accrued interest will be payable by Borrower in consecutive monthly
installments due and payable on the first day of each calendar month. The amount of the monthly installment of principal and interest
payable pursuant to this Section 3(d)(ii) on an Installment Due Date will be calculated so as to equal the monthly payment amount
which would be payable on the Installment Due Date as if the unpaid principal balance of this Note as of the first day of the Interest
Adjustment Period immediately preceding the Installment Due Date was to be fully amortized, together with interest thereon at the
Floating Interest Rate in effect for such Interest Adjustment Period, in equal consecutive monthly payments paid on the first day
of each calendar month over the Remaining Amortization Period. |
| (h) | All remaining Indebtedness, including all principal and
interest, will be due and payable by Borrower on the Maturity Date. |
Florida Amended and Restated Multifamily Note Floating Rate | Page 6 |
| (i) | Lender will provide Borrower with Notice, given in the manner specified in the Loan Agreement,
of the amount of each monthly installment due under this Note. However, if Lender has not provided Borrower with prior Notice of
the monthly payment due on any Installment Due Date, then Borrower will pay on that Installment Due Date an amount equal to the
monthly installment payment for which Borrower last received Notice. If Lender at any time determines that Borrower has paid one
or more monthly installments in an incorrect amount because of the operation of the preceding sentence, or because Lender has miscalculated
the Floating Interest Rate or has otherwise miscalculated the amount of any monthly installment, then Lender will give Notice to
Borrower of such determination. If such determination discloses that Borrower has paid less than the full amount due for the period
for which the determination was made, Borrower, within 30 calendar days after receipt of the Notice from Lender, will pay to Lender
the full amount of the deficiency. If such determination discloses that Borrower has paid more than the full amount due for the
period for which the determination was made, then the amount of the overpayment will be credited to the next installment(s) of
interest only or principal and interest, as applicable, due under this Note (or, if an Event of Default has occurred and is continuing,
such overpayment will be credited against any amount owing by Borrower to Lender). |
| (j) | All payments under this Note must be made in immediately available U.S. funds. |
| (k) | Any regularly scheduled monthly installment of interest only or principal and interest payable
pursuant to this Section 3 that is received by Lender before the date it is due will be deemed to have been received on the
due date for the purpose of calculating interest due. |
| (l) | Any accrued interest remaining past due for 30 days or more, at Lender’s discretion, may
be added to and become part of the unpaid principal balance of this Note and any reference to “accrued interest” will
refer to accrued interest which has not become part of the unpaid principal balance. Any amount added to principal pursuant to
the Loan Documents will bear interest at the applicable rate or rates specified in this Note and will be payable with such interest
upon demand by Lender and absent such demand, as provided in this Note for the payment of principal and interest. |
| (m) | In accordance with Section 16, interest charged under this Note cannot exceed the Maximum Interest
Rate. If the Floating Interest Rate at any time exceeds the Maximum Interest Rate, resulting in the charging of interest hereunder
to be limited to the Maximum Interest Rate, then any subsequent reduction in the Floating Interest Rate will not reduce the rate
at which interest under this Note accrues below the Maximum Interest Rate until the total amount of interest accrued hereunder
equals the amount of interest which would have accrued had the Floating Interest Rate at all times been in effect. |
| 4. | Application of Partial Payments. If at any time Lender receives, from Borrower or otherwise,
any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, Lender may apply the amount
received to amounts then due and payable in any manner and in any order determined by Lender, in Lender’s discretion. Borrower
agrees that neither Lender’s acceptance of a payment from Borrower in an amount that is less than all amounts then due and
payable nor Lender’s application of such payment will constitute or be deemed to constitute either a waiver of the unpaid
amounts or an accord and satisfaction. |
Florida Amended and Restated Multifamily Note Floating Rate | Page 7 |
| 5. | Security. The Indebtedness is secured by, among other things, the Security Instrument, and
reference is made to the Security Instrument and the Loan Agreement for other rights with respect to collateral for the Indebtedness. |
| 6. | Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid principal
balance, any accrued interest, any prepayment premium payable under Section 10, and all other amounts payable under this Note and
any other Loan Document, will at once become due and payable, at the option of Lender, without any prior Notice to Borrower (except
if notice is required by applicable law, then after such notice). Lender may exercise this option to accelerate regardless of any
prior forbearance. For purposes of exercising such option, Lender will calculate the prepayment premium as if prepayment occurred
on the date of acceleration. If prepayment occurs thereafter, Lender will recalculate the prepayment premium as of the actual prepayment
date. |
| (a) | If any monthly installment of interest or principal and interest or other amount payable under
this Note or under the Loan Agreement or any other Loan Document is not received in full by Lender within 10 days after the installment
or other amount is due, counting from and including the date such installment or other amount is due (unless applicable law requires
a longer period of time before a late charge may be imposed, in which event such longer period will be substituted), Borrower must
pay to Lender, immediately and without demand by Lender, a late charge equal to 5% of such installment or other amount due (unless
applicable law requires a lesser amount be charged, in which event such lesser amount will be substituted). If the Loan is not
fully amortizing, the late charge will not be due on the final payment of principal owed on the Maturity Date if such payment is
not timely made. |
| (b) | Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional
expenses in servicing and processing the Loan and that it is extremely difficult and impractical to determine those additional
expenses. Borrower agrees that the late charge payable pursuant to this Section represents a fair and reasonable estimate,
taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason
of such late payment. The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant
to Section 8. |
| (a) | So long as (i) any monthly installment under this Note remains past due for 30 days or more
or (ii) any other Event of Default has occurred and is continuing, then notwithstanding anything in Section 3 of this Note
to the contrary, interest under this Note will accrue on the unpaid principal balance from the Installment Due Date of the first
such unpaid monthly installment or the occurrence of such other Event of Default, as applicable, at the Default Rate. |
| (b) | From and after the Maturity Date, the unpaid principal balance will continue to bear interest at
the Default Rate until and including the date on which the entire principal balance is paid in full. |
Florida Amended and Restated Multifamily Note Floating Rate | Page 8 |
| (c) | Borrower acknowledges that (i) its failure to make timely payments will cause Lender to incur
additional expenses in servicing and processing the Loan, (ii) during the time that any monthly installment under this Note
is delinquent for 30 days or more, Lender will incur additional costs and expenses arising from its loss of the use of the money
due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment
opportunities, and (iii) it is extremely difficult and impractical to determine those additional costs and expenses. Borrower also
acknowledges that, during the time that any monthly installment under this Note is delinquent for 30 days or more or any other
Event of Default has occurred and is continuing, Lender’s risk of nonpayment of this Note will be materially increased and
Lender is entitled to be compensated for such increased risk. Borrower agrees that the increase in the rate of interest payable
under this Note to the Default Rate represents a fair and reasonable estimate, taking into account all circumstances existing on
the date of this Note, of the additional costs and expenses Lender will incur by reason of the Borrower’s delinquent payment
and the additional compensation Lender is entitled to receive for the increased risks of nonpayment associated with a delinquent
loan. |
| 9. | Limits on Personal Liability. |
| (a) | Except as otherwise provided in this Section 9, Borrower will have no personal liability under
this Note, the Loan Agreement or any other Loan Document for the repayment of the Indebtedness or for the performance of or compliance
with any other obligations of Borrower under the Loan Documents and Lender’s only recourse for the satisfaction of the Indebtedness
and the performance of such obligations will be Lender’s exercise of its rights and remedies with respect to the Mortgaged
Property and to any other collateral held by Lender as security for the Indebtedness. This limitation on Borrower’s liability
will not limit or impair Lender’s enforcement of its rights against any Guarantor of the Indebtedness or any Guarantor of
any other obligations of Borrower. |
| (b) | Borrower will be personally liable to Lender for the amount of the Base Recourse, plus any other
amounts for which Borrower has personal liability under this Section 9. |
| (c) | In addition to the Base Recourse, Borrower will be personally liable to Lender for the repayment
of a further portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of the occurrence of any of
the following events: |
| (i) | Borrower fails to pay to Lender upon demand after an Event of Default all Rents to which Lender
is entitled under Section 3 of the Security Instrument and the amount of all security deposits collected by Borrower from
tenants then in residence. However, Borrower will not be personally liable for any failure described in this Section 9(c)(i) if
Borrower is unable to pay to Lender all Rents and security deposits as required by the Security Instrument because of a valid order
issued in a bankruptcy, receivership, or similar judicial proceeding. |
| (ii) | Borrower fails to apply all Insurance proceeds and Condemnation proceeds as required by the Loan
Agreement. However, Borrower will not be personally liable for any failure described in this Section 9(c)(ii) if Borrower is unable
to apply Insurance or Condemnation proceeds as required by the Loan Agreement because of a valid order issued in a bankruptcy,
receivership, or similar judicial proceeding. |
Florida Amended and Restated Multifamily Note Floating Rate | Page 9 |
| (iii) | Either of the following occurs: |
| (A) | Borrower fails to deliver the statements, schedules and
reports required by Section 6.07 of the Loan Agreement and Lender exercises its right to audit those statements, schedules and
reports. |
| (B) | If an Event of Default has occurred and is continuing,
Borrower fails to deliver all books and records relating to the Mortgaged Property or its operation in accordance with the provisions
of Section 6.07 of the Loan Agreement. |
| (iv) | Borrower fails to pay when due in accordance with the terms of the Loan Agreement the amount of
any item below marked “Deferred”; provided however, that if no item is marked “Deferred”, this Section 9(c)(iv)
will be of no force or effect. |
[Collect] |
Property Insurance premiums or other Insurance premiums |
[Collect] |
Taxes or payments in lieu of taxes (PILOT) |
[Deferred] |
water and sewer charges (that could become a lien on the Mortgaged Property) |
[N/A] |
Ground Rents |
[Deferred] |
assessments or other charges (that could become a lien on the Mortgaged Property), including home owner association dues |
| (v) | Borrower engages in any willful act of material waste of the Mortgaged Property. |
| (vi) | Borrower fails to comply with any provision of Section 6.13(a)(iii) through (xxvi) of the
Loan Agreement or any SPE Equity Owner fails to comply with any provision of Section 6.13(b)(iii) through (v) of the Loan Agreement
(subject to possible full recourse liability as set forth in Section 9(f)(ii)). |
| (vii) | Any of the following Transfers occurs: |
| (A) | Any Person that is not an Affiliate creates a mechanic’s lien or other involuntary lien or
encumbrance against the Mortgaged Property and Borrower has not complied with the provisions of the Loan Agreement. |
| (B) | A Transfer of property by devise, descent or operation of law occurs upon the death of a natural
person and such Transfer does not meet the requirements set forth in the Loan Agreement. |
| (C) | Borrower grants an easement that does not meet the requirements set forth in the Loan Agreement. |
| (D) | Borrower executes a Lease that does not meet the requirements set forth in the Loan Agreement. |
Florida Amended and Restated Multifamily Note Floating Rate | Page 10 |
| (ix) | through (xviii) are Reserved. |
| (xix) | Borrower fails to complete any Property Improvement Alterations that have been commenced in accordance
with Section 6.09(e)(v) of the Loan Agreement. |
| (d) | In addition to the Base Recourse, Borrower will be personally liable to Lender for all of the following: |
| (i) | Borrower will be personally liable for the performance of all of Borrower’s obligations under
Sections 6.12 and 10.02(b) of the Loan Agreement (relating to environmental matters). |
| (ii) | Borrower will be personally liable for the costs of any audit under Section 6.07 of the Loan
Agreement. |
| (iii) | Borrower will be personally liable for any costs and expenses incurred by Lender in connection
with the collection of any amount for which Borrower is personally liable under this Section 9, including Attorneys’
Fees and Costs and the costs of conducting any independent audit of Borrower’s books and records to determine the amount
for which Borrower has personal liability. |
| (iv) | through (vii) are Reserved. |
| (e) | All payments made by Borrower with respect to the Indebtedness and all amounts received by Lender
from the enforcement of its rights under the Loan Agreement and the other Loan Documents will be applied first to the portion of
the Indebtedness for which Borrower has no personal liability. |
| (f) | Notwithstanding the Base Recourse, Borrower will become personally liable to Lender for the repayment
of all of the Indebtedness upon the occurrence of any of the following Events of Default: |
| (i) | Borrower fails to comply with Section 6.13(a)(i) or (ii) of the Loan Agreement or any SPE
Equity Owner fails to comply with Section 6.13(b)(i) or (ii) of the Loan Agreement. |
| (ii) | Borrower fails to comply with any provision of Section 6.13(a)(iii) through (xxvi) of the
Loan Agreement or any SPE Equity Owner fails to comply with any provision of Section 6.13(b)(iii) through (v) of the Loan Agreement
and a court of competent jurisdiction holds or determines that such failure or combination of failures is the basis, in whole or
in part, for the substantive consolidation of the assets and liabilities of Borrower or any SPE Equity Owner with the assets and
liabilities of a debtor pursuant to Title 11 of the Bankruptcy Code. |
| (iii) | A Transfer that is an Event of Default under Section 7.02 of the Loan Agreement occurs other
than a Transfer set forth in Section 9(c)(vii) above (for which Borrower will have personal liability for Lender’s loss or
damage); provided, however, that Borrower will not have any personal liability for a Transfer consisting solely of the involuntary
removal or involuntary withdrawal of a general partner in a limited partnership or a manager in a limited liability company. |
Florida Amended and Restated Multifamily Note Floating Rate | Page 11 |
| (iv) | There was fraud or written material misrepresentation by Borrower or any officer, director, partner,
member, or employee of Borrower in connection with the application for or creation of the Indebtedness or there is fraud in connection
with any request for any action or consent by Lender. |
| (v) | Borrower or any SPE Equity Owner voluntarily files for bankruptcy protection under the Bankruptcy
Code. |
| (vi) | Borrower or any SPE Equity Owner voluntarily becomes subject to any reorganization, receivership,
insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights. |
| (vii) | The Mortgaged Property or any part of the Mortgaged Property becomes an asset in a voluntary bankruptcy
or becomes subject to any voluntary reorganization, receivership, insolvency proceeding, or other similar voluntary proceeding
pursuant to any other federal or state law affecting debtor and creditor rights. |
| (viii) | An order of relief is entered against Borrower or any SPE Equity Owner pursuant to the Bankruptcy
Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined
in by a Related Party. |
| (ix) | An involuntary bankruptcy or other involuntary insolvency proceeding is commenced against Borrower
or any SPE Equity Owner (by a party other than Lender) but only if Borrower or such SPE Equity Owner has failed to use commercially
reasonable efforts to dismiss such proceeding or has consented to such proceeding. “Commercially reasonable efforts”
will not require any direct or indirect interest holders in Borrower or any SPE Equity Owner to contribute or cause the contribution
of additional capital to Borrower or any SPE Equity Owner. |
| (x) | through (xii) are reserved. |
| (g) | For purposes of Sections 9(f) and (h), the term “Related Party” will include
all of the following: |
| (i) | Borrower, any Guarantor, or any SPE Equity Owner. |
| (ii) | Any Person that holds, directly or indirectly, any ownership interest (including any shareholder,
member or partner) in Borrower, any Guarantor, or any SPE Equity Owner or any Person that has a right to manage Borrower, any Guarantor,
or any SPE Equity Owner. |
| (iii) | Any Person in which Borrower, any Guarantor, or any SPE Equity Owner has any ownership interest
(direct or indirect) or right to manage. |
| (iv) | Any Person in which any partner, shareholder, or member of Borrower, any Guarantor, or any SPE
Equity Owner has an ownership interest or right to manage. |
| (v) | Any Person in which any Person holding an interest in Borrower, any Guarantor, or any SPE Equity
Owner also has any ownership interest. |
Florida Amended and Restated Multifamily Note Floating Rate | Page 12 |
| (vi) | Any creditor (as defined in the Bankruptcy Code) of Borrower that is related by blood, marriage
or adoption to Borrower, any Guarantor, or any SPE Equity Owner. |
| (vii) | Any creditor (as defined in the Bankruptcy Code) of Borrower that is related to any partner, shareholder
or member of, or any other Person holding an interest in, Borrower, any Guarantor, or any SPE Equity Owner. |
| (h) | If Borrower, any Guarantor, any SPE Equity Owner, or any Related Party has solicited creditors
to initiate or participate in any proceeding referred to in Section 9(f), regardless of whether any of the creditors solicited
actually initiates or participates in the proceeding, then such proceeding will be considered as having been initiated by a Related
Party. |
| (i) | To the extent that Borrower has personal liability under this Section 9, Lender may, to the
fullest extent permitted by applicable law, exercise its rights against Borrower personally without regard to whether Lender has
exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any Guarantor, or pursued
any other rights available to Lender under this Note, the Loan Agreement, any other Loan Document, or applicable law. To the fullest
extent permitted by applicable law, in any action to enforce Borrower’s personal liability under this Section 9, Borrower
waives any right to set off the value of the Mortgaged Property against such personal liability. |
| 10. | Voluntary and Involuntary Prepayments. |
| (a) | Any receipt by Lender of principal due under this Note prior to the Maturity Date, other than principal
required to be paid in monthly installments pursuant to Section 3, constitutes a prepayment of principal under this Note.
