INVESTMENT ALLOCATION AGREEMENT

 

 

This INVESTMENT ALLOCATION AGREEMENT (this “Agreement”) is dated as of April 2,
2014, by and among Bluerock Residential Growth REIT, Inc., a Maryland
corporation (the “Company”), Bluerock Residential Holdings, LP, a Delaware
limited partnership (the “Operating Partnership”), BRG Manager, LLC, a Delaware
limited liability company (the “Manager”), and Bluerock Real Estate, L.L.C., a
Delaware limited liability company (“Bluerock”). Capitalized terms used herein
and not otherwise defined are as defined on Schedule I hereto.

 

WHEREAS, the Company intends to invest in the Target Assets;

 

WHEREAS, pursuant to a Management Agreement, dated the date hereof (the
“Management Agreement”), by and among the Company, Operating Partnership and the
Manager, the Company will be externally managed and advised by the Manager,
which is an Affiliate of Bluerock;

 

WHEREAS, an Affiliate of Bluerock is the manager of the SOIF II, the purpose of
which is to invest in certain of the Target Assets in addition to investments in
certain other types of real estate related assets;

 

WHEREAS, an Affiliate of Bluerock is the manager of the SOIF III, the purpose of
which is to invest in certain of the Target Assets in addition to investments in
certain other types of real estate related assets;

 

WHEREAS, an Affiliate of Bluerock is the manager of the BGF, the purpose of
which is to invest in certain of the Target Assets in addition to investments in
certain other types of real estate related assets;

 

WHEREAS, an Affiliate of Bluerock is the manager of the BGF II, the purpose of
which is to invest in certain of the Target Assets in addition to investments in
certain other types of real estate related assets;

 

WHEREAS, the Manager and Bluerock wish to provide the Company and the Operating
Partnership with certain rights to invest in Target Assets; and

 

WHEREAS, the Manager and Bluerock have agreed to the additional sponsorship and
management restrictions as set forth herein.

 

NOW, THEREFORE, in consideration of the mutual agreements herein made and
intending to be legally bound, the parties hereto hereby agree as follows:

 

ARTICLE I

INVESTMENT OPPORTUNITIES

 

1.1 Other Investment Vehicles.

 

(a) Each of the Manager and Bluerock represent and warrant to the Company and
the Operating Partnership that none of the Manager, Bluerock or any Affiliate of
Bluerock currently sponsor or manage any Potential Competing Investment Vehicle
with Uncommitted Capital other than the Company and the Bluerock Private Real
Estate Funds.

 

(b) Each of the Manager and Bluerock agree that during the term of this
Agreement, none of the Manager, Bluerock or any Affiliate of Bluerock will
sponsor or manage a Potential Competing Investment Vehicle, unless Bluerock
causes such vehicle to become a party hereto and bound by the terms hereof as
apply to the Bluerock Private Real Estate Funds.

 

 

 

 

1.2 Co-Investment Rights.

 

(a) Subject to paragraph (b) of this Section 1.2, the parties hereto agree that
Company shall have following co-investment rights during the Co-Investment
Period:

 

(i) Of the equity capital proposed to be invested by any of the Bluerock Private
Real Estate Funds, any Potential Competing Investment Vehicle or the Company in
any Bluerock Target Asset Opportunity, the Company (including through its
Operating Partnership) shall have the right, but not the obligation, to invest
at least seventy-five percent (75.0%) of such equity capital (the “Bluerock
Investment Equity”), subject to the discretion of the Company’s board of
directors;

 

(ii) To the extent that any or all of the Bluerock Private Real Estate Funds and
any Potential Competing Investment Vehicle elect to invest less than twenty-five
percent (25.0%) of the Bluerock Investment Equity in any Bluerock Target Asset
Opportunity, the Company shall also have the right, but not the obligation, to
invest an additional percentage of equity capital in such Bluerock Target Asset
Opportunity equal to the percentage of the Bluerock Investment Equity not so
invested by any or all of Bluerock Private Real Estate Funds and any Potential
Competing Investment Vehicle.

 

(iii) To the extent that the Company does not have sufficient capital to invest
at least seventy-five percent (75.0%) of the Bluerock Investment Equity,
Bluerock shall allocate the opportunity to invest the Bluerock Investment Equity
on a fair and equitable basis among the Company, the Bluerock Private Real
Estate Funds and Potential Competing Vehicles taking into account the
suitability of the investment opportunity for the particular Bluerock investment
vehicle and the Company (in consideration of the Investment Guidelines) and the
capital available for investment by each such Bluerock investment vehicle and
the Company.

