UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 10, 2020
Bluerock Residential Growth REIT, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| Maryland | 001-36369 | 26-3136483 | ||
| (State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
1345 Avenue of the Americas, 32nd Floor
New York, NY 10105
(Address of principal executive offices)
(212) 843-1601
(Registrant’s telephone number, including area code)
None
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
| Class A Common Stock, $0.01 par value per share | BRG | NYSE American |
| 8.250% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share | BRG-PrA | NYSE American |
| 7.625% Series C Cumulative Redeemable Preferred Stock, $0.01 par value per share | BRG-PrC | NYSE American |
| 7.125% Series D Cumulative Preferred Stock, $0.01 par value per share | BRG-PrD | NYSE American |
Securities registered pursuant to Section 12(g) of the Exchange Act:
| Title of each class |
| Series B Redeemable Preferred Stock, $0.01 par value per share |
| Warrants to Purchase Shares of Class A Common Stock, $0.01 par value per share |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| ITEM 3.02 | UNREGISTERED SALES OF EQUITY SECURITIES. |
Quarterly Payment of Certain Salaries in Equity
As previously disclosed in the Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on April 3, 2020 (the “Prior 8-K”) by Bluerock Residential Growth REIT, Inc. (the “Company,” “we,” “us,” or “our”), the amended and restated employment agreements with each of R. Ramin Kamfar (“Mr. Kamfar”) and Jordan B. Ruddy (“Mr. Ruddy”) set forth, respectively, the terms and conditions of Mr. Kamfar’s service as our Chief Executive Officer and Chairman of our Board of Directors, and Mr. Ruddy’s service as our Chief Operating Officer and President, and provide, respectively, that Mr. Kamfar will receive an annual base salary of $400,000, and that Mr. Ruddy will receive an annual base salary of $300,000 (collectively, the “Base Salaries” and each, a “Base Salary”). As also previously disclosed in the Prior 8-K, on March 31, 2020, the Compensation Committee (the “Compensation Committee”) of our Board of Directors (the “Board”) approved, and each of Mr. Kamfar and Mr. Ruddy formally elected and agreed to receive, and the Company agreed to pay, (a) 97.0% of the Base Salary of Mr. Kamfar for the fiscal year ending December 31, 2020, and (b) (i) 66.7% of the Base Salary of Mr. Ruddy for the first quarter of such fiscal year and (ii) 87.3% of the Base Salary of Mr. Ruddy for the second, third and fourth quarters of such fiscal year, in Company equity rather than in cash, as more specifically set forth therein.
On April 15, 2020 (the “Common Stock Date of Grant”), the Company granted (a) to Mr. Kamfar, 97.0% of the portion of the Base Salary payable to Mr. Kamfar for the period from January 1, 2020 through March 31, 2020, and (b) to Mr. Ruddy, 66.7% of the portion of the Base Salary payable to Mr. Ruddy for such period, in each case, as a grant of equity incentive compensation under the Company’s Third Amended and Restated 2014 Equity Incentive Plan for Individuals (the “Individuals Plan”) in the form of shares of the Company’s Class A common stock (the “Common Stock”), with the remainder payable in cash.
The number of shares of Common Stock granted to each of Mr. Kamfar and Mr. Ruddy on the Common Stock Date of Grant was determined by dividing the dollar value of each such grant by the volume weighted average closing price of a share of the Common Stock as reported on the NYSE American for the twenty (20) trading days immediately preceding the Common Stock Date of Grant. On the Common Stock Date of Grant, the Company calculated that 16,611 shares of Common Stock would be issued to Mr. Kamfar, and that 8,563 shares of Common Stock would be issued to Mr. Ruddy, in each case in payment of the Base Salary payable to each of Messrs. Kamfar and Ruddy for the period from January 1, 2020 through March 31, 2020, and the Company issued 16,611 shares of Common Stock to Mr. Kamfar, and 8,563 shares of Common Stock to Mr. Ruddy, in payment thereof.
