UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D. C. 20549





FORM 10-K








(Mark One)


xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 OR
 oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the transition period from  ____ to ____
  Commission file number: 333-153135
  BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.
  Maryland



(State or Other Jurisdiction of  Incorporation or Organization)

26-3136483



(I.R.S. Employer Identification No.)680 5th Avenue, 16th Floor, New York, NY

(Address of Principal Executive Offices)

10019

(Zip Code)Registrant’s Telephone Number, Including Area Code: (212) 843-1601



Securities registered pursuant to section 12(b) of the Act:

None



Securities registered pursuant to section 12(g) of the Act:

Common stock, $0.0001 par value per share

(Title of Class)
  (Exact Name of Registrant as Specified in Its Charter)
 
 Indicate by check mark if the Registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act). Yes  ̈No x
  Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ̈No x
  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 xNo  ̈
  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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ̈No  ̈
 
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy of information statements incorporated by reference in part III of this Form 10-K or any amendment to this Form 10-K. x
 
 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. (Check one):
  Large Accelerated Filer  ̈           Accelerated Filer    ̈            Non-Accelerated Filer     ̈             Smaller reporting companyx
  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ̈  No x
  There is no established market for the Registrant’s shares of common stock.  The Registrant is currently conducting the ongoing initial public offering of its shares of common stock pursuant to a Registration Statement on Form S-11, which shares are being sold at $10.00 per share, with discounts available for certain categories of purchasers.  There were no common shares held by non-affiliates as of June 30, 2009 (the last business day of the registrant’s most recently completed second fiscal quarter).
  As of March 23, 2010, the Registrant had issued 37,200 shares of common stock.








BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.




FORM 10-K




December 31, 2009


PART I
  Item 1.
Business
3Item 1A.
Risk Factors
6Item 1B.
Unresolved Staff Comments
6Item 2.
Properties
6Item 3.
Legal Proceedings
8Item 4.
[RESERVED]
8
 
 PART II
 
 Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
8Item 6.
Selected Financial Data
9Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
10Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
15Item 8.
Financial Statements and Supplementary Data
15Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
15Item 9A(T).
Controls and Procedures
15Item 9B.
Other Information
15
 
 PART III
 
 Item 10.
Directors, Executive Officers and Corporate Governance
15Item 11.
Executive Compensation
20Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
22Item 13.
Certain Relationships and Related Transaction and Director Independence
22Item 14.
Principal Accounting Fees and Services
26
 
 PART IV
 
 Item 15.
Exhibits, Financial Statement Schedules
27
 Signatures








Forward-Looking Statements




Certain statements in this Annual Report on Form 10-K constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements, include discussion and analysis of the financial condition of Bluerock Enhanced Multifamily Trust, Inc. and our subsidiaries (which may be referred to herein as the “Company,” “we,” “us” or “our”), our anticipated capital expenditures required to complete projects, amounts of anticipated cash distributions to our stockholders in the future and other matters.  These forward-looking statements are not historical facts but are the intent, belief, or current expectations of our management based on their knowledge and understanding of the business and industry.  Words such as “may,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “could,” “should” and variations of these words and similar expressions are intended to identify forward-looking statements.  These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. We intend for these forward-looking statements to be covered by the applicable safe harbor provisions created by Section 27A of the Securities Act and Section 21E of the Exchange Act.




Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false.  We caution investors not to place undue reliance on forward-looking statements, which reflect our management’s view only as of the date of this Annual Report on Form 10-K.  We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.  The forward-looking statements should be read in light of the risk factors identified in the “Risk Factors” section of this Annual Report on Form 10-K.




Cautionary Note




The representations, warranties, and covenants made by us in any agreement filed as an exhibit to this Annual Report on Form 10-K are made solely for the benefit of the parties to the agreement, including, in some cases, for the purpose of allocating risk among the parties to the agreement, and should not be deemed to be representations, warranties, or covenants to or with any other parties.  Moreover, these representations, warranties, or covenants should not be relied upon as accurately describing or reflecting the current state of our affairs.




PART I


1.
Business




Organization





Bluerock Enhanced Multifamily Trust, Inc. (the “Company”) was incorporated on July 25, 2008 under the laws of the state of Maryland. We intend to qualify as a real estate investment trust, or REIT, for federal income tax purposes.As a REIT, we generally are not subject to corporate-level income taxes.  To maintain our REIT status, we are required, among other requirements, to distribute annually at least 90% of our “REIT taxable income,” as defined by the Internal Revenue Code of 1986, as amended (the ”Code”), to our stockholders.  If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate tax rates.





On August 22, 2008, the Company filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer a maximum of $1,000,000,000 in shares and a minimum of $2,500,000 in shares of our common stock in our primary offering, at an offering price of $10.00 per share, with discounts available for certain categories of purchasers (our “Initial Public Offering”).  We also are offering up to $285,000,000 in shares pursuant to our distribution reinvestment plan at $9.50 per share. The SEC declared our registration statement effective on October 15, 2009 and we have retained Select Capital to serve as the dealer manager of the offering.  The dealer manager is responsible for marketing our shares in the ongoing initial public offering.  We intend to use substantially all of the net proceeds from the ongoing initial public offering to invest in a diverse portfolio of real estate and real estate-related assets as described above.  As of December 31, 2009, we owned, through a joint venture partnership, one multifamily real estate property.





We have no employees and are supported by related-party service agreements. We are externally managed by Bluerock Enhanced Multifamily Advisors LP (the “Advisor”), a Delaware limited partnership organized in 2007.  The Advisor is responsible for managing our affairs on a day-to-day basis and for identifying and making real estate investments on our behalf.  Substantially all our business is conducted through our operating partnership Bluerock Enhanced Multifamily Holdings LP, a Delaware limited partnership (“Bluerock Holdings”).





The principal executive offices of our company and our advisor are located at 680 Fifth Avenue, 16th Floor, New York, New York 10019. Our telephone number is (877) 826-BLUE (2583).


3


Material Acquisition





On December 3, 2009, we acquired a multifamily community known as Springhouse at Newport News, located in Newport News, Virginia, through a consolidated joint venture.  We invested $2.5 million to acquire a 50% equity interest in the managing member of the joint venture.  For more information regarding our investment, see "Item 2. Properties" below.





Investment Objectives





We intend to acquire a diversified portfolio of real estate and real estate-related investments, with a primary focus on well-located, institutional quality apartment properties with strong and stable cash flows. We intend to implement what we refer to as the “Enhanced Multifamily” strategy at these apartment properties, which we believe will increase rents, tenant retention and property values, and generate attractive returns for our investors. We also intend to acquire well-located residential properties that we believe present significant opportunities for short-term capital appreciation, such as those requiring repositioning, renovation or redevelopment, and properties available at opportunistic prices from distressed or time-constrained sellers. In addition, we will seek to originate or invest in real estate-related securities that we believe present the potential for high current income or total return, including but not limited to mortgage, bridge or subordinated loans, debt securities and preferred or other equity securities of other real estate companies, which we refer to as real estate-related investments, and may invest in entities that make similar investments.





We may adjust our targeted portfolio allocation based on, among other things, prevailing real estate market conditions and the availability of attractive investment opportunities. We will not forego an attractive investment because it does not fit within our targeted asset class or portfolio composition. The volume and value of properties and real estate-related investments we acquire will depend initially on the proceeds of this offering.




Enhanced Multifamily Strategy






Our advisor’s Enhanced Multifamily strategy consists of a series of initiatives that we believe can create a sustainable competitive advantage and allow us to realize long-term increases in apartment property value. This strategy seeks to transform the perception of the apartment from a purely functional one (i.e.,as solely a place to live) to a lifestyle product / community (i.e.,as a place to live, interact, and socialize) thereby creating an enhanced perception of value among residents, allowing for premium rental rates, and improving resident retention.






The initiatives consist of amenities and attributes that go beyond traditional features, and incorporate cosmetic and architectural improvements along with technology, music and activities to establish an enhanced sense of comfort and appeal to our target residents’ desire for a “sense of community” by creating places to gather, socialize and interact in a highly amenitized environment. This strategy is specifically targeted to appeal to the following two lucrative and rapidly growing segments of the multifamily market:




•
Lifestyle Rentersare generally established, adult households with multiple housing choices open to them, which choose to rent an apartment for primarily nonfinancial reasons. They include Baby Boomers (individuals born in the U.S. between 1946 and 1964), who have become empty nesters and are seeking to live a simpler lifestyle without the responsibilities of home ownership, as well as those older members of the Echo Boomers (the generation born in the U.S. between 1981 and 2000).•
Middle Market Rentersare generally younger and more mobile than Lifestyle Renters, and while they can generally afford to own, they have chosen either to save their money (perhaps to purchase a larger house at a later date), to spend it on other goods and services or to invest in something other than housing, or they are in a personal or job transition. For Middle Market Renters an apartment can provide an inexpensive and maintenance-free residence.




As a further benefit, by appealing to and attracting the Lifestyle Renters and Middle Market renters, we believe the Enhanced Multifamily strategy can generate significant additional revenue-enhancing options at our properties, including the ability to provide and charge for premium units, upgrade packages and equipment rentals such as washer and dryers, flat screen televisions and premium sound systems.






Borrowing Policies






Under our charter, the maximum amount of our indebtedness may not exceed 300% of our net assets as of the date of any borrowing, which is generally expected to approximate 75% of the cost of our investments; however, we may exceed that limit if approved by a majority of our independent directors. We expect that once we have fully invested the proceeds of this offering, our indebtedness will be approximately 50% of the sum of the value of our real properties (before deducting depreciation and other non-cash reserves) and the value of our other assets. There is no limitation on the amount we may borrow for the purchase of any single property or other investment. Our board of directors must review our aggregate borrowings at least quarterly.




4




Distribution Policy






Generally, our policy will be to pay distributions from cash flow from operations.  However, we expect that some or all of our distributions will be paid from sources other than funds from operations, such as from the proceeds of our public offering, cash advances to us by our advisor, cash resulting from a waiver of asset management fees and borrowings (including borrowings secured by our assets) in anticipation of future operating cash flow until such time as we have sufficient cash flow from operations to fully fund the payment of distributions there from.  Further, because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that at least during the early stages of our development and from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period, and we will pay these distributions in advance of our actual receipt of these funds. In these instances, we expect to look to third-party borrowings to fund our distributions. We may also fund such distributions from advances from our advisor or sponsors or from our advisor’s deferral of its asset management fee.






To the extent that we redeem shares pursuant to our share repurchase plan or make payments or reimburse certain expenses to our advisor pursuant to our advisory agreement, our cash flow and therefore our ability to make distributions from cash flow, as well as cash flow available for investment, will be negatively impacted. In addition, certain amounts we are required to pay to our advisor, including the monthly asset management fee, the property management fee, the financing fee, the disposition fee and the payment made upon conversion of our convertible stock, depend on the assets acquired, gross revenues of the properties managed, indebtedness incurred, sales prices of investments sold or the value of our company at the time of conversion, respectively, and therefore cannot be quantified or reserved for until such fees have been earned.  We are required to pay these amounts to our advisor regardless of the amount of cash we distribute to our stockholders, and therefore our ability to make distributions from cash flow, as well as cash flow available for investment, to our stockholders may be negatively impacted. In addition, to the extent we invest in development or redevelopment projects or in properties that have significant capital requirements, these properties will not immediately generate operating cash flow. Thus, our ability to make distributions may be negatively impacted, especially during our early periods of operation.






Once our board of directors has begun to authorize distributions, we expect to declare distributions on a quarterly basis and to pay distributions to our stockholders on a monthly basis. We intend to calculate these monthly distributions based on daily record dates so our investors will become eligible for distributions immediately upon the purchase of their shares. Distributions will be paid to stockholders as of the record dates selected by the directors.






We are required to make distributions sufficient to satisfy the requirements for qualification as a REIT for tax purposes. Generally, distributed income will not be taxable to us under the Code if we distribute at least 90% of our REIT taxable income.






Distributions will be authorized at the discretion of our board of directors, in accordance with our earnings, cash flow, anticipated cash flow and general financial condition. The board’s discretion will be directed, in substantial part, by its intention to cause us to comply with the REIT requirements. Because we may receive income from interest or rents at various times during our fiscal year, distributions may not reflect our income earned in that particular distribution period but may be made in anticipation of cash flow that we expect to receive during a later period and may be made in advance of actual receipt of funds in an attempt to make distributions relatively uniform. We may utilize capital, borrow money, issue new securities or sell assets in order to make distributions. In addition, from time to time, our advisor and its affiliates may, but are not required to, agree to waive or defer all or a portion of the acquisition, asset management or other fees or other incentives due to them, enter into lease agreements for un-leased space, pay general administrative expenses or otherwise supplement investor returns in order to increase the amount of cash available to make distributions to our stockholders.






Many of the factors that can affect the availability and timing of cash distributions to stockholders are beyond our control, and a change in any one factor could adversely affect our ability to pay future distributions. There can be no assurance that future cash flow will support distributions at the rate that such distributions are paid in any particular distribution period.




Regulations




Our investments are subject to various federal, state, local and foreign laws, ordinances and regulations, including, among other things, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution and indirect environmental impacts such as increased motor vehicle activity. We believe that we have all permits and approvals necessary under current law to operate our investments.




Environmental




As an owner of real estate, we are subject to various environmental laws of federal, state and local governments. Compliance with existing laws has not had a material adverse effect on our financial condition or results of operations, and management does not believe it will have such an impact in the future.  However, we cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on properties in which we hold an interest, or on properties that may be acquired directly or indirectly in the future.




5


Industry Segment




Our current business consists of investing in and operating multifamily communities. All of our consolidated revenues are from consolidated real estate property.  We internally evaluate operating performance on an individual property level and view our real estate assets as one industry segment, and, accordingly, our properties will be aggregated into one reportable segment.




Available Information




We electronically file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports with the SEC. We also have filed with the SEC registration statements on Form S-11 in connection with the Initial Public Offering of our common stock.  Copies of our filings with the SEC may be obtained from the SEC’s website at www.sec.gov. Access to these filings is free of charge.




Item 1A. Risk Factors





We have omitted a discussion of risk factors because, as a smaller reporting company, we are not required to provide such information.  For a discussion of the significant factors that make an investment in our shares risky, see the prospectus that relates to our ongoing Initial Public Offering.




Item 1B. Unresolved Staff Comments




We have no unresolved staff comments




Item 2.  Properties





As of March 23, 2010, we, through a wholly owned subsidiary of our operating partnership, have acquired one investment through a consolidated joint venture as further described below.  The following is a summary of our investment portfolio as of March 23, 2010:




Multifamily Community Name
Location
Approximate

Rentable

Square

Footage
Number of

Units
DateAcquired
Property

Acquisition

Cost(1)
Joint Venture Equity Investment Information
Approximate

Annualized

Base Rent
Approx. %

LeasedAmount of

Our

Investment
Our

Ownership

Interest in

Property

OwnerSpringhouse at Newport News
Newport News, Virginia
314,512
432
12/03/2009
$30.1 million
$2.5 million
37.5%
$4,163,000
91%


(1)
Includes contract purchase price, acquisition fees and closing costs.




Springhouse at Newport News





On December 3, 2009, through a wholly owned subsidiary of our operating partnership, we completed an investment in a joint venture along with Bluerock Special Opportunity + Income Fund, LLC (“BEMT Co-Investor”), an affiliate of our sponsor, and Hawthorne Springhouse, LLC (“Hawthorne”), an unaffiliated entity, to acquire a 432-unit garden-style multifamily community known as Springhouse at Newport News (the “Springhouse property”), located in Newport News, Virginia, from Newport-Oxford Associates Limited Partnership, an unaffiliated entity. The material features of our investment in the joint venture, the property acquisition and related financings, and the acquired property are described below.





Joint Venture Parties and Structure





In connection with the closing of the Springhouse property acquisition, we invested $2.5 million to acquire a 50% equity interest in BR Springhouse Managing Member, LLC (the “Springhouse Managing Member JV Entity”) through a wholly owned subsidiary of our operating partnership, BEMT Springhouse, LLC (“BEMT Springhouse”). BEMT Co-Investor invested $2.5 million to acquire the remaining 50% interest in the Springhouse Managing Member JV Entity. BEMT Springhouse and BEMT Co-Investor are co-managers of the Springhouse Managing Member JV Entity.





