UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________________________

FORM 10-Q

____________________________________________________________________________



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~June 3130, 2017



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-54686

_________________________________________________________________________________

CNL Growth Properties, Inc.

(Exact name of registrant as specified in its charter)

_________________________________________________________________________________




Maryland		26-3859644
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

CNL Center at City Commons 450 South Orange Avenue Orlando, Florida		32801
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (407) 650-1000

Former name, former address and former fiscal year, if changed since last report

___________________________________________________________________________

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 x No ¨

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨	Accelerated filer	¨

Non-accelerated filer	x (Do not check if a smaller reporting company)	Smaller reporting company	¨

		Emerging growth company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of common stock of the registrant outstanding as of ~~May~~August 81, 2017 was 22,526,171.

CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited):	1
	Condensed Consolidated Statements of Net Assets (Liquidation Basis)	1
	Condensed Consolidated Statement of Changes in Net Assets (Liquidation Basis)	2
	Condensed Consolidated Statement of Operations (Going Concern Basis)	3
	Condensed Consolidated Statements of Operations (Going Concern Basis)	3
	Condensed Consolidated Statement of Equity (Going Concern Basis)	4
	Condensed Consolidated Statement of Cash Flows (Going Concern Basis)	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	16
Item 4.	Controls and Procedures	16
PART II. OTHER INFORMATION		17
Item 1.	Legal Proceedings	17
Item 1A	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.	Defaults Upon Senior Securities	17
Item 4.	Mine Safety Disclosures	17
Item 5.	Other Information	17
Item 6.	Exhibits	17
Signatures		18
Exhibits		19

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF NET ASSETS

(Liquidation Basis)

(Unaudited)

	March 31, 2017		December 31, 2016
	June 30, 2017		December 31, 2016
ASSETS
Real estate assets, net	$	~~269~~141,~~472~~425,000	$	331,970,000
Cash and cash equivalents	4287,~~594~~162,~~106~~734		17,926,602
Restricted cash	~~302~~1,~~044~~154,210		405,255
Other assets	~~203~~222,~~260~~437		257,989
Total Assets	$	~~312~~229,~~571~~964,~~410~~381	$	350,559,846
LIABILITIES
Mortgage and construction notes payable	$	~~147~~71,~~079~~799,~~731~~475	$	179,135,370
Liability for non-controlling interests	3323,~~249~~063,~~047~~074		35,080,687
Liability for estimated costs in excess of estimated receipts during liquidation	8,~~811~~321,~~916~~459		11,306,997
Accrued development costs	~~58,955~~—		2,944,380
Accounts payable and other accrued expenses	21,~~163~~981,~~077~~076		4,379,230
Due to related parties	1,~~891~~830,~~640~~573		1,812,609
Other liabilities	~~801~~1,~~406~~259,084		850,990
Total Liabilities	~~194~~108,~~055~~254,~~772~~741		235,510,263
Commitments and contingencies
Net assets in liquidation	$	121,709,640	$	115,049,583
Net assets in liquidation	$	118,515,638	$	115,049,583

See accompanying notes to condensed consolidated financial statements.

Table of Contents

CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS

(Liquidation Basis)

(Unaudited)

	Three Months Ended March 31, 2017
	Six Months Ended June 30, 2017
Net assets in liquidation, December 31, 2016 (Note 4)	$	115,049,583
Net assets in liquidation, December 31, 2016	$	115,049,583
Changes in net assets in liquidation:
Change in liquidation value of investments in real estate	310,~~222~~801,000
Remeasurement of assets and liabilities	3,~~070~~391,~~392~~933
Remeasurement of noncontrolling interests	(27,~~826~~532,~~337~~876		)
Net increase in liquidation value	36,~~466~~660,~~055~~057
Net assets in liquidation, March 31, 2017	$	118,515,638
Net assets in liquidation, June 30, 2017	$	121,709,640

See accompanying notes to condensed consolidated financial statements.

Table of Contents

CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF OPERATIONS

(Going Concern Basis)

(Unaudited)