The shares of Common Stock so granted in payment of the Base Salaries of Mr. Kamfar and Mr. Ruddy were issued in accordance with, and are subject to, the terms of the Individuals Plan, and in reliance upon exemptions from registration provided by Section 4(a)(2) of the Securities Act of 1933 and Regulation D thereunder for transactions not involving any public offering. No general solicitation or advertising occurred in connection with the issuance and sale of such securities. Each such share of Common Stock will become vested and nonforfeitable on the first anniversary of the Common Stock Date of Grant. Each such grant to each of Messrs. Kamfar and Ruddy was evidenced by Restricted Stock Award Agreement.
Payment of Annual Incentive Bonus Awards for Fiscal Year 2019
The information set forth under Item 5.02 of this Current Report on Form 8-K is incorporated herein by reference.
| ITEM 5.02 | DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS. |
Determination and Payment of Annual Incentive Bonus Awards for Fiscal Year 2019
As described in the Company’s Annual Report on Form 10-K filed with the SEC on February 24, 2020 (the “Form 10-K”), pursuant to the respective employment or services agreement of each of the Company’s executive officers (collectively, the “Executive Agreements”), each such executive officer is entitled to payment of an annual incentive bonus for the fiscal year ended December 31, 2019 (each, a “2019 Annual Bonus,” and collectively, the “2019 Annual Bonuses”). As further described in the Form 10-K, the Compensation Committee uses the following criteria in determining the amount of the 2019 Annual Bonus for which each executive officer is eligible: (a) 75% is based upon the Company’s achievement, during the fiscal year ended December 31, 2019, of certain objective Company performance criteria and targets; and (b) the remaining 25% is based upon the Compensation Committee’s subjective evaluation of the performance of each such executive officer during such time period. As also described in the Form 10-K, in December 2018, each of the Company’s executive officers, other than Christopher J. Vohs (“Mr. Vohs”) and Michael DiFranco (“Mr. DiFranco”), executed a Second Side Letter to their Executive Agreement to reflect their prospective election to receive any 2019 Annual Bonus in the form of long-term incentive plan units (“LTIP Units”) of the Company’s operating partnership, Bluerock Residential Holdings, L.P. (the “Operating Partnership”), rather than in cash. (See “Compensation Discussion and Analysis—2019 Compensation Decisions—2019 Annual Cash Bonuses” on page 101 of the Form 10-K).
On April 10, 2020, the Compensation Committee approved payment of 2019 Annual Bonuses, based on the evaluation of the previously-established objective criteria and targets along with the subjective evaluation, to each of the Company’s executive officers in amounts equal to (A) 125.1% of the annual incentive bonus target amount as previously established by the Compensation Committee for each of the following executive officers of the Company: (i) Mr. Kamfar, (ii) James G. Babb, III (“Mr. Babb”), (iii) Ryan S. MacDonald (“Mr. MacDonald”), (iv) Mr. Ruddy, (v) Mr. Vohs, and (vi) Michael L. Konig (“Mr. Konig”), through his wholly-owned law firm, Konig & Associates, LLC, a New Jersey limited liability company (“K&A”); and (B) 112.6% of the annual incentive bonus target amount as previously established by the Compensation Committee for Mr. DiFranco. All references to Mr. Konig herein refer to Mr. Konig acting through K&A.
On April 15, 2020 (the “2019 Annual Bonus LTIP Date of Grant”), the Company granted 2019 Annual Bonuses, in each case, as a grant of equity incentive compensation (i) to each of Messrs. Kamfar, Babb, Ruddy and MacDonald under the Individuals Plan, and (ii) to Mr. Konig under the Company’s Third Amended and Restated 2014 Equity Incentive Plan for Entities (the “Entities Plan,” and together with the Individuals Plan, the “Plans”), in the form of LTIP Units, rather than in cash, in the following amounts: 85,690 LTIP Units to Mr. Kamfar; 69,623 LTIP Units to Mr. Babb; 64,268 LTIP Units to Mr. Ruddy; 64,268 LTIP Units to Mr. MacDonald; and 64,268 LTIP Units to Mr. Konig. Each LTIP Unit issued in payment of the 2019 Annual Bonuses will vest and become nonforfeitable on the first anniversary of the 2019 Annual Bonus LTIP Date of Grant, subject to certain clawback and termination provisions. Each such grant to each of Messrs. Kamfar, Babb, Ruddy, MacDonald and Konig was evidenced by an LTIP Unit Vesting Agreement. By mutual agreement of the Company and each of Messrs. Vohs and DiFranco, the 2019 Annual Bonuses payable to each of Messrs. Vohs and DiFranco will be paid on or before April 30, 2020, in each case in cash.