 

(iv) Any portion of a Bluerock Target Asset Opportunity that the Company elects
not to invest in pursuant to clauses (i) or (ii) of paragraph (b) of this
Section 1.2 may be thereafter offered to, and purchased by, any investment
vehicle sponsored or managed by the Manager, Bluerock or their respective
Affiliates.

 

(b) The Company’s rights set forth in paragraph (a) of this Section 1.2 are
subject to the following conditions:

 

(i) the availability of the Company’s cash to make investments;

 

(ii) the Manager’s determination that the proposed investment opportunity
referred to in paragraph (a) of this Section 1.2 (x) is consistent with the
Investment Guidelines, (y) would not violate any of the Investment Guidelines,
and (z) will be made pursuant to the requirements of the Investment Guidelines;

 

(iii) the determination by the Manager that the proposed investment opportunity
referred to in paragraph (a) of this Section 1.2 permits the Company, taking
into account the composition of the Company’s portfolio at the time and any
other relevant factors, to maintain its status as a real estate investment
trust; and

 

(iv) the determination by Bluerock that such investment opportunity permits the
Company, any Bluerock Private Real Estate Fund and any Potential Competing
Vehicle to maintain its exemption from registration under the Investment Company
Act of 1940, as amended.

 

(c) For purposes of this Section 1.2, the Bluerock Target Asset Opportunities
shall also include opportunities to invest in a portfolio of assets including
both Target Assets and real estate related equity investments if the Manager
determines that more than 50% of the aggregate anticipated investment returns
from the portfolio is expected to come from the Target Assets. 

 

 

 

  

ARTICLE II

MISCELLANEOUS 

 

2.1 Termination. This Agreement shall terminate on the earlier of the date
(i) on which the Management Agreement terminates or expires in accordance with
its terms, and (ii) the Manager and Bluerock are no longer under common control.

 

2.2 Notices. All notices, requests and demands to or upon the respective parties
hereto to be effective shall be in writing (including by telecopy), and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered against receipt or upon actual receipt of (i) personal
delivery, (ii) delivery by reputable overnight courier, (iii) delivery by
facsimile transmission with telephonic confirmation or (iv) delivery by
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below (or to such other address as may be hereafter
notified by the respective parties hereto in accordance with this Section 2.2):

 

          The Company:   Bluerock Residential Growth REIT, Inc.     712 Fifth
Avenue, 9th Floor     New York, New York 10019     Attention: R. Ramin Kamfar  
  Fax: (646) 278-4220           with a copy to:   Kaplan Voekler Cunningham &
Frank, PLC     1401 East Cary Street     Richmond, Virginia 23219     Attention:
Richard P. Cunningham, Jr., Esq.     Fax: (804) 823-4099           The Operating
Partnership:   Bluerock Residential Holdings, L.P.     712 Fifth Avenue, 9th
Floor     New York, New York 10019     Attention: R. Ramin Kamfar     Fax:
(646) 278-4220           with a copy to:   Kaplan Voekler Cunningham & Frank,
PLC     7 East 2nd Street     Richmond, Virginia 23224     Attention: Richard P.
Cunningham, Jr., Esq.     Fax: (804) 823-4099           The Manager or Bluerock:
  BRG Manager, LLC     712 Fifth Avenue, 9th Floor     New York, New York 10019
    Attention: Jordan Ruddy     Fax: (646) 278-4220

 

2.3 Binding Nature of Agreement; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors and assigns as provided herein.

 

2.4 Integration. This Agreement contains the entire agreement and understanding
among the parties hereto with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements, understandings, inducements
and conditions, express or implied, oral or written, of any nature whatsoever
with respect to the subject matter hereof. The express terms hereof control and
supersede any course of performance and/or usage of the trade inconsistent with
any of the terms hereof.

 

 

 

 

2.5 Amendments; Waivers. This Agreement may not be amended, supplemented or
modified except in an instrument in writing executed by the parties hereto;
provided, however, a Potential Competing Investment Vehicle may be added as a
party hereto for purposes of Section 1.1(b) without any written execution by a
party hereunder. No waiver of any term or condition hereof or obligation
hereunder shall be valid unless made in writing and signed by the parties to
this Agreement.