The Springhouse Managing Member JV Entity contributed its capital to acquire a 75% equity interest in BR Hawthorne Springhouse JV, LLC (the “Springhouse JV Entity”) and acts as the manager of the Springhouse JV Entity. Hawthorne invested $1.7


6




million to acquire the remaining 25% interest in the Springhouse JV Entity. The Springhouse JV Entity is the sole owner of BR Springhouse, LLC (“BR Springhouse”), a special-purpose entity that holds title to the Springhouse property.





Under the terms of the operating agreement for the Springhouse Managing Member JV Entity, certain major decisions regarding the investments of the Springhouse Managing Member JV Entity require the unanimous approval of BEMT Co-Investor and us (through BEMT Springhouse). To the extent that we and BEMT Co-Investor are not able to agree on a major decision or at any time after


December 3, 2012, either party may initiate a buy-sell proceeding. Additionally, any time after December 3, 2012, either party may initiate a proceeding to force the sale of the Springhouse Managing Member JV Entity’s interest in the Springhouse JV Entity to a third party, or, in the instance of the non-initiating party’s rejection of a sale, cause the non-initiating party to purchase the initiating party’s


interest in the Springhouse Managing Member JV Entity. The operating agreement contains terms, conditions, representations, warranties and indemnities that are customary and standard for joint ventures in the real estate industry.





Under the terms of the operating agreement of the Springhouse JV Entity, major decisions with respect to the joint venture or the Springhouse property are made by the majority vote of an appointed management committee, which is controlled by the Springhouse Managing Member JV Entity. However, any decision with respect to the sale or refinancing of the Springhouse property requires the unanimous approval of the Springhouse Managing Member JV Entity and Hawthorne. Further, to the extent that the Springhouse Managing Member JV Entity and Hawthorne are not able to agree on a major decision or at any time after December 3, 2012, either party may initiate a buy-sell proceeding. Additionally, any time after December 3, 2012, either party may initiate a proceeding to force the sale of the Springhouse property to a third party, or, in the instance of the non-initiating party’s rejection of a sale, cause the non-initiating party to purchase the initiating party’s interest in the Springhouse JV Entity. The operating agreement contains terms, conditions, representations, warranties and indemnities that are customary and standard for joint ventures in the real estate industry.





As a result of the structure described above, we and BEMT Co-Investor each hold a 37.5% indirect equity interest in the Springhouse property, and Hawthorne holds the remaining 25% indirect equity interest. We, BEMT Co-Investor and Hawthorne will each receive current distributions from the operating cash flow generated by the Springhouse property in proportion to these respective percentage equity interests.





Affiliate Loan for our Investment in the Joint Venture





In connection with our investment in the joint venture, on December 3, 2009, BEMT Springhouse entered into a loan agreement with BEMT Co-Investor pursuant to which BEMT Springhouse borrowed $3.2 million (the “BEMT Co-Investor Loan”). The BEMT Co-Investor Loan has a six-month term, maturing June 3, 2010, and may be prepaid without penalty. It bears interest compounding monthly at a rate of 30-day LIBOR + 5.00%, subject to a minimum rate of 7.00%, annualized. As of March 1, 2010, the interest rate on the BEMT Co-Investor Loan was 7.00%. Interest on the loan will be paid on a current basis from cash flow distributed to us from the Springhouse Managing Member JV Entity. The BEMT Co-Investor Loan is secured by a pledge of our indirect membership interest in BEMT Springhouse and a pledge of BEMT Springhouse’s membership interest in the Springhouse Managing Member JV Entity. In accordance with the requirements of our charter, the BEMT Co-Investor Loan was reviewed and approved by a majority of our board of directors (including a majority of our independent directors) as being fair, competitive, and commercially reasonable and no less favorable to us than loans between unaffiliated parties under the same circumstances. Furthermore, due to the unique investment opportunity presented by the Springhouse property, including the opportunity to distinguish ourselves competitively from other early-stage non-traded REITs, our board of directors expressly considered and approved leverage in excess of our general charter-imposed limitations in connection with entering into the BEMT Co-Investor loan.





Property Acquisition and Senior Financing





Our sponsor, Bluerock Real Estate, LLC, entered into a purchase and sale contract dated September 24, 2009 to purchase the Springhouse property. The purchase price for the Springhouse property was $29.25 million, plus closing costs, which represents a nominal capitalization rate of 8.34% (the expected first year yield on the investment, excluding recurring capital costs). Immediately prior to the closing on December 3, Bluerock Real Estate, LLC assigned the purchase and sale agreement to BR Springhouse.





The acquisition was funded with $6.7 million of gross equity from the Springhouse JV Entity, and a $23.4 million senior mortgage loan made to BR Springhouse by CWCapital LLC and subsequently sold to the Federal Home Loan Mortgage Corporation (Freddie Mac) (the “Senior Loan”), which Senior Loan is secured by the Springhouse property. The Senior Loan has a 10-year term, maturing on January 1, 2020. The effective interest rate on the loan is fixed at 5.66% per annum, with interest-only payments for the first two years and fixed monthly payments of approximately $134,221 based on a 30-year amortization schedule thereafter.





Prepayment terms of the Senior Loan depend on whether the loan is securitized on or before January 1, 2011. If the loan is securitized, then a two-year lockout period from the date of funding applies, with BR Springhouse having the right to defease after the lockout period up to the third month prior to the maturity date, after which the loan may be prepaid in full without penalty. If the Senior Loan is not securitized on or before January 1, 2011, then 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 loan amount will be required, and thereafter the loan may be prepaid without penalty.


7


R. Ramin Kamfar and James G. Babb, III, who are our executive officers and members of our board of directors, and Edward Harrington, Samantha Davenport and Shoffner Allison, who are Hawthorne affiliates, have guaranteed all recourse liabilities of BR Springhouse under the Senior Loan, including environmental indemnities.





Description of the Springhouse Property





The Springhouse property is comprised of 432 units featuring one- and two-bedroom layouts in 24 two-story garden-style apartment buildings surrounding a central private lake on approximately 28 acres in Newport News, Virginia. The property contains approximately 314,512 rentable square feet and the average unit size is 728 square feet. As of November 2009, the property had an average market rent of $826 per unit and was 96.8% occupied. Additional property amenities include a clubhouse, fitness center, swimming pool, tennis court, volleyball court, picnic area and a private lake with gazebo.





The Springhouse property is located within a ten-minute drive of two major Newport News area employers, Northrop Grumman and the Fort Eustis Army Base. In addition, Cannon Virginia, a subsidiary of Cannon USA, Inc. recently opened a $640 million, 700,000-square foot manufacturing facility within a few miles of the property. The Springhouse property is situated between I-64 and Jefferson Avenue, the two main north-south thoroughfares in Newport News, within close proximity to the Newport News/Williamsburg International Airport. Several neighborhood-oriented retail centers are located within a five-minute drive of the property.





The Springhouse property is located within the Hampton Roads MSA, which is home to 18 publicly traded corporations, the world’s largest naval base, a major East Coast port, and numerous internationally known tourist attractions. According to a recent CBRE appraisal, the Hampton Roads MSA’s population has grown 5.6% on average from 2000 through 2008. As of October 2009, the MSA’s unemployment was 6.5%, which compared favorably with the national average of 9.5%. Historically, unemployment in the region has been below the national average. Traditionally, the Hampton Roads MSA has been home to the military, shipbuilding and healthcare, but over the past decade the region has attracted financial service firms, distribution companies, telemarketing and customer service operations.





Hawthorne Residential Partners, LLC, a Hawthorne affiliate, will be responsible for providing day-to-day property management services to the property. Hawthorne Residential Partners, LLC will receive an annual management fee of 4% of gross receipts generated by the Springhouse property. From this amount, 1% of gross property collections will be re-allowed to the Springhouse Managing Member JV Entity as an oversight fee, which fee will be shared equally between Bluerock Enhanced Multifamily Advisor, LLC, our advisor, and Bluerock Property Management, LLC, an indirect wholly owned subsidiary of our sponsor. Under the property management agreement, Hawthorne Residential Partners, LLC will also be entitled to receive a construction management fee of 5% of the cost of any approved capital project exceeding $10,000 (excluding regular recurring interior capital replacements).





The investment in the Springhouse property is consistent with our geographic and sector-based strategy to acquire stabilized assets in select markets that satisfy our investment criteria for providing favorable risk-adjusted returns.





Item 3.  Legal Proceedings




We are not party to, and none of our properties are subject to, any material pending legal proceeding.




Item 4.   [RESERVED]




PART II




Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities




Market Information




There is no established public trading market for our common stock. Therefore, there is a risk that a stockholder may not be able to sell our stock at a time or price acceptable to the stockholder. Pursuant to the Initial Public Offering, we are selling shares of our common stock to the public at a price of $10.00 per share and at a price of $9.50 per share pursuant to our distribution reinvestment plan. Unless and until our shares are listed on a national securities exchange, it is not expected that a public market for the shares will develop.




To facilitate Financial Industry Regulatory Authority (“FINRA”) member participation in our Initial Public Offering, we disclose in each annual report distributed to stockholders our per-share estimated value of our common stock, the method by which it was developed, and the date of the data used to develop the estimated value. In addition, we prepare annual statements of estimated share values to assist both fiduciaries of retirement plans subject to the annual reporting requirements of ERISA and custodians of individual retirement accounts (“IRAs”) in the preparation of their reports relating to an investment in our shares. For these purposes, our estimated value of a share of our common stock is $10.00 per share as of December 31, 2009.  The basis for this valuation is the fact that the current public offering price for our shares in the Initial Public Offering is $10.00 per share (ignoring purchase price discounts for certain categories of purchasers). However, this estimated value is likely to be higher than the price at which you could resell your shares because (1) our public offering involves the payment of underwriting compensation and other directed selling efforts, which payments and efforts




8


are likely to produce a higher sales price than could otherwise be obtained, and (2) there is no public market for our shares. Moreover, this estimated value is likely to be higher than the amount you would receive per share if we were to liquidate at this time because of the up-front fees that we pay in connection with the issuance of our shares. We expect to continue to use the most recent public offering price for a share of our common stock as the estimated per share value reported in our annual reports on Form 10-K until 18 months have passed since the last sale of a share of common stock in a public offering, excluding public offerings conducted on behalf of selling stockholders or offerings related to a dividend reinvestment plan, employee benefit plan, or the redemption of interests in our operating partnership.  There can be no assurance that the valuation we have provided will satisfy the valuation requirements applicable to ERISA plans and IRAs.




After the 18-month period described above (or possibly sooner if our board so directs), we expect the estimated share values reported in our annual reports will be based on estimates of the values of our assets net of our liabilities. We do not currently anticipate that we will obtain new or updated appraisals for our properties in connection with such estimates, and accordingly, our estimated share values should not be viewed as estimates of the amount of net proceeds that would result from a sale of our properties at that time. We expect that any estimates of the value of our properties will be performed by our advisor; however, our board of directors could direct our advisor to engage one or more third-party valuation firms in connection with such estimates.




Shareholder Information




As of March 23, 2009, we had approximately 37,200 shares of common stock outstanding held by affiliates of the Company.




Distributions




We initiated our initial public offering on October 15, 2009.  Until we have receipt and acceptance of subscriptions aggregating at least $2,500,000, all subscription proceeds will be placed in an interest bearing escrow account with UMB Bank, N.A. as escrow agent.  As of March 23, 2010, we have not yet satisfied the conditions of this escrow.




Until we generate sufficient cash flow from operations or FFO to fully fund the payment of distributions, some or all of our distributions will be paid from other sources.  We may generate cash to pay distributions from financing activities, components of which may include borrowings (including borrowings secured by our assets) in anticipation of future operating cash flow and proceeds of this offering.  In addition, from time to time, our advisor and its affiliates may agree to waive or defer all, or a portion, of the acquisition, asset management or other fees or other incentives due to them, enter into lease agreements for unleased space, pay general administrative expenses or otherwise supplement investor returns in order to increase the amount of cash available to make distributions to our stockholders.  In addition, to the extent we invest in development or redevelopment projects or in properties that have significant capital requirements, these properties may not immediately generate cash flow from operations or FFO. Thus, our ability to make distributions may be negatively impacted, especially during our early periods of operation.




We expect our board of directors to declare distributions on a quarterly basis and to pay distributions to our stockholders on a monthly basis.  We intend to calculate these monthly distributions based on daily record dates so our investors will become eligible for distributions immediately upon purchasing shares.  Distributions will be paid to stockholders as of the record dates selected by the directors.  As of March 23, 2010, all of our outstanding shares of common stock are owned by our advisor and our independent directors. Although we acquired an interest in a property in December 2009, we have not yet declared or paid any distributions on our outstanding shares of common stock through March 23, 2010.





Share Repurchase Plan




We have adopted a share repurchase program that may enable stockholders to sell their shares to us in limited circumstances.  We amended and restated our share repurchase program on February 12, 2010.  The effect of the amendment was to change the price at which we will redeem the shares.  As amended, prior to establishing the estimated value of our shares, the prices at which we will initially repurchase shares are as follows:





·
The lower of $9.25 or the price paid to acquire the shares from us for stockholders who have held their shares for at least one year;


·
The lower of $9.50 or the price paid to acquire the shares from us for stockholders who have held their shares for at least two years;


·
The lower of $9.75 or the price paid to acquire the shares from us for stockholders who have held their shares for at least three years; and


·
The lower of $10.00 or the price paid to acquire the shares from us for stockholders who have held their shares for at least four years.




Item 6.  Selected Financial Data
  We have omitted presentation of selected financial data because, as a smaller reporting company, we are not required to provide such information.


9





Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations





The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Bluerock Enhanced Multifamily Trust, Inc., and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Bluerock Enhanced Multifamily Trust, Inc., a Maryland corporation, and, as required by context, Bluerock Enhanced Multifamily Holdings, L.P. , a Delaware limited partnership, which we refer to as our “operating partnership,” and to their subsidiaries. Also see “Forward-Looking Statements” preceding Part I.




Overview




We are a recently formed Maryland corporation that intends to qualify as a REIT beginning with the taxable year in which the Company satisfies the minimum offering requirements, which we expect will be with the taxable year ended December 31, 2010.





Subscription proceeds may be released to us after the minimum offering is achieved and will be applied to investment in properties and the payment or reimbursement of selling commissions and other fees and expenses. We will experience a relative increase in liquidity as we receive additional subscriptions for shares and a relative decrease in liquidity as we spend net offering proceeds in connection with the acquisition, development and operation of our assets.




We intend to make reserve allocations as necessary to aid our objective of preserving capital for our investors by supporting the maintenance and viability of properties we acquire in the future. If reserves and any other available income become insufficient to cover our operating expenses and liabilities, it may be necessary to obtain additional funds by borrowing, refinancing properties or liquidating our investment in one or more properties. There is no assurance that such funds will be available or, if available, that the terms will be acceptable to us.






We intend to make an election to be taxed as a REIT under Section 856(c) of the Internal Revenue Code. In order 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.




Our Investment Strategy





We intend to achieve our investment objectives by acquiring a diverse portfolio of real estate and real estate-related investments. We plan to diversify our portfolio by investment type, size, property location and risk with the goal of attaining a portfolio that will generate attractive returns for our investors, with the potential for capital appreciation. Our targeted portfolio allocation is as follows:





•
Enhanced Multifamily. We intend to allocate approximately 50% of our portfolio to investments in well-located, institutional quality apartment properties that we believe demonstrate strong and stable cash flows, typically located in supply constrained sub-markets with relatively high expectations of rent growth. As appropriate, we intend to implement our advisor’s Enhanced Multifamily strategy (as described in the prospectus relating to our ongoing public offering) at these properties, which we anticipate will create sustainable long-term increases in property value and lead to increased returns to our investors by, among other benefits, generating higher rental revenue and reducing resident turnover.





•
Value-Added Residential. We intend to allocate approximately 30% of our portfolio to investments in well-located, residential properties that offer a significant potential for short-term capital appreciation through repositioning, renovation or redevelopment. In addition, we will seek to acquire properties available at opportunistic prices from distressed or time-constrained sellers in need of liquidity. As appropriate, we intend to implement our advisor’s Enhanced Multifamily strategy at these properties as well.