The LTIP Units granted as 2019 Annual Bonuses to each of Messrs. Kamfar, Babb, Ruddy, MacDonald and Konig were issued in reliance upon exemptions from registration provided by Section 4(a)(2) of the Securities Act of 1933 and Regulation D thereunder for transactions not involving any public offering. No general solicitation or advertising occurred in connection with the issuance and sale of such securities.
All other compensation paid or earned by each of the Company’s named executive officers for the fiscal year ended December 31, 2019 was previously reported by the Company in the Summary Compensation Table beginning on page 110 of the Form 10-K. As of the filing of the Form 10-K, the 2019 Annual Bonuses had not been determined, and thus were not included in the Summary Compensation Table. In accordance with Item 5.02(f) of Form 8-K, the Company is providing a revised Summary Compensation Table, which includes the 2019 Annual Bonuses paid to each of our named executive officers and revised total compensation figures for 2019:
Summary Compensation Table
The table below summarizes the total compensation paid or earned by our named executive officers in 2019, 2018 and 2017.
| Name and Principal Position | Year |
Salary ($) |
Bonus ($)(1) |
Stock Awards ($)(2)(3) |
Non-Equity Incentive Plan Compensation ($)(4) |
All Other Compensation ($) |
Total ($) | ||||||||
|
R. Ramin Kamfar Chairman and CEO |
2019 | 400,000 | 500,400(2) | 1,719,492(5) | — | — | 2,619,892 | ||||||||
| 2018 | 400,000 | 385,200 | 3,968,912(6) | — | — | 4,754,112 | |||||||||
| 2017 | 66,667 | 66,667 | — | — | — | 133,334 | |||||||||
|
Jordan B. Ruddy President and COO |
2019 | 300,000 | 375,300(2) | 628,505(5) | — | — | 1,303,805 | ||||||||
| 2018 | 300,000 | 288,900 | 1,728,870(6) | — | — | 2,317,770 | |||||||||
| 2017 | 50,000 | 50,000 | — | — | — | 100,000 | |||||||||
|
James G. Babb, III Chief Investment Officer |
2019 | 325,000 | 406,575(2) | 628,505(5) | — | — | 1,360,080 | ||||||||
| 2018 | 325,000 | 312,975 | 1,728,870(6) | — | — | 2,366,845 | |||||||||
| 2017 | 54,167 | 54,167 | — | — | — | 108,334 | |||||||||
|
Ryan S. MacDonald Chief Acquisitions Officer |
2019 | 300,000 | 375,300(2) | 628,505(5) | — | — | 1,303,805 | ||||||||
| 2018 | 250,000 | 240,750 | 1,664,972(6) | — | — | 2,155,722 | |||||||||
| 2017 | 41,667 | 41,667 | — | — | — | 83,334 | |||||||||
|
Christopher J. Vohs Chief Financial Officer & Treasurer |
2019 | 250,000 | 156,375 | 186,777(5) | — | — | 593,152 | ||||||||
| 2018 | 250,000 | 120,375 | 614,875(6) | — | — | 985,250 | |||||||||
| 2017 | 41,667 | 20,833 | — | — | — | 62,500 | |||||||||
|
Michael L. Konig* Chief Legal Officer & Secretary |
2019 | 300,000 | 375,300(2) | 628,505(5) | — | — | 1,303,805 | ||||||||
| 2018 | 300,000 | 288,900 | 1,728,870(6) | — | — | 2,317,770 | |||||||||
| 2017 | 50,000 | 50,000 | — | — | — | 100,000 |
| * | Pursuant to a Services Agreement with his wholly-owned law firm, K & A. | |
| (1) | Amounts shown for 2019 for each of Messrs. Kamfar, Babb, Ruddy, MacDonald and Konig reflect payment of the 2019 Annual Bonuses in LTIP Units, rather than in cash, by mutual agreement of each such executive officer and the Company. Amounts shown for 2019 for each of Messrs. Vohs and DiFranco reflect payment of the 2019 Annual Bonuses in cash. | |
| (2) |
Amounts shown do not reflect compensation actually received by the named executive officer. Instead, the amounts shown are the full grant date fair value of LTIP Unit awards issued to the executives in each applicable year. In accordance with SEC disclosure requirements, the amounts for each such year include the full grant date fair value of awards issued under the Incentive Plans. The grant date fair value is computed in accordance with FASB ASC 718, “Compensation-Stock Compensation,” or “ASC 718.”