 

2.6 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT FOR ANY DISTRICT WITHIN SUCH STATE FOR THE PURPOSE OF ANY
ACTION OR JUDGMENT RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY AND TO THE LAYING OF VENUE IN SUCH COURT.

 

2.7 WAIVER OF JURY TRIAL. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO
ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

 

2.8 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of a party hereto, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.

 

2.9 Costs and Expenses. Each party hereto shall bear its own costs and expenses
(including the fees and disbursements of counsel and accountants) incurred in
connection with the negotiations and preparation of and the closing under this
Agreement and all matter incident thereto.

 

2.10 Section Headings. The section and subsection headings in this Agreement are
for convenience in reference only and shall not be deemed to alter or affect the
interpretation of any provisions hereof.

 

2.11 Counterparts. This Agreement may be executed by the parties to this
Agreement on any number of separate counterparts (including by telecopy), and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.

 

2.12 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 

 

 

 

 

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above. 

 

            Bluerock Residential Growth REIT, Inc.            By:   /s/
Christopher J. Vohs       Name:   Christopher J. Vohs        Title:   Treasurer
and Chief Accounting Officer     

 

            Bluerock Residential Holdings, L.P.            By:   Bluerock
Residential Growth REIT, Inc., its General Partner               By: /s/
Christopher J. Vohs       Name:   Christopher J. Vohs        Title:   Treasurer
and Chief Accounting Officer        BRG Manager, LLC            By:   Bluerock
Real Estate, L.L.C., its Manager               By: /s/ Jordan B. Ruddy      
Name:   Jordan B. Ruddy        Title:   Authorized Signatory   

 

  Bluerock Real Estate, L.L.C.               By:   /s/ Jordan B. Ruddy      
Name: Jordan B. Ruddy       Title:   Authorized Signatory  

 

Signature Page to Investment Allocation Agreement

 

 

 

  

Schedule I 

 

“Affiliate” means, with respect to a specified Person, any Person directly or
indirectly controlling, controlled by, or under common control with the
specified Person.

 

“BGF” means Bluerock Growth Fund, LLC, a Delaware limited liability company.

 

“BGF II” means Bluerock Growth Fund II, LLC, a Delaware limited liability
company.

 

“Bluerock Private Real Estate Funds” means SOIF II, SOIF III, BGF and BGF II.

 

“Bluerock Target Asset Opportunities” means investment opportunities in Target
Assets that are identified by Bluerock, the Manager or one of their respective
Affiliates.

 

“Co-Investment Period” means the period during which the Management Agreement is
in effect and any of the Bluerock Private Real Estate Funds have Uncommitted
Capital.

 

“Investment Guidelines” means the Investment Guidelines attached to the
Management Agreement, subject to any amendments to the Investment Guidelines
from time to time adopted by the board of directors of the Company.

 

“IPO Prospectus” means the Company’s prospectus, dated March 28, 2014, forming a
part of the Company’s Registration Statement on Form S-11 (No. 333-192610).

 

“Person” means any individual, general partnership, limited partnership, limited
liability company, corporation, joint venture, trust, business trust,
cooperative or association and the heirs, executors, administrators, legal
representatives, successors and assigns of such Person where the context so
admits.

 

“Potential Competing Investment Vehicle” means an investment vehicle that
invests in the Target Assets, whether primarily or not primarily but as part of
a general real estate strategy.

 

“SOIF II” means Bluerock Special Opportunity + Income Fund II, LLC, a Delaware
limited liability company.

 

“SOIF III” means Bluerock Special Opportunity + Income Fund III, LLC, a Delaware
limited liability company.

 

“Target Assets” means the types of assets described under “Our Business and
Properties — Our Business and Growth Strategies” in the IPO Prospectus, subject
to, and including any changes to the Company’s Investment Guidelines that may be
approved by the board of directors of the Company from time to time.

 

“Uncommitted Capital” means the capital of an investment vehicle (including in
the form of unfunded capital commitments) that has not been (i) invested, or
reserved for, in any investment in accordance with the terms of the investment
vehicle’s operative documents, or (ii) allocated to a particular investment
opportunity pursuant to a definitive agreement or a binding or non-binding
letter of intent, in each case between such investment vehicle and a proposed
seller of an investment.