•
Real Estate-Related Investments. We intend to allocate approximately 20% of our portfolio in other real estate-related investments with the potential for high current income or significant total returns. These investments could include first and second mortgages, subordinated, bridge and other loans, debt and other securities related to or secured by real estate assets, and common and preferred equity, which may include securities of other REITs and real estate companies. Subject to the provisions of our charter, some of these investments may be made in connection with programs sponsored, managed or advised by our affiliates or those of our advisor.




Although the above outlines our target portfolio, we may make adjustments based on, among other things, prevailing real estate market conditions and the availability of attractive investment opportunities. We will not forego an attractive investment because it does not fit within our targeted asset class or portfolio composition. We may use the proceeds of this offering to purchase or invest in any type of real estate or real estate-related investment which we determine is in the best interest of our stockholders, subject to the provisions of our charter which limit certain types of investments.


10


Results of Operations





Our results of operations as of December 31, 2009 are not indicative of those expected in future periods as we were in our organizational and development stage and had not commenced business operations until the purchase of our first asset on December 3, 2009.  During the period from inception (July 25, 2008) to December 31, 2008, we had been formed but had not yet commenced operations, as we had not yet begun our best efforts initial public offering.





The SEC declared the registration statement for our best efforts initial public offering effective on October 15, 2009, and we retained Select Capital Corporation to serve as our dealer manager for the offering.  We began our operations on December 3, 2009 with our acquisition of the Springhouse property.  Our management is not aware of any material trends or uncertainties, favorable or unfavorable, other than national economic conditions affecting our targeted portfolio, the apartment housing industry and real estate generally, which may be reasonably anticipated to have a material impact on either capital resources or the revenues or incomes to be derived from the operation of our assets.





Our organization and offering costs are initially being paid by our advisor, the dealer manager and their affiliates on our behalf. These organization and offering costs include all expenses (other than selling commissions and the dealer manager fee) to be paid by us in connection with our initial public offering, including but not limited to (i) legal, accounting, printing, mailing and filing fees; (ii) charges of the escrow holder; (iii) reimbursement of the dealer manager for amounts it may pay to reimburse the bona fide diligence expenses of broker-dealers; (iv) reimbursement to the advisor for the salaries of its employees and other costs in connection with preparing supplemental sales materials; (v) the cost of educational conferences held by us (including the travel, meal and lodging costs of registered representatives of broker-dealers); and (vi) reimbursement to the dealer manager for travel, meals, lodging and attendance fees incurred by employees of the dealer manager to attend retail seminars conducted by broker-dealers. Our advisor and its affiliates have incurred on our behalf organization and offering costs of approximately $2,893,000 through December 31, 2009. These costs are not recorded in our consolidated financial statements because such costs are not a liability to us until we sell the minimum number of shares, and such costs will only become a liability to us to the extent selling commissions, the dealer manager fee and other organization and offering costs do not exceed 15% of the gross proceeds of the offering.







We accounted for the acquisition of the Springhouse property in accordance with the provisions of the Consolidation Topic of the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”.)  The Company consolidates the joint venture because we have a controlling financial interest in the joint venture.  The results of operations represent the consolidated results from December 3, 2009, the date of acquisition, through December 31, 2009.





Rental revenue was approximately $309,000 and includes net base rent and tenant reimbursements for the Springhouse property.





Property operating expenses were approximately $57,700 and were comprised of property operating expenses for the Springhouse property.





Property taxes and insurancewere approximately $36,500 and were related to the Springhouse property.





Management fees were approximately $20,550 and include the property management fee and the asset management fee paid to our advisor.





General and administrative expenseswere approximately $30,200 and include the accrued director’s compensation from the October restricted stock grant.





Depreciation and amortizationtotaled approximately $164,000 and were comprised of depreciation of the Springhouse property and amortization of loan financing costs associated with the Springhouse acquisition.





Interest expensewas approximately $123,900 and was related to the mortgage loan and affiliate loan for the Springhouse acquisition.





Loss allocated to minority interestswas approximately $41,000 and represents the 62.5% pro-rata share of the consolidated loss from the Springhouse joint venture.




Liquidity and Capital Resources





We are offering a maximum of $1,000,000,000 in shares and a minimum of $2,500,000 in shares of our common stock in our primary offering, at an offering price of $10.00 per share, with discounts available for certain categories of purchasers.  We also are offering up to $285,000,000 in shares pursuant to our distribution reinvestment plan at $9.50 per share.





Our principal demands for cash will be for acquisition costs, including the purchase price of any properties, loans or securities we acquire, and construction and development costs and the payment of our operating and administrative expenses, continuing debt








11








service obligations and distributions to our stockholders. Generally, we will fund our acquisitions from the net proceeds of our public offering. We intend to acquire our assets with cash and mortgage or other debt, but we may acquire assets free and clear of permanent mortgage or other indebtedness by paying the entire purchase price for the asset in cash or in units of limited partnership interest in our operating partnership. Due to the delay between the sale of our shares and our acquisitions, there may be a delay in the benefits to our stockholders, if any, of returns generated from our investments.





We anticipate that adequate cash will be generated from operations to fund our operating and administrative expenses, continuing debt service obligations and the payment of distributions. However, our ability to finance our operations is subject to several uncertainties. Our ability to generate working capital is dependent on our ability to attract and retain tenants and the economic and business environments of the various markets in which our properties are located. Our ability to sell real estate investments is partially dependent upon the state of real estate markets and the ability of purchasers to obtain financing at reasonable commercial rates. In general, our policy will be to pay distributions from cash flow from operations. However, some or all of our distributions may be paid from other sources, such as from borrowings, advances from our advisor, our advisor’s deferral of its fees and expense reimbursements or the proceeds of our public offering.





Potential future sources of capital include secured or unsecured financings from banks or other lenders, establishing additional lines of credit, proceeds from the sale of properties and undistributed cash flow.





Our charter prohibits us from incurring debt that would cause our borrowings to exceed 75% of the cost of our assets unless a majority of our independent directors approves the borrowing. Our charter also requires that we disclose the justification for any borrowings in excess of the 75% leverage guideline in the next quarterly report. Our independent directors approved the borrowing of approximately $3.2 million (discussed below) to purchase the Springhouse property and the resulting leverage ratio in excess of the 75% guideline. The independent directors determined that the excess leverage was justified for the following reasons:





• the loans enabled us to purchase the property and earn rental income more quickly;





• the property acquisition is likely to increase the net offering proceeds from our initial public offering, thereby improving our ability to meet our goal of acquiring a diversified portfolio of properties to generate current income for investors and preserve investor capital;





• the loans are non-recourse to the Company;





• the prospectus for our initial public offering disclosed the likelihood that we would exceed the charter’s leverage guidelines during the early stages of the offering.





Note Payable





In connection with our investment in the Springhouse joint venture, on December 3, 2009, BEMT Springhouse LLC, a wholly owned subsidiary of our operating partnership (“BEMT Springhouse”), borrowed $3.2 million (the “BEMT Co-Investor Loan”) from Bluerock Special Opportunity + Income Fund, LLC (“BEMT Co-Investor”), an affiliate of our advisor. The BEMT Co-Investor Loan has a six-month term, maturing June 3, 2010, and may be prepaid without penalty. It bears interest compounding monthly at a rate of 30-day LIBOR + 5.00%, subject to a minimum rate of 7.00%, annualized. As of March 1, 2010, the interest rate on the BEMT Co-Investor Loan was 7.00%. Interest on the loan will be paid on a current basis from cash flow distributed to us from BR Springhouse Managing Member, LLC (the “Springhouse Managing Member JV Entity”). The BEMT Co-Investor Loan is secured by a pledge of our indirect membership interest in BEMT Springhouse and a pledge of BEMT Springhouse’s membership interest in the Springhouse Managing Member JV Entity.  We expect to repay the note upon maturity with the proceeds to be raised from our Initial Public Offering.  If we are unable to repay the principal amount upon maturity, we will seek to extend the loan or refinance.  If we cannot repay or refinance the note, then we will lose our interest in the Springhouse joint venture.





Mortgage Payable





The acquisition of the Springhouse property by BR Hawthorne Springhouse JV, LLC (“Springhouse JV Entity”), a 75%-owned subsidiary of the Springhouse Managing Member JV Entity, was funded, in part, with a $23.4 million senior mortgage loan made to BR Springhouse, LLC (“BR Springhouse”), a wholly owned subsidiary of Springhouse JV Entity, by CW Capital LLC and subsequently sold to the Federal Home Loan Mortgage Corporation (Freddie Mac) (the “Senior Loan”), which Senior Loan is secured by the Springhouse property. The Senior Loan has a 10-year term, maturing on January 1, 2020. The effective interest rate on the loan is fixed at 5.66% per annum, with interest-only payments for the first two years and fixed monthly payments of approximately $134,221 based on a 30-year amortization schedule thereafter.
 
 Prepayment terms of the Senior Loan depend on whether the loan is securitized on or before January 1, 2011. If the loan is securitized, then a two-year lockout period from the date of funding applies, with BR Springhouse having the right to defease after the lockout period up to the third month prior to the maturity date, after which the loan may be prepaid in full without penalty. If the Senior Loan is not securitized on or before January 1, 2011, then 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 loan amount will be required and thereafter the loan may be prepaid without penalty.
 
 R. Ramin Kamfar and James G. Babb, III, who are our executive officers and members of our board of directors, and Edward Harrington, Samantha Davenport and Shoffner Allison, who are affiliates of Hawthorne Springhouse, LLC (“Hawthorne”), the 25% owner of the Springhouse JV Entity, have guaranteed all recourse liabilities of BR Springhouse under the Senior Loan, including environmental indemnities. During the year ended December 31, 2009 the Company incurred $123,875 of interest expense.







12





Distributions





We have not paid any distributions as of the date of December 31, 2009. We intend to make regular cash distributions to our stockholders, typically on a monthly basis. Our board of directors will determine the amount of distributions to be distributed 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.





Funds From Operations





One of our objectives is to provide cash distributions to our stockholders from cash generated by our operations and funds from operations. Funds from operations is not equivalent to our net operating income or loss as determined under GAAP. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a measure known as Funds From Operations, or FFO, which it believes more accurately reflects the operating performance of a REIT such as our company.





We define FFO, a non-GAAP measure, consistent with the 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, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joints ventures will be calculated to reflect FFO on the same basis.





We consider FFO to be an appropriate supplemental measure of a REIT’s 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. The use of FFO is recommended by the REIT industry as a supplemental performance measure.





Presentation of this information is intended to assist the reader in comparing the operating performance of different REITs, although it should be noted that not all REITs calculate FFO the same way, so comparisons with other REITs may not be meaningful. Furthermore, FFO is not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income as an indication of our performance.





Critical Accounting Policies




Below is a discussion of the accounting policies that management believes will be critical once we commence real estate operations. We consider these policies critical because they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our consolidated financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.




Real Estate Assets




Depreciation




We have to make subjective assessments as to the useful lives of our depreciable assets. These assessments have a direct impact on our net income, because, if we were to shorten the expected useful lives of our investments in real estate, we would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis throughout the expected useful lives of these investments. We consider the period of future benefit of an asset to determine its appropriate useful life. We anticipate the estimated useful lives of our assets by class to be as follows:




Buildings                                                                                     25-40 years
 Building improvements                                                             10-25 years
 Land improvements                                                                   20-25 years







13


Tenant origination and absorption costs                           Remaining term of related lease


Real Estate Purchase Price Allocation




Real estate, consisting of land, buildings and improvements, is recorded at cost.  The Company allocates the cost of an acquisition to the acquired tangible assets and identifiable intangibles based on their estimated fair values in accordance with the Consolidation Topic of the FASB ASC.




We will record above-market and below-market in-place leases values for acquired properties based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease.  We will amortize any recorded above-market or below-market lease values as a reduction or increase, respectively, to rental income over the remaining non-cancelable terms of the respective lease.  Upon termination of a lease, the unamortized portion of the above-market or below-market lease intangible associated with the vacating tenant’s lease would be charged to rental income in that period.





We will continually monitor events and changes in circumstances that could indicate that the carrying amounts of our real estate and related intangible assets may not be recoverable. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets may not be recoverable, we will assess the recoverability of the assets by estimating whether we will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. If based on this analysis we do not believe that we will be able to recover the carrying value of the asset, we will record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the asset as required by the provisions of the Impairment or Disposal of Long Lived Assets Topic of the FASB ASC.




Projections of future cash flows require us to estimate the expected future operating income and expenses related to an asset as well as market and other trends. The use of inappropriate assumptions in our future cash flows analyses would result in an incorrect assessment of our assets’ future cash flows and fair values and could result in the overstatement of the carrying values of our real estate assets and an overstatement of our net income.




Real Estate Loans Receivable




The real estate loans receivable will be recorded at cost and reviewed for potential impairment at each balance sheet date. A loan receivable is considered impaired when it becomes probable, based on current information, that we will be unable to collect all amounts due according to the loan’s contractual terms. The amount of impairment, if any, is measured by comparing the recorded amount of the loan to the present value of the expected cash flows or the fair value of the collateral. If a loan was deemed to be impaired, we would record a reserve for loan losses through a charge to income for any shortfall. Failure to recognize impairment would result in the overstatement of the carrying values of our real estate loans receivable and an overstatement of our net income.




Income Taxes




The Company intends to elect to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, and intends to operate as such commencing with the taxable year in which the Company satisfies the minimum offering requirements.  The Company expects to have little or no taxable income prior to electing REIT status.  To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable income to stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its stockholders. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, and federal income and excise taxes on our undistributed income.  If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income and net cash available for distribution to stockholders. However, the Company intends to organize and operate in such a manner as to qualify for treatment as a REIT.







Subsequent Events





On March 23, 2010, our board of directors approved investments in two properties.


The Reserve at Creekside Village (“Creekside”) is a 192-unit class A garden style multifamily community located in Chattanooga, Tennessee.  The investment will be through a joint venture consisting of a wholly owned subsidiary of our operating partnership (“BEMT Creekside”), BEMT Co-Investor, an affiliate of our sponsor, Bluerock Special Opportunity + Income Fund II, LLC (“BEMT Co-Investor II”), an affililiate of our sponsor, and Hawthorne, an unaffiliated entity.  BEMT Creekside will have a 22.7% indirect equity interest.  Our equity capital investment in BEMT Creekside will be funded by an up to $1.1 million related party loan from BEMT Co-Investor II. The related party loan will have a six-month term with an interest rate of 30-day LIBOR plus 5.00% subject to a 7% floor. The aggregate purchase price for the Creekside property is approximately $14.25 million, plus closing costs funded with approximately $2.4 million of gross equity from the joint venture entity and a $12.5 million HUD loan that is being assumed from the








14


seller. The HUD loan has a ten year term with a 6% interest rate.





The second investment is The Apartments at Meadowmont (“Meadowmont”).  Meadowmont is a 258-unit class A  multifamily community located in Chapel Hill, North Carolina.  The investment will be through a joint venture consisting of a wholly owned subsidiary of our operating partnership (“BEMT Meadowmont”), BEMT Co-Investor II, an affiliate of our sponsor and Bell Partners, an unaffiliated entity.  BEMT Meadowmont will have a 25% indirect equity interest in the Meadowmont property.  Our equity capital investment in BEMT Meadowmont will be funded by an up to $2.6 million related party loan from BEMT Co-Investor II. The related party loan will have a six-month term with an interest rate of 30-day LIBOR plus 5.00% subject to a 7% floor. The aggregate purchase price for the Meadowmont property is approximately $37 million, plus closing costs funded with approximately $9.65 million of gross equity from the joint venture entity and a $28.5 million senior mortgage loan made to the joint venture by CW Capital LLC to be subsequently sold to the Federal Home Loan Mortgage Corporation.  The loan has a ten year term with a 5.5% interest rate.











Item 7A.  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 8.  Financial Statements and Supplementary Data




The information required by this Item 8 is hereby included in our Consolidated Financial Statements beginning on page F-1 of the Annual Report on Form 10-K.




Item 9.  Change in and Disagreements With Accountants on Accounting and Financial Disclosure




None.




Item 9A(T). 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 Financial Officer, evaluated, as of December 31, 2009, 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 Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2009, to provide reasonable assurance that information required to be disclosed by us in this report 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 Financial 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 system 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.




Management’s Annual Report on Internal Control over Financial Reporting




This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the Company’s registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.




Item 9B. Other Information




None.