Without limiting the foregoing, any application by Lender, prior to the Maturity Date, of any proceeds of collateral or other security
to the repayment of any portion of the unpaid principal balance of this Note constitutes a prepayment under this Note. |
| (b) | Borrower may not voluntarily prepay any portion of the principal balance of this Note during the
Lockout Period, if a Lockout Period is applicable to this Note. However, if any portion of the principal balance of this Note is
prepaid during the Lockout Period by reason of the application by Lender of any proceeds of collateral or other security to any
portion of the unpaid principal balance of this Note or following a determination that the prohibition on voluntary prepayments
during the Lockout Period is in contravention of applicable law, then Borrower must also pay to Lender upon demand by Lender, a
prepayment premium equal to 5% of the amount of principal being prepaid. |
| (c) | Following the end of the Lockout Period, Borrower may voluntarily prepay all of the unpaid principal
balance of this Note on an Installment Due Date so long as Borrower designates the
date for such prepayment in a Notice from Borrower to Lender given at least 30 days prior to the date of such prepayment. If an
Installment Due Date (as defined in Section 1(a)) falls on a day which is not a Business Day, then with respect to
payments made under this Section 10 only, the term “Installment Due Date” will mean the Business Day immediately preceding
the scheduled Installment Due Date. |
Florida Amended and Restated Multifamily Note Floating Rate | Page 13 |
| (d) | Notwithstanding Section 10(c), Borrower may voluntarily prepay all of the unpaid principal balance
of this Note on a Business Day other than an Installment Due Date if Borrower provides Lender with the Notice set forth in Section
10(c) and meets the other requirements set forth in this Section 10(d). Borrower acknowledges that Lender has agreed that Borrower
may prepay principal on a Business Day other than an Installment Due Date only because Lender will deem any prepayment received
by Lender on any day other than an Installment Due Date to have been received on the Installment Due Date immediately following
such prepayment and Borrower must pay to Lender all interest that would have been due if the prepayment had actually been made
on the Installment Due Date immediately following such prepayment. |
| (e) | Unless otherwise expressly provided in the Loan Documents, Borrower may not voluntarily prepay
less than all of the unpaid principal balance of this Note. In order to voluntarily prepay all or any part of the principal of
this Note, Borrower must also pay to Lender, together with the amount of principal being prepaid, (i) all accrued and unpaid interest
due under this Note, plus (ii) all other sums due to Lender at the time of such prepayment, plus (iii) any prepayment premium calculated
pursuant to Section 10(f). |
| (f) | Except as provided in Section 10(g), a prepayment premium will be due and payable by Borrower in
connection with any prepayment of principal under this Note during the Prepayment Premium Period. The prepayment premium will be
1.0% of the amount of principal being prepaid for any prepayments occurring during the Prepayment Premium Period but after the
Lockout Period (if applicable). |
| (g) | Notwithstanding any other provision of this Section 10, no prepayment premium will be payable
with respect to any of the following: |
| (i) | Any prepayment made during the Window Period. |
| (ii) | Any prepayment occurring as a result of the application
of any Insurance proceeds or Condemnation award. |
| (iii) | Any prepayment required under the terms of the Loan Agreement
in connection with a Condemnation proceeding. |
| (iv) | Any prepayment of the entire principal
balance of this Note that occurs on or after the 12th Installment Due Date under this Note with the proceeds of a fixed interest
rate mortgage loan that is the subject of a binding commitment for purchase between Freddie Mac and a Freddie Mac-approved Program
Plusâ Seller/Servicer.
|
| (h) | Unless Lender agrees otherwise in writing, a permitted or required prepayment of less than the
unpaid principal balance of this Note will not extend or postpone the due date of any subsequent monthly installments or change
the amount of such installments. |
| (i) | Borrower recognizes that any prepayment of any of the unpaid principal balance of this Note, whether
voluntary or involuntary or resulting from an Event of Default by Borrower, will result in Lender’s incurring loss, including
reinvestment loss, additional expense and frustration or impairment of Lender’s ability to meet its commitments to third
parties. Borrower agrees to pay to Lender upon demand damages for the detriment caused by any prepayment, and agrees that it is
extremely difficult and impractical to ascertain the extent of such damages. Borrower therefore acknowledges and agrees that the
formula for calculating prepayment premiums set forth in this Note represents a reasonable estimate of the damages Lender will
incur because of a prepayment. Borrower further acknowledges that any lockout and prepayment premium provisions of this Note are
a material part of the consideration for the Loan, and that the terms of this Note are in other respects more favorable to Borrower
as a result of the Borrower’s voluntary agreement to the lockout and prepayment premium provisions. |
Florida Amended and Restated Multifamily Note Floating Rate | Page 14 |
| 13. | Costs and Expenses. To the fullest extent allowed by applicable law, Borrower must pay all
expenses and costs, including Attorneys’ Fees and Costs incurred by Lender as a result of any default under this Note or
in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents,
including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief
from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding. Borrower acknowledges
and agrees that, in connection with each request by Borrower under this Note or any Loan Document, Borrower must pay all reasonable
Attorneys’ Fees and Costs and expenses incurred by Lender, including any fees charged by the Rating Agencies (if applicable),
regardless of whether the matter is approved, denied or withdrawn. |
| 14. | Forbearance. Any forbearance by Lender in exercising any right or remedy under this Note,
the Loan Agreement, or any other Loan Document, or otherwise afforded by applicable law, will not be a waiver of or preclude the
exercise of that or any other right or remedy. The acceptance by Lender of any payment after the due date of such payment, or in
an amount which is less than the required payment, will not be a waiver of Lender’s right to require prompt payment when
due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment. Enforcement by
Lender of any security for Borrower’s obligations under this Note will not constitute an election by Lender of remedies so
as to preclude the exercise of any other right or remedy available to Lender. |
| 15. | Waivers. Borrower and all endorsers and Guarantors of this Note and all other third party
obligors waive presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate
payment or maturity, presentment for payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness. |
| 16. | Loan Charges. Neither this Note nor any of the other Loan Documents will be construed to
create a contract for the use, forbearance, or detention of money requiring payment of interest at a rate greater than the Maximum
Interest Rate. If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower in
connection with the Loan is interpreted so that any interest or other charge provided for in any Loan Document, whether considered
separately or together with other charges provided for in any other Loan Document, violates that law, and Borrower is entitled
to the benefit of that law, that interest or charge is hereby reduced to the extent necessary to eliminate that violation. The
amounts, if any, previously paid to Lender in excess of the permitted amounts will be applied by Lender to reduce the unpaid principal
balance of this Note. For the purpose of determining whether any applicable law limiting the amount of interest or other charges
permitted to be collected from Borrower has been violated, all Indebtedness that constitutes interest, as well as all other charges
made in connection with the Indebtedness that constitute interest, will be deemed to be allocated and spread ratably over the stated
term of this Note. Unless otherwise required by applicable law, such allocation and spreading will be effected in such a manner
that the rate of interest so computed is uniform throughout the stated term of this Note. |
Florida Amended and Restated Multifamily Note Floating Rate | Page 15 |
| 17. | Commercial Purpose. Borrower represents that Borrower is incurring the Indebtedness solely
for the purpose of carrying on a business or commercial enterprise, and not for personal, family, household, or agricultural purposes. |
| 18. | Counting of Days. Any reference in this Note to a period of “days” means calendar
days, not Business Days, except where otherwise specifically provided. |
| 19. | Governing Law. This Note will be governed by the law of the Property Jurisdiction. |
| 20. | Captions. The captions of the Sections of this Note are for convenience only and will
be disregarded in construing this Note. |
| 21. | Notices; Written Modifications. |
| (a) | All Notices, demands, and other communications required or permitted to be given pursuant to this
Note will be given in accordance with Section 11.03 of the Loan Agreement. |
| (b) | Any modification or amendment to this Note will be ineffective unless in writing and signed by
the party sought to be charged with such modification or amendment; provided, however, in the event of a Transfer under the terms
of the Loan Agreement that requires Lender’s consent, any or some or all of the Modifications to Multifamily Note set forth
in Exhibit A to this Note may be modified or rendered void by Lender at Lender’s option, by Notice to Borrower
and the transferee, as a condition of Lender’s consent. |
| 22. | Consent to Jurisdiction and Venue. Borrower agrees that any controversy arising under or
in relation to this Note may be litigated in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction
in the Property Jurisdiction will have jurisdiction over all controversies that will arise under or in relation to this Note. Borrower
irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which
it might be entitled by virtue of domicile, habitual residence, or otherwise. However, nothing in this Note is intended to limit
any right that Lender may have to bring any suit, action, or proceeding relating to matters arising under this Note in any court
of any other jurisdiction. |
| 23. | WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (a) AGREES NOT TO ELECT A TRIAL
BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT
IS TRIABLE OF RIGHT BY A JURY AND (b) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY
SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL. |
| 24. | State-Specific Provisions. N/A. |
Florida Amended and Restated Multifamily Note Floating Rate | Page 16 |
| 25. | Attached Riders. The following Riders are attached to this Note: |
x |
|
Primary Access by Easement or Private Road and Signage Easement |
| 26. | Attached Exhibit. The following Exhibit, if marked with an “X”
in the space provided, is attached to this Note: |
x |
|
Exhibit A |
Modifications to Multifamily Note |
IN WITNESS WHEREOF, and in consideration
of the Lender’s agreement to lend Borrower the principal amount set forth above, Borrower has signed and delivered this Note
under seal or has caused this Note to be signed and delivered under seal by its duly authorized representative.
Florida Amended and Restated Multifamily Note Floating Rate | Page 17 |
Florida documentary stamp taxes in the
amount of $71,400.00 were paid on the Mortgage recorded in Official Records Book 10098, at Page 4833, as amended in Official Records
Book 10120, at Page 3259, of the Public Records of Orange County, Florida (the “Original Mortgage”) and were also paid
in the amount of $87,496.50 on the Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement dated
concurrently herewith and contemporaneously recorded in the Public Records of Orange County, Florida (the “Amended and Restated
Mortgage”). Florida non-recurring intangibles taxes in the amount of $40,800.00 were paid on the Original Mortgage. Additional
non-recurring intangibles taxes in the amount of $10,888.91 are due and have been paid on the recordation of the Amended and Restated
Mortgage.
|
BR CARROLL WORLD GATEWAY, LLC, a |
|
|
Delaware limited liability company |
|
|
|
|
By: |
/s/ Jordan Ruddy |
|
|
Jordan Ruddy |
|
|
Chief Executive Officer |
Florida Amended and Restated Multifamily Note Floating Rate | Page 18 |
PAY TO THE ORDER OF _________________
__________________, WITHOUT RECOURSE.
JONES LANG LASALLE |
|
|
OPERATIONS, L.L.C., an Illinois |
|
|
limited liability company |
|
By: |
/s/ Faron G. Thompson |
|
|
Faron G. Thompson |
|
|
Managing Director, Capital Markets-Real
Estate Investment Banking |
|
Freddie Mac Loan No. 708556663
Florida Amended and Restated Multifamily Note Floating Rate | Page 19 |
Jones Lang LaSalle Operations, L.L.C.,
an Illinois limited liability company, holder of the Original Note, signs below to acknowledge its consent to the terms of this
Amended and Restated Multifamily Note.
|
JONES LANG LASALLE OPERATIONS, |
|
|
L.L.C., an Illinois limited liability company |
|
|
|
|
|
|
By: |
/s/ Faron G. Thompson |
|
|
|
Faron G. Thompson |
|
|
|
Managing Director, Capital Markets-Real |
|
|
|
Estate Investment Banking |
Florida Amended and Restated Multifamily Note Floating Rate | Page 20 |
RIDER TO MULTIFAMILY
NOTE
PRIMARY ACCESS
BY EASEMENT OR PRIVATE ROAD AND SIGNAGE EASEMENT
(Revised 3-1-2014)
The following changes are made to the Note
which precedes this Rider:
| A. | Section 9(c)(xi) is restated as follows: |
| (xi) | Either of the following occurs: |
| (A) | Any party takes, or threatens to take, any action to deny ingress to or egress from the Land,
from or to the publicly dedicated and maintained right-of-way known as through the easement established under the Declaration
of Covenants, Conditions and Restrictions for the Greene Project, Orange County, Florida, dated January 10, 1995, and
recorded at Official Records Book 4843, Page 1448 in the records of Orange County, Florida, as amended, and the plat of World
Gateway Phase 3 as per plat recorded in Book 46, pages 10 through 12, Official Records of Orange County, Florida
(“Access Easement”). |
| (B) | Any party takes, or threatens to
take, any action to deny the owner of the Mortgaged Property the right to maintain signage
identifying the Mortgaged Property within the “Easement Area” designated
in the Grant of Signage Easement dated December 29, 2000, and recorded at Official Records
Book 6161, Page 5064 in the records of Orange County, Florida, as amended (“Signage
Easement”). |
| (C) | Any dispute or controversy arises
under or with respect to the Access Easement or the Signage Easement. |
Rider to Multifamily Note Primary
Access by Easement or Private Road and Signage Easement | |
EXHIBIT
A
MODIFICATIONS TO MULTIFAMILY NOTE
The following modifications are made to the text of the Note
that precedes this Exhibit.
| 1. | The definition of “Lockout Period” in Section 1(a) is deleted and replaced with the
following: |
“Lockout Period”
means the period from the date of this Note through the day preceding the 24th Installment Due Date under this Note.
| 2. | Section 10(g)(iv) is deleted and replaced with the following: |
| (iv) | Any prepayment of the entire principal
balance of this Note that occurs on or after the 24th Installment Due Date under this
Note with the proceeds of a fixed interest rate mortgage loan that is the subject of
a binding commitment for purchase between Freddie Mac and a Freddie Mac-approved Program
Plusâ Seller/Servicer. |
| 3. | Section 9(a) is revised to read as follows: |
| (a) | Except as otherwise provided in
this Section 9, neither Borrower nor any of its direct or indirect owners (with
the exception of any Guarantor pursuant to any Guaranty of even date herewith, if any)
will have any personal liability under this Note, the Loan Agreement or any other Loan
Document for the repayment of the Indebtedness or for the performance of or compliance
with any other obligations of Borrower under the Loan Documents and Lender’s only
recourse for the satisfaction of the Indebtedness and the performance of such obligations
will be Lender’s exercise of its rights and remedies with respect to the Mortgaged
Property and to any other collateral held by Lender as security for the Indebtedness.
This limitation on Borrower’s liability will not limit or impair Lender’s
enforcement of its rights against any Guarantor of the Indebtedness or any Guarantor
of any other obligations of Borrower. |
| 4. | Section 9(d) is revised by adding the following new subsection: |
| (iv) | the amount of, and any loss or damage suffered by Lender by reason of, any failure to fully and
timely pay all intangible, documentary stamp, recordation, transfer, or similar taxes, if any, imposed in connection with the Loan
or any advances of the Loan, the Original Note, this Note, the Original Mortgage, the Security Instrument, any default under any
Loan Document, or any other transaction relating to or arising out of the Loan, plus all interest, penalties and fines that may
be or may become due as a result of any of the foregoing. |
Multifamily Note Floating Rate | Page A-1 |
Exhibit 10.7
THIS INSTRUMENT PREPARED BY,
RECORDED AND RETURN TO:
(Print Name of Attorney)
Erin O’Neil Ashby, Esquire
Troutman Sanders LLP
P.O. Box 1122
Richmond, VA 23218
|
(Reserved) |
This Instrument evidences (A) the modification
of a Multifamily Mortgage, Assignment of Rents and Security Agreement recorded among the Public Records of Orange County, Florida
(the “Public Records”) in Official Records Book 10098, at Page 4833, as amended by that certain First Amendment to
Multifamily Mortgage, Assignment of Rents and Security Agreement, dated as of October 12, 2010, recorded in the Public Records
in Official Records Book 10120, at Page 3259 (the “Original Mortgage”), in the original principal amount of $20,400,000.00
with a current outstanding principal balance of $19,554,546.60, as previously assigned to the within named mortgagee and assumed
herein by the within named mortgagor, and (B) the $5,444,453.40 increase in the principal amount of the obligation to $24,999,000.00.
Documentary stamp taxes in the amount of $71,400.00 and non-recurring intangibles taxes in the amount of $40,800.00 were paid on
the Original Mortgage. Documentary stamp taxes in the amount of $87,496.50 are due on the recordation hereof. Additional non-recurring
intangibles taxes in the amount of $10,888.91 are due on the recordation hereof. Florida Statutes, §§ 201.09(1), 199.145(4)(b).
AMENDED AND RESTATED
MULTIFAMILY MORTGAGE,
ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
FLORIDA
(Revised 3-1-2014)
Freddie Mac Loan No. 708556663
Century Palms at World Gateway
AMENDED AND RESTATED
MULTIFAMILY MORTGAGE,
ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
FLORIDA
(Revised 3-1-2014)
THIS AMENDED AND RESTATED MULTIFAMILY MORTGAGE,
ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (“Instrument”) is dated as of the 20th day of August, 2015, between
BR CARROLL WORLD GATEWAY, LLC, a limited liability company organized and existing under the laws of Delaware, whose address
is c/o Carroll Organization, LLC, 3340 Peachtree Road, Suite 1620, Atlanta, Georgia 30326, as mortgagor (“Borrower”),
and JONES LANG LASALLE OPERATIONS, L.L.C., a limited liability company organized and existing under the laws of Illinois,
whose address is 3344 Peachtree Road NE, Suite 1100, Atlanta, Georgia 30326, as mortgagee (“Lender”).
