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ITEM 2.03
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CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT.
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Modification
Agreement
On
June 7, 2016, (i) BR T&C BLVD., LLC, a Delaware limited liability company, or the Borrower (a majority owned subsidiary of
BR T&C BLVD JV Member, LLC, a Delaware limited liability company, a partially owned subsidiary of BRG T&C BLVD Houston,
LLC, a Delaware limited liability company, a wholly owned subsidiary of our operating partnership, Bluerock Residential Holdings,
L.P., a Delaware limited partnership), (ii) CFP Residential, L.P., a Texas limited partnership, Maple Residential, L.P., a Delaware
limited partnership, CFH Maple Residential Investor, L.P., a Texas limited partnership, VF Residential, Ltd., a Texas limited partnership,
and VF Multifamily Holdings, Ltd., a Texas limited partnership, or collectively, the Guarantors, and (iii) Compass Bank, an Alabama
banking corporation, or Compass Bank, and Green Bank, a N.A., a national banking association, or Green Bank, and together with
Compass Bank, the Lenders, entered into that certain modification agreement, or the Modification Agreement, to amend the terms
of the credit facility, or the Construction Loan, financing the construction and development of a 340-unit class A, apartment community
located in Houston, Texas, to be known as Alexan CityCentre, or the Alexan Development. For purposes herein, we refer to the Construction
Loan, as modified by the Modification Agreement, as the Modified Construction Loan.
The
maximum principal amount available to the Borrower under the terms of the Modified Construction Loan is $55.1 million, or the Maximum
Principal. The maturity date of the Modified Construction Loan is January 1, 2020, subject to a single one-year extension exercisable
at the option of the Borrower. The interest rate on the Modified Construction Loan is a variable per annum rate equal to the prime
rate plus 0.5%; provided that, at the request of the Borrower, the interest rate for a portion of the outstanding principal amount
(not less than $500,000) may alternatively be determined in accordance with the LIBOR rate plus 3.00%. The Modified Construction
Loan requires monthly interest payments until the maturity date, after which $60,000 monthly payments of principal will be required
in addition to payment of accrued interest during the maturity extension period. The Borrower will be required to initially fund
$2,619,645 as an interest reserve and $597,661 as an operating deficit reserve. In connection with the Modification Agreement,
the Borrower has provided an updated project budget and agreed, subject to certain exceptions, not to make distributions to its
members during the course of the Modified Construction Loan. The Modified Construction Loan contains releases from liability and
indemnities that are customary and standard for loan agreements in the real estate industry. The Guarantors have agreed to guaranty
and have entered into agreements fully guarantying the completion of the Alexan Development and partial guaranties of the Borrower’s
principal and interest obligations under the Modified Loan Agreement. Pursuant to the Modified Construction Loan, the Borrower
is required to complete the Alexan Development by December 31, 2017 (without extension for any reason). To obtain the Modification
Agreement, the Borrower is required to contribute additional equity for the Alexan Development in the amount of $2,200,500 to be
applied to development costs. As compensation for entering into the Modification Agreement and performing under the Modified Construction
Loan, the Lenders received a loan extension fee of $275,500, representing 0.5% of the Maximum Principal.
The
foregoing description of the terms of the Modification Agreement and their effect on the terms of the existing Construction Loan
is a summary and is qualified in its entirety by the terms of the Modification Agreement, a copy of which is filed as Exhibit No.
10.1 to this Current Report on Form 8-K and incorporated by reference into this Item 2.03.