Item 10.  Directors, Executive Officers and Corporate Governance






Our Executive Officers and Directors






The individuals listed as our executive officers below will also serve as officers and employees of our advisor. As executive officers of the advisor, they will serve to manage the day-to-day affairs and carry out the directives of our board of directors in the review, selection and recommendation of investment opportunities and operating acquired investments and monitoring the performance of those investments to ensure that they are consistent with our investment objectives.  The duties that these executive officers will perform on our







15




behalf, on the other hand, will not involve the review, selection and recommendation of investment opportunities, but rather the performance of corporate governance activities on our behalf that require the attention of one of our corporate officers, including signing certifications required under Sarbanes-Oxley Act of 2002, as amended, for filing with the our periodic reports.  All of the individuals listed below as our directors have terms expiring on the date of the 2011 annual meeting or until his or her successor is elected and qualified.




Name*
Age**
Position
Year First Became

DirectorR. Ramin Kamfar
46
Chairman of the Board and Chief Executive Officer
2008James G. Babb, III
45
President, Chief Investment Officer and Director
2008Jordan B. Ruddy
47
Senior Vice President and Chief Operating Officer
N/AJerold E. Novack
54
Senior Vice President and Chief Financial Officer
N/AMichael L. Konig
49
Senior Vice President, Secretary and General Counsel
N/ABrian D. Bailey
43
Independent Director
2009I. Bobby Majumder
41
Independent Director
2009Romano Tio
50
Independent Director
2009







* The address of each executive officer and director listed is 680 5th Avenue, 16th Floor, New York, New York 10019.




** As of March 23, 2010.






R. Ramin Kamfar, Chairman of the Board and Chief Executive Officer. Mr. Kamfar serves as our Chairman of the Board and Chief Executive Officer, and is the Chief Executive Officer of our advisor. He has also served as the Chairman and Chief Executive Officer of Bluerock since its inception in October 2002. Mr. Kamfar has approximately 20 years of experience in building operating companies, and in various aspects of real estate, mergers and acquisitions, private equity investing, investment banking, public and private financings, and retail operations.






From 1988 to 1993, Mr. Kamfar worked as an investment banker at Lehman Brothers Inc., New York, New York, where he specialized in mergers and acquisitions, corporate finance and private placements. From 1993 to 2002, Mr. Kamfar was the CEO and Chairman of New World Restaurant Group, Inc. (now known as Einstein Noah Restaurant Group, Inc (NASDAQ: BAGL)), a company he founded and grew through a consolidation and turnaround of several companies to approximately 800 locations and $400 million in gross revenues and a portfolio of brands which included Einstein Bros. ® and Noah’s NY Bagels ® . From 1999 to 2002, Mr. Kamfar served as an active investor, advisor and member of the Board of Directors of Vsource, Inc., a technology company subsequently sold to Symphony House (KL: SYMPHNY), a leading business process outsourcing company focused on the Fortune 500 and Global 500. Mr. Kamfar received an M.B.A. degree with distinction in Finance in 1988 from The Wharton School of the University of Pennsylvania, located in Philadelphia, Pennsylvania, and a B.S. degree with distinction in Finance in 1985 from the University of Maryland located in College Park, Maryland.






James G. Babb, III, President and Chief Investment Officer. Mr. Babb serves as our President and Chief Investment Officer and is on our board of directors, and is the President and Chief Investment Officer of our advisor. Mr. Babb is also the Managing Director and Chief Investment Officer of Bluerock, which he joined in July 2007. He oversees all real estate sourcing, diligence, structuring and acquisitions for Bluerock. He has been involved exclusively in real estate acquisition, management, financing and disposition for more than 20 years, primarily on behalf of investment funds since 1992.






From 1992 to August 2003, Mr. Babb helped lead the residential and office acquisitions initiatives for Starwood Capital Group, or Starwood Capital, most recently as a Senior Vice President. Starwood Capital was formed in 1992 and during his tenure raised and invested funds on behalf of institutional investors through seven private real estate funds, each of which had investment objectives similar to ours (but not limited to multifamily investments), and which in the aggregate ultimately invested approximately $8 billion in approximately 250 separate transactions. During such period, Mr. Babb led or shared investment responsibility for over 75 investment transactions totaling approximately $2.5 billion of asset value in more than 20 million square feet of residential, office and industrial properties located in 25 states and seven foreign countries, including a significant number of transactions that were contributed to the initial public offering of Equity Residential Properties Trust (NYSE: EQR), and to create iStar Financial Inc. (NYSE: SFI). Mr. Babb was also active in Starwood Capital’s efforts to expand its platform to invest in Europe.  From August 2003 to July 2007, Mr. Babb founded his own principal investment company, Bluepoint Capital, LLC. Bluepoint was a private real estate investment company focused on the acquisition, development and/or redevelopment of residential and commercial properties in the Northeast United States and Western Europe. Mr. Babb received a B.A. degree in Economics in 1987 from the University of North Carolina at Chapel Hill.







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Jordan B. Ruddy, Senior Vice President and Chief Operating Officer. Jordan Ruddy serves as the Senior Vice President and Chief Operating Officer of our company and of our advisor. Mr. Ruddy is also the President and Chief Operating Officer for Bluerock, which he joined in 2002. Mr. Ruddy has 20 years of experience in real estate acquisitions, financings, management and dispositions.






From 2000 to 2001, Mr. Ruddy served as an investment banker at Banc of America Securities LLC, where he was responsible for various types of real estate investment banking transactions including equity offerings, debt placements and asset sales. From 1997 to 2000, Mr. Ruddy served as Vice President of Amerimar Enterprises, a real estate company specializing in value-added investments nationwide, where he managed acquisitions, financings, leasing, asset management and dispositions involving over 1,500,000 square feet of commercial and multifamily real estate. From 1995 to 1997, Mr. Ruddy served as an investment banker at Smith Barney Inc., where he was responsible for various types of real estate investment banking transactions including equity offerings, debt placements and asset sales. From 1988 to 1993, Mr. Ruddy served in the real estate department of The Chase Manhattan Bank, most recently as a Second Vice President. Mr. Ruddy received an M.B.A. degree in Finance and Real Estate in 1995 from The Wharton School of the University of Pennsylvania, located in Philadelphia, Pennsylvania, and a B.S. degree with high honors in Economics in 1986 from the London School of Economics, located in London, England.






Jerold E. Novack, Senior Vice President and Chief Financial Officer. Mr. Novack serves as Senior Vice President and Chief Financial Officer of our company and our advisor. Mr. Novack has also served as the Senior Vice President — Chief Financial Officer of Bluerock since October 2004. Mr. Novack has over 25 years of experience in public and private financings, operations and management.






From June 1994 to April 2002, Mr. Novack served in senior financial positions of New World Restaurant Group, Inc. (now known as Einstein Noah Restaurant Group, Inc. (NASDAQ: BAGL)), including as its Executive Vice President and Chief Financial Officer. From 1982 to 1993, Mr. Novack held various senior financial positions at several specialty retail chains, including Mercantile Department Stores and Brooks Fashion Stores. Mr. Novack received a B.S. degree in Accounting in 1976 from Brooklyn College, City University of New York.






Michael L. Konig, Senior Vice President, Secretary and General Counsel. Mr. Konig serves as the Senior Vice President and General Counsel of our company and our advisor. Mr. Konig has also served as counsel for Bluerock and its affiliates since December 2004. Mr. Konig has over 20 years of experience in law and business.






From 1987 to 1997, Mr. Konig was an attorney at the firms of Greenbaum Rowe Smith & Davis and Ravin Sarasohn Cook Baumgarten Fisch & Baime, representing borrowers and lenders in numerous financing transactions, primarily involving real estate, distressed real estate and Chapter 11 reorganizations, as well with respect to a broad variety of litigation and corporate law matters. From 1998 to 2002, Mr. Konig served as legal counsel, including as General Counsel, at New World Restaurant Group, Inc. (now known as Einstein Noah Restaurant Group, Inc. (NASDAQ: BAGL)). From 2002 to December 2004, Mr. Konig served as Senior Vice President of Roma Food Enterprises, Inc. where he led operations and the restructuring and sale of the privately held company with approximately $300 million in annual revenues. Mr. Konig received a J.D. degree cum laude in 1987 from California Western School of Law, located in San Diego, California, and an M.B.A. degree in Finance in 1988 from San Diego State University.






Brian D. Bailey, Independent Director. Mr. Bailey has served as one of our independent directors since January 2009. Mr. Bailey has more than 15 years of experience in sourcing, evaluating, structuring and managing private investments, as well as 8 years of experience with real estate and real estate-related debt financing. Mr. Bailey founded and currently serves as a Managing Partner of Carmichael Partners a private equity investment firm based in Charlotte, North Carolina. From October 2008 to December 2009, Mr. Bailey served as a Senior Advisor of Carousel Capital, a private equity investment firm with more than $500 million of capital commitments under management based in Charlotte, North Carolina. From April 2000 to October 2008, Mr. Bailey served as a Managing Partner of Carousel Capital. Since its inception, Carousel has made portfolio investments in more than 25 operating companies and has completed numerous additional acquisitions and financings related to these portfolio companies, including sale leaseback transactions, and has utilized such financings in several of its investments. Mr. Bailey’s duties at Carousel Capital included sourcing and evaluating investment opportunities, managing the firm’s investment process, serving on the firm’s Investment Committee, managing the firm’s fundraising efforts and communications with its limited partners and Board of Advisors, and serving as a director on the boards of certain portfolio companies, some of which have meaningful real estate assets on their balance sheets. Thus, Mr. Bailey has been involved in the management of numerous real estate issues over the course of his involvement with such portfolio companies. From 1999 to 2000, Mr. Bailey was a team member of Forstmann Little & Co., a leading private equity firm in New York, New York. From 1996 to 1999, Mr. Bailey was a Principal at the Carlyle Group in Washington, D.C., a global private equity firm which manages approximately $90 billion in capital. Earlier in his career, Mr. Bailey worked in the leveraged buyout group at CS First Boston in New York, New York and in the mergers and acquisitions group at Bowles Hollowell Conner & Company in Charlotte, North Carolina. Mr. Bailey has also worked in the public sector, as Assistant to the Deputy Chief of Staff and Special Assistant to the President at the White House from 1994 to 1996 and









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as Director of Strategic Planning and Policy at the U.S. Small Business Administration in 1994. He currently serves as a director of the Telecommunications Development Fund, a private equity investment fund headquartered in Washington, DC, and as a trustee at the North Carolina School of Science and Mathematics. Mr. Bailey received a B.A. degree in Mathematics and Economics in 1988 from the University of North Carolina at Chapel Hill and an M.B.A. degree in 1992 from the Stanford Graduate School of Business, located in Stanford, California.






I. Bobby Majumder, Independent Director. Mr. Majumder has served as one of our independent directors since January 2009. Mr. Majumder became a partner at the law firm of K&L Gates LLP in May 2005, where he specializes in corporate and securities transactions with an emphasis on the representation of underwriters, placement agents and issuers in both public and private offerings, private investment in public equity (PIPE) transactions and venture capital and private equity funds. From January 2000 to April 2005, Mr. Majumder was a partner at the firm of Gardere Wynne Sewell LLP. Through his law practice, Mr. Majumder has gained significant experience relating to the acquisition of a number of types of real property assets including raw land, improved real estate and oil and gas interests. He is an active member of the Park Cities Rotary Club, a charter member of the Dallas Chapter of The Indus Entrepreneurs and an Associates Board member of the Cox School of Business at Southern Methodist University. Mr. Majumder received a J.D. degree in 1993 from Washington and Lee University School of Law, located in Lexington, Virginia, and a B.A. degree in 1990 from Trinity University, located in San Antonio, Texas.






Romano Tio, Independent Director. Mr. Tio has served as one of our independent directors since January 2009. Mr. Tio serves as Managing Director at RM Capital Management LLC, a boutique investment and advisory firm focused on investing in distressed commercial mortgages at discounts that provide attractive risk adjusted returns. From January 2008 to May 2009, Mr. Tio served as a Managing Director and co-head of the commercial real estate efforts of HCP Real Estate Investors, LLC, an affiliate of Harbinger Capital Partners Funds, a $10+ billion private investment firm specializing in event/distressed strategies. From August 2003 until December 2007, Mr. Tio was a Managing Director at Carlton Group Ltd., a boutique real estate investment banking firm where he was involved in over $2.5 billion worth of commercial real estate transactions. Earlier in his career, Mr. Tio was involved in real estate sales and brokerage for 25 years. Mr. Tio received a B.S. degree in Biochemistry in 1982 from Hofstra University located in Hempstead, New York.






Nomination of Directors






General






We do not have a standing nominating committee and do not have a charter that governs the director nomination process.  However, our independent directors are responsible for identifying and nominating replacements for vacancies among our independent director positions.  Our board believes that the primary reason for creating a standing nominating committee is to ensure that candidates for independent director positions can be identified and their qualifications assessed under a process free from conflicts of interest with us.  Because nominations for vacancies in independent director positions are handled exclusively by our independent directors, our board of directors has determined that the creation of a standing nominating committee is not necessary.  Nominations for replacements for vacancies among non-independent director positions will be considered and made by the full board.






Board Membership Criteria






Each Director, other than Independent Directors, must have at least three years of relevant experience demonstrating the knowledge and experience required to successfully acquire and manage the type of assets we plan to acquire and manage.  In addition, at least one of the Independent Directors must have at least three years of relevant real estate experience.






With respect to filling vacancies for independent director positions, the independent directors will review the appropriate experience, skills and characteristics required of board members in the context of the then-current membership of the board.  The full board annually conducts a similar review with respect to all director nominations.  This assessment includes, in the context of the perceived needs of the board at that time, issues of knowledge, experience, judgment and skills, such as an understanding of the real estate and real estate finance industry or accounting or financial management expertise.  The board seeks to nominate directors with diverse backgrounds, experiences and skill sets that complement each other so as to maximize the collective knowledge, experience, judgment and skills of the entire board.  The board will assess its effectiveness in achieving this goal annually, in part, by reviewing the diversity of the skill sets of the directors and determining whether there are any deficiencies in the board’s collective skill set that should







18




be addressed in the nominating process.  The board will make its first assessment in connection with director nominations for the 2011 annual stockholders’ meeting.






Other considerations in director nominations include the candidate’s independence from conflict with us and the ability of the candidate to attend board meetings regularly and to devote an appropriate amount of time in preparation for those meetings.  It also is expected that independent directors will be individuals who possess a reputation and hold positions or affiliations befitting a director of a publicly held company and who are actively engaged in their occupations or professions or are otherwise regularly involved in the business, professional or academic community.






Selection of Directors






In determining the composition of our initial board of directors, our sponsor’s goal was to assemble a group of individuals of sound character, judgment and business acumen, whose varied backgrounds, leadership experience and real estate experience would complement each other to bring a diverse set of skills and perspectives to the board.






Mr. Kamfar, who controls our sponsor, was chosen to serve as the Chairman of the board because, as our Chief Executive Officer, Mr. Kamfar is well positioned to provide essential insight and guidance to the board from the inside perspective of the day-to-day operations of the company.  Furthermore, Mr. Kamfar brings to the board approximately 20 years of experience in building operating companies, and in various aspects of real estate, mergers and acquisitions, private equity investing, public and private financings, and retail operations.  His experience with complex financial and operational issues in the real estate industry, as well as his strong leadership ability and business acumen make him critical to proper functioning of our board.






Our sponsor selected Mr. Babb to serve as one of our initial directors because of his extensive expertise in real estate acquisition, management, finance and disposition. With more than 20 years of experience investing in and managing real estate investments, Mr. Babb will offer key insights and perspective with respect to our real estate portfolio. As one of our executive officers and the Chief Investment Officer of our advisor, Mr. Babb will also be able to inform and advise the board with respect the critical operational issues facing our company.






Our sponsor selected Mr. Bailey as one of our initial independent directors in order to leverage his extensive experience in sourcing, evaluating, structuring and managing private equity investments and his experience related to real estate and real-estate related debt financing.  In addition, Mr. Bailey’s prior service on the audit committees of numerous privately held companies provides him with the requisite skills and knowledge to serve effectively on our audit committee.






Our sponsor selected Mr. Majumder as one of our initial independent directors due to his depth of legal experience in advising clients with respect to corporate and securities transactions, including representations of underwriters, placement agents and issuers in both public and private offerings.  Mr. Majumder also brings with him significant legal experience relating to the acquisition of a number of types of real estate assets.