RECITALS
| A. | Lender is the holder of a Multifamily Note-CME, Multistate - Fixed Rate, dated as of August 31,
2010, in the original principal amount of $20,400,000.00 (“Original Note”) made by Centennial World Gateway,
LLC, a Delaware limited liability company (“Original Borrower”) and payable to the order of Primary Capital
Advisors LC, a Georgia limited liability company (the “Original Payee”). |
| B. | The Original Note is secured by a Multifamily Mortgage, Assignment of Rents and Security Agreement,
dated as of August 31, 2010, from Original Borrower to the Original Payee, recorded among the Public Records of Orange County,
Florida (the “Public Records”) in Official Records Book 10098, at Page 4833, as amended by that certain First
Amendment to Multifamily Mortgage, Assignment of Rents and Security Agreement, dated as of October 12, 2010, recorded in the Public
Records in Official Records Book 10120, at Page 3259 (“Original Mortgage”) on certain improved real property
located in Orange County, Florida. |
| C. | The Original Note was sold and assigned (i) by the Original Payee to the Federal Home Loan Mortgage
Corporation (“Freddie Mac”), (ii) by Freddie Mac to U.S. Bank National Association, a national banking association,
as trustee for the registered holders of Deutsche Mortgage & Asset Receiving Corporation, Multifamily Mortgage Pass-Through
Certificates, Series 2011-K11 (the “Trustee”) and (iii) by the Trustee to Lender. |
| D. | The Original Mortgage was assigned (i) by the Original Payee to Freddie Mac pursuant to an Assignment
of Security Instrument dated August 31, 2010, and recorded in the Public Records in Official Records Book 10098, at Page 4917,
(ii) by Freddie Mac to the Trustee by Assignment recorded in the Public Records in Official Records Book 10195, at Page 727, and
(iii) by the Trustee to Lender pursuant to an Assignment of Mortgage, dated as of the date hereof and recorded or intended to be
recorded among the Public Records of Orange County, Florida, prior hereto. |
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 1 |
| E. | By its execution and delivery of this Instrument, Borrower assumes and ratifies all of the obligations
and agreements of Original Borrower under the Original Note and the Original Mortgage. By its execution and delivery of this
Instrument, Lender accepts such assumption by Borrower and hereby unconditionally and irrevocably, fully and completely releases
and discharges Original Borrower, and each guarantor of the Original Note and the Original Mortgage, from all further liability
or obligations under or with respect to the Original Note and Original Mortgage, with such release being for the benefit of and
enforceable by the Original Borrower and each such guarantor. |
| F. | The Original Note is being consolidated, amended and restated in its entirety pursuant to a certain
Amended and Restated Multifamily Note dated the same date as this Instrument from Borrower, as maker, to the order of Lender, as
payee, to reflect among other things, a change in the interest rate and terms of payment and an increase in the unpaid principal
amount to $24,999,000.00 to evidence an additional advance in the amount of $5,444,453.40 made by Lender to Borrower on the date
hereof. |
| G. | Borrower and Lender now desire to amend and modify the terms of the Original Mortgage and have
agreed, for purposes of convenience, to consolidate, amend and restate the Original Mortgage in its entirety as follows: |
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 2 |
MULTIFAMILY MORTGAGE,
ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
FLORIDA
(Revised 3-1-2014)
THIS MULTIFAMILY MORTGAGE, ASSIGNMENT OF
RENTS AND SECURITY AGREEMENT (“Instrument”) is made to be effective this 20th day of August, 2015, between BR
CARROLL WORLD GATEWAY, LLC, a limited liability company organized and existing under the laws of Delaware, whose address is
c/o Carroll Organization, LLC, 3340 Peachtree Road, Suite 1620, Atlanta, Georgia 30326, as mortgagor (“Borrower”),
and JONES LANG LASALLE OPERATIONS, L.L.C., a limited liability company organized and existing under the laws of Illinois,
whose address is 3344 Peachtree Road NE, Suite 1100, Atlanta, Georgia 30326, as mortgagee (“Lender”). Borrower’s
organizational identification number, if applicable, is 5780611.
RECITAL
Borrower is indebted to Lender in the principal
amount of $24,999,000.00, as evidenced by Borrower’s Multifamily Note payable to Lender dated as of the date of this Instrument,
and maturing on September 1, 2022 (“Maturity Date”).
AGREEMENT
TO SECURE TO LENDER the repayment of the
Indebtedness, and all renewals, extensions and modifications of the Indebtedness, and the performance of the covenants and agreements
of Borrower contained in the Loan Agreement or any other Loan Document, Borrower mortgages, warrants, grants, conveys and assigns
to Lender the Mortgaged Property, including the Land located in Orange County, State of Florida and described in Exhibit A
attached to this Instrument.
Borrower represents and warrants that Borrower
is lawfully seized of the Mortgaged Property, has the right, power and authority to grant, convey and assign the Mortgaged Property,
and that the Mortgaged Property is unencumbered, except as shown on the schedule of exceptions to coverage in the title policy
issued to and accepted by Lender contemporaneously with the execution and recordation of this Instrument and insuring Lender’s
interest in the Mortgaged Property (“Schedule of Title Exceptions”). Borrower covenants that Borrower will warrant
and defend generally the title to the Mortgaged Property against all claims and demands, subject to any easements and restrictions
listed in the Schedule of Title Exceptions.
UNIFORM COVENANTS
(Revised 7-17-2014)
Covenants. In consideration of the
mutual promises set forth in this Instrument, Borrower and Lender covenant and agree as follows:
| 1. | Definitions. The following terms, when used in this Instrument (including when used in the
above recitals), will have the following meanings and any capitalized term not specifically defined in this Instrument will have
the meaning ascribed to that term in the Loan Agreement: |
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 3 |
“Attorneys’ Fees
and Costs” means (a) fees and out-of-pocket costs of Lender’s and Loan Servicer’s attorneys, as applicable,
including costs of Lender’s and Loan Servicer’s in-house counsel, support staff costs, costs of preparing for litigation,
computerized research, telephone and facsimile transmission expenses, mileage, deposition costs, postage, duplicating, process
service, videotaping and similar costs and expenses; (b) costs and fees of expert witnesses, including appraisers; (c) investigatory
fees; and (d) the costs for any opinion required by Lender pursuant to the terms of the Loan Documents.
“Borrower”
means all Persons identified as “Borrower” in the first paragraph of this Instrument, together with their successors
and assigns.
“Business Day”
means any day other than a Saturday, a Sunday or any other day on which Lender or the national banking associations are not
open for business.
“Event of Default”
means the occurrence of any event described in Section 8.
“Fixtures”
means all property owned by Borrower which is attached to the Land or the Improvements so as to constitute a fixture under applicable
law, including: machinery, equipment, engines, boilers, incinerators and installed building materials; systems and equipment for
the purpose of supplying or distributing heating, cooling, electricity, gas, water, air or light; antennas, cable, wiring and conduits
used in connection with radio, television, security, fire prevention or fire detection or otherwise used to carry electronic signals;
telephone systems and equipment; elevators and related machinery and equipment; fire detection, prevention and extinguishing systems
and apparatus; security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves, microwave ovens,
refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances; light fixtures, awnings, storm windows and
storm doors; pictures, screens, blinds, shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall
coverings; fences, trees and plants; swimming pools; and exercise equipment.
“Governmental Authority”
means any board, commission, department, agency or body of any municipal, county, state or federal governmental unit, or any subdivision
of any of them, that has or acquires jurisdiction over the Mortgaged Property, or the use, operation or improvement of the Mortgaged
Property, or over Borrower.
“Ground Lease”
means the lease described in the Loan Agreement pursuant to which Borrower leases the Land, as such lease may from time to time
be amended, modified, supplemented, renewed and extended.
“Improvements”
means the buildings, structures, improvements now constructed or at any time in the future constructed or placed upon the Land,
including any future alterations, replacements and additions.
“Indebtedness”
means the principal of, interest at the fixed or variable rate set forth in the Note on, and all other amounts due at any time
under, the Note, this Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and
advances as provided in Section 7 to protect the security of this Instrument.
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 4 |
“Land” means
the land described in Exhibit A.
“Leasehold Estate”
means Borrower’s interest in the Land and any other real property leased by Borrower pursuant to the Ground Lease, if applicable,
including all of the following:
| (a) | All rights of Borrower to renew or extend the term of the Ground Lease. |
| (b) | All amounts deposited by Borrower with Ground Lessor under the Ground Lease. |
| (c) | Borrower’s right or privilege to terminate, cancel, surrender, modify or amend the Ground
Lease. |
| (d) | All other options, privileges and rights granted and demised to Borrower under the Ground Lease
and all appurtenances with respect to the Ground Lease. |
“Leases” means
all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter in force,
whether oral or written, covering or affecting the Mortgaged Property, or any portion of the Mortgaged Property (including proprietary
leases or occupancy agreements if Borrower is a cooperative housing corporation), and all modifications, extensions or renewals.
“Lender” means
the entity identified as “Lender” in the first paragraph of this Instrument, or any subsequent holder of the Note.
“Loan Agreement”
means the Multifamily Loan and Security Agreement executed by Borrower in favor of Lender and dated as of the date of this Instrument,
as such agreement may be amended from time to time.
“Loan Documents”
means the Note, this Instrument, the Loan Agreement, all guaranties, all indemnity agreements, all collateral agreements, UCC filings,
O&M Programs, the MMP and any other documents now or in the future executed by Borrower, any guarantor or any other Person
in connection with the loan evidenced by the Note, as such documents may be amended from time to time.
“Loan Servicer”
means the entity that from time to time is designated by Lender or its designee to collect payments and deposits and receive Notices
under the Note, this Instrument and any other Loan Document, and otherwise to service the loan evidenced by the Note for the benefit
of Lender. Unless Borrower receives Notice to the contrary, the Loan Servicer is the entity identified as “Lender”
in the first paragraph of this Instrument.
“Mortgaged Property”
means all of Borrower’s present and future right, title and interest in and to all of the following:
| (a) | The Land, or, if Borrower’s interest in the Land is pursuant to a Ground Lease, the Ground
Lease and the Leasehold Estate. |
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 5 |
| (e) | All current and future rights, including air rights, development rights, zoning rights and other
similar rights or interests, easements, tenements, rights of way, strips and gores of land, streets, alleys, roads, sewer rights,
waters, watercourses and appurtenances related to or benefiting the Land or the Improvements, or both, and all rights-of-way, streets,
alleys and roads which may have been or may in the future be vacated. |
| (f) | All proceeds paid or to be paid by any insurer of the Land, the Improvements, the Fixtures, the
Personalty or any other part of the Mortgaged Property, whether or not Borrower obtained the insurance pursuant to Lender’s
requirement. |
| (g) | All awards, payments and other compensation made or to be made by any municipal, state or federal
authority with respect to the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property,
including any awards or settlements resulting from condemnation proceedings or the total or partial taking of the Land, the Improvements,
the Fixtures, the Personalty or any other part of the Mortgaged Property under the power of eminent domain or otherwise and including
any conveyance in lieu thereof. |
| (h) | All contracts, options and other agreements for the sale of the Land, or the Leasehold Estate,
as applicable, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property entered into by Borrower
now or in the future, including cash or securities deposited to secure performance by parties of their obligations. |
| (i) | All proceeds from the conversion, voluntary or involuntary, of any of the items described in subsections
(a) through (h) inclusive into cash or liquidated claims, and the right to collect such proceeds. |
| (k) | All earnings, royalties, accounts receivable, issues and profits from the Land, the Improvements
or any other part of the Mortgaged Property, and all undisbursed proceeds of the loan secured by this Instrument. |
| (l) | All Imposition Reserve Deposits. |
| (m) | All refunds or rebates of Impositions by Governmental Authority or insurance company (other than
refunds applicable to periods before the real property tax year in which this Instrument is dated). |
| (n) | All tenant security deposits which have not been forfeited by any tenant under any Lease and any
bond or other security in lieu of such deposits. |
| (o) | All names under or by which any of the above Mortgaged Property may be operated or known, and all
trademarks, trade names, and goodwill relating to any of the Mortgaged Property. |
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 6 |
| (p) | If required by the terms of Section 4.05 of the Loan Agreement, all rights under the Letter
of Credit and the Proceeds, as such Proceeds may increase or decrease from time to time. |
| (q) | If the Note provides for interest to accrue at a floating or variable rate and there is a Cap Agreement,
the Cap Collateral. |
“Note” means
the Multifamily Note (including any Amended and Restated Note, Consolidated, Amended and Restated Note, or Extended and Restated
Note) executed by Borrower in favor of Lender and dated as of the date of this Instrument, including all schedules, riders, allonges
and addenda, as such Multifamily Note may be amended, modified and/or restated from time to time.
“Notice” or
“Notices” means all notices, demands and other communication required under the Loan Documents, provided in
accordance with the requirements of Section 11.03 of the Loan Agreement.
“Person”
means any natural person, sole proprietorship, corporation, general partnership, limited partnership, limited liability company,
limited liability partnership, limited liability limited partnership, joint venture, association, joint stock company, bank, trust,
estate, unincorporated organization, any federal, state, county or municipal government (or any agency or political subdivision
thereof), endowment fund or any other form of entity.
“Personalty”
means all of the following:
| (a) | Accounts (including deposit accounts) of Borrower related to the Mortgaged Property. |
| (b) | Equipment and inventory owned by Borrower, which are used now or in the future in connection with
the ownership, management or operation of the Land or Improvements or are located on the Land or Improvements, including furniture,
furnishings, machinery, building materials, goods, supplies, tools, books, records (whether in written or electronic form) and
computer equipment (hardware and software). |
| (c) | Other tangible personal property owned by Borrower which is used now or in the future in connection
with the ownership, management or operation of the Land or Improvements or is located on the Land or in the Improvements, including
ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances (other than
Fixtures). |
| (d) | Any operating agreements relating to the Land or the Improvements. |
| (e) | Any surveys, plans and specifications and contracts for architectural, engineering and construction
services relating to the Land or the Improvements. |
| (f) | All other intangible property, general intangibles and rights relating to the operation of, or
used in connection with, the Land or the Improvements, including all governmental permits relating to any activities on the Land
and including subsidy or similar payments received from any sources, including a Governmental Authority. |
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 7 |
| (g) | Any rights of Borrower in or under letters of credit. |
“Property Jurisdiction”
means the jurisdiction in which the Land is located.
“Rents” means
all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, parking
fees, laundry and vending machine income and fees and charges for food, health care and other services provided at the Mortgaged
Property, whether now due, past due or to become due, and deposits forfeited by tenants,
and, if Borrower is a cooperative housing corporation or association, maintenance
fees, charges or assessments payable by shareholders or residents under proprietary leases or occupancy agreements, whether now
due, past due, or to become due.
“Taxes” means
all taxes, assessments, vault rentals and other charges, if any, whether general, special or otherwise, including all assessments
for schools, public betterments and general or local improvements, which are levied, assessed or imposed by any public authority
or quasi-public authority, and which, if not paid, will become a Lien on the Land or the Improvements.
| 2. | Uniform Commercial Code Security Agreement. |
| (a) | This Instrument is also a security agreement under the Uniform Commercial Code for any of the Mortgaged
Property which, under applicable law, may be subjected to a security interest under the Uniform Commercial Code, for the purpose
of securing Borrower’s obligations under this Instrument and to further secure Borrower’s obligations under the Note,
this Instrument and other Loan Documents, whether such Mortgaged Property is owned now or acquired in the future, and all products
and cash and non-cash proceeds thereof (collectively, “UCC Collateral”), and by this Instrument, Borrower grants
to Lender a security interest in the UCC Collateral. To the extent necessary under applicable law, Borrower hereby authorizes Lender
to prepare and file financing statements, continuation statements and financing statement amendments in such form as Lender may
require to perfect or continue the perfection of this security interest. |
| (b) | Unless Borrower gives Notice to Lender within 30 days after the occurrence of any of the following,
and executes and delivers to Lender modifications or supplements of this Instrument (and any financing statement which may be filed
in connection with this Instrument) as Lender may require, Borrower will not (i) change its name, identity, structure or jurisdiction
of organization; (ii) change the location of its place of business (or chief executive office if more than one place of business);
or (iii) add to or change any location at which any of the Mortgaged Property is stored, held or located. |
| (c) | If an Event of Default has occurred and is continuing, Lender will have the remedies of a secured
party under the Uniform Commercial Code, in addition to all remedies provided by this Instrument or existing under applicable law.