The actual value of awards with respect to these awards are contingent on continued employment and assumes maximum performance had been achieved under any long term performance awards. | |
| (3) | 2018 amounts include a one-time grant of an Initial Commitment Award to each such executive officer pursuant to their respective Executive Agreements. The Initial Commitment Awards were issued to each such executive officer on January 1, 2018, in a number of LTIP Units with a full grant date fair value equal (in each case) to the following: $2,435,418 for Mr. Kamfar; $1,217,709 for each of Messrs. Ruddy, Babb, MacDonald, and Konig (through K&A); and $487,080 for Mr. Vohs. Each such Initial Commitment Award vested or will vest and become nonforfeitable in five equal annual installments: the first, on December 31, 2018; and thereafter, on October 31, 2019 and each anniversary thereof, through and including October 31, 2022. | |
| (4) |
The executive officers did not receive any non-equity incentive plan compensation in 2019. | |
| (5) |
Reflects the issuance, on January 1, 2019, of LTIP Units based on a price of $9.02 per LTIP Unit, which was the closing price of a share of our Class A Common Stock as reported on the NYSE American for the trading day immediately preceding the date of grant. | |
| (6) |
Reflects the issuance (a) on January 1, 2018, of LTIP Units based on a price of $10.11 per LTIP Unit, and (b) on October 4, 2018, of LTIP Units based on a price of $9.37 per LTIP Unit, which were the respective closing prices of a share of our Class A Common Stock as reported on the NYSE American for the trading day immediately preceding the applicable date of grant. |
CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Ramin Kamfar, Chief Executive Officer (the “CEO”):
The amount earned in 2019 by Mr. Ramin Kamfar, our Chief Executive Officer (the “CEO”) with respect to the 2019 Annual Bonus granted to him for the 2019 performance period was not calculable as of the date of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “Form 10-K”) because the final performance data for the 2019 performance period that determines the amount of the 2019 Annual Bonus earned was not available at that time. As permitted by Instruction 6 to Item 402(u) of Regulation S-K, we thus omitted the CEO pay ratio disclosure required by Item 402(u) of Regulation S-K from the Form 10-K, and have included the required CEO pay ratio disclosure in this Current Report on Form 8-K.
For 2019, our last completed fiscal year:
| • | the annual total compensation of the employee identified at median of our company (other than our CEO), was $143,662; and |
| • | the annual total compensation of the CEO for purposes of determining the CEO pay ratio was $2,619,892. |
The annual total compensation is based on compensation earned from January 1, 2019 through December 31, 2019.
Based on this information, for 2019, the ratio of the annual total compensation of Mr. Kamfar, our Chief Executive Officer, to the median of the annual total compensation of all employees was estimated to be 18.2 to 1.
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described below. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of the “median employee,” the methodology and the material assumptions, adjustments, and estimates that we used were as follows: (a) we determined that, as of December 31, 2019, our employee population consisted of approximately 58 individuals, and (b) to identify the “median employee” from our employee population, we collected actual base salary, bonus earned, and any overtime paid during the period from January 1, 2019 through December 31, 2019.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BLUEROCK RESIDENTIAL GROWTH REIT, INC. | |||
| Dated: April 16, 2020 | By: | /s/ Christopher J. Vohs | |
| Christopher J. Vohs | |||
| Chief Financial Officer and Treasurer | |||