Our sponsor selected Mr. Tio as one of our initial independent directors as a result of his demonstrated leadership skill and industry-specific experience developed through a number of high-level management positions with investment and advisory firms specialized in the commercial real estate sector.






Committees of the Board of Directors






Our board of directors may establish committees it deems appropriate to address specific areas in more depth than may be possible at a full board meeting, provided that the majority of the members of each committee are independent directors. Our board of directors has established an audit committee and an investment committee.






We do not currently have a compensation committee because we do not plan to pay any compensation to our officers since we are externally managed by our advisor and have no employees.






Audit Committee






Our board of directors has established an audit committee. The audit committee will meet on a regular basis, at least quarterly and more frequently as necessary. The audit committee’s primary functions are:







19




·
to evaluate and approve the audit and non-audit services and fees of our independent registered public accounting firm;




·
to periodically review the auditors’ independence; and




·
to assist the board of directors in fulfilling its oversight responsibilities by reviewing the financial information to be provided to the stockholders and others, management’s system of internal controls and the audit and financial reporting process and overseeing the compliance with legal and regulatory requirements.




The members of the audit committee are Brian D. Bailey, I. Bobby Majumder and Romano Tio.  All of the members of the audit committee are “independent” as defined by our charter and by the New York Stock Exchange (“NYSE”) rules.  All members of the audit committee have significant financial and/or accounting experience, and the board of directors has determined that Mr. Majumder satisfies the SEC’s requirements for an “audit committee financial expert.”






The background and experience of Messrs. Bailey, Majumder and Tio are described above in “Our Executive Officers and Directors.”






Investment Committee






Our board of directors has delegated to the investment committee (1) certain responsibilities with respect to investments in specific real estate and real estate-related investments proposed by our advisor and (2) the authority to review our investment policies and procedures on an ongoing basis and recommend any changes to our board of directors.






Our board of directors has delegated to the investment committee the authority to approve all real property acquisitions, developments and dispositions, including real property portfolio acquisitions, developments and dispositions, as well as all real estate-related investments and all other investments in real estate consistent with our investment objectives, for investment cost of up to $50 million, including any financing of such investment. The board of directors, including a majority of the independent directors, must approve all investments for an investment cost greater than $50 million, including the financing of such investment. Our advisor will recommend suitable investments for consideration by the investment committee. If the members of the investment committee approve a given investment, then our advisor will be directed to make such investment on our behalf, if such investment can be completed on terms approved by the committee. Investments may be acquired from our advisor or its affiliates or our officers and directors or their affiliates, provided that a majority of our board of directors (including a majority of the independent directors), not otherwise interested in the transaction, approves the transaction as being fair and reasonable to our company and at a price to our company no greater than the cost of the investments to our advisor, its affiliates or any of our officers and directors, unless substantial justification exists for a price in excess of the cost to the affiliate and the excess is reasonable.






The initial members of our Investment Committee are James G. Babb, III, Brian D. Bailey and Romano Tio.






The background and experience of Messrs. Babb, Bailey and Tio are described above in “Our Executive Officers and Directors.”






Code of Ethics and Whistleblower Policy






Our board of directors adopted a Code of Ethics, Whistleblower Policy, and Corporate Governance Guidelines on January 14, 2009.  We believe these policies are reasonably designed to deter wrongdoing and promote honest and ethical conduct; full, fair, accurate, timely, and understandable disclosure in our reporting to our stockholders and the SEC; compliance with applicable laws; reporting of violations of the code; and accountability for adherence to the code.  Copies of our Code of Ethics, Whistleblower Policy, and Corporate Governance Guidelines are filed as exhibits to this Form 10-K.






Item 11.  Executive Compensation






Compensation of Executive Officers






We do not pay any compensation to our officers because we are externally managed by our advisor and have no employees.  We do not reimburse our advisor for compensation our advisor pays our executive officers.  The board intends to appoint a compensation committee composed of our independent directors to the extent necessary to discharge any board responsibilities in the future relating to compensation of our executives.  Officers will be eligible for awards under our Incentive Plan, however, we currently do not intend to grant any such awards, and no awards have been granted to our executive officers under our Incentive Plan.














20











Compensation of Directors






If a director is also one of our executive officers, we do not pay any compensation for services rendered as a director.  The amount and form of compensation payable to our independent directors for their service to us is determined by our board of directors, based upon recommendations from our advisor.  Two of our executive officers, Messrs. Kamfar and Babb, manage and control our advisor, and through the advisor, they are involved in recommending and setting the compensation to be paid to our independent directors.






We have provided below certain information regarding compensation earned by and paid to our directors during fiscal year 2009.




Name

Fees Earned or Paid in Cash in 2009 (1)


All Other Compensation (3)


TotalBrian D. Bailey

$
$29,500


$
$10,000


$
$39,500I. Bobby Majumder

$
29,500


$
$10,000


$
$39,500Romano Tio

$
29,500


$
$10,000


$
$39,500R. Ramin Kamfar(2)


−



−



−James G. Babb, III(2)


−



−



−


_____________________




(1) No independent director fees or director reimbursements are payable unless we raise in our initial public offering the minimum offering amount of $2,500,000; until we raise the minimum offering amount, fees and other amounts payable to our board of directors will accrue without interest.




(2) Directors who are also our executive officers do not receive compensation for services rendered as a director.




(3)Value of vested portion of October 15, 2009 restricted stock grant.






We pay each of our independent directors:






·
an annual retainer of $25,000;




·
$2,500 for each board meeting attended;




·
$2,000 for each committee meeting attended; and




·
$1,000 for each teleconference meeting of the board or any committee.




All directors receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at meetings of the board of directors.






We have approved  and adopted an independent directors compensation plan, which will operate as a sub-plan of our Incentive Plan as described below. See“—Incentive Stock Plan.” Under the independent directors compensation plan and subject to such plan’s conditions and restrictions, each of our current independent directors received 5,000 shares of restricted stock on October 15, 2009, the date our offering was declared effective by the SEC. Going forward, each new independent director that joins the board will receive 5,000 shares of restricted stock upon election or appointment to the board. In addition, on the date following an independent director’s re-election to the board, he or she will receive 2,500 shares of restricted stock. Restricted stock will vest as to 20% of the shares on the date of grant and as to 20% of the shares on each of the first four anniversaries of the date of grant. Notwithstanding the foregoing, the restricted stock will become fully vested on the earlier occurrence of (1) the termination of the grantee’s service as a director due to his or her death, disability or termination without cause or (2) the occurrence of a change in our control.







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Item 12.  Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters






Stock Ownership






The following table sets forth the beneficial ownership of our common stock as of March 23, 2010, for each person or group that holds more than 5% of our common stock, for each director and executive officer and for our directors and executive officers as a group.




Name of Beneficial Owner(1)

Number of Shares

Beneficially Owned(2)


Percent of

All SharesR. Ramin Kamfar


22,200



61
%James G. Babb, III


-Jordan B. Ruddy


-Jerold E. Novack


-Michael L. Konig


-Brian D. Bailey


5,000



13
%I. Bobby Majumder


5,000



13
%Romano Tio


5,000



13
%All directors and executive officers as a group


37,200



100.0
%




(1)           The address of each beneficial owner listed is 680 Fifth Avenue, 16th Floor, New York, New York 10019.






(2)           As of March 23, 2010, our advisor owned 22,200 shares of our common stock, all of which is issued and outstanding stock, and 1,000 shares of convertible stock, all of which is issued and outstanding. Our advisor is controlled by BER Holdings, LLC, which is controlled by Mr. Kamfar. Thus, Mr. Kamfar has the power to direct how our advisor votes its shares of common stock.






Item 13. Certain Relationships And Related Transactions And Director Independence






Director Independence






Although our shares are not listed for trading on any national securities exchange, a majority of the members of our board of directors, and all of the members of the audit committee are “independent.”  An “independent” director is a person who is not one of our officers or employees or an officer or employee of our advisor or its affiliates and has not been so for the previous two years. Serving as a director of, or having an ownership interest in, another program sponsored by Bluerock will not, by itself, preclude independent director status.  The board of directors has determined that Brian D. Bailey, I. Bobby Majumder and Romano Tio each satisfies these criteria.  None of these directors has ever served as (or is related to) an employee of ours or any of our predecessors or acquired companies or received or earned any compensation from us or any such other entities except for compensation directly related to service as a director of us.  Therefore, we believe that all of these directors are independent directors.






Certain Transactions with Related Persons






As described further below, we have entered into agreements with certain affiliates pursuant to which they will provide services to us.  As of March 23, 2010, we have not yet broken escrow in our initial public offering, but we have commenced operations through financing obtained from an affiliate loan transaction (described below under “Affiliate Loan for our Investment in the Springhouse Joint Venture”).  Our independent directors have reviewed the material transactions between our affiliates and us since the beginning of 2009 as well as any such currently proposed transactions.  Set forth below is a description of such transactions and the independent directors’ determination of their fairness.







Our Relationship with Bluerock Enhanced Multifamily Advisor, LLC (our Advisor)







22




R. Ramin Kamfar, our chairman of the board and chief executive officer, indirectly owns BER Holdings, LLC, the sole owner of our advisor.  Mr. Kamfar actively participates in the management and operations of the advisor. Since our inception, our advisor has provided day-to-day management of our business.  Among the services provided by our advisor under the terms of the advisory agreement are the following:






·
finding, presenting and recommending to us real estate investment opportunities consistent with our investment policies and objectives;




·
structuring the terms and conditions of our real estate investments, sales and joint ventures;




·
acquiring properties and other investments on our behalf in compliance with our investment objectives and policies;




·
sourcing and structuring our loan originations;




·
arranging for financing and refinancing of properties and our other investments;




·
entering into leases and service contracts for our properties;




·
supervising and evaluating each property manager’s performance;




·
reviewing and analyzing the properties’ operating and capital budgets;




·
assisting us in obtaining insurance;




·
generating an annual budget for us;




·
reviewing and analyzing financial information for each of our assets and the overall portfolio;




·
formulating and overseeing the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of our properties and other investments;




·
performing investor-relations services;




·
maintaining our accounting and other records and assisting us in filing all reports required to be filed with the SEC, the IRS and other regulatory agencies;




·
engaging and supervising the performance of our agents, including our registrar and transfer agent; and




·
performing any other services reasonably requested by us.




Our advisor is subject to the supervision of our board of directors and only has such authority as we may delegate to it as our agent. The advisory agreement has a one-year term expiring October 15, 2010, but may be renewed for an unlimited number of successive one-year periods upon the mutual consent of our advisor and us. Additionally, either party may terminate the advisory agreement without penalty upon 60 days’ written notice and, in such event, our advisor must cooperate with us and our directors in making an orderly transition of the advisory function.  From January 1, 2009 through the most recent date practicable, which was February 28, 2010, we have compensated our advisor as set forth below.






Our advisor or its affiliates may pay some of our organization and offering costs (other than selling commissions and dealer manager fees) incurred in connection with our ongoing public offering, including our legal, accounting, printing, mailing and filing fees.  We will reimburse our advisor for these costs, but only to the extent that the reimbursement would not cause selling commissions, the dealer manager fee and other organization and offering expenses borne by us to exceed 15% of the gross offering proceeds of our ongoing public offering.  In addition, our advisor is obligated to reimburse us to the extent selling commissions, the dealer manager fee and other organization and offering costs incurred by us in the offering exceed 15% of gross offering proceeds. From January 1, 2009 through February 28, 2010, our advisor incurred approximately $2.96 million of our organization and offering expenses on our behalf.  As of March 23,2010, we have not yet broken escrow in our initial public offering, and therefore we have not yet reimbursed our advisor for any of these costs.







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We incur acquisition fees payable to our advisor equal to 1.75% of the cost of our acquired investments, including acquisition expenses and any debt attributable to such investments. With respect to investments in and originations of loans, in lieu of an acquisition fee we pay our advisor an origination fee equal to 1.75% of the amount funded by us to acquire or originate mortgage, mezzanine, bridge or other loans, including any expenses related to such investment and any debt we use to fund the acquisition or origination of the loan.  Acquisition and origination fees relate to services provided in connection with the selection and acquisition or origination of real estate and real estate-related investments.  Acquisition fees from January 1, 2009 through February 28, 2010 totaled approximately $236,000.  We paid no origination fees during that period.  All acquisition and origination fees incurred as of February 28, 2010 have been paid.






In addition to acquisition and origination fees, we reimburse our advisor for amounts that it pays in connection with the selection, acquisition or development of a property or the selection and acquisition or origination of a real estate-related investment, whether or not we ultimately acquire the asset. From January 1, 2009 through February 28, 2010, our advisor and its affiliates did not incur any such costs as of February 28, 2010.






For asset management services, we pay our advisor a monthly fee equal to one-twelfth of 1.0% of the higher of the cost or value of each asset, where cost excludes acquisition fees and expenses but includes any debt attributable to the asset, as well as any costs we expend to develop, construct or improve an asset and where value is the fair market value established by an independent valuation report.  However, 50% of the asset management fee will not be payable until stockholders have received distribution in an amount equal to at least a 6.0% per annum cumulative, non-compounded return.  From January 1, 2009 through February 28, 2010, our asset management fees totaled approximately $8,000 and were accrued but unpaid as of February 28, 2010.






Under our advisory agreement our advisor and its affiliates have the right to seek reimbursement from us for all costs and expenses they incur in connection with their provision of services to us, including our allocable share of our advisor’s overhead, such as rent, employee costs, utilities and information technology costs.  We do not, however, reimburse our advisor for personnel costs in connection with services for which our advisor receives acquisition, origination or disposition fees.  Although the advisor has the right to seek reimbursement for our allocable share of its employee costs, to date it has not done so. From January 1, 2009 through February 28, 2010, our advisor and its affiliates incurred approximately $1.3 million of insurance premiums and operating expenses incurred on our behalf, which amount has not yet been reimbursed as of February 28, 2010.






The independent directors reviewed our relationship with our advisor during 2009 and considered it to be fair.  The independent directors believe that the amounts payable to the advisor under the advisory agreement are similar to those paid by other publicly offered, unlisted, externally advised REITs and that this compensation is necessary in order for the advisor to provide the desired level of services to us and our stockholders.






Other Services Provided by Affiliates






In addition to the services described above to be provided by our advisor and its affiliates, affiliates of our advisor may provide other property-level services to our company and may receive compensation for such services, including leasing, loan servicing, property tax reduction and risk management fees. However, under no circumstances will such compensation exceed an amount that would be paid to non-affiliated third parties for similar services. A majority of the independent directors must approve all compensation for such other services paid to our advisor or any of its affiliates.






Springhouse Joint Venture with Affiliate






On December 3, 2009, through a wholly owned subsidiary of our operating partnership, we completed an investment in a joint venture along with Bluerock Special Opportunity + Income Fund, LLC (“BEMT Co-Investor”), an affiliate of our sponsor, and Hawthorne Springhouse, LLC (“Hawthorne”), an unaffiliated entity, to acquire a 432-unit garden-style multifamily community known as Springhouse at Newport News (the “Springhouse property”), located in Newport News, Virginia, from Newport-Oxford Associates Limited Partnership, an unaffiliated entity.






In connection with the closing of the Springhouse property acquisition, we invested $2.5 million to acquire a 50% equity interest in BR Springhouse Managing Member, LLC (the “Springhouse Managing Member JV Entity”) through a wholly owned subsidiary of our operating partnership, BEMT Springhouse, LLC (“BEMT Springhouse”).  BEMT Co-Investor invested $2.5 million to acquire the remaining 50% interest in the Springhouse Managing Member JV Entity.  BEMT Springhouse and BEMT Co-Investor are co-managers of the Springhouse Managing Member JV Entity.







24




The Springhouse Managing Member JV Entity contributed its capital to acquire a 75% equity interest in BR Hawthorne Springhouse JV, LLC (the “Springhouse JV Entity”) and acts as the manager of the Springhouse JV Entity.  Hawthorne invested $1.7 million to acquire the remaining 25% interest in the Springhouse JV Entity.  The Springhouse JV Entity is the sole owner of BR Springhouse, LLC (“BR Springhouse”), a special-purpose entity that holds title to the Springhouse property.