In exercising any remedies, Lender may exercise its remedies against the UCC Collateral separately or together, and in any order,
without in any way affecting the availability of Lender’s other remedies. |
| (d) | This Instrument also constitutes a financing statement with respect to any part of the Mortgaged
Property that is or may become a Fixture, if permitted by applicable law. |
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 8 |
| 3. | Assignment of Rents; Appointment of Receiver; Lender in Possession. |
| (a) | As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns
and transfers to Lender all Rents. |
| (i) | It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment
to Lender of all Rents and to authorize and empower Lender to collect and receive all Rents without the necessity of further action
on the part of Borrower. |
| (ii) | Promptly upon request by Lender, Borrower agrees to execute and deliver such further assignments
as Lender may from time to time require. Borrower and Lender intend this assignment of Rents to be immediately effective and to
constitute an absolute present assignment and not an assignment for additional security only. |
| (iii) | For purposes of giving effect to this absolute assignment of Rents, and for no other purpose, Rents
will not be deemed to be a part of the Mortgaged Property. However, if this present, absolute and unconditional assignment of Rents
is not enforceable by its terms under the laws of the Property Jurisdiction, then the Rents will be included as a part of the Mortgaged
Property and it is the intention of Borrower that in this circumstance this Instrument create and perfect a Lien on Rents in favor
of Lender, which Lien will be effective as of the date of this Instrument. |
|
(b) | (i) | Until the occurrence of an Event of Default, Lender
hereby grants to Borrower a revocable license to collect and receive all Rents, to hold all Rents in trust for the benefit of
Lender and to apply all Rents to pay the installments of interest and principal then due and payable under the Note and the other
amounts then due and payable under the other Loan Documents, including Imposition Reserve Deposits, and to pay the current costs
and expenses of managing, operating and maintaining the Mortgaged Property, including utilities, Taxes and insurance premiums
(to the extent not included in Imposition Reserve Deposits), tenant improvements and other capital expenditures. |
| (ii) | So long as no Event of Default has occurred and is continuing, the Rents remaining after application
pursuant to the preceding sentence may be retained by Borrower free and clear of, and released from, Lender’s rights with
respect to Rents under this Instrument. |
| (iii) | After the occurrence of an Event of Default, and during the continuance of such Event of Default,
Borrower authorizes Lender to collect, sue for and compromise Rents and directs each tenant of the Mortgaged Property to pay all
Rents to, or as directed by, Lender. From and after the occurrence of an Event of Default, and during the continuance of such Event
of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly,
or by a receiver, Borrower’s license to collect Rents will automatically terminate and Lender will without Notice be entitled
to all Rents as they become due and payable, including Rents then due and unpaid. Borrower will pay to Lender upon demand all Rents
to which Lender is entitled. |
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 9 |
| (iv) | At any time on or after the date of Lender’s demand for Rents, Lender may give, and Borrower
hereby irrevocably authorizes Lender to give, notice to all tenants of the Mortgaged Property instructing them to pay all Rents
to Lender. No tenant will be obligated to inquire further as to the occurrence or continuance of an Event of Default. No tenant
will be obligated to pay to Borrower any amounts which are actually paid to Lender in response to such a notice. Any such notice
by Lender will be delivered to each tenant personally, by mail or by delivering such demand to each rental unit. Borrower will
not interfere with and will cooperate with Lender’s collection of such Rents. |
| (c) | If an Event of Default has occurred and is continuing, then Lender will have each of the following
rights and may take any of the following actions: |
| (i) | Lender may, regardless of the adequacy of Lender’s security or the solvency of Borrower and
even in the absence of waste, enter upon and take and maintain full control of the Mortgaged Property in order to perform all acts
that Lender in its discretion determines to be necessary or desirable for the operation and maintenance of the Mortgaged Property,
including the execution, cancellation or modification of Leases, the collection of all Rents, the making of Repairs to the Mortgaged
Property and the execution or termination of contracts providing for the management, operation or maintenance of the Mortgaged
Property, for the purposes of enforcing the assignment of Rents pursuant to Section 3(a), protecting the Mortgaged Property
or the security of this Instrument, or for such other purposes as Lender in its discretion may deem necessary or desirable. |
| (ii) | Alternatively, if an Event of Default has occurred and is continuing, regardless of the adequacy
of Lender’s security, without regard to Borrower’s solvency and without the necessity of giving prior notice (oral
or written) to Borrower, Lender may apply to any court having jurisdiction for the appointment of a receiver for the Mortgaged
Property to take any or all of the actions set forth in the preceding sentence. If Lender elects to seek the appointment of a receiver
for the Mortgaged Property at any time after an Event of Default has occurred and is continuing, Borrower, by its execution of
this Instrument, expressly consents to the appointment of such receiver, including the appointment of a receiver ex parte
if permitted by applicable law. |
| (iii) | If
Borrower is a housing cooperative corporation or association, Borrower hereby agrees
that if a receiver is appointed, the order appointing the receiver may contain a provision
requiring the receiver to pay the installments of interest and principal then due and
payable under the Note and the other amounts then due and payable under the other Loan
Documents, including Imposition Reserve Deposits, it being acknowledged and agreed that
the Indebtedness is an obligation of Borrower and must be paid out of maintenance charges
payable by Borrower’s tenant shareholders under their proprietary leases or occupancy
agreements. |
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 10 |
| (iv) | Lender or the receiver, as the case may be, will be entitled to receive a reasonable fee for managing
the Mortgaged Property. |
| (v) | Immediately upon appointment of a receiver or immediately upon Lender’s entering upon and
taking possession and control of the Mortgaged Property, Borrower will surrender possession of the Mortgaged Property to Lender
or the receiver, as the case may be, and will deliver to Lender or the receiver, as the case may be, all documents, records (including
records on electronic or magnetic media), accounts, surveys, plans, and specifications relating to the Mortgaged Property and all
security deposits and prepaid Rents. |
| (vi) | If Lender takes possession and control of the Mortgaged Property, then Lender may exclude Borrower
and its representatives from the Mortgaged Property. |
Borrower acknowledges and agrees
that the exercise by Lender of any of the rights conferred under this Section 3 will not be construed to make Lender a mortgagee-in-possession
of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and Improvements.
| (d) | If Lender enters the Mortgaged Property, Lender will be liable to account only to Borrower and
only for those Rents actually received. Except to the extent of Lender’s gross negligence or willful misconduct, Lender will
not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Mortgaged Property, by
reason of any act or omission of Lender under Section 3(c), and Borrower hereby releases and discharges Lender from any such
liability to the fullest extent permitted by law. |
| (e) | If the Rents are not sufficient to meet the costs of taking control of and managing the Mortgaged
Property and collecting the Rents, any funds expended by Lender for such purposes will become an additional part of the Indebtedness
as provided in Section 7. |
| (f) | Any entering upon and taking of control of the Mortgaged Property by Lender or the receiver, as
the case may be, and any application of Rents as provided in this Instrument will not cure or waive any Event of Default or invalidate
any other right or remedy of Lender under applicable law or provided for in this Instrument. |
| 4. | Assignment of Leases; Leases Affecting the Mortgaged Property. |
| (a) | As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns
and transfers to Lender all of Borrower’s right, title and interest in, to and under the Leases, including Borrower’s
right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease. |
| (i) | It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment
to Lender of all of Borrower’s right, title and interest in, to and under the Leases. Borrower and Lender intend this assignment
of the Leases to be immediately effective and to constitute an absolute present assignment and not an assignment for additional
security only. |
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 11 |
| (ii) | For purposes of giving effect to this absolute assignment of the Leases, and for no other purpose,
the Leases will not be deemed to be a part of the Mortgaged Property. |
| (iii) | However, if this present, absolute and unconditional assignment of the Leases is not enforceable
by its terms under the laws of the Property Jurisdiction, then the Leases will be included as a part of the Mortgaged Property
and it is the intention of Borrower that in this circumstance this Instrument create and perfect a Lien on the Leases in favor
of Lender, which Lien will be effective as of the date of this Instrument. |
| (b) | Until Lender gives Notice to Borrower of Lender’s exercise of its rights under this Section 4,
Borrower will have all rights, power and authority granted to Borrower under any Lease (except as otherwise limited by this Section or
any other provision of this Instrument), including the right, power and authority to modify the terms of any Lease or extend or
terminate any Lease. Upon the occurrence of an Event of Default, and during the continuance of such Event of Default, the permission
given to Borrower pursuant to the preceding sentence to exercise all rights, power and authority under Leases will automatically
terminate. Borrower will comply with and observe Borrower’s obligations under all Leases, including Borrower’s obligations
pertaining to the maintenance and disposition of tenant security deposits. |
|
(c) | (i) | Borrower acknowledges and agrees that the exercise
by Lender, either directly or by a receiver, of any of the rights conferred under this Section 4 will not be construed to
make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession
of the Land and the Improvements. |
| (ii) | The acceptance by Lender of the assignment of the Leases pursuant to Section 4(a) will
not at any time or in any event obligate Lender to take any action under this Instrument or to expend any money or to incur any
expenses. |
| (iii) | Except to the extent of Lender’s gross negligence or willful misconduct, Lender will not
be liable in any way for any injury or damage to person or property sustained by any Person or Persons in or about the Mortgaged
Property. |
| (iv) | Prior to Lender’s actual entry into and taking possession of the Mortgaged Property, Lender
will not be obligated for any of the following: |
| (A) | Lender will not be obligated to perform any of the terms, covenants and conditions contained in
any Lease (or otherwise have any obligation with respect to any Lease). |
| (B) | Lender will not be obligated to appear in or defend any action or proceeding relating to the Lease
or the Mortgaged Property. |
| (C) | Lender will not be responsible for the operation, control, care, management or repair of the Mortgaged
Property or any portion of the Mortgaged Property. The execution of this Instrument by Borrower will constitute conclusive evidence
that all responsibility for the operation, control, care, management and repair of the Mortgaged Property is and will be that of
Borrower, prior to such actual entry and taking of possession. |
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 12 |
| (d) | Upon delivery of Notice by Lender to Borrower of Lender’s exercise of Lender’s rights
under this Section 4 at any time after the occurrence of an Event of Default, and during the continuance of such Event of
Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly,
by a receiver, or by any other manner or proceeding permitted by the laws of the Property Jurisdiction, Lender immediately will
have all rights, powers and authority granted to Borrower under any Lease, including the right, power and authority to modify the
terms of any such Lease, or extend or terminate any such Lease. |
| (e) | Borrower will, promptly upon Lender’s request, deliver to Lender an executed copy of each
residential Lease then in effect. |
| (f) | If Borrower is a cooperative housing corporation or association, notwithstanding anything to the
contrary contained in this Instrument, so long as Borrower remains a cooperative housing corporation or association and is not
in breach of any covenant of this Instrument, Lender consents to the following: |
| (i) | Borrower may execute leases of apartments for a term in excess of 2 years to a tenant shareholder
of Borrower, so long as such leases, including proprietary leases, are and will remain subordinate to the Lien of this Instrument. |
| (ii) | Borrower may surrender or terminate such leases of apartments where the surrendered or terminated
lease is immediately replaced or where Borrower makes its best efforts to secure such immediate replacement by a newly-executed
lease of the same apartment to a tenant shareholder of Borrower. However, no consent is given by Lender to any execution, surrender,
termination or assignment of a lease under terms that would waive or reduce the obligation of the resulting tenant shareholder
under such lease to pay cooperative assessments in full when due or the obligation of the former tenant shareholder to pay any
unpaid portion of such assessments. |
| 5. | Prepayment Premium. Borrower will be required to pay a prepayment premium in connection
with certain prepayments of the Indebtedness, including a payment made after Lender’s exercise of any right of acceleration
of the Indebtedness, as provided in the Note. |
| 6. | Application of Payments. If at any time Lender receives, from Borrower or otherwise, any
amount applicable to the Indebtedness which is less than all amounts due and payable at such time, then Lender may apply that payment
to amounts then due and payable in any manner and in any order determined by Lender, in Lender’s discretion. Neither Lender’s
acceptance of an amount that is less than all amounts then due and payable nor Lender’s application of such payment in the
manner authorized will constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.
Notwithstanding the application of any such amount to the Indebtedness, Borrower’s obligations under this Instrument, the
Note and all other Loan Documents will remain unchanged. |
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 13 |
| 7. | Protection of Lender’s Security; Instrument Secures Future Advances. |
| (a) | If Borrower fails to perform any of its obligations under this Instrument or any other Loan Document,
or if any action or proceeding is commenced which purports to affect the Mortgaged Property, Lender’s security or Lender’s
rights under this Instrument, including eminent domain, insolvency, code enforcement, civil or criminal forfeiture, enforcement
of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings involving a bankrupt or decedent, then Lender
at Lender’s option may make such appearances, file such documents, disburse such sums and take such actions as Lender reasonably
deems necessary to perform such obligations of Borrower and to protect Lender’s interest, including all of the following: |
| (i) | Lender may pay Attorneys’ Fees and Costs. |
| (ii) | Lender may pay fees and out-of-pocket expenses of accountants, inspectors and consultants. |
| (iii) | Lender may enter upon the Mortgaged Property to make Repairs or secure the Mortgaged Property. |
| (iv) | Lender may procure the Insurance required by the Loan Agreement. |
| (v) | Lender may pay any amounts which Borrower has failed to pay under the Loan Agreement. |
| (vi) | Lender may perform any of Borrower’s obligations under the Loan Agreement. |
| (vii) | Lender may make advances to pay, satisfy or discharge any obligation of Borrower for the payment
of money that is secured by a Prior Lien. |
| (b) | Any amounts disbursed by Lender under this Section 7, or under any other provision of this Instrument
that treats such disbursement as being made under this Section 7, will be secured by this Instrument, will be added to, and become
part of, the principal component of the Indebtedness, will be immediately due and payable and will bear interest from the date
of disbursement until paid at the Default Rate. |
| (c) | Nothing in this Section 7 will require Lender to incur any expense or take any action. |
| 8. | Events of Default. An Event of Default under the Loan Agreement will constitute an Event
of Default under this Instrument. |
| 9. | Remedies Cumulative. Each right and remedy provided in this Instrument is distinct from
all other rights or remedies under this Instrument, the Loan Agreement or any other Loan Document or afforded by applicable law
or equity, and each will be cumulative and may be exercised concurrently, independently or successively, in any order. Lender’s
exercise of any particular right or remedy will not in any way prevent Lender from exercising any other right or remedy available
to Lender. Lender may exercise any such remedies from time to time and as often as Lender chooses. |
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 14 |
| 10. | Waiver of Statute of Limitations, Offsets, and Counterclaims. Borrower waives the right
to assert any statute of limitations as a bar to the enforcement of the Lien of this Instrument or to any action brought to enforce
any Loan Document. Borrower hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action
or proceeding brought against it by Lender or otherwise to offset any obligations to make the payments required by the Loan Documents.
No failure by Lender to perform any of its obligations under this Instrument will be a valid defense to, or result in any offset
against, any payments that Borrower is obligated to make under any of the Loan Documents. |
| 11. | Waiver of Marshalling. |
| (a) | Notwithstanding the existence of any other security interests in the Mortgaged Property held by
Lender or by any other party, Lender will have the right to determine the order in which any or all of the Mortgaged Property will
be subjected to the remedies provided in this Instrument, the Note, the Loan Agreement or any other Loan Document or applicable
law. Lender will have the right to determine the order in which any or all portions of the Indebtedness are satisfied from the
proceeds realized upon the exercise of such remedies. |
| (b) | Borrower and any party who now or in the future acquires a security interest in the Mortgaged Property
and who has actual or constructive notice of this Instrument waives any and all right to require the marshalling of assets or to
require that any of the Mortgaged Property be sold in the inverse order of alienation or that any of the Mortgaged Property be
sold in parcels or as an entirety in connection with the exercise of any of the remedies permitted by applicable law or provided
in this Instrument. |
| 12. | Further Assurances; Lender’s Expenses. |
| (a) | Borrower will deliver, at its sole cost and expense, all further acts, deeds, conveyances, assignments,
estoppel certificates, financing statements or amendments, transfers and assurances as Lender may require from time to time in
order to better assure, grant and convey to Lender the rights intended to be granted, now or in the future, to Lender under this
Instrument and the Loan Documents or in connection with Lender’s consent rights under Article VII of the Loan Agreement. |
| (b) | Borrower acknowledges and agrees that, in connection with each request by Borrower under this Instrument
or any Loan Document, Borrower will pay all reasonable Attorneys’ Fees and Costs and expenses incurred by Lender, including
any fees payable in accordance with any request for further assurances or an estoppel certificate pursuant to the Loan Agreement,
regardless of whether the matter is approved, denied or withdrawn. Any amounts payable by Borrower under this Instrument or under
any other Loan Document will be deemed a part of the Indebtedness, will be secured by this Instrument and will bear interest at
the Default Rate if not fully paid within 10 days of written demand for payment. |
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 15 |
| 13. | Governing Law; Consent to Jurisdiction and Venue. This Instrument, and any Loan Document
which does not itself expressly identify the law that is to apply to it, will be governed by the laws of the Property Jurisdiction.
