Bluerock Residential Growth REIT

The charter contains extensive related-party conflict provisions (Article X) allowing the Corporation to transact with the Sponsor, Advisor, Directors, and Affiliates subject only to majority Independent Director approval and fairness determinations. The Corporation may invest in joint ventures with affiliates, and the Advisor may earn fees from multiple transactions.

“The Corporation may purchase or lease an Asset or Assets from the Sponsor, the Advisor, a Director or any Affiliate thereof upon a finding by a majority of Directors (including a majority of Independent Directors) not otherwise interested in the transaction that such transaction is fair and reasonable to the Corporation and at a price to the Corporation no greater than the cost of the Asset to such Sponsor, Advisor, Director or Affiliate.”

The Corporation is expressly permitted to invest in Joint Ventures with the Sponsor, Advisor, Directors or their Affiliates, subject only to majority approval of disinterested Directors. This creates a structural related-party conflict where insiders may co-invest alongside the Corporation.

“The Corporation may invest in Joint Ventures with the Sponsor, Advisor, one or more Directors or any Affiliate, only if a majority of Directors (including a majority of Independent Directors) not otherwise interested in the transaction, approve such investment as being fair and reasonable to the Corporation and on substantially the same terms and conditions as those received by the other joint venturers.”

The charter expressly permits the Advisor, Sponsor, Directors and their Affiliates to purchase or lease Assets from the Corporation, subject only to majority approval of disinterested Directors, creating a potential conflict of interest in asset dispositions.

“An Advisor, Sponsor, Director or Affiliate thereof may purchase or lease Assets from the Corporation if a majority of Directors (including a majority of Independent Directors) not otherwise interested in the transaction determine that the transaction is fair and reasonable to the Corporation.”

The Manager and its Affiliates are expressly permitted to manage other investment programs with similar objectives, and the Company is explicitly told it is not entitled to preferential treatment relative to those other programs. Conflicts in investment allocation are reported to the Board but not prohibited.

“nothing in this Agreement shall (i) prevent the Manager or any of its Affiliates, officers, directors or employees, from engaging in other businesses or from rendering services of any kind to any other Person or entity, whether or not the investment objectives or policies of any such other Person or entity are similar to those of the Company ... The Company shall be entitled to equitable treatment under the circumstances in receiving information, recommendations and any other services, but the Company recognizes that it is not entitled to receive preferential treatment as compared with the treatment given by the Manager or any Affiliate of the Manager to others.”

The Advisor (Bluerock Enhanced Multifamily Advisor, LLC) holds Convertible Shares that convert to Common Shares upon a Triggering Event, entitling the Advisor to a 15% promote on value appreciation above a 7% cumulative return threshold. This creates a direct economic conflict between the Advisor and Common Shareholders as to timing and structure of liquidity events.

“Conversion Product . The term 'Conversion Product' shall mean the product of 0.15 times the amount, if any, by which (X) the sum of the Enterprise Value as of the date of the Triggering Event plus total Distributions paid to holders of Common Shares through the date of the Triggering Event, exceeds (Y) the sum of Invested Capital plus the Stockholders' 7% Return as of the date of the Triggering Event.”

The Advisor (Bluerock Enhanced Multifamily Advisor, LLC) and its Affiliates hold 1,000 non-participating, non-voting Convertible Shares that automatically convert to Common Shares upon a Triggering Event, capturing 15% of appreciation above a 7% cumulative return threshold. This is a direct economic interest of the Advisor in the fund's upside, creating a structural related-party conflict.

“The term 'Conversion Product' shall mean the product of 0.15 times the amount, if any, by which (X) the sum of the Enterprise Value as of the date of the Triggering Event plus total Distributions paid to holders of Common Shares through the date of the Triggering Event, exceeds (Y) the sum of Invested Capital plus the Stockholders' 7% Return as of the date of the Triggering Event.”

Upon Termination Without Cause or internalization, the Company must pay the Manager a Termination Fee equal to 3x the trailing 12-month sum of Base Management Fee plus Incentive Fee. This creates a substantial financial disincentive for shareholders seeking to remove an underperforming manager.

“In the event of a Termination Without Cause, the Company shall pay the Manager the Termination Fee before or on the last day of the Initial Term or such Automatic Renewal Term, as the case may be”