Under the terms of the operating agreement for the Springhouse Managing Member JV Entity, certain major decisions regarding the investments of the Springhouse Managing Member JV Entity require the unanimous approval of BEMT Co-Investor and us (through BEMT Springhouse).  To the extent that we and BEMT Co-Investor are not able to agree on a major decision or at any time after December 3, 2012, either party may initiate a buy-sell proceeding.  Additionally, any time after December 3, 2012, either party may initiate a proceeding to force the sale of the Springhouse Managing Member JV Entity’s interest in the Springhouse JV Entity to a third party, or, in the instance of the non-initiating party’s rejection of a sale, cause the non-initiating party to purchase the initiating party’s interest in the Springhouse Managing Member JV Entity.  The operating agreement contains terms, conditions, representations, warranties and indemnities that are customary and standard for joint ventures in the real estate industry.






Under the terms of the operating agreement of the Springhouse JV Entity, major decisions with respect to the joint venture or the Springhouse property are made by the majority vote of an appointed management committee, which is controlled by the Springhouse Managing Member JV Entity.  However, any decision with respect to the sale or refinancing of the Springhouse property requires the unanimous approval of the Springhouse Managing Member JV Entity and Hawthorne.  Further, to the extent that the Springhouse Managing Member JV Entity and Hawthorne are not able to agree on a major decision or at any time after December 3, 2012, either party may initiate a buy-sell proceeding.  Additionally, any time after December 3, 2012, either party may initiate a proceeding to force the sale of the Springhouse property to a third party, or, in the instance of the non-initiating party’s rejection of a sale, cause the non-initiating party to purchase the initiating party’s interest in the Springhouse JV Entity.  The operating agreement contains terms, conditions, representations, warranties and indemnities that are customary and standard for joint ventures in the real estate industry.






As a result of the structure described above, we and BEMT Co-Investor each hold a 37.5% indirect equity interest in the Springhouse property, and Hawthorne holds the remaining 25% indirect equity interest.  We, BEMT Co-Investor and Hawthorne will each receive current distributions from the operating cash flow generated by the Springhouse property in proportion to these respective percentage equity interests.






The independent directors reviewed the proposed joint venture transaction with our affiliate and considered it to be fair and reasonable to us and on substantially the same terms and conditions as those received by the other joint venturers.






Affiliate Loan for our Investment in the Springhouse Joint Venture






In connection with our investment in the Springhouse joint venture, on December 3, 2009, BEMT Springhouse entered into a loan agreement with BEMT Co-Investor pursuant to which BEMT Springhouse borrowed $3.2 million (the “BEMT Co-Investor Loan”).  The BEMT Co-Investor Loan has a six-month term, maturing June 3, 2010, and may be prepaid without penalty.  It bears interest compounding monthly at a rate of 30-day LIBOR + 5.00%, subject to a minimum rate of 7.00%, annualized.  As of March 1, 2010, the interest rate on the BEMT Co-Investor Loan was 7.00%.  Interest on the loan will be paid on a current basis from cash flow distributed to us from the Springhouse Managing Member JV Entity.  The BEMT Co-Investor Loan is secured by a pledge of our indirect membership interest in BEMT Springhouse and a pledge of BEMT Springhouse’s membership interest in the Springhouse Managing Member JV Entity.  In accordance with the requirements of our charter, the BEMT Co-Investor Loan was reviewed and approved by a majority of our board of directors (including a majority of our independent directors) as being fair, competitive, and commercially reasonable and no less favorable to us than loans between unaffiliated parties under the same circumstances.  Furthermore, due to the unique investment opportunity presented by the Springhouse property, including the opportunity to distinguish ourselves competitively from other early-stage non-traded REITs, our board of directors expressly considered and approved leverage in excess of our general charter-imposed limitations in connection with entering into the BEMT Co-Investor loan.






Currently Proposed Transactions






On March 23, 2010 the board of directors approved two investment transactions with related parties (described above under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Subsequent Events.)







25




Item 14.  Principal Accounting Fees and Services






Independent Auditors






During the years ended December 31, 2009 and 2008, Freedman & Goldberg served as our independent auditor and provided certain tax and other services.  Freedman & Goldberg has served as our independent auditor since our formation.






Pre-Approval Policies






In order to ensure that the provision of such services does not impair the auditors’ independence, the audit committee approved, on January 14, 2009, an Audit Committee Pre-approval Policy for Audit and Non-audit Services.  In establishing this policy, the audit committee considered whether the service is a permissible service under the rules and regulations promulgated by the SEC.  In addition, the audit committee, may, in its discretion, delegate one or more of its members the authority to pre-approve any audit or non-audit services to be performed by the independent auditors, provided any such approval is presented to and approved by the full audit committee at its next scheduled meeting.






Since October 15, 2009, when we became a reporting company under Section 15(d) of the Securities Exchange Act of 1934, all services rendered by Freedman & Goldberg have been pre-approved in accordance with the policies and procedures described above.






Principal Auditor Fees






The aggregate fees billed to us for professional accounting services, including the audit of our annual financial statements by Freedman & Goldberg for the years ended December 31, 2009 and 2008, are set forth in the table below.




2009


2008Audit fees

$
31,030


$
-Audit-related fees


66,278



-Tax fees


1,610



-All other fees


-



-Total

$
98,918


$
-




For purposes of the preceding table, Freedman & Goldberg’s professional fees are classified as follows:






·
Audit fees – These are fees for professional services performed for the audit of our annual financial statements and the required review of quarterly financial statements and other procedures performed by Freedman & Goldberg in order for them to be able to form an opinion on our consolidated financial statements.  These fees also cover services that are normally provided by independent auditors in connection with statutory and regulatory filings or engagements.




·
Audit-related fees – These are fees for assurance and related services that traditionally are performed by independent auditors that are reasonably related to the performance of the audit or review of the financial statements, such as due diligence related to acquisitions and dispositions, attestation services that are not required by statute or regulation, internal control reviews and consultation concerning financial accounting and reporting standards.




·
Tax fees – These are fees for all professional services performed by professional staff in our independent auditor’s tax division, except those services related to the audit of our financial statements.  These include fees for tax compliance, tax planning and tax advice, including federal, state and local issues.  Services may also include assistance with tax audits and appeals before the IRS and similar state and local agencies, as well as federal, state and local tax issues related to due diligence.




·
All other fees – These are fees for any services not included in the above-described categories.










26







PART IV


Item 15.  Exhibits, Financial Statement Schedules.





(a)
List of Documents Filed.





1.
Financial Statements





The list of the financial statements filed as part of this Annual Report on Form 10-K is set forth on page F-1 herein.





2.
Financial Statement Schedules





Schedule III Real Estate and Accumulated Depreciation





3.
Exhibits





The list of exhibits filed as part of this Annual Report on Form 10-K is set forth in the Exhibit Index following the financial


statements in response to Item 601 of Regulation S-K.





(b)
Exhibits.





The exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto.





(c)
Financial Statement Schedules.





All financial statement schedules, except for Schedule III (see (a) 2. above), have been omitted because the required information of such schedules is not present, is not present in amounts sufficient to require a schedule or is included in the financial statements.





SIGNATURES







Pursuant to the requirements of Section 13 or 15(d) 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 ENHANCED MULTIFAMILY TRUST, INC.











DATE: March 31, 2010                                                                        /s/ R. Ramin Kamfar


R. Ramin Kamfar


Chief Executive Officer and Chairman of the Board


(Principal Executive Officer)





Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf


of the registrant and in the capacities and on the dates indicated.





BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.











DATE: March 31, 2010                                                                        /s/ R. Ramin Kamfar


R. Ramin Kamfar


Chief Executive Officer and Chairman of the Board


(Principal Executive Officer)







DATE: March 31, 2010                                                                        /s/ Jerold E. Novack


Jerold E. Novack


Chief Financial Officer


(Principal Financial Officer and Principal Accounting Officer)








27





DATE: March 31, 2010                                                                        /s/ Brian D. Bailey


Brian D. Bailey


Director





DATE: March 31, 2010                                                                        /s/ I Bobby Majumder


I Bobby Majumder


Director





DATE: March 31, 2010                                                                        /s/ Romano Tio


Romano Tio


Director














28





INDEX TO CONSOLIDATED FINANCIAL STATEMENTS





PageFinancial StatementsReport of Independent Registered Public Accounting Firm
F-2Consolidated Balance Sheets as of December 31, 2009 and 2008
F-3Consolidated Statements of Operations for the Years Ended December 31, 2009
F-4Consolidated Statements of Stockholders’ Equity and Comprehensive Loss for the Years Ended December 31, 2009 and 2008
F-5Consolidated Statements of Cash Flows for the Years Ended December 31, 2009
F-6Notes to Consolidated Financial Statements
F-7Financial Statement SchedulesSchedule III —Real Estate and Accumulated Depreciation
F-16























F-1








REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  
 
 
 The Board of Directors and Stockholders
 Bluerock Enhanced Multifamily Trust, Inc.
 
 
  We have audited the accompanying consolidated balance sheets of Bluerock Enhanced Multifamily Trust, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended.  Our audits also included the financial statement schedule in Item 15(a), Schedule III-Real Estate Assets and Accumulated Depreciation.  These financial statements and schedule are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
   We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
   In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Bluerock Enhanced Multifamily Trust, Inc. as of December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
  
 /s/ Freedman & Goldberg, CPAs, PC
 
  Farmington Hills, MI
 March 31, 2010









F-2


BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.CONSOLIDATED BALANCE SHEETSAs of December 31, 2009 and 20082009


2008ASSETSReal Estate:Land

$
5,616,000


$
-Buildings and improvements


23,634,000Total real estate, cost


29,250,000



-Less accumulated depreciation and amortization


(157,937
)Total real estate, net


29,092,063



-Cash and cash equivalents


666,714



201,001Rents, other receivables and prepaid expenses


125,162Deferred financing, net


1,102,802Other assetsTOTAL ASSETS

$
30,986,741


$
201,001LIABILITIES AND STOCKHOLDERS' EQUITYMortgage payable

$
23,400,000


$
-Note payable


2,778,389Accounts payable and accrued liabilities


219,882Due to affiliates


-Total liabilities


26,398,271



-Minority interest


4,492,039Stockholders' equityPreferred stock, $0.01 par value, 50,000,000 sharesauthorized; none issued and outstandingCommon stock, $0.01 par value, 249,999,000 sharesauthorized; 37,200 shares issued and outstanding


372



222Nonvoting convertible stock, $0.01 par value per share;1,000 shares authorized, issued and outstanding


10Additional paid-in-capital, net of costs


336,481



200,779Deferred compensation - incentive shares


(120,000
)Cumulative net loss


(120,432
)Total stockholders' equity


96,431



201,001TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
30,986,741


$
201,001See Notes to Consolidated Financial Statements









F-3





BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.CONSOLIDATED STATEMENT OF OPERATIONSFor the Year Ended December 31, 2009RevenuesRental revenue

$
303,219Tenant reimbursements and other income


8,972Total Revenues


312,191ExpensesProperty operating expenses


57,672Property taxes and insurance


36,558Management fees


20,550General and administrative


30,193Depreciation and amortization


163,775Total expenses


308,748Operating income


3,443Interest expense


123,875Loss before minority interest allocation


(120,432
)Loss allocated to minority interests


41,111Net loss

$
(79,321
)Basic and diluted loss per share

$
(3.12
)Weighted average number of shares outstanding


25,405See Notes to Consolidated Financial Statements







F-4






BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYFor the Year Ended December 31, 2009 and 2008




Convertible Stock


Common StockNumber of Shares


Par Value


Number of Shares


Par Value


Additional Paid-in Capital


Deferred Compensation - Incentive Shares


Cumulative Distributions


Net Loss (Income)


Total Stockholders' EquityBalance, January 1, 2008













$
-


$
-


$
-


$
-


$
-Issuance of common stock, net








22,200


$
222



199,779















200,001Issuance of convertible stock


1,000


$
10











990















1,000Balance, December 31, 2008


1,000



10



22,200



222



200,769


$
-



-



-



201,001Issuance of restricted stock, net










15,000



150



149,850



(120,000
)










30,000Deferred offering costs


















(14,138
)














(14,138
)Net Loss






























(120,432
)


(120,432
)Balance, December 31, 2009


1,000


$
10



37,200


$
372


$
336,481


$
(120,000
)

$
-


$
(120,432
)

$
96,431




See Notes to Consolidated Financial Statements





F-5




BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.CONSOLIDATED STATEMENT OF CASH FLOWSFor the Year Ended December 31, 2009Cash flows from operating activitiesNet loss


$                (79,321)Minority interest in net loss of consolidated entity
(41,111)Depreciation and amortization
163,775Increase in receivables
(125,162)Increase in deferred financing
(1,108,640)Increase in accounts payable
219,882Net cash flow from operations

(970,577)Cash Flows from Investing ActivitiesPurchase of real estate
(29,250,000)Net Cash Flows from Investing Activities

(29,250,000)Cash Flows from Financing ActivitiesProceeds from mortgages
23,400,000Proceeds from notes payable
2,778,389Minority interest contributions
4,492,039Issuance of common stock, net
15,862Net Cash Flows from Financing Activities

30,686,290Net change in cash and cash equivalents

465,713Cash and cash equivalents at beginning of year

201,001Cash and cash equivalents at end of year

$                666,714See Notes to Consolidated Financial Statements




F-6
  BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  AS OF DECEMBER 31, 2009 and DECEMBER 31, 2008
  1. ORGANIZATION AND NATURE OF BUSINESS
  Bluerock Enhanced Multifamily Trust, Inc. (the “Company”) was incorporated on July 25, 2008 under the laws of the state of Maryland. If we meet the qualification requirements, we intend to elect to be treated as a real estate investment trust or REIT for Federal income tax purposes. We were incorporated to raise capital and acquire a diverse portfolio of residential real estate assets.  Our day-to-day operations are to be managed by Bluerock Enhanced Multifamily Advisor, LLC, or our advisor, under an advisory agreement. Our advisor is affiliated with us in that we and our advisor have common ownership and management.  The use of the words “we,” “us” or “our” refers to Bluerock Enhanced Multifamily Trust, Inc. and its subsidiary Bluerock Enhanced Multifamily Holdings, L.P., or our operating partnership, except where the context otherwise requires.
 
 On August 22, 2008, the Company filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer a maximum of $1,000,000,000 in shares and a minimum of $2,500,000 in shares of our common stock in our primary offering, at an offering price of $10.00 per share, with discounts available for certain categories of purchasers.  We also are offering up to $285,000,000 in shares pursuant to our distribution reinvestment plan at $9.50 per share. The SEC declared our registration statement effective on October 15, 2009 and on December 3, 2009 the Company acquired, through a joint venture partnership, one multifamily real estate property and commenced active operations
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Principles of Consolidation and Basis of Presentation
  We intend to operate in an umbrella partnership REIT structure in which our wholly owned subsidiary, Bluerock Enhanced Multifamily Holdings, L.P., a Delaware limited partnership, or wholly owned subsidiaries of our operating partnership, will own substantially all of the properties acquired on our behalf.
 
 In June 2009, the Financial Accounting Standards Board (“FASB”) issued its final Statement of Financial Accounting Standards – The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. This Statement made the FASB Accounting Standards Codification (the “ASC”) the single source of U.S. Generally Accepted Accounting Principles (“GAAP”) used by nongovernmental entities in the preparation of financial statements, except for rules and interpretive releases of the SEC under authority of federal securities laws. The ASC supersedes all existing non-SEC accounting and reporting standards and was effective for the interim and annual periods ending after September 15, 2009.  We have prepared our consolidated financial statements in conformity with the ASC using the plain English approach encouraged by the FASB in the FASB Accounting Standards Codification Notice to Constituents (v.3.0) release.
  Because we are the sole general partner of our operating partnership and have unilateral control over its management and major operating decisions (even if additional limited partners are admitted to our operating partnership), the accounts of our operating partnership are consolidated in our company’s consolidated financial statements. All significant intercompany accounts and transactions are eliminated in consolidation.  The Company will consider future majority owned and controlled joint ventures for consolidation in accordance with the provisions required by the Consolidation Topic of the FASB ASC.
 