Borrower agrees that any controversy arising under or in relation to the Note, this Instrument or any other Loan Document may be
litigated in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the Property Jurisdiction
will have jurisdiction over all controversies that may arise under or in relation to the Note, any security for the Indebtedness
or any other Loan Document. Borrower irrevocably consents to service, jurisdiction and venue of such courts for any such litigation
and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. However, nothing
in this Section 13 is intended to limit Lender’s right to bring any suit, action or proceeding relating to matters under
this Instrument in any court of any other jurisdiction. |
| 14. | Notice. All Notices, demands and other communications under or concerning this Instrument
will be governed by the terms set forth in the Loan Agreement. |
| 15. | Successors and Assigns Bound. This Instrument will bind the respective successors and assigns
of Borrower and Lender, and the rights granted by this Instrument will inure to Lender’s successors and assigns. |
| 16. | Joint and Several Liability. If more than one Person signs this Instrument as Borrower,
the obligations of such Persons will be joint and several. |
| 17. | Relationship of Parties; No Third Party Beneficiary. |
| (a) | The relationship between Lender and Borrower will be solely that of creditor and debtor, respectively,
and nothing contained in this Instrument will create any other relationship between Lender and Borrower. Nothing contained in this
Instrument will constitute Lender as a joint venturer, partner or agent of Borrower, or render Lender liable for any debts, obligations,
acts, omissions, representations or contracts of Borrower. |
| (b) | No creditor of any party to this Instrument and no other Person will be a third party beneficiary
of this Instrument or any other Loan Document. Without limiting the generality of the preceding sentence, (i) any arrangement (“Servicing
Arrangement”) between Lender and any Loan Servicer for loss sharing or interim advancement of funds will constitute a
contractual obligation of such Loan Servicer that is independent of the obligation of Borrower for the payment of the Indebtedness,
(ii) Borrower will not be a third party beneficiary of any Servicing Arrangement, and (iii) no payment by the Loan Servicer under
any Servicing Arrangement will reduce the amount of the Indebtedness. |
| 18. | Severability; Amendments. |
| (a) | The invalidity or unenforceability of any provision of this Instrument will not affect the validity
or enforceability of any other provision, and all other provisions will remain in full force and effect. This Instrument contains
the entire agreement among the parties as to the rights granted and the obligations assumed in this Instrument. |
| (b) | This Instrument may not be amended or modified except by a writing signed by the party against
whom enforcement is sought; provided, however, that in the event of a Transfer prohibited by or requiring Lender’s approval
under Article VII of the Loan Agreement, some or all of the modifications to the Loan Documents (if any) may be modified or rendered
void by Lender at Lender’s option by Notice to Borrower and the transferee(s). |
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 16 |
| (a) | The captions and headings of the Sections of this Instrument are for convenience only and will
be disregarded in construing this Instrument. Any reference in this Instrument to a “Section” will, unless otherwise
explicitly provided, be construed as referring to a Section of this Instrument. |
| (b) | Any reference in this Instrument to a statute or regulation will be construed as referring to that
statute or regulation as amended from time to time. |
| (c) | Use of the singular in this Instrument includes the plural and use of the plural includes the singular. |
| (d) | As used in this Instrument, the term “including” means “including, but not limited
to” and the term “includes” means “includes without limitation.” |
| (e) | The use of one gender includes the other gender, as the context may require. |
| (f) | Unless the context requires otherwise any definition of or reference to any agreement, instrument
or other document in this Instrument will be construed as referring to such agreement, instrument or other document as from time
to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications
set forth in this Instrument). |
| (g) | Any reference in this Instrument to any person will be construed to include such person’s
successors and assigns. |
| 20. | Subrogation. If, and
to the extent that, the proceeds of the loan evidenced by the Note,
or subsequent advances under Section 7, are used to pay, satisfy or discharge
a Prior Lien, such loan proceeds
or advances will be deemed to have been advanced by Lender at Borrower’s
request, and Lender will automatically, and without further action on its part, be subrogated
to the rights, including Lien priority, of the owner or holder of the obligation secured
by the Prior Lien, whether or not the Prior Lien is released. |
| 31. | Acceleration; Remedies; Waiver Of Permissive Counterclaims. At any time during the existence
of an Event of Default, Lender, at Lender’s option, may declare the Indebtedness to be immediately due and payable without
further demand, and may foreclose this Instrument by judicial proceeding and may invoke any other remedies permitted by Florida
law or provided in this Instrument, the Loan Agreement or in any other Loan Document. Lender will be entitled to collect all costs
and expenses incurred in pursuing such remedies, including Attorneys’ Fees and Costs and costs of documentary evidence, abstracts
and title reports. Borrower waives any and all rights to file or pursue permissive counterclaims in connection with any legal action
brought by Lender under this Instrument, the Note or any other Loan Document. |
| 32. | Release. Upon payment of the Indebtedness, Lender will release this Instrument. Borrower
will pay Lender’s reasonable costs incurred in releasing this Instrument. |
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 17 |
| 33. | Future Advances. Lender may from time to time, in Lender’s discretion, make optional
future or additional advances (collectively, “Future Advances”) to Borrower, except that at no time will the
unpaid principal balance of all indebtedness secured by the Lien of this Instrument, including Future Advances, be greater than
an amount equal to 200% of the original principal amount of the Note as set forth on the first page of this Instrument plus accrued
interest and amounts disbursed by Lender under Section 7 or any other provision of this Instrument or the other Loan Documents
that treats a disbursement by Lender as being made under Section 7. All Future Advances will be made, if at all, within 20 years
after the date of this Instrument, or within such lesser period that may in the future be provided by law as a prerequisite for
the sufficiency of actual or record notice of Future Advances as against the rights of creditors or subsequent purchasers for value.
Borrower will, immediately upon request by Lender, execute and deliver to Lender a promissory note evidencing each Future Advance
together with a notice of such Future Advance in recordable form. All promissory notes evidencing Future Advances will be secured,
pari passu, by the Lien of this Instrument, and each reference in this Instrument to the Note will be deemed to be
a reference to all promissory notes evidencing Future Advances. |
| 34. | WAIVER OF TRIAL BY JURY. |
| (a) | BORROWER AND LENDER EACH COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY
ISSUE ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY
A JURY. |
| (b) | BORROWER AND LENDER EACH WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE
EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY,
KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL. |
| 35. | Attached Riders. The following Riders are attached to this Instrument: NONE. |
| 36. | Attached Exhibits. The following Exhibits, if marked with an “X” in the space
provided, are attached to this Instrument: |
|
x |
|
Exhibit A |
Description of the Land (required) |
|
|
|
|
|
|
x |
|
Exhibit B |
Modifications to Instrument |
|
|
|
|
|
|
¨ |
|
Exhibit C |
Ground Lease Description (if applicable) |
REMAINDER OF PAGE INTENTIONALLY LEFT
BLANK
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 18 |
IN WITNESS WHEREOF, Borrower has signed
and delivered this Instrument or has caused this Instrument to be signed and delivered by its duly authorized representative.
WITNESS: |
|
BR CARROLL WORLD GATEWAY, LLC, a Delaware limited liability company |
/s/ Natalie Murphy |
|
|
|
Print Name: |
Natalie Murphy |
|
|
|
|
|
|
By: |
/s/ Jordan Ruddy |
/s/ R. Ramin Kamfar |
|
|
Jordan Ruddy |
Print Name: |
R. Ramin Kamfar |
|
|
Chief Executive Officer |
STATE OF New York
CITY/COUNTY OF New York
, ss:
I HEREBY CERTIFY that
on this day, before me, an officer duly authorized in the state aforesaid and in the county aforesaid to take acknowledgments,
personally appeared Jordan Ruddy, to me known to be the person described in and who executed the foregoing instrument as the Chief
Executive Officer of BR Carroll World Gateway, LLC, a Delaware limited liability company, and acknowledged to me that he as such
officer of the limited liability company, being authorized to do so, executed the foregoing instrument for the purposes therein
contained in the name of such limited liability company by himself as Chief Executive Officer of the limited liability company.
Witness my hand and official
seal in the county and state aforesaid, this 14 day of August, 2015.
|
/s/ Dale Pozzi |
|
Notary Public |
My Commission Expires: January 28, 2017
DALE POZZI
NOTARY PUBLIC – STATE OF
NEW YORK
No. 01PO6275397
Qualified in New York County
My Commission Expires January
28, 2017
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 19 |
Consent to the Amended
and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement is hereby evidenced by Jones Lang LaSalle Operations,
L.L.C., an Illinois limited liability company, the holder of the Note.
WITNESS: |
|
LENDER: |
|
|
|
/s/ Danielle Montgomery |
|
JONES LANG LASALLE OPERATIONS, |
Print Name: |
Danielle Montgomery |
|
L.L.C., an Illinois limited liability company |
|
|
|
|
|
|
|
|
By: |
/s/ Faron G. Thompson |
/s/ Jennifer Fischer |
|
|
Faron G. Thompson |
Print Name: |
Jennifer Fischer |
|
|
Managing Director, Capital Markets-Real Estate Investment Banking |
STATE OF Georgia
CITY/COUNTY OF Fulton , ss:
I HEREBY CERTIFY that
on this day, before me, an officer duly authorized in the state aforesaid and in the county aforesaid to take acknowledgments,
personally appeared Faron G. Thompson, to me known to be the person described in and who executed the foregoing instrument as the
Managing Director, Capital Markets-Real Estate Investment Banking of Jones Lang LaSalle Operations, L.L.C., an Illinois limited
liability company, and acknowledged to me that he as such officer of the limited liability company, being authorized to do so,
executed the foregoing instrument for the purposes therein contained in the name of such a limited liability company by himself
as Managing Director, Capital Markets-Real Estate Investment Banking of the limited liability company.
Witness my hand and official
seal in the county and state aforesaid, this 18 day of August, 2015.
|
/s/ Valerie A. Copeland |
|
Notary Public |
My Commission Expires: 4/15/2017
VALERIE A. COPELAND
NOTARY PUBLIC
HENRY CO., GEORGIA
My Commission Expires 4/15/2017
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page 20 |
EXHIBIT A
DESCRIPTION OF THE LAND
Century Palms at World Gateway
PARCEL 1 (FEE ESTATE)
PARCEL A-2 OF WORLD GATEWAY PHASE 3, ACCORDING TO THE PLAT THEREOF
AS RECORDED IN PLAT BOOK 46, PAGES 10 THROUGH 12, INCLUSIVE OF THE PUBLIC RECORDS OF ORANGE COUNTY, FLORIDA.
PARCEL 2 (EASEMENT ESTATE)
NON-EXCLUSIVE EASEMENT RIGHTS ARISING UNDER THAT CERTAIN GRANT
OF SIGNAGE EASEMENT EXECUTED BY WORLD GATEWAY PROPERTY OWNERS ASSOCIATION, INC., IN FAVOR OF GCB ASSOCIATES, LTD., AND ORLANDO
GATEWAY, LLC, DATED DECEMBER 29, 2000 AND RECORDED DECEMBER 29, 2000 IN OFFICIAL RECORDS BOOK 6161, PAGE 5064, OF THE PUBLIC RECORDS
OF ORANGE COUNTY, FLORIDA.
AND
THOSE CERTAIN EASEMENTS CREATED IN ARTICLE VI OF THE DECLARATION
OF COVENANTS, CONDITIONS AND RESTRICTIONS FOR THE GREEN PROJECT, ORANGE COUNTY, FLORIDA, RECORDED JANUARY 12, 1995 IN OFFICIAL
RECORDS BOOK 4843, PAGE 1448; SUPPLEMENTAL DECLARATION RECORDED JUNE 5, 1997 IN OFFICIAL RECORDS BOOK 5266, PAGE 4882 AND RECORDED
SEPTEMBER 17, 1997 IN OFFICIAL RECORDS BOOK 5328, PAGE 1945; FIRST AMENDMENT RECORDED NOVEMBER 26, 1997 IN OFFICIAL RECORDS BOOK
5371, PAGE 1159; SUPPLEMENTAL DECLARATION RECORDED IN OFFICIAL RECORDS BOOK 5816, PAGE 4379, AND SECOND AMENDMENT RECORDED IN OFFICIAL
RECORDS BOOK 5847, PAGE 3397, OF THE PUBLIC RECORDS OF ORANGE COUNTY, FLORIDA; THIRD AMENDMENT RECORDED IN OFFICIAL RECORDS BOOK
6600, PAGE 2868; FOURTH AMENDMENT RECORDED IN OFFICIAL RECORDS BOOK 7656, PAGE 3988; FIFTH AMENDMENT RECORDED IN OFFICIAL RECORDS
BOOK 9934, PAGE 2784; FIFTH AMENDMENT RECORDED IN OFFICIAL RECORDS BOOK 10010, PAGE 3690 AND SIXTH AMENDMENT RECORDED IN OFFICIAL
RECORDS BOOK 10377, PAGE 4396, ALL OF THE PUBLIC RECORDS OF ORANGE COUNTY, FLORIDA.
AND
TOGETHER WITH AN UNDIVIDED INTEREST IN AND TO EASEMENT FOR COMMON
AREA PURSUANT TO ARTICLE VIII OF THE DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS AS RECORDED IN O.R. BOOK 4843, PAGE
1448.
AND
TOGETHER WITH THE BENEFIT OF EASEMENT FOR INGRESS AND EGRESS
OVER AND ACROSS TRACT D (SATAY DRIVE) AS PROVIDED FOR AND SET FORTH ON THE PLAT OF WORLD GATEWAY PHASE 3 ACCORDING TO THE PLAT
THEREOF AS RECORDED IN PLAT BOOK 46, PAGES 10 THROUGH 12, AND AFFECTED BY THAT CERTAIN QUIT CLAIM DEED DATED DECEMBER 29, 2000
AND RECORDED DECEMBER 29, 2000 IN OFFICIAL RECORDS BOOK 6161, PAGE 4998.
AND
TOGETHER WITH THAT CERTAIN SLOPE EASEMENT AGREEMENT RECORDED
IN O.R. BOOK 8089, PAGE 4987, ALL OF THE PUBLIC RECORDS OF ORANGE COUNTY, FLORIDA.
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page A-1 |
EXHIBIT B
MODIFICATIONS TO INSTRUMENT
The following modifications are made to the text of the Instrument
that precedes this Exhibit:
| I. | FLORIDA AMENDED AND RESTATED MODIFICATIONS: |
| 1. | In the first paragraph of text on Page 3 starting with “Borrower is indebted to Lender...”,
the words “Multifamily Note” are hereby revised to read “Amended and Restated Multifamily
Note”. |
| 2. | A new Section 37 is added as follows: |
| 37. | NO NOVATION; NO DEFENSES. |
| (a) | Neither this Instrument nor the Note is a substitution or novation of the indebtedness of the Original
Note. Neither this Instrument nor the Note extinguishes the indebtedness of the Original Note or discharges or releases or in any
way adversely affects the lien or lien priorities of the Original Mortgage or any other security for the indebtedness of the Original
Note. In the event that any of the provisions of this Instrument shall be construed by a court of competent jurisdiction as operating
to affect the lien priority of the Original Mortgage over claims which would otherwise be subordinate thereto, then at the sole
option of Lender, Lender may treat such provisions as void and of no force or effect and enforce the provisions of the Original
Mortgage as modified by this Instrument excluding such provisions, or at the sole option of Lender, Lender may enforce the Original
Mortgage pursuant to the terms therein contained, independent of this Instrument to the extent that third persons acquiring an
interest in such real property between the time of recording of the Original Mortgage and the recording hereof are prejudiced by
this Instrument. However, if Lender elects either such option, the parties hereto, as between themselves, shall in all events be
bound by all the terms and conditions of this Instrument and the Note until all Indebtedness owing from Borrower to Lender shall
have been paid in full. |
| (b) | Borrower hereby confirms that it has no defenses or offsets of any kind against any of the indebtedness
due under the Original Note. Borrower hereby waives any claim which it may have with respect to the Original Note or Original Mortgage,
or any other document executed in connection therewith or related thereto, as the same may have been modified, or as hereby or
hereafter modified. Borrower agrees not to raise any such defenses or claims in any civil proceedings or otherwise. |
| 3. | A new subsection (h) is added to Section 19 as follows: |
| (h) | By its execution and delivery of this Instrument, Borrower assumes and ratifies all of the obligations and agreements of Original
Borrower under the Original Note and the Original Mortgage. By its execution and delivery of this Instrument, Lender accepts
such assumption by Borrower and hereby unconditionally and irrevocably, fully and completely releases and discharges Original Borrower,
and each guarantor of the Original Note and the Original Mortgage, from all further liability or obligations under or with respect
to the Original Note and Original Mortgage, with such release being for the benefit of and enforceable by the Original Borrower
and each such guarantor |
Florida Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement | Page B-1 |
Exhibit 10.8
Freddie Mac Loan No. 708556663
Century Palms at World Gateway
AGREEMENT TO AMEND
OR COMPLY
THIS AGREEMENT TO AMEND
OR COMPLY (“Agreement”) is made as of this 20th day of August, 2015 by and between BR CARROLL WORLD GATEWAY,
LLC, a Delaware limited liability company (“Borrower”) and JONES LANG LASALLE OPERATIONS, L.L.C.,
an Illinois limited liability company (“Lender”).
RECITALS:
A. Borrower has
borrowed the sum of $24,999,000.00 (the "Loan") from Lender, evidenced by a Multifamily Loan and Security Agreement
of even date herewith executed by Borrower and Lender (the "Loan Agreement") and Borrower's Multifamily Note of
even date herewith (the "Note"), which Loan Agreement and Note are secured by an Amended and Restated Multifamily
Mortgage, Assignment of Rents and Security Agreement (the "Security Instrument") encumbering the multifamily rental
project known as Century Palms at World Gateway located in Orlando (Orange County), Florida (the "Property") and
more particularly described in the Security Instrument.
B. The Loan Agreement,
the Note, the Security Instrument and the other documents, certificates, instruments and agreements executed by Borrower in connection
with or to otherwise evidence or secure the Loan are hereinafter collectively referred to as the "Loan Documents."
C. Pursuant to the
terms of a Commitment Letter (the “Commitment”), Borrower has been advised that Lender intends to sell, transfer,
deliver and assign the Loan to the Federal Home Loan Mortgage Corporation (“Freddie Mac”).
NOW, THEREFORE, in
consideration of and as an inducement to Lender to make the Loan, Borrower, intending to be legally bound, hereby covenants and
agrees as follows:
1. Further Documentation.
In the event any further documentation or information is (a) reasonably required by Lender in order to enable Lender to sell the
Loan to Freddie Mac, or (b) deemed reasonably necessary or appropriate by Lender in the exercise of its rights under the Commitment
or to correct patent mistakes in the Loan Documents, materials relating to mortgagee’s land title insurance or the funding
of the Loan, Borrower shall provide, or cause to be provided to Freddie Mac or Lender, as the case may be, at Borrower’s
cost and expense, including the payment of any additional fees required by Freddie Mac, such further documentation or information.
Borrower shall execute and deliver to Lender and/or Freddie Mac such documentation, including but not limited to, any amendments,
corrections, deletions or additions to the Note, the Security Instrument and the other Loan Documents as may be required by Lender
or Freddie Mac; provided, however, that Borrower shall not be required to do anything that has the effect of (a) changing the essential
economic terms of the Loan set forth in the Commitment, or (b) imposing greater liability under the Loan Documents than that set
forth in the Commitment, or (c) resulting in any significant cost or expense to the Borrower.