 F-7
 
 
  BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  AS OF DECEMBER 31, 2009 and DECEMBER 31, 2008
  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  Revenue Recognition
  The Company will recognize minimum rent, including rental abatements and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related lease, and amounts expected to be received in later years will be recorded as deferred rents. The Company will record property operating expense reimbursements due from tenants for common area maintenance, real estate taxes, and other recoverable costs in the period the related expenses are incurred.
  The Company will recognize gains on sales of real estate pursuant to the provisions required by the Real Estate Sales Topic of the FASB ASC. The specific timing of a sale is measured against various criteria related to the terms of the transaction and any continuing involvement associated with the property. If the criteria for profit recognition under the full-accrual method are not met, the Company will defer gain recognition and account for the continued operations of the property by applying the percentage-of-completion, reduced profit, deposit, installment or cost recovery methods, as appropriate, until the appropriate criteria are met.
  
 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.  These estimates include such items as purchase price allocation of real estate acquisitions, impairment of long-lived assets, depreciation and amortization and allowance for doubtful accounts.  Actual results could differ from those estimates.
  Cash and Cash Equivalents
  The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents may include cash and short-term investments. Short-term investments are stated at cost, which approximates fair value.  There are no restrictions on the use of the Company’s cash as of December 31, 2009.
  
 Accounts Receivable and Prepaid Expenses
 
 Accounts receivable primarily consists of rental revenue receivables of approximately $44,000 and prepaid insurance expense of approximately $81,000 as of December 31, 2009.
 
 Deferred Financing Fees
 
 Deferred financing fees are recorded at cost and are amortized to interest expense using a straight-line method that approximates the effective interest method over the life of the related debt. Accumulated amortization of deferred financing fees was approximately $6,000 as of December 31, 2009.
 
 F-8
 
 
  
 BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 AS OF DECEMBER 31, 2009 and DECEMBER 31, 2008
  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  Real Estate Assets
  Depreciation
  Real estate costs related to the acquisition, development, construction, and improvement of properties will be capitalized. Repair and maintenance costs will be charged to expense as incurred and significant replacements and betterments will be capitalized. Repair and maintenance costs include all costs that do not extend the useful life of the real estate asset. The Company considers the period of future benefit of an asset to determine its appropriate useful life. The Company anticipates the estimated useful lives of its assets by class to be generally as follows:
  Buildings                                                            25-40 years
 Building improvements                                    10-25 years
 Land improvements                                          20-25 years
 Tenant improvements                                      Shorter of lease term or expected useful life
 Tenant origination and absorption costs       Remaining term of related lease
 As of December 31, 2009, accumulated depreciation related to our consolidated real estate property was $157,937.
 
 Real Estate Purchase Price Allocation
  Real estate, consisting of land, buildings and improvements, is recorded at cost.  The Company allocates the cost of an acquisition to the acquired tangible assets and identifiable intangibles based on their estimated fair values in accordance with the Consolidation Topic of the FASB ASC.
  
 We will record above-market and below-market in-place leases values for acquired properties based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease.  We will amortize any recorded above-market or below-market lease values as a reduction or increase, respectively, to rental income over the remaining non-cancelable terms of the respective lease.  Upon termination of a lease, the unamortized portion of the above-market or below-market lease intangible associated with the vacating tenant’s lease would be charged to rental income in that period.
 
  Impairment of Real Estate Assets
  The Company will continually monitor events and changes in circumstances that could indicate that the carrying amounts of its real estate and related intangible assets may not be recoverable. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets may not be recoverable, the Company will assess the recoverability of the assets by estimating whether the Company will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. If based on this analysis the Company does not believe that it will be able to recover the carrying value of the asset, the Company will record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the asset as required by the provisions of the Impairment or Disposal of Long Lived Assets Topic of the FASB ASC.
  Real Estate Loans Receivable
 
 The real estate loans receivable will be recorded at cost and reviewed for potential impairment at each balance sheet date. A loan receivable is considered impaired when it becomes probable, based on current information, that the Company will be unable to collect all amounts due according to the loan’s contractual terms. The amount of impairment, if any, is measured by comparing the recorded amount of the loan receivable to the present value of the expected cash flows or the fair value of the collateral. If a loan was deemed to be impaired, the Company would record a reserve for loan losses through a charge to income for any shortfall
 
 F-9
 
 BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 AS OF DECEMBER 31, 2009 and DECEMBER 31, 2008
  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  Rents and Other Receivables
  The Company will periodically evaluate the collectability of amounts due from tenants and maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements. The Company will maintain an allowance for deferred rent receivable that arises from the straight-lining of rents. The Company will exercise judgment in establishing these allowances and consider payment history and current credit status of its tenants in developing these estimates.
  
 Stock-Based Compensation
 
 The Company accounts for stock-based compensation in accordance with the provisions of the Equity Topic of the FASB ASC. This topic established a fair value based method of accounting for stock-based compensation and requires the fair value of stock-based compensation awards to amortize as an expense over the vesting period and requires any dividend equivalents earned to be treated as dividends for financial reporting purposes.  Stock-based compensation awards are valued at the fair value on the date of grant and amortized as an expense over the vesting period.
 
 Distribution Policy
  The Company intends to elect to be taxed as a REIT and to operate as a REIT beginning with its taxable year ending December 31, 2009. To maintain its qualification as a REIT, the Company intends to make distributions each taxable year equal to at least 90% of its REIT annual taxable income (excluding net capital gains and income from operations or sales through a taxable REIT subsidiary, or TRS). The Company expects to authorize and declare daily distributions that will be paid on a monthly basis.
  Distributions to stockholders will be determined by the board of directors of the Company and will be dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements, and annual distribution requirements in order to maintain the Company’s status as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”) and other considerations as our board of directors may deem relevant.
  Organization and Offering Costs
  Organization and offering costs (other than selling commissions and the dealer manager fee) of the Company are initially being paid by the advisor, the dealer manager or their affiliates on behalf of the Company. These other organization and offering costs include all expenses to be paid by the Company in connection with the Company’s ongoing public offering, including but not limited to (i) legal, accounting, printing, mailing and filing fees; (ii) charges of the escrow holder and transfer agent; (iii) charges of the advisor for administrative services related to the issuance of shares in the offering; (iv) reimbursement of the dealer manager for amounts it may pay to reimburse the bona fide diligence expenses of broker-dealers; (v) reimbursement to the advisor for costs in connection with preparing supplemental sales materials; (vi) the cost of bona fide training and education meetings held by the Company (primarily the travel, meal and lodging costs of registered representatives of broker-dealers); (vii) reimbursement to the dealer manager for attendance and sponsorship fees and cost reimbursements for employees of the dealer manager to attend retail seminars conducted by broker-dealers; and (viii) in special cases, reimbursement to participating broker-dealers for technology costs associated with the offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of the shares in the offering and the ownership of the shares by such broker-dealers’ customers. Pursuant to the Advisory Agreement and the Dealer Manager Agreement, the Company will be obligated to reimburse the advisor, the dealer manager or their affiliates, as applicable, for organization and offering costs paid by them on behalf of the Company, provided that the advisor would be obligated to reimburse the Company to the extent selling commissions, the dealer manager fee and other organization and offering costs incurred by the Company in the offering exceed 15% of gross offering proceeds
 
 In the event the minimum number of shares of the Company’s common stock is not sold to the public, the Company will terminate the offering and will have no obligation to reimburse the advisor, the dealer manager or their affiliates for any organization and offering costs. As of December 31, 2009, the advisor has incurred on behalf of the Company organization and offering costs of approximately $2,893,000. These costs are not recorded in the consolidated financial statements of the Company as of December 31, 2009 because such costs are not a liability of the Company until the minimum number of shares of the Company’s common stock is issued, and such costs will only become a liability of the Company to the extent selling commissions, the dealer manager fee and other organization and offering costs do not exceed 15% of the gross proceeds of the offering. When recorded by the Company, organization costs will be expensed as incurred, and offering costs, which include selling commissions and dealer manager fees, will be deferred and charged to stockholders’ equity as such amounts are reimbursed to the advisor, the dealer manager or their affiliates from the gross proceeds of the offering.
  
 F-10
 
 BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 AS OF DECEMBER 31, 2009 and DECEMBER 31, 2008
  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  Independent Director Compensation
  The Company will pay each of its independent directors an annual retainer of $25,000. In addition, the independent directors will be paid for attending meetings as follows: (i) $2,500 for each board meeting attended, (ii) $2,000 for each committee meeting attended, (iii) $1,000 for each teleconference board meeting attended, and (iv) $1,000 for each teleconference committee meeting attended.  All directors also receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at meetings of the board of directors. In addition 5,000 shares of restricted stock will be granted upon election to the board and 2,500 shares of restricted stock will be granted upon re-election to the board. Director compensation is an operating expense of the Company that is subject to the operating expense reimbursement obligation of the advisor discussed in Note 6, “Related -Party Transactions.”
  Income Taxes
  The Company intends to elect to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, and intends to operate as such commencing with the taxable year in which the Company satisfies the minimum offering requirements.  The Company expects to have little or no taxable income prior to electing REIT status.  To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable income to stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its stockholders. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, and federal income and excise taxes on our undistributed income.  If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income and net cash available for distribution to stockholders. However, the Company intends to organize and operate in such a manner as to qualify for treatment as a REIT.
  Per Share Data
  Loss per basic share of common stock is calculated by dividing net loss by the weighted-average number of shares of common stock outstanding during such period. Diluted loss per share of common stock equals basic loss per share of common stock as there were no potentially dilutive shares of common stock for the year ended December 31, 2009.
 
  3.  RECENT ACCOUNTING PRONOUNCEMENTS
  In April 2009, the FASB issued new provisions required under the Financial Instruments Topic of the FASB ASC, which require (i) disclosure of the fair value of all financial instruments for which it is practicable to estimate that value in interim period financial statements as well as in annual financial statements, (ii) that the fair value information be presented together with the related carrying amount of the asset or liability, and (iii) disclosure of the methods and significant assumptions used to estimate the fair value and changes, if any, to the methods and significant assumptions used during the period. The provisions are effective for interim periods ending after June 15, 2009.
 
 In May 2009, the FASB issued new provisions required under the Subsequent Events Topic of the FASB ASC, to establish general standards of accounting for and disclosure of subsequent events. The provisions rename the two types of subsequent events as recognizedsubsequent events or non-recognizedsubsequent events and modify the definition of the evaluation period for subsequent events as events or transactions that occur after the balance sheet date, but before the financial statements are issued. This will require entities to disclose the date through which they have evaluated subsequent events and the basis for that date (theissued date for public companies). The provisions are effective for interim or annual financial periods ending after June 15, 2009, and will be applied prospectively.  This disclosure is presented in Note 10.
  
 F-11
 
 BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 AS OF DECEMBER 31, 2009 and DECEMBER 31, 2008
  4.  ACQUISITIONS
   On December 3, 2009, through a wholly owned subsidiary of our operating partnership, we completed an investment in a joint venture along with Bluerock Special Opportunity + Income Fund, LLC (“BEMT Co-Investor”), an affiliate of our sponsor, and Hawthorne Springhouse, LLC (“Hawthorne”), an unaffiliated entity, to acquire a 432-unit garden-style multifamily community known as Springhouse at Newport News (the “Springhouse property”), located in Newport News, Virginia, from Newport-Oxford Associates Limited Partnership, an unaffiliated entity.
  The aggregate purchase price for the Springhouse property was approximately $29.25 million, plus closing costs.  The acquisition was funded with approximately $6.7 million of gross equity from the Springhouse JV Entity, and a $23.4 million senior mortgage loan to BR Springhouse, LLC.  The terms of the senior mortgage loan are described in Note 5 below.
  5.  MORTGAGES AND NOTES PAYABLE
  The mortgage payable in the amount of $23,400,000 relates to the acquisition of the Springhouse property.  It has 120-month term, payable in monthly installments of interest only for first 24 months followed by principal and interest payments for remaining term, and bears fixed interest rate of 5.66%.  This mortgage note is secured by real estate assets with a net book value of approximately $29,250,000.  Our pro-rata share of the indebtedness is $8,775,000.
  The note payable in the amount of $2,778,389 relates to the acquisition of the Springhouse property.  We entered into a loan agreement with BEMT Co-Investor pursuant to which BEMT Springhouse borrowed $3.2 million (the “BEMT Co-Investor Loan”). The BEMT Co-Investor Loan has a six-month term, maturing June 3, 2010, and may be prepaid without penalty. It bears interest compounding monthly at a rate of 30-day LIBOR + 5.00%, subject to a minimum rate of 7.00%, annualized. As of March 1, 2010, the interest rate on the BEMT Co-Investor Loan was 7.00%. Interest on the loan will be paid on a current basis from cash flow distributed to us from the Springhouse Managing Member JV Entity. The BEMT Co-Investor Loan is secured by a pledge of our indirect membership interest in BEMT Springhouse and a pledge of BEMT Springhouse’s membership interest in the Springhouse Managing Member JV Entity. In accordance with the requirements of our charter, the BEMT Co-Investor Loan was reviewed and approved by a majority of our board of directors (including a majority of our independent directors) as being fair, competitive, and commercially reasonable and no less favorable to us than loans between unaffiliated parties under the same circumstances.
 
 During the year ended December 31, 2009 the Company incurred $123,875 of interest expense.
  The following is a schedule of maturities for all mortgages and notes payable as of December 31, 2009
  2010

$
2,778,3892011


-2012


279,9012013


322,3332014


341,057Thereafter


22,456,709$
26,178,389
 
 
 6.  RELATED-PARTY TRANSACTIONS
 
 As of December 31, 2009, approximately $2,893,000 of organizational and offering costs have been incurred on the Company’s behalf. These costs are not recorded in its consolidated financial statements because such costs are not its liability until the subscriptions for the minimum number of shares are received and accepted by the Company. When recorded by the Company, organizational and offering costs will be expensed as incurred, and third-party offering costs will be deferred and charged to shareholders’ equity as such amounts are reimbursed to the advisor or its affiliates from the gross proceeds of the offering.
  In connection with our investment in the Springhouse property, on December 3, 2009, we entered into a loan agreement with BEMT Co-Investor, the terms of which are described above in Note 5.  Mortgages and Notes Payable.
 
 The advisor performs its duties and responsibilities as the Company’s fiduciary under an advisory agreement. The term of the current advisory agreement ends October 14, 2010, subject to renewals by the Company’s board of directors for an unlimited number of successive one-year periods. The advisor will conduct the Company’s operations and manage its portfolio of real estate and real estate-related investments under the terms of the advisory agreement.
 
 Certain of the Company’s affiliates will receive fees and compensation in connection with the Company’s public offering, and the acquisition, management and sale of its real estate investments
  The Company will pay its advisor a monthly asset management fee for the services it provides pursuant to the advisory agreement. The asset management fee will be equal to one-twelfth of 1.0% 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; provided, however, that 50% of the advisor’s asset management fee will not be payable until stockholders have received distributions in an amount equal to at least a 6.0% per annum cumulative, non-compounded return on invested capital, at
 
 F-12
 
 BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
 DECEMBER 31, 2009 and DECEMBER 31, 2008
 
 6.RELATED-PARTY TRANSACTIONS – (Continued)
 
 which time all such amounts will become immediately due and payable. For these purposes, “invested capital” means the original issue price paid for the shares of the Company’s common stock reduced by prior distributions identified as special distributions from the sale of its asset. The asset management fee will be based only on the portion of the cost or value attributable to the Company’s investment in an asset if the Company does not own all of an asset. The Company will also pay the advisor a financing fee equal to 1% of the amount available under any loan or line of credit made available to the Company. The advisor may re-allow some or all of this fee to reimburse third parties with whom it may subcontract to procure such financing.
 
 The advisor will also receive 1.75% of the purchase price of a property or investment for its services in connection with the investigation, selection, sourcing, due diligence and acquisition of that property or investment. The purchase price of a property or investment will equal 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 will equal the product of (1) the purchase price of the underlying property and (2) the Company’s ownership percentage in the joint venture. The Company will pay the advisor an origination fee in lieu of an acquisition fee for services in connection with the investigation, selection, sourcing, due diligence, and acquisition of mortgage, subordinated, bridge or other loans of 1.75% of the principal amount of the borrower’s loan obligation or of the purchase price of any loan the Company purchases including third- party expenses.
 