2. Compliance
with Freddie Mac Requirements. Borrower shall do anything reasonably necessary to comply with the requirements of Freddie Mac,
in order to enable Lender to sell the Loan to Freddie Mac or to obtain a refund of the commitment fee from Freddie Mac; provided,
however, that Borrower shall not be required to do anything that has the effect of (a) changing the essential economic terms of
the Loan set forth in the Commitment, or (b) imposing greater liability under the Loan Documents than that set forth in the Commitment,
or (c) resulting in any significant cost or expense to the Borrower.
Agreement to Amend or Comply | Page 1 |
3. Event of Default.
In the event Borrower is requested to: (a) furnish any documentation or information, (b) execute and deliver any documentation;
(c) correct or amend any documents previously executed, or (d) perform any acts, as provided herein, and Borrower fails to do so
such that Freddie Mac refuses to purchase the Loan, or, if previously purchased, Freddie Mac requires that Lender repurchase the
Loan, then such failure by Borrower shall be, at the sole option of Lender, an event of default under the Loan Agreement, the Note,
the Security Instrument and the other Loan Documents and Lender shall have the right, in its sole and absolute option, to demand
payment in full of the Note, and pursue such remedies as are available to Lender under the Security Instrument and the other Loan
Documents.
4. Signatures.
Borrower acknowledges that the Loan Documents may contain blanks for the date of the Loan Documents as well as for certain other
provisions in that such date and terms were not known at the time the Loan Documents were delivered to Borrower for execution.
Borrower further acknowledges that modifications may need to be made to the Loan Documents to incorporate changes thereto agreed
upon by Borrower, any guarantor, and Lender after delivery of the Loan Documents to Borrower for execution (collectively, the “Changes”).
Borrower hereby acknowledges and agrees that Lender is authorized to complete any blanks in the Loan Documents and to substitute
pages into the Loan Documents necessary to reflect any Changes upon review by Borrower and Borrower’s counsel. Borrower further
agrees that should any dispute arise as to which version of the Loan Documents is the “final” version, the computer
files maintained by Lender’s counsel, including without limitation any records of email communications, shall be conclusive
except in the case of manifest error.
5. Survival.
This Agreement shall survive closing of the Loan and funding by Freddie Mac to Lender of Freddie Mac’s purchase of the Loan.
6. Notices.
All notices given under this Agreement shall be in writing to the other party at the address and in the manner set forth in the
Loan Agreement and Security Instrument.
7. Governing
Law: Recourse. This Agreement shall be governed by and construed in accordance with the laws of the jurisdiction in which the
Property is located and applicable federal law, and shall be binding on Borrower and its successors and assigns and shall inure
to the benefit of Lender and its successors and assigns. This Agreement is being executed in connection with the making of the
Loan pursuant to the terms of the Loan Agreement and the Note. Borrower’s liability hereunder shall be limited to the same
extent provided in the Note. Time is of the essence of this Agreement.
8. Counterparts.
This Agreement may be executed in multiple counterparts, each of which shall constitute an original document and all of which together
shall constitute one agreement.
IN WITNESS WHEREOF,
the parties have caused the execution and delivery of this Agreement, under seal, as of the day and year first above written.
Agreement to Amend or Comply | Page 2 |
|
BORROWER: |
|
|
|
BR CARROLL WORLD GATEWAY, LLC,
a Delaware limited liability company |
|
|
|
|
By: |
/s/ Jordan Ruddy |
|
|
Jordan Ruddy |
|
|
Chief Executive Officer |
{Signatures continued on next page}
Agreement to Amend or Comply | Page 3 |
|
LENDER: |
|
|
|
JONES LANG LASALLE OPERATIONS, L.L.C.,
an Illinois limited liability company |
|
|
|
|
By: |
/s/ Faron G. Thompson |
|
|
Faron G. Thompson |
|
|
Managing Director, Capital Markets-Real Estate Investment Banking |
Agreement to Amend or Comply | Page 4 |
Exhibit 10.9
Freddie Mac Loan Number: 708556663
Property Name: Century Palms at World Gateway
ASSIGNMENT OF MANAGEMENT AGREEMENT AND
SUBORDINATION OF MANAGEMENT FEES
(Revised 5-1-2015)
THIS ASSIGNMENT OF MANAGEMENT
AGREEMENT AND SUBORDINATION OF MANAGEMENT FEES (“Assignment”) is made effective as of the 20th day of August,
2015, by and among BR CARROLL WORLD GATEWAY, LLC, a Delaware limited liability company (“Borrower”),
JONES LANG LASALLE OPERATIONS, L.L.C., an Illinois limited liability company (“Lender”), and CARROLL
MANAGEMENT GROUP, LLC, a Georgia limited liability company (“Property Manager”).
RECITALS:
| A. | Borrower has requested that Lender make a loan to Borrower (“Loan”). The Loan
will be evidenced by an Amended and Restated Multifamily Note from Borrower to Lender effective as of the date of this Assignment
(“Note”). The Note is secured by, among other things, a Multifamily Loan and Security Agreement (“Loan
Agreement”) and an Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement (“Security
Instrument”), dated as of the date of this Assignment, which grants Lender a first lien on the property encumbered by
the Security Instrument (“Mortgaged Property”). The Note, the Loan Agreement, the Security Instrument, this
Assignment and any of the other documents evidencing the Loan are collectively referred to as the “Loan Documents”.
Other capitalized terms used but not defined in this Assignment will have the meanings given to those terms in the Loan Agreement. |
| B. | Pursuant to a Management Agreement between Borrower and Property Manager (“Management
Agreement”) (a true and correct copy of which is attached as Exhibit A), Borrower employed Property Manager exclusively
to lease, operate and manage the Mortgaged Property, and Property Manager is entitled to certain management fees (“Management
Fees”) pursuant to the Management Agreement. |
| C. | Lender requires as a condition to the making of the Loan that Borrower assign the Management Agreement
and that Property Manager subordinate its interest in the Management Fees in lien and payment to the Loan as set forth below. |
For good and valuable
consideration the parties agree as follows:
| 1. | Assignment of Management Agreement. As additional collateral security for the Loan, Borrower
conditionally transfers, sets over, and assigns to Lender all of Borrower’s right, title and interest in and to the Management
Agreement and all extensions and renewals. This transfer and assignment will automatically become a present, unconditional assignment,
at Lender’s option, upon a default by Borrower under the Note, the Loan Agreement, the Security Instrument or any of the
other Loan Documents (each, an “Event of Default”), and the failure of Borrower to cure such Event of Default
within any applicable grace period. |
Assignment of Management Agreement and
Subordination of Management Fees
| 2. | Subordination of Management Fees. The Management Fees and all rights and privileges of Property
Manager to the Management Fees are and will at all times continue to be subject and unconditionally subordinate in all respects
in lien and payment to the lien and payment of the Loan Agreement, the Security Instrument, the Note, and the other Loan Documents,
and to any renewals, extensions, modifications, assignments, replacements, or consolidations of the Loan Documents and the rights,
privileges, and powers of Lender under the Note, the Loan Agreement, the Security Instrument, or any of the other Loan Documents. |
| 3. | Estoppel. Property Manager and Borrower represent and warrant that all of the following
are true as of the date of this Assignment: |
| (a) | The Management Agreement is in full force and effect and has not been modified, amended or assigned
other than pursuant to this Assignment. |
| (b) | Neither Property Manager nor Borrower is in default under any of the terms, covenants or provisions
of the Management Agreement and Property Manager knows of no event which, but for the passage of time or the giving of notice or
both, would constitute an event of default under the Management Agreement. |
| (c) | Neither Property Manager nor Borrower has commenced any action or given or received any notice
for the purpose of terminating the Management Agreement. |
| (d) | The Management Fees and all other sums due and payable to the Property Manager under the Management
Agreement have been paid in full. |
| 4. | Agreement by Borrower and Property Manager. Borrower and Property Manager agree that if
there is an Event of Default by Borrower (continuing beyond any applicable grace period) under the Note, the Loan Agreement, the
Security Instrument or any of the other Loan Documents during the term of this Assignment or upon the occurrence of any event which
would entitle Lender to terminate the Management Agreement in accordance with the terms of the Loan Documents, Lender may terminate
the Management Agreement without payment of any cancellation fee or penalty and require Property Manager to transfer its responsibility
for the management of the Mortgaged Property to a management company selected by Lender in Lender’s sole discretion, effective
as of the date set forth in Lender’s notice to Property Manager. Following any such termination, Property Manager agrees
to apply all rents, security deposits, issues, proceeds and profits of the Mortgaged Property in accordance with Lender’s
written directions to Property Manager. |
| 5. | Lender’s Right to Replace Property Manager. If Lender, in Lender’s reasonable
discretion, at any time during the term of this Assignment, determines that the Mortgaged Property is not being managed in accordance
with generally accepted management practices for properties similar to the Mortgaged Property, Lender will deliver written notice
to Borrower and Property Manager, which notice will specify with particularity the grounds for Lender’s determination. If
Lender reasonably determines that the conditions specified in Lender’s notice are not remedied to Lender’s reasonable
satisfaction by Borrower or Property Manager within 30 days from receipt of such notice or that Borrower or Property Manager have
failed to diligently undertake correcting such conditions within such 30-day period, Lender may direct Borrower to terminate Property
Manager as manager of the Mortgaged Property and terminate the Management Agreement without payment of any cancellation fee or
penalty and to replace Property Manager with a management company acceptable to Lender in Lender’s sole discretion pursuant
to a management agreement acceptable to Lender in Lender’s sole discretion. |
Assignment of Management Agreement and Subordination of Management Fees | Page 2 |
| 6. | Receipt of Management Fees. Property Manager will not be obligated to return or refund to
Lender any Management Fees or other fee, commission or other amount received by Property Manager prior to the occurrence of the
Event of Default, and to which Property Manager was entitled under the Management Agreement. If the Property Manager receives any
Management Fees after it has received notice of an Event of Default, Property Manager agrees that such Management Fees will be
received and held in trust for Lender, to be applied by Lender to amounts due under the Loan Documents. |
| 7. | Consent and Agreement by Property Manager. Property Manager acknowledges and consents to
this Assignment and agrees that Property Manager will act in conformity with the provisions of this Assignment and Lender’s
rights under this Assignment or otherwise related to the Management Agreement. If the responsibility for the management of the
Mortgaged Property is transferred from Property Manager in accordance with the provisions of this Assignment, then Property Manager
will fully cooperate in transferring its responsibility to a new management company and complete such transfer no later than 30
days from the date the Management Agreement is terminated. Further, Property Manager agrees as follows: |
| (a) | It will not contest or impede the exercise by Lender of any right Lender has under or in connection
with this Assignment. |
| (b) | It will give at least 30 days prior written notice to Lender of its intention to terminate the
Management Agreement or otherwise discontinue its management of the Mortgaged Property, in the manner provided for in this Assignment. |
| (c) | It will not amend any of the provisions or terms of the Management Agreement without the prior
consent of Lender. |
| 8. | Termination. When the Loan is paid in full and the Security Instrument is released or assigned
of record, this Assignment and all of Lender’s right, title and interest hereunder with respect to the Management Agreement
will terminate. |
| (a) | All notices under or concerning this Assignment (“Notice”) will be in writing.
Each Notice will be deemed given on the earliest to occur of: (i) the date when the Notice is received by the addressee, (ii) the
first Business Day after the Notice is delivered to a recognized overnight courier service, with arrangements made for payment
of charges for next Business Day delivery, or (iii) the third Business Day after the Notice is deposited in the United States mail
with postage prepaid, certified mail, return receipt requested. Addresses for Notice are as follows: |
If to Lender: |
Jones Lang LaSalle Operations, L.L.C.
3344 Peachtree Road NE, Suite 1100
Atlanta, Georgia 30326
Attention: Servicing Department |
Assignment of Management Agreement and Subordination of Management Fees | Page 3 |
If to Borrower: |
BR Carroll World Gateway, LLC
c/o Carroll Organization, LLC
3340 Peachtree Road, Suite 1620
Atlanta, Georgia 30326
Attention: Josh Champion
|
If to Property Manager: |
Carroll Management Group, LLC
c/o Carroll Organization, LLC
3340 Peachtree Road, Suite 1620
Atlanta, Georgia 30326
Attention: Josh Champion |
| (b) | Any party to this Assignment may change the address to which Notices intended for it are to be
directed by means of Notice given to the other parties in accordance with this Section 9. Each party agrees that it will not refuse
or reject delivery of any Notice given in accordance with this Section 9, that it will acknowledge, in writing, the receipt of
any Notice upon request by the other party and that any Notice rejected or refused by it will be deemed for purposes of this Section
9 to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of
the U.S. Postal Service or the courier service. |
| 10. | Governing Law; Consent to Jurisdiction and Venue. |
| (a) | This Assignment will be construed in accordance with and governed by the laws of the Property Jurisdiction. |
| (b) | Borrower and Property Manager agree that any controversy arising under or in relation to this Assignment
may be litigated in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the Property Jurisdiction
will have jurisdiction over all controversies that may arise under or in relation to this Assignment. Borrower and Property Manager
irrevocably consent to service, jurisdiction and venue of such courts for any such litigation and waive any other venue to which
it might be entitled by virtue of domicile, habitual residence or otherwise. However, nothing in this Section 10 is intended
to limit Lender’s right to bring any suit, action or proceeding relating to matters under this Assignment in any court of
any other jurisdiction. |
| 11. | Captions, Cross References and Exhibits. The captions assigned to provisions of this Assignment
are for convenience only and will be disregarded in construing this Assignment. Any reference in this Assignment to an “Exhibit”
or a “Section,” unless otherwise explicitly provided, will be construed as referring, respectively, to an Exhibit attached
to this Assignment or to a section of this Assignment. All Exhibits attached to or referred to in this Assignment are incorporated
by reference into this Assignment. |
| 12. | Number and Gender. Use of the singular in this Assignment includes the plural, use of the
plural includes the singular, and use of one gender includes all other genders, as the context may require. |
| 13. | No Partnership. This Assignment is not intended to, and will not, create a partnership or
joint venture among the parties, and no party to this Assignment will have the power or authority to bind any other party except
as explicitly provided in this Assignment. |
Assignment of Management Agreement and Subordination of Management Fees | Page 4 |
| 14. | Severability. The invalidity or unenforceability of any provision of this Assignment will
not affect the validity of any other provision, and all other provisions will remain in full force and effect. |
| 15. | Entire Assignment. This Assignment contains the entire agreement among the parties as to
the rights granted and the obligations assumed in this Assignment. |
| 16. | No Waiver; No Remedy Exclusive. Any forbearance by a party to this Assignment in exercising
any right or remedy given under this Assignment or existing at law or in equity will not constitute a waiver of or preclude the
exercise of that or any other right or remedy. Unless otherwise explicitly provided, no remedy under this Assignment is intended
to be exclusive of any other available remedy, but each remedy will be cumulative and will be in addition to other remedies given
under this Assignment or existing at law or in equity. |
| 17. | Third Party Beneficiaries. Neither any creditor of any party to this Assignment, nor any
other person, is intended to be a third party beneficiary of this Assignment. |
| 18. | Further Assurances and Corrective Instruments. To the extent permitted by law, the parties
will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements
to this Assignment and such further instruments as may reasonably be required for carrying out the intention of or facilitating
the performance of this Assignment. |
| 19. | Counterparts. This Assignment may be executed in multiple counterparts, each of which will
constitute an original document and all of which together will constitute one agreement. |
| 20. | Indemnity. By executing this Assignment Borrower agrees to indemnify and hold harmless Lender
and its successors and assigns from and against any and all losses, claims, damages, liabilities and expenses including Attorneys’
Fees and Costs, which may be imposed or incurred in connection with this Assignment. |
| 21. | Costs and Expenses. Wherever pursuant to this Assignment it is provided that Borrower will
pay any costs and expenses, such costs and expenses will include Lender’s Attorneys’ Fees and Costs. |
| 22. | Determinations by Lender. In any instance where the consent or approval of Lender may be
given or is required, or where any determination, judgment or decision is to be rendered by Lender under this Assignment, the granting,
withholding or denial of such consent or approval and the rendering of such determination, judgment or decision will be made or
exercised by Lender (or its designated representative) at its sole and exclusive option and in its sole and absolute discretion
and will be final and conclusive, except as may be otherwise expressly and specifically provided in this Assignment. |
| 23. | Successors and Assigns. This Assignment will be binding upon and inure to the benefit of
Borrower, Lender and Property Manager and their respective successors and assigns forever. |
| 24. | Secondary Market. Lender may sell, transfer and deliver the Note and assign the Loan
Agreement, the Security Instrument, this Assignment and the other Loan Documents to one or more investors in the secondary mortgage
market (“Investors”). In connection with such sale, Lender may retain or assign responsibility for servicing
the Loan, including the Note, the Loan Agreement, the Security Instrument, this Assignment and the other Loan Documents, or may
delegate some or all of such responsibility and/or obligations to a servicer including any subservicer or master servicer, on behalf
of the Investors. All references to Lender in this Assignment will refer to and include any such servicer to the extent applicable. |
Assignment of Management Agreement and Subordination of Management Fees | Page 5 |
IN WITNESS WHEREOF the
undersigned have executed this Assignment as of the date and year first written above.