 In addition, to the extent the advisor provides a substantial amount of services in connection with the disposition of one or more of the Company’s properties or investments (except for securities that are traded on a national securities exchange), the advisor will 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 may disposition fees paid to the advisor or its affiliates and unaffiliated third parties exceed in the aggregate 6% of the contract sales price In addition to the fees payable to the advisor, the Company will reimburse the advisor for all reasonable and incurred expenses in connection with services provided to the Company, subject to the limitation that the Company will not reimburse any amount that would cause its total operating expenses at the end of four preceding fiscal quarters to exceed the greater of 2% of the Company’s average invested assets or 25% of the Company’s 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 the Company’s assets for the period unless a majority of its independent directors has determined such expenses were justified based on unusual and non-recurring factors. The Company will not reimburse the advisor for personnel costs in connection with services for which the advisor receives acquisition, origination or disposition fees.
 
 The Company has issued 1,000 shares of convertible stock, par value $0.01 per share to its advisor. The convertible stock will convert to shares of common stock if and when: (A) the Company has 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 lists its common stock for trading on a national securities exchange. A “listing” will be deemed to have occurred on the effective date of any merger of the Company in which the consideration received by the holders of the Company’s common stock is the securities of another issuer that are listed on a national securities exchange. Upon conversion, each share of convertible stock will convert into a number of shares of common stock equal to 1/1000 of the quotient of (A) 15% of the excess of (1) the Company’s “enterprise value” (as defined in its charter) plus the aggregate value of distributions paid to date on the outstanding shares of its common stock over the (2) aggregate purchase price paid by the stockholders for those shares plus an 8% cumulative, non-compounded, annual return on the original issue price of those shares, divided by (B) the Company’s enterprise value divided by the number of outstanding shares of common stock, in each case calculated as of the date of the conversion. In the event an event triggering the conversion occurs after the advisory agreement with the advisor is not renewed or terminates (other than because of a material breach by the advisor), the number of shares of common stock the advisor will receive upon conversion will be prorated to account for the period of time the advisory agreement was in force.
  The Company will pay Bluerock REIT Property Management, LLC, a wholly owned subsidiary of the advisor, a property management fee equal to 4% of the monthly gross income from any properties it manages. Alternatively, the Company may contract property management services for certain properties directly to non-affiliated third parties, in which event the Company will pay the 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 advisor and other Bluerock-affiliated entities as well as executive officers and directors of the Company.  As a result, they owe fiduciary duties to each of these entities, their members and 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.
   
 F-13
  BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
 DECEMBER 31, 2009 and DECEMBER 31, 2008
 
 
 6. RELATED-PARTY TRANSACTIONS – (Continued)
 
 Some of the material conflicts that the advisor or its affiliates will face are: 1) the determination of whether an investment opportunity should be recommended to the Company 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; 3) the fees received by the advisor and its affiliates in connection with transactions involving the purchase, origination, management and sale of investments regardless of the quality of the asset acquired or the service provided the Company; and 4) the fees received by the advisor  and its affiliates in connection with the Company’s public offering of equity securities.
 
 7.  MINORITY INTEREST



The Company invested $2.5 million to acquire a 50% equity interest in BR Springhouse Managing Member, LLC (the “Springhouse Managing Member JV Entity”) through a wholly owned subsidiary of its operating partnership, BEMT Springhouse, LLC (“BEMT Springhouse”).  BEMT Co-Investor invested $2.5 million to acquire the remaining 50% interest in the Springhouse Managing Member JV Entity.  BEMT Springhouse and BEMT Co-Investor are co-managers of the Springhouse Managing Member JV Entity.  Under the terms of the operating agreement for the Springhouse Managing Member JV Entity, certain major decisions regarding the investments of the Springhouse Managing Member JV Entity require the unanimous approval of the Company (through BEMT Springhouse), and BEMT Co-Investor.  To the extent that the Company and BEMT Co-Investor are not able to agree on a major decision or at any time after December 3, 2012, either party may initiate a buy-sell proceeding.  Additionally, any time after December 3, 2012, either party may initiate a proceeding to force the sale of the Springhouse Managing Member JV Entity’s interest in the Springhouse JV Entity to a third party, or, in the instance of the non-initiating party’s rejection of a sale, cause the non-initiating party to purchase the initiating party’s interest in the Springhouse Managing Member JV Entity.  The operating agreement contains terms, conditions, representations, warranties and indemnities that are customary and standard for joint ventures in the real estate industry.



The Springhouse Managing Member JV Entity contributed its capital to acquire a 75% equity interest in BR Hawthorne Springhouse JV, LLC (the “Springhouse JV Entity”) and acts as the manager of the Springhouse JV Entity.  Hawthorne invested $1.7 million to acquire the remaining 25% interest in the Springhouse JV Entity.  The Springhouse JV Entity is the sole owner of BR Springhouse, LLC, a special-purpose entity that holds title to the Springhouse property (“BR Springhouse”).  Under the terms of the operating agreement of the Springhouse JV Entity, major decisions with respect to the joint venture or the Springhouse property are made by the majority vote of an appointed management committee, which is controlled by the Springhouse Managing Member JV Entity.  However, any decision with respect to the sale or refinancing of the Springhouse property requires the unanimous approval of the Springhouse Managing Member JV Entity and Hawthorne.  Further, to the extent that the Springhouse Managing Member JV and Hawthorne are not able to agree on a major decision or at any time after December 3, 2012, either party may initiate a buy-sell proceeding.  Additionally, any time after December 3, 2012, either party may initiate a proceeding to force the sale of the Property to a third party, or, in the instance of the non-initiating party’s rejection of a sale, cause the non-initiating party to purchase the initiating party’s interest in the Springhouse JV Entity.  The operating agreement contains terms, conditions, representations, warranties and indemnities that are customary and standard for joint ventures in the real estate industry.



As a result of the structure described above, the Company and BEMT Co-Investor each hold a 37.5% indirect equity interest in the Springhouse property, and Hawthorne holds the remaining 25% indirect equity interest.  The Company, BEMT Co-Investor and Hawthorne will each receive current distributions from the operating cash flow generated by the Springhouse property in proportion to these respective percentage equity interests.



We concluded that the Springhouse JV Entity meets the criteria under the Consolidation Topic of the FASB ASC therefore, we consolidate the Springhouse JV Entity in our financial statements and record as minority interest the portion of the Springhouse JV Entity  not owned by the Company.
 
 F-14
 
 
  BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
 DECEMBER 31, 2009 and DECEMBER 31, 2008
 8.  STOCKHOLDERS’ EQUITY
 
 Common Stock
 The Company is offering and selling to the public up to 100,000,000 million shares of its $.01 par value common stock for $10.00 per share, with discounts available for certain categories of purchasers. The Company is also offering up to 30,000,000 shares of its $.01 par value common stock to be issued pursuant to its distribution reinvestment plan at $9.50 per share.
 
 Convertible Stock
 
 The Company has issued to its advisor 1,000 shares of its convertible stock for an aggregate purchase price of $1,000. Upon certain conditions, the convertible stock will convert to shares of common stock with a value equal to 15% of the excess of (i) the Company’s enterprise value (as defined in its charter) plus the aggregate value of distributions paid to stockholders over (ii) the aggregate purchase price paid by stockholders for the Company’s shares plus a 8% cumulative, non-compounded, annual return on the original issue price paid for those outstanding shares..
 
 Share Repurchase Plan
 
 The Company’s board of directors has approved a share repurchase plan. The share repurchase plan allows for share repurchases by the Company when certain criteria are met.
 Stock-based Compensation for Independent Directors
 
 The Company’s independent directors received an automatic grant of 5,000 shares of restricted stock on the effective date of the public offering and will receive an automatic grant of 2,500 shares of restricted stock at each annual meeting of the Company’s stockholders thereafter. Each person who thereafter is elected or appointed as an independent director will receive an automatic grant of 5,000 shares of restricted stock on the date such person is first elected as an independent director and an automatic grant of 2,500 shares of restricted stock at each annual meeting of the Company’s stockholders thereafter. To the extent allowed by applicable law, the independent directors will not be required to pay any purchase price for these grants of restricted stock. The restricted stock will vest 20% at the time of the grant and 20% on each anniversary thereafter over four years from the date of the grant. All restricted stock may receive distributions, whether vested or unvested. The value of the restricted stock to be granted is not determinable until the date of grant.
 
 9.  ECONOMIC DEPENDENCY
  The Company is dependent on the advisor 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 the Company’s real estate portfolio; and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other sources.
  10.  SUBSEQUENT EVENTS
 
 Pursuant to the Subsequent Events Topic of FASB ASC, we have reviewed all subsequent events and transactions that occurred after our December 31, 2009 unaudited consolidated balance sheet date through the time of filing this annual report on Form 10-K on March 31, 2010.
 
 On March 15, 2010, the Company’s three independent directors received an automatic grant of 2,500 shares each of restricted stock after their re-election to the board of directors at our annual meeting.
 
 On March 23, 2010 the board of directors approved two investment transactions with related parties (described above under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations -Subsequent Events.).
 
 F-15
 
  SCHEDULE III
 BLUEROCK ENHANCED MULTIFAMILY TRUST, INC.REAL ESTATE AND ACCUMULATED DEPRECIATIONSCHEDULE IIIDecember 31, 2009
 Initial cost to company



Gross amount at which carried at close of periodProperty Name

Location

Ownership %

Encumbrances

Land

Building and improvements

Total

Costs Capitalized Subsequent to Acquisition

Land

Building and improvements

Total

Accumulated depreciation

Year of constuction

Date acquiredSpringhouse at Newport News

Newport News, VA

37.5%

$          23,400,000

$  5,616,000

$    23,634,000

$     29,250,000

$                                 -

$   5,616,000

$     23,634,000

$     29,250,000

$       157,937

1986

12/3/2009
   F-16
 
 
  EXHIBIT INDEX
  Exhibit Number
   3.1
Articles of Amendment and Restatement of the Registrant (incorporated by reference to Exhibit 3.1 to Pre-Effective Amendment No. 4 to the Company’s Registration Statement on Form S-11 (No. 333-153135))
  3.2
Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-11 (No. 333-153135))
  4.1
Distribution Reinvestment Plan (included as Exhibit C to the Prospectus, incorporated by reference to Exhibit C to Pre-Effective Amendment No. 4 to the Company’s Registration Statement on Form S-11 (No. 333-153135))
  10.3
Bluerock Enhanced Multifamily Trust, Inc. Long Term Incentive Plan (incorporated by reference to Exhibit 10.3 to Pre-Effective Amendment No. 1 to the Company’s Registration Statement on Form S-11 (No. 333-153135))
  10.4
Advisory Agreement between Bluerock Enhanced Multifamily Trust, Inc. and Bluerock Enhanced Multifamily Advisor, LLC(incorporated by reference to Exhibit 10.4 to Pre-Effective Amendment No. 4 to the Company’s Registration Statement on Form S-11 (No. 333-153135))
  10.5
Form of Escrow Agreement between Bluerock Enhanced Multifamily Trust, Inc. and UMB Bank, N.A. (incorporated by reference to Exhibit 10.5 to Pre-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-153135))
  10.6
Bluerock Enhanced Multifamily Trust, Inc. Independent Directors Compensation Plan(incorporated by reference to Exhibit 10.6 to Pre-Effective Amendment No. 1 to the Company’s Registration Statement on Form S-11 (No. 333-153135))
  10.7
Limited Liability Company/Joint Venture Agreement of BR Springhouse Managing Member, LLC, dated as of December 3, 2009 (incorporated by reference to Exhibit 10.7 to Post-Effective Amendment No. 2 to the Company’s Prospectus dated October 15, 2009.)
  10.8
Limited Liability Company/Joint Venture Agreement of BR Hawthorne Springhouse JV, LLC, dated as of December 3, 2009(incorporated by reference to Exhibit 10.8 to Post-Effective Amendment No. 2 to the Company’s Prospectus dated October 15, 2009.)
  10.9
Property Management Agreement by and between BR Springhouse, LLC and Hawthorne Residential Partners, LLC, dated as of December 3, 2009 (incorporated by reference to Exhibit 10.9 to Post-Effective Amendment No. 2 to the Company’s Prospectus dated October 15, 2009.)
  10.10
Multifamily Deed of Trust, Assignment of Rents and Security Agreement by BR Springhouse, LLC for the benefit of CW Capital, LLC dated December 3, 2009 (incorporated by reference to Exhibit 10.10 to Post-Effective Amendment No. 2 to the Company’s Prospectus dated October 15, 2009.)
  10.11
Loan Agreement by and between Bluerock Special Opportunity + Income Fund, LLC, as lender, and BEMT Springhouse, LLC, dated as of December 3, 2009 (incorporated by reference to Exhibit 10.11 to Post-Effective Amendment No. 2 to the Company’s Prospectus dated October 15, 2009.)
  10.12
Pledge and Security Agreement by Bluerock Enhanced Multifamily Holdings L.P. and BEMT Springhouse LLC for Bluerock Special Opportunity + Income Fund, LLC dated December 3, 2009 (incorporated by reference to Exhibit 10.12 to Post-Effective Amendment No. 2 to the Company’s Prospectus dated October 15, 2009.)
  10.13
Pledge and Security Agreement by BEMT Springhouse LLC for Bluerock Special Opportunity + Income Fund, LLC dated December 3, 2009 (incorporated by reference to Exhibit 10.13 to Post-Effective Amendment No. 2 to the Company’s Prospectus dated October 15, 2009.)
  10.14
Code of Ethics of Bluerock Enhanced Multifamily Trust, Inc. adopted January 14, 2009
   
 F-17
  
 10.15
Whistleblower Policy of Bluerock Enhanced Multifamily Trust, Inc. adopted January 14, 2009
 
 10.16
Corporate Governance Guidelines of Bluerock Enhanced Multifamily Trust, Inc. adopted January 14, 2009]
 21.1             List of Subsidiaries
  31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
 
 F-18
 
 
  Exhibit 21.1
  Bluerock Enhanced Multifamily Trust, Inc.
  List of Subsidiaries
  Bluerock Enhanced Multifamily Holdings, L.P.
  Bluerock REIT Holdings, LLC
  Bluerock Enhanced Multifamily Holdings L.P.
  BEMT Springhouse, LLC
  BR Springhouse Managing Member, LLC
  
 F-19
 
  
 
   EXHIBIT 31.1
  CERTIFICATION OF CHIEF EXECUTIVE OFFICER
  
  I, R. Ramin Kamfar, certify that:
  1.     I have reviewed this quarterly report on Form 10-Q of Bluerock Enhanced Multifamily Trust, 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)) for the registrant and have [Language omitted in accordance with SEC Release No. 34-47986 and 34-54942]:
  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;
  b.       [Paragraph omitted in accordance with SEC transition instructions contained in SEC Release Nos. 34-47986 and 34-54942];
  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 registrants most recent fiscal quarter (the registrants fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to affect, the registrant’s internal controls over financial reporting; and
  5.     The registrant’s other certifying officer 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: March 31, 2010                                                                        /s/ R. Ramin Kamfar
 R. Ramin Kamfar
 Chief Executive Officer and Chairman of the Board
 (Principal Executive Officer)
  
 
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   EXHIBIT 31.2
  CERTIFICATION OF CHIEF FINANCIAL OFFICER
  
  I, Jerold E. Novack, certify that:
  1.     I have reviewed this quarterly report on Form 10-Q of Bluerock Enhanced Multifamily Trust, 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)) for the registrant and have [Language omitted in accordance with SEC Release No. 34-47986 and 34-54942]:
  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;
  b.       [Paragraph omitted in accordance with SEC transition instructions contained in SEC Release Nos. 34-47986 and 34-54942];
  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 registrants most recent fiscal quarter (the registrants fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to affect, the registrant’s internal controls over financial reporting; and
  5.     The registrant’s other certifying officer 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: March 31, 2010                                                                        /s/ Jerold E. Novack
 Jerold E. Novack
 Chief Financial Officer
 (Principal Financial Officer and Principal Accounting Officer)
 
 
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   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 Enhanced Multifamily Trust, 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, 2009 (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.
  
 March 31, 2010                                                                                     /s/ R. Ramin Kamfar
 R. Ramin Kamfar
 Chief Executive Officer and Chairman of the Board
 (Principal Executive Officer)
  
  
 March 31, 2010                                                                                     /s/ Jerold E. Novack
 Jerold E. Novack
 Chief Financial Officer
 (Principal Financial Officer and Principal Accounting 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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