Assignment of Management Agreement and Subordination of Management Fees | Page 6 |
|
BORROWER: |
|
|
|
BR CARROLL WORLD GATEWAY, LLC, a Delaware limited liability company |
|
|
|
|
By: |
/s/ Jordan Ruddy |
|
|
Jordan Ruddy |
|
|
Chief Executive Officer |
Assignment of Management Agreement and Subordination of Management Fees | Page 7 |
|
LENDER: |
|
|
|
JONES LANG LASALLE OPERATIONS, L.L.C., an Illinois limited liability company |
|
|
|
|
By: |
/s/ Faron G. Thompson |
|
|
Faron G. Thompson |
|
|
Managing Director, Capital Markets-Real Estate Investment Banking |
Assignment of Management Agreement and Subordination of Management Fees | Page 8 |
|
PROPERTY MANAGER: |
|
|
|
CARROLL MANAGEMENT GROUP, LLC, a Georgia limited liability company |
|
|
|
|
By: |
/s/ Josh Champion |
|
|
Name: Josh Champion |
|
|
Title: President |
Assignment of Management Agreement and Subordination of Management Fees | Page 9 |
EXHIBIT A
MANAGEMENT AGREEMENT
See Attached
Assignment of Management Agreement and Subordination of Management Fees | Page A-1 |
Exhibit 10.10
Freddie Mac Loan No. 708556663
Century Palms at World Gateway
August 20, 2015
Jones Lang LaSalle Operations, L.L.C.
3344 Peachtree Road NE, Suite 1200
Atlanta Georgia 30326
| Re: | $24,999,000.00 Multifamily Note of even date herewith (“Note”) made by BR Carroll
World Gateway, LLC, a Delaware limited liability company (“Borrower”) to the order of Jones Lang LaSalle Operations,
L.L.C. (“Lender”) |
Gentlemen:
Anything to the contrary
contained in the Note notwithstanding, the undersigned Borrower covenants and agrees not to prepay, in whole or in part, the indebtedness
evidenced by the Note (excluding, however, monthly installments of principal and/or interest due under the Note, which are not
affected by the provisions of this instrument) for a period commencing on the date hereof and ending on the earlier of (a) 61 days
from the date hereof or (b) the date on which the Note is transferred to Federal Home Loan Mortgage Corporation (“Freddie
Mac”). Upon the satisfaction of either of the conditions (a) or (b) expressed in this instrument, this instrument shall
have no further force or effect and any prepayments under the Note shall be made in accordance with the provisions of the Note.
In the event that Borrower breaches the covenants contained in this instrument, Borrower agrees to indemnify and to hold Lender
harmless from all costs associated with such breach and the prepayment of the Note resulting therefrom, including without limitation
all fees, penalties, other consideration and expenses incurred by Lender as a result of such breach and prepayment.
This instrument is
not incorporated into the Note and is not a part thereof, but constitutes an obligation and undertaking of Borrower separate and
independent of the Note. This instrument shall be binding upon Borrower and its successors and assigns and shall inure to the benefit
of Lender exclusively, but shall have no effect upon Freddie Mac now or at the time of the purchase of the Note by Freddie Mac.
{Signatures on next page}
|
BORROWER: |
|
|
|
BR CARROLL WORLD GATEWAY, LLC, a Delaware limited liability company |
|
|
|
|
By: |
/s/ Jordan Ruddy |
|
|
Jordan Ruddy |
|
|
Chief Executive Officer |
Exhibit 10.11
Freddie Mac Loan No. 708556663
Century Palms at World Gateway
BORROWER’S UNDERWRITING CERTIFICATE
THIS BORROWER’S
UNDERWRITING CERTIFICATE (“Certificate”) is made as of this 20th day of August, 2015 by BR CARROLL WORLD
GATEWAY, LLC, a Delaware limited liability company (“Borrower”), for the benefit of JONES LANG LASALLE
OPERATIONS, L.L.C., an Illinois limited liability company (“Lender”).
Recitals:
A. This Certificate
is being executed in connection with Lender's making a mortgage loan to Borrower in the original principal amount of $24,999,000.00
(the “Loan”). The proceeds of the Loan will be used for the financing of a multifamily project known as Century
Palms at World Gateway, and located in Orlando (Orange County), Florida (the “Property”).
B. The Loan is evidenced
by an Amended and Restated Multifamily Note (the “Note”), dated of even date herewith, made by Borrower, and
is secured by, among other things, a Multifamily Loan and Security Agreement (the “Loan Agreement”), and an
Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement (the “Security Instrument”),
dated of even date herewith, granting a lien on the Property (the Note, Loan Agreement, Security Instrument, and other documents
executed in connection with the Loan, including this Certificate, are collectively referred to as the “Loan Documents”).
C. Lender requires
as a condition to the making of the Loan that Borrower make the following specific representations, warranties and agreements in
addition to all other representations, warranties and agreements set forth in the other Loan Documents.
D. Lender intends
to sell, transfer and deliver the Note and assign the Security Instrument to the Federal Home Loan Mortgage Corporation (“Freddie
Mac”). (Lender, its successors, transferees and assigns as holder of the Note, including Freddie Mac, are referred to
as “Lender”).
Agreement:
NOW, THEREFORE, in consideration
of the above and to induce Lender to make the Loan, Borrower represents, warrants and agrees as follows:
1. Authority.
(a) No authorization,
consent, approval, or other action by, or filing with, any state or federal court or governmental authority is required in connection
with the execution and delivery by Borrower of the Loan Documents, other than any filings, notices or recordings which may be required
for the perfection of any liens, pledges or security interests granted pursuant to the Loan Documents. Borrower has obtained all
material permits, licenses or other authorizations or approvals necessary under the laws of the state and local jurisdiction where
the Property is located and the United States of America for the operation of multifamily residential housing on the Property.
(b) The execution
and delivery of the Loan Documents (i) will not cause Borrower to be in violation of, or constitute a material default under, the
provisions of any agreement to which the Borrower is a party or by which Borrower is bound and (ii) will not conflict with, or
result in a breach of, any court judgment, decree or order of any governmental body to which Borrower is subject. In the event
Borrower is a partnership, Borrower represents, warrants and agrees that the representations in subparagraphs (i) and (ii) are
also true and correct with respect to any general partner of Borrower.
Borrower’s Underwriting Certificate | Page 1 |
2. Occupancy
Permits. All required permits or certificates, such as certificates of occupancy or equivalent, have been obtained and
are current and in full force and effect.
| x | Construction was completed for the use and operation of the Property
prior to three (3) years from the date hereof. |
| ¨ | Construction was completed for the use and operation of the Property
within three (3) years or less from the date hereof and therefore copies of all applicable certificates of occupancy for the use
and operation of the Property have been submitted to Lender. |
3. No Subordinate
Financing. No part of the Property or any personal property subject to the Security Instrument is subject to a second mortgage,
deed of trust, or other type of subordinate lien. Borrower has not filed, nor has there been filed on Borrower's behalf, any financing
statement not shown on the UCC financing statement searches furnished to Lender in connection with the Loan.
4. Certifications
as to Loan.
(a) There are no defenses,
offsets or counterclaims to the Note, the Loan Agreement, the Security Instrument or the other Loan Documents. All provisions of
the Note, the Loan Agreement, the Security Instrument and the other Loan Documents are in full force and effect and have not been
modified, amended or in any way waived or changed. There are no defaults under the provisions of the Note, the Loan Agreement,
the Security Instrument or the other Loan Documents.
(b) To Borrower’s
knowledge, there are no issues relating to (i) the structure of the Loan, (ii) Borrower’s organization or structure, (iii)
Borrower’s title in and to the Property, or (iv) the laws of the jurisdiction(s) in which the Property is located and/or
in which Borrower is organized which would materially limit the enforceability of the Loan Documents or, in the event of a foreclosure,
materially impair the title acquired by any purchaser of the Property at foreclosure.
5. Representations,
Warranties and Agreements Survive. The representations, warranties and agreements herein made by Borrower to Lender are
an inducement to Lender for Lender to make the Loan to Borrower. These representations, warranties and agreements shall survive
the making of the Loan by Lender to Borrower and shall remain in effect until the Loan has been repaid in full and the Security
Instrument has been released.
6. Enforcement
of Certificate. This Certificate is executed by Borrower for the benefit of Lender. Borrower understands and agrees that,
in connection with the anticipated sale of the Loan to Freddie Mac, this Certificate may be assigned to Freddie Mac.
7. Indemnification.
Borrower agrees to indemnify, defend and hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities,
losses, damages, obligations and costs or, expenses, including litigation costs and reasonable attorneys fees, arising from or
in any way connected with the representations, warranties and agreements set forth herein.
Borrower’s Underwriting Certificate | Page 2 |
8. Successors
and Assigns Bound. This Certificate shall inure to the benefit of and may be enforced by the Lender and its successors,
transferees and assigns.
9. Amendment
and Waiver. No amendment to this Certificate will be valid unless it is made in writing and executed by Borrower.
10. Severability.
The invalidity, illegality, or unenforceability of any provision of this Certificate pursuant to judicial decree shall not affect
the validity or enforceability of any other provision of this Certificate, all of which shall remain in full force and effect.
11. Purchase
Price. Borrower represents and warrants to Lender that the aggregate of the gross cash purchase price for the Property
(without consideration of any closing costs paid by Borrower) to be reflected on the settlement statement to be approved by Lender,
is not less than $37,000,000.00.
IN WITNESS WHEREOF, Borrower has
executed this Certificate as of the date and year first written above.
Borrower’s Underwriting Certificate | Page 3 |
|
BR CARROLL WORLD GATEWAY, LLC, a Delaware limited liability company |
|
|
|
|
By: |
/s/ Jordan Ruddy |
|
|
Jordan Ruddy |
|
|
Chief Executive Officer |
Borrower’s Underwriting Certificate | Page 4 |
Exhibit 10.12
Freddie Mac Loan Number 708556663
Century Palms at World Gateway
MMP
AND O&M PROGRAMS Implementation Certificate
| Property: | Century Palms at World Gateway
9000 Avenue Pointe Circle
Orlando, Florida 32821 |
The Borrower has accepted and implemented
the Moisture Management Plan for the Property.
The Borrower has accepted and implemented
the following, as an O&M Program for the Property:
Asbestos Operations and Maintenance
Plan dated as of July 7, 2015, prepared by Real Estate Advisory LLC.
[End
of Page - Signature Page to Follow]
MMP and O&M Programs Implementation Certificate | Page 1 |
|
BR CARROLL WORLD GATEWAY, LLC, a Delaware limited liability company |
|
|
|
By: |
/s/ Jordan Ruddy |
|
|
Jordan Ruddy |
|
|
Chief Executive Officer |
MMP and O&M Programs Implementation Certificate | Page 2 |
Exhibit 10.13
BACKSTOP AGREEMENT
THIS AGREEMENT (the
“Agreement”) is made as of the 20th day of August, 2015 (the “Effective Date”),
by MPC PARTNERSHIP HOLDINGS LLC, a Georgia limited liability company (“Carroll Guarantor”), and CARROLL MANAGEMENT
GROUP, LLC, a Georgia limited liability company (“Property Manager”) and BLUEROCK RESIDENTIAL GROWTH REIT, INC.,
a Maryland corporation (“Bluerock Guarantor” and together with the Carroll Guarantor, collectively, the “Guarantors”
and each a “Guarantor”).
WITNESSETH
WHEREAS, BR
WORLD GATEWAY JV MEMBER, LLC, a Delaware limited liability company, an affiliate of the Bluerock Guarantor (the “BR Member”),
and CARROLL CO-INVEST III WORLD GATEWAY, LLC, a Georgia limited liability company, an affiliate of the Carroll Guarantor (the “Carroll
Member”), have entered into that certain Limited Liability Company Agreement, dated as of August __, 2015 (“Operating
Agreement”), of BR Carroll World Gateway Orlando JV, LLC, a Delaware limited liability company (“Company”);
WHEREAS, the
Company is the sole member of BR Carroll World Gateway, LLC, a Delaware limited liability company (the “Property Owner”),
the owner of fee simple title to the Property;
WHEREAS, on
or about August __, 2015, (a) the Property Owner has obtained a loan from Jones Lang LaSalle Operations, L.L.C. (“Lender”),
in the maximum principal amount of $24,999,000 (the “Loan”) evidenced by a Promissory Note dated August__, 2015
(the “Note”) and a Multifamily Loan and Security Agreement dated August __, 2015 (the “Loan Agreement”)
and secured by a first lien mortgage on the Property, and (b) pursuant to those certain Guaranty Agreements executed and delivered
by the Carroll Guarantor and by the Bluerock Guarantor in favor of Lender (each a “Mortgage Guaranty” and collectively,
the “Mortgage Guaranties”), each of such parties is guaranteeing certain obligations relating to the Loan;
WHEREAS, Carroll
Guarantor, Bluerock Guarantor and Property Manager have agreed to execute and deliver this Agreement to set forth their agreement
with respect to liabilities which may arise under the Mortgage Guaranties; and
WHEREAS, capitalized
terms used herein and not otherwise defined shall have the meaning ascribed thereto in the Operating Agreement.
NOW, THEREFORE,
for good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties agree, as follows:
1. Defined
Terms. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall,
except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular
and plural forms thereof):
“Acquiesces”
or “Acquiesced” means, with respect to any Person and any act or omission that may give rise to Guaranty Losses,
and such Person having received (separately, simultaneously and with particularity) written notice from the Person causing such
action to be taken or omitted and specifically describing such act or omission, such Person responding with a written statement
within five (5) Business Days of its receipt of such notice affirmatively stating that such Person does not object to such noticed
acts or omissions (it being specifically acknowledged and agreed, however, that if such Person does not so timely respond within
such five (5) Business Day period, then such Person shall be deemed to have not Acquiesced). For example, if (x) any Carroll Party
desires to take or omit an action which if taken or omitted may give rise to Guaranty Losses, (y) such Carroll Party gives simultaneous
and specific written notices to the Bluerock Guarantor of such Carroll Party’s intent with regard to such action, and (z)
the Bluerock Guarantor fails to respond within five (5) Business Days, then the Bluerock Guarantor shall be deemed to have
not Acquiesced to such action.
“BR Party”
means any of (a) the Bluerock Guarantor, (b) BR Member, including in its capacity as the manager of the Company (the “Bluerock
Manager”), (c) any Person that acquires a membership interest in the Company from a BR Party pursuant to the provisions
of the Operating Agreement, and (d) any employee, agent, representative, officer, manager or member of Bluerock Manager.
“BR Party Caused
Guaranty Losses” means any Guaranty Losses that arise as a result of (x) any acts, omissions or failure to perform of
any BR Party, including, without limitation, any of the same that is the subject of Sections 9(c), 9(d) or 9(f) of the Note to
occur or (y) actions taken by another Person at the direction of, or pursuant to any contract or subcontract entered into with,
any BR Party; provided, however, if such action or omission is (a) Acquiesced to by a Carroll Party, then the same
shall not be deemed a BR Party Caused Guaranty Loss, but rather shall be deemed a Joint Loss or (b) was undertaken at the direction
of a Carroll Party or on account of a prior act or omission of a Carroll Party, then the same shall not be deemed a BR Party Caused
Guaranty Loss, but rather shall be deemed a Carroll Party Caused Guaranty Loss.
“Business
Day” means a day of the year on which banks are open for business in the State of New York and the State of Florida other
than a (a) Saturday, (b) Sunday, (c) legal holiday in the State of New York or (d) legal holiday in the State of Florida.
“Carroll Party”
means, any of (a) the Carroll Guarantor, (b) the Carroll Member, (c) Property Manager, (d) any employee, agent, representative,
officer or member of the Carroll Member or Property Manager, and (e) and any Person that acquires a membership interest in the
Company from a Carroll Party pursuant to the provisions of the Operating Agreement.
“Carroll Party
Caused Guaranty Losses” means any Guaranty Losses that arise as a result of (x) any acts, omissions or failure to perform
of any Carroll Party, including, without limitation, any of the same that is the subject of Sections 9(c), 9(d) or 9(f) of the
Note to occur (i.e., Property Manager or another Carroll Party fails to apply insurance proceeds as required by the Loan Documents,
thus causing a violation of the terms of Section 9(c)(ii) of the Note), or (y) actions taken by another Person at the direction
of, or pursuant to any contract or subcontract entered into with, any Carroll Party, provided, however, if an action
or omission is (a) Acquiesced to by a BR Party, then the same shall not be deemed a Carroll Party Caused Guaranty Loss, but rather
shall be deemed a Joint Loss or (b) was undertaken at the direction of a Bluerock Party or on account of a prior act or omission
of a Bluerock Party, then the same shall not be deemed a Carroll Party Caused Guaranty Loss but rather shall be deemed a BR Party
Caused Guaranty Loss.
“Guaranty
Loss” or “Guaranty Losses” means (individually and collectively, as appropriate) any and all actual out-of-pocket
losses, damages, costs and expenses paid by any of the Guarantors to Lender (or its successor or assignee as lender under the Loan)
under any Mortgage Guaranty.
“Guaranty
Notice” means a written notice from a Guarantor (and/or Property Manager) to the other Guarantors (and/or Property Manager)
specifically describing an act or omission which could give rise to a Guaranty Loss.
“Joint Loss”
or “Joint Losses” means (individually and collectively, as appropriate) any Guaranty Losses that are not a BR Party
Caused Guaranty Loss or a Carroll Party Caused Guaranty Loss. The Carroll Guarantor and Property Manager shall be responsible (on
a joint and several basis) for 5% of any Joint Loss, and the Bluerock Guarantor shall be responsible for 95% of any Joint Loss.
“Loan Documents”
has the meaning given thereto in the Loan Agreement.
“Person”
means any natural person, partnership, corporation, limited liability company and any other form of business or legal entity.
2. Indemnity.
Subject to Section 3 below, (i) the Carroll Guarantor and Property Manager hereby jointly and severally indemnify and hold
the Bluerock Guarantor harmless from and against (a) all Carroll Party Caused Guaranty Losses and (b) 5% of all Joint Losses, and
(ii) the Bluerock Guarantor hereby indemnifies and holds the Carroll Guarantor harmless from and against (c) all BR Party Caused
Guaranty Losses and (d) 95% of all Joint Losses.
3. Limitations.
Notwithstanding anything to the contrary contained in this Agreement, the parties acknowledge and agree as follows:
(a) in
no event shall (i) the Carroll Guarantor or Property Manager have any obligation under this Agreement for any loss, claim, liability,
judgment, cost, damage and/or expense (including, without limitation, reasonable attorneys’ fees, costs and disbursements)
incurred by the Bluerock Guarantor with respect to a claim under a Mortgage Guaranty that is a BR Party Caused Guaranty Loss; or
(ii) the Bluerock Guarantor have any obligation under this Agreement for any loss, claim, liability, judgment, cost, damage and/or
expense (including, without limitation, reasonable attorneys’ fees, costs and disbursements) incurred by the Carroll Guarantor
with respect to a claim under a Mortgage Guaranty that is a Carroll Party Caused Guaranty Loss;
(b) Intentionally
Omitted;
(c) Intentionally
Omitted
(d) in
the event that Property Manager ceases to function as the property manager for the Property for any reason and is not replaced
by another property management company affiliated with a Carroll Party (a “Property Manager Removal Event”),
then the Property Manager shall have no further obligations under this Agreement except with respect to (i) Carroll Party Caused
Guaranty Losses arising from events or circumstances occurring prior to the occurrence of such Property Manager Removal Event,
(ii) Joint Losses based on events or circumstances occurring prior to the occurrence of such Property Manager Removal Event, or
(iii) attorneys’ fees and defense costs for which the Carroll Guarantor and Property Manager are liable under Section
4. Notwithstanding anything in this Paragraph 3(d) to the contrary, the Carroll Guarantor shall remain fully liable
for all obligations owing by the Carroll Guarantor hereunder (notwithstanding such release of Property Manager for future liability
hereunder);
(e) in
the event that any BR Party acquires all of the membership interests in the Company owned on the Effective Date hereof by the Carroll
Member (a “BR Party 100% Acquisition Event”), then the Carroll Guarantor and Property Manager shall have no
further obligations under this Agreement (provided that nothing contained herein shall release the Carroll Guarantor from potential
liability to Lender pursuant to the Mortgage Guaranty executed by the Carroll Guarantor) except with respect to (i) Carroll Party
Caused Guaranty Losses based on events or circumstances occurring prior to the occurrence of such BR Party 100% Acquisition Event,
(ii) Joint Losses based on events or circumstances occurring prior to the occurrence of such BR Party 100% Acquisition Event, or
(iii) attorneys’ fees or defenses costs for which the Carroll Guarantor and Property Manager are liable under Section
4. Following any release of the Carroll Guarantor and Property Manager from future liability in accordance with this Paragraph
3(e), the Bluerock Guarantor shall remain fully liable for all obligations owing by the Bluerock Guarantor to the Carroll Guarantor
under Paragraph 2(ii) hereof (provided, however, that for these purposes and only in this limited circumstance, the Bluerock
Guarantor shall be liable for 100% of any Joint Loss), the same to survive the occurrence of a BR Party 100% Acquisition Event;
and
(f) in
the event that any Carroll Party acquires all of the membership interests in the Company owned on the Effective Date hereof by
BR Member (a “Carroll Party 100% Acquisition Event”), then the Bluerock Guarantor shall have no further obligations
under this Agreement (provided that nothing contained herein shall release the Bluerock Guarantor from potential liability to Lender
pursuant to the Mortgage Guaranty executed by the Bluerock Guarantor) except with respect to (i) BR Party Caused Guaranty Losses
based on events or circumstances occurring prior to the occurrence of such Carroll Party 100% Acquisition Event, (ii) Joint Losses
based on events or circumstances occurring prior to the occurrence of such Carroll Party 100% Acquisition Event, or (iii) attorneys’
fees or defense costs for which the Bluerock Guarantor is liable under Section 4. Following any release of the Bluerock
Guarantor from future liability in accordance with this Paragraph 3(f), the Carroll Guarantor and Property Manager shall
remain fully liable for all obligations owing by the Carroll Guarantor and Property Manager to the Bluerock Guarantor under Paragraph
2(i) hereof (provided, however, that for these purposes and only in this limited circumstance, the Carroll Guarantor and Property
Manager shall be liable for 100% of any Joint Loss), the same to survive the occurrence of a Carroll Party 100% Acquisition Event.
4. Claim
Mechanics.
(a) If
any Guarantor (for purposes of this Paragraph 4, a “Claiming Guarantor”) receives a notice of claim from
the Lender under the Mortgage Guaranty executed by such Claiming Guarantor (any such notice, a “Lender Claim Notice”)
and believes that it is entitled to indemnification under this Agreement, then as a condition to the obligations of any Guarantor
or Property Manager under this Agreement, the Claiming Guarantor:
(i) shall
deliver a notice (the “Claim Notice”) to the other Guarantor and Property Manager (each a “Recipient
Guarantor” in such instance) stating the amount claimed (the “Claimed Amount”), together with (x)
a description of the basis for its belief that the Recipient Guarantors are liable for all or a portion of such amounts and (y)
a copy of the Lender Claim Notice;
(ii) shall
take no action (such as admission of liability or payment to Lender of amounts in respect of the claim under the Mortgage Guaranty)
that would prejudice the Recipient Guarantors in defense of any such claim; provided, however, that (x) the Claiming Guarantor
shall be permitted to disclose information and/or make payments pursuant to the order of any court of competent jurisdiction (a
“Court Order”) requiring such disclosure and/or payment, and (y) the Claiming Guarantor shall promptly notify
the Recipient Guarantors of such Court Order to permit the Recipient Guarantors to seek a protective order or to take other appropriate
action (provided that failure to so promptly notify Recipient Guarantors shall not serve to relieve the Recipient Guarantors from
their obligations under this Agreement unless such failure prejudices the Recipient Guarantors with respect to defense of the underlying
claim). The Claiming Guarantor shall, if requested by the Recipient Guarantors, cooperate (at no cost or expense to the Claiming
Guarantor) in the Recipient Guarantors’ efforts to obtain an order barring such disclosure and/or payment;
(iii) agrees
that if the Recipient Guarantor(s) agrees that the Claim Notice relates to a Guaranty Loss caused by the Recipient Guarantor(s),
then the Recipient Guarantors shall have the exclusive right to conduct the defense to any claim, demand or suit relating to such
Lender Claim Notice; and
(iv) agrees
that if the Recipient Guarantor(s) agrees that the Claim Notice relates to a Guaranty Loss that is a Joint Loss, then the Guarantors
and Property Manager shall jointly conduct the defense to any claim, demand or suit relating to such Lender Claim Notice, and the
Carroll Guarantor and Property Manager shall pay (on a joint and several basis) 5% and the Bluerock Guarantor shall pay 95% of
the actual and reasonable attorneys’ fees and other actual and reasonable costs actually incurred in connection with such
defense; provided, however, if the parties under such circumstance cannot agree on joint legal counsel or that the Claim Notice
relates to a Joint Loss, then each of the Claiming Guarantors shall be entitled to conduct its own defense and the provisions of
Paragraph 4(c)(i) through (iv) shall apply.
(b) On
or before the date which is 10 days after receipt of the Claim Notice, the Recipient Guarantors shall either:
(i) pay
the Claimed Amount to the Claiming Guarantor or directly to Lender;
(ii) deliver
notice to the Claiming Guarantor that the Recipient Guarantors agree that the Recipient Guarantors are liable for the Claimed Amount
and that the Recipient Guarantors are electing to defend against the Lender Claim Notice; or
(iii) deliver
a notice to the Claiming Guarantor disputing that the Recipient Guarantors are liable for any portion of the Claimed Amount (it
being acknowledged that the Recipient Guarantors’ failure to respond shall be deemed delivery of a notice under this subparagraph
(iii) on the last day of such 10 day period).
(c) Each
party to this Agreement agrees that, notwithstanding any provision herein to the contrary, if a Recipient Guarantor proceeds under
the provisions of Paragraph 4(a)(iii) or Paragraph 4(b)(ii) above but such Recipient Guarantor thereafter fails to
diligently defend against any such Lender Claim Notice, then after notice of such failure by the Claiming Guarantor to such Recipient
Guarantor and the failure of such Recipient Guarantor to diligently commence such defense within 10 days of such notice (it being
agreed that notices to Lender disputing the Lender Claim Notice shall constitute commencement of defense against such Lender Claim
Notice and in such event the Recipient Guarantors shall not be required to commence litigation, arbitration or take other actions
to be deemed to be defending against any such Lender Claim Notice):
(i) the
Claiming Guarantor shall have the right to conduct the defense to the applicable Lender Claim Notice;
(ii) the
Claiming Guarantor shall not be required to obtain the consent of such Recipient Guarantor to any settlement or resolution of any
matters arising from the applicable Lender Claim Notice (including, without limitation, any proposed payment to Lender);
(iii) if
it is ultimately determined that such Lender Claim Notice relates to a Carroll Party Caused Guaranty Loss or a BR Party Caused
Guaranty Loss, then the applicable Recipient Guarantor shall be required to pay all actual and reasonable attorneys’ fees
and other reasonable costs actually incurred by the Claiming Guarantor in connection with such defense; and
(iv) if
it is ultimately determined that such Lender Claim Notice relates to a Joint Loss, the Carroll Guarantor and Property Manager shall
be required to pay (on a joint and several basis) 5% and the Bluerock Guarantor shall be required to pay 95% of the actual and
reasonable attorneys’ fees and other reasonable costs actually incurred by the Claiming Guarantor in connection with such
defense.
(d) For
the avoidance of doubt, nothing contained in this Section 4 shall limit any Guarantor from delivering more than one Claim
Notice as to any particular Lender Claim Notice.
5. WAIVER
OF JURY TRIAL. THE PARTIES HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT
TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS AGREEMENT OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION HEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY
BY THE PARTIES, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY
WOULD OTHERWISE ACCRUE. EACH PARTY IS HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE
OF THIS WAIVER BY EACH OTHER PARTY, AS APPLICABLE.
6. VENUE
AND JURISDICTION. THE PARTIES HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF
NEW YORK, STATE OF NEW YORK AND IRREVOCABLY AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT
SHALL BE LITIGATED IN SUCH COURTS. THE PARTIES ACCEPT FOR THEMSELVES AND IN CONNECTION WITH THEIR PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE JURISDICTION OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO SUCH VENUE AS BEING AN INCONVENIENT FORUM.
7. Entire
Agreement; Writing Required. This Agreement constitutes the entire agreement between the Carroll Guarantor, Property Manager
and the Bluerock Guarantor with respect to the matters referred to herein, and no modification or waiver of any of the terms hereof
shall be effective unless in writing, signed by the party to be charged with such modification or waiver.
8. Governing
Law. This Agreement shall be governed by the laws of the State of Florida, without regard for conflicts of laws principles
or otherwise.
9. Severability.
Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions
of this Agreement.
10. Notices.
Any notice or request required or permitted to be given hereunder (each, a “Notice” or a “notice”)
shall be in writing and shall be (as elected by the party giving such notice) (i) transmitted by certified or registered mail,
return receipt requested, postage prepaid, (ii) transmitted by personal delivery, or (iii) transmitted by nationally recognized
overnight courier service. Except as otherwise specified herein, all notices and other communications shall be deemed to have been
duly given (a) five (5) Business Days after the date of posting if transmitted by certified or registered mail, (b) the date of
delivery if transmitted by personal delivery or (c) the first Business Day after the date of posting if delivered by nationally-recognized
overnight courier service. Each party may change its address for purposes hereof by notice given to the other parties. Notices
hereunder shall be directed:
To the Carroll Guarantor
and Property Manager, at:
c/o Carroll Organization, LLC
3340 Peachtree Road, Suite 1620
Atlanta, Georgia 30326
Attention: M. Patrick Carroll
Facsimile No. (404) 523-9372
With a copy to:
Morris, Manning & Martin LLP
1600 Atlanta Financial Center
3343 Peachtree Road, NE
Atlanta, Georgia 30326
Attention: Gerald V. Thomas II, Esq.
Facsimile: (404) 365-9532
To the Bluerock Guarantor:
c/o Bluerock Real Estate, L.L.C.
712 Fifth Avenue, 9th Floor
New York, New York 10019
Attn: R. Ramin Kamfar
With a copy to:
c/o Bluerock Real Estate, L.L.C.
712 Fifth Avenue, 9th Floor
New York, New York 10019
Attn: Michael L. Konig, Esq.
11. Counterparts.
This Agreement may be executed in counterparts (including facsimile counterparts), each of which shall be deemed an original and
all of which taken together shall constitute the same instrument. All signatories hereto intend (as evidenced by their execution
hereof) that a facsimile copy and signature shall have the same effect as an original.
12. No
Third Party Beneficiary; Recitals Incorporated. This Agreement does not create, and shall not be construed as creating, any
rights or claims enforceable by any person or entity other than the parties hereto, it being the intention of the parties hereto
that no one shall be deemed to be a third party beneficiary of this Agreement. The recitals set forth above are incorporated into
this Agreement as if fully set forth herein.
13. Prevailing
Party Fees. To the fullest extent permitted by law, in the event of any litigation arising out of this Agreement, including,
but not limited to, any claim for amounts due under Section 4, the prevailing party shall be entitled to receive from the
losing party an amount equal to the prevailing party’s costs incurred in such litigation, including, without limitation,
the prevailing party’s attorneys’ fees, costs and disbursements. Additionally, if any Guarantor or Property Manager
becomes subject to any bankruptcy proceeding, other relief from creditors, receivership or similar proceedings (whether same are
voluntary or involuntary), then the other Guarantors or Property Manager, as applicable, shall be entitled to receive reimbursement
for all costs and expenses (including, without limitation, actual and reasonable attorneys’ fees, costs and disbursements)
incurred by such other parties in responding to or participating in such proceeding from the Guarantor or Property Manager, as
applicable, subject to such bankruptcy proceeding. The provisions of this Section 13 shall survive the termination of this
Agreement.
14. Further
Assurances. Each party hereto agrees that it will without further consideration execute and deliver such other documents and
take such other action, subsequent to the Effective Date as may be reasonably requested by another party hereto to consummate more
effectively the purposes or subject matter of this Agreement.
[SIGNATURES ON FOLLOWING PAGES]
IN WITNESS WHEREOF,
the parties have executed this Agreement as of the Effective Date.
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CARROLL GUARANTOR: |
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MPC PARTNERSHIP HOLDINGS LLC, a Georgia limited liability company |
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By: |
/s/ M. Patrick Carroll |
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Name: |
M. Patrick Carroll |
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Title: |
President |
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PROPERTY MANAGER: |
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CARROLL MANAGEMENT GROUP, LLC |
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By: |
/s/ Josh Champion |
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Name: |
Josh Champion |
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Title: |
President |
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BLUEROCK GUARANTOR: |
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BLUEROCK RESIDENTIAL GROWTH REIT, INC., a Maryland corporation |
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By: |
/s/ Michael L. Konig |
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Name: |
Michael L. Konig |
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Title: |
Sr. V.P. – General Counsel |
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE
OFFICER
I, R. Ramin Kamfar, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Bluerock Residential Growth REIT, Inc.: |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and |
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a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c. |
Evaluated the effectiveness of the registrant’s disclosures controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this based on such evaluation; and |
|
d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 12, 2015 |
/s/ R. Ramin Kamfar |
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R. Ramin Kamfar |
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Chief Executive Officer and President |
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(Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL
OFFICER
I, Christopher J. Vohs, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Bluerock Residential Growth REIT, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and |
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c. |
Evaluated the effectiveness of the registrant’s disclosures controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this based on such evaluation; and |
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d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 12, 2015 |
/s/ Christopher J. Vohs |
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Christopher J. Vohs |
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Chief Accounting Officer and Treasurer |
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(Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION
1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. § 1350, as created by Section §
906 of the Sarbanes-Oxley Act of 2002, the undersigned officers of Bluerock Residential Growth REIT, Inc. (the “Company”)
hereby certify, to such officers’ knowledge, that:
|
(i) |
The accompanying Quarterly Report on Form 10-Q for the period ended September 30, 2015 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
|
(ii) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
November 12, 2015 |
/s/ R. Ramin Kamfar |
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R. Ramin Kamfar |
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Chief Executive Officer and President |
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(Principal Executive Officer) |
November 12, 2015 |
/s/ Christopher J. Vohs |
|
Christopher J. Vohs |
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Chief Accounting Officer and Treasurer |
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(Principal Financial Officer) |
A signed original of this written statement required by Section
906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission
or its staff upon request.
The foregoing certification is being furnished as an exhibit
to the Report pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 and, accordingly,
is not being filed with the Securities and Exchange Commission as part of the Report and is not to be incorporated by reference
into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934 (whether made before or
after the date of the Report, irrespective of any general incorporation language contained in such filing).
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