	Three Months Ended March 31, 2016
	Quarter Ended June 30, 2016			Six Months Ended June 30, 2016
Revenues:
Rental income from operating leases	$	8,~~064~~877,~~713~~307		$	16,942,020
Other property revenues	~~623~~744,~~362~~419			1,367,781
Total revenues	89,~~688~~621,~~075~~726			18,309,801
Expenses:
Property operating expenses	45,~~395~~585,~~400~~703			9,981,103
General and administrative	1,~~214~~311,~~343~~882			2,526,225
Asset management fees, net of amounts capitalized	~~654~~729,~~145~~916			1,384,061
Property management fees	~~413~~440,~~828~~331			854,159
Depreciation	2,~~054~~380,~~519~~902			4,435,421
Total operating expenses	810,~~732~~448,~~235~~734			19,180,969
Operating loss	(44827,~~160~~008		)	(871,168		)
Other expense:
Other income (expense):
Fair value adjustments and other expense	(10,741		)
Fair value adjustments and other income (expense)	7,032			(3,709		)
Interest expense and loan cost amortization, net of amounts capitalized	(1,~~567~~987,~~019~~328		)	(3,554,347		)
Total other expense	(1,577,760		)
Loss on extinguishment of debt	(27,454		)	(27,454		)
Loss before income taxes	(1,621,920		)
Total other expense	(2,007,750		)	(3,585,510		)
Income tax expense	(116,654		)
Loss before income taxes	(2,834,758		)	(4,456,678		)
Net loss	(1,738,574		)
Income tax expense	(31,203		)	(147,857		)
Net loss attributable to noncontrolling interests	134,055
Loss before gain on sale of real estate	(2,865,961		)	(4,604,535		)
Net loss attributable to common stockholders	$	(1,604,519	)
Gain on sale of real estate, net of tax of $99,581	40,917,543			40,917,543
Net loss per share of common stock (basic and diluted)	$	(0.07	)
Net income including noncontrolling interests	38,051,582			36,313,008
Weighted average number of shares of common stock outstanding (basic and diluted)	22,526,171
Net income attributable to noncontrolling interests	(22,214,709		)	(22,080,654		)
Net income attributable to common stockholders	$	15,836,873		$	14,232,354
Net income per share of common stock (basic and diluted)	$	0.70		$	0.63
Weighted average number of shares of common stock outstanding (basic and diluted)	22,526,171			22,526,171

See accompanying notes to condensed consolidated financial statements.

Table of Contents

CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(Going Concern Basis)

(Unaudited)

	Common Stock			Capital in Excess ofPar Value		Accumulated Earnings(Deficit)			Accumulated CashDistributions			Total Stockholders’Equity			NoncontrollingInterests			Total Equity
	Number ofShares	Par Value
Balance at December 31, 2015	22,526,171	$	225,262	$	170,792,081	$	18,895,225		$	(67,578,518	)	$	122,334,050		$	25,554,478		$	147,888,528
Distributions to noncontrolling interests	—	—		—		—			—			—			(~~519~~27,~~144~~060,056		)	(~~519~~27,~~144~~060,056		)
Net loss	—	—		—		(114,~~604~~232,~~519~~354		)	—			(114,~~604~~232,~~519~~354		)	~~(134~~22,~~055~~080,654		)	(136,~~738~~313,~~574~~008		)
Balance at March 31, 2016	22,526,171	$	225,262	$	170,792,081	$	17,290,706		$	(67,578,518	)	$	120,729,531		$	24,901,279		$	145,630,810
Balance at June 30, 2016	22,526,171	$	225,262	$	170,792,081	$	33,127,579		$	(67,578,518	)	$	136,566,404		$	20,575,076		$	157,141,480

See accompanying notes to condensed consolidated financial statements.

Table of Contents

CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Going Concern Basis)

(Unaudited)

	Three Months Ended March 31, 2016
	Six Months Ended June 30, 2016
Operating Activities:
Net loss, including amounts attributable to noncontrolling interests	$	(1,738,574	)
Net income, including amounts attributable to noncontrolling interests	$	36,313,008
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,054,519
Depreciation	4,435,421
Amortization of loan costs	~~163~~365,~~859~~050
Loss on extinguishment of debt	27,454
Loss on retirement of fixed assets	1,005
Unrealized loss from change in fair value of interest rate caps	18,785
Gain on sale of real estate held for sale	(41,017,124		)
Straight-line rent adjustments	(34,775		)
Unrealized loss from change in fair value of interest rate caps	23,453
Straight-line rent adjustments	(236,692		)
Changes in operating assets and liabilities:
Other assets	~~354~~117,~~476~~553
Due to related parties	21111,~~005~~499
Accounts payable and other accrued expenses	(28115,~~843~~729		)
Other liabilities	55(5,~~547~~044		)
Net cash provided by operating activities	~~867~~19,~~004~~854
Investing Activities:
Development property costs, including land and capital expenditures	(2548,~~412~~653,~~395~~596		)
Capital expenditures	(2187,~~447~~267		)
Changes in restricted cash	308,542
Proceeds from sale of properties	109,996,325
Net cash used in investing activities	(25,125,300		)
Changes in restricted cash	(99,556		)
Net cash provided by investing activities	61,155,906
Financing Activities:
Proceeds from mortgage and construction notes payable	2548,~~326~~834,~~545~~325
Distributions to noncontrolling interests	(519,144		)
Payments of mortgage and construction notes payable	(51,133,110		)
Net cash provided by financing activities	24,807,401
Advance from affiliate of noncontrolling interest	418,522
Net Increase in Cash and Cash Equivalents	549,105
Repayment of advance from affiliate of noncontrolling interest	(15,000		)
Distributions to noncontrolling interests	(11,497,907		)
Net cash used in financing activities	(13,393,170		)
Net Increase in Cash and Cash Equivalents	47,782,590
Cash and Cash Equivalents at Beginning of Period	19,016,194
Cash and Cash Equivalents at End of Period	$	1966,~~565~~798,~~299~~784
Supplemental Disclosure of Non-Cash Investing and Financing Transactions:
Amounts incurred but not paid:
Development costs	$	1811,~~573~~688,~~164~~846
Loan cost amortization capitalized on development properties	$	130,407
Distributions to noncontrolling interests	$	15,562,149
Loan cost amortization capitalized on development properties	$	221,621

See accompanying notes to condensed consolidated financial statements.

CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2017

(UNAUDITED)


1.	Business and Organization

CNL Growth Properties, Inc. was organized in Maryland on December 12, 2008. The term “Company” includes, unless the context otherwise requires, CNL Growth Properties, Inc., Global Growth, LP, a Delaware limited partnership (the “Operating Partnership”), Global Growth GP, LLC and other subsidiaries (including variable interest entities) of CNL Growth Properties, Inc. The Company operates, and has elected to be taxed, as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2010.

The Company is externally advised by CNL Global Growth Advisors, LLC (the “Advisor”) and its property manager is CNL Global Growth Managers, LLC (the “Property Manager”), each of which is an affiliate of CNL Financial Group, LLC, the Company’s sponsor (“CNL” or the “Sponsor”). The Advisor is responsible for managing the Company’s affairs on a day-to-day basis on behalf of the Company pursuant to an advisory agreement among the Company, the Operating Partnership and the Advisor. Substantially all of the Company’s operating, administrative and certain property management services, are provided by sub-advisors to the Advisor and sub-property managers to the Property Manager.

On August 4, 2016, the Company's stockholders approved a plan of liquidation and dissolution (the "Plan of Dissolution") authorizing the Company to undertake an orderly liquidation. The Company intends to sell ~~of all of~~ its remaining ~~assets~~property, ~~pay~~make ~~all~~reasonable ofprovisions ~~its~~for known ~~liabilities~~, ~~provide~~contingent ~~for~~or ~~the payment of its~~ unknown ~~or contingent~~ liabilities, distribute its remaining cash to its stockholders as liquidating distributions, wind-up its operations and dissolve the Company in accordance with Maryland law. As a result of the approval of the Plan of Dissolution by the stockholders in August 2016, the Company adopted the liquidation basis of accounting ("Liquidation Basis of Accounting") on August 1, 2016 as described in Note 4. "Net Assets in Liquidation."

As of ~~March~~June 3130, 2017, the Company owned interests in ~~six~~three Class A multifamily properties, ~~all~~and ofhad ~~which~~entered ~~were~~into ~~operational~~three ~~and~~separate ~~four~~sale ofagreements ~~which~~with ~~had~~unrelated ~~reached~~third ~~stabilization~~party buyers. The Company had a total of ~~1,712~~894 completed apartment units as of ~~March~~June 3130, 2017. The Company sold two properties in July 2017, as described further in Note 9. "Subsequent Events".

All of the Company’s multifamily properties are owned through joint ventures in which it has co-invested with an affiliate of a national or regional multifamily developer.


2.	Plan of Dissolution

The Plan of Dissolution provides for an orderly sale of the Company's assets, payment of the Company's liabilities and other obligations, the winding up of operations and dissolution of the Company. The Company is permitted to provide for the payment of any unascertained or contingent liabilities and may do so by purchasing insurance, establishing a reserve fund, transacting with a third party or in other ways.

The Plan of Dissolution enables the Company to sell any and all of its assets without further approval of the stockholders and provides that liquidating distributions be made to the stockholders as determined by the board of directors. ~~Pursuant~~The todissolution ~~applicable~~process ~~REIT~~and ~~rules,~~the inamount ~~order~~and totiming beof ~~able~~distributions to ~~deduct~~stockholders ~~liquidating~~involves ~~distributions~~risks asand ~~dividends~~uncertainties. Accordingly, ~~the~~it ~~Company~~is ~~must~~not ~~complete~~possible ~~the~~to ~~disposition~~accurately ofpredict ~~its~~the ~~assets~~timing byor ~~August~~aggregate 5,amount ~~2018,~~which ~~two~~will ~~years~~ultimately ~~after~~be ~~the~~distributed ~~date~~to ~~the~~stockholders ~~Plan~~and ofno ~~Dissolution~~assurance ~~was~~can ~~approved~~be bygiven ~~stockholders.~~that To the ~~extent~~distributions ~~that~~will ~~all~~equal ofor exceed the ~~Company's~~estimate ~~assets~~of ~~are~~net ~~not~~assets ~~sold~~presented byin ~~such date,~~ the ~~Company~~Condensed ~~may~~Consolidated ~~transfer~~Statement ~~and~~of ~~assign~~Net ~~its~~Assets ~~remaining~~as ~~assets~~of toJune 30, ~~a liquidating trust~~2017. ~~Upon~~The ~~such~~Company ~~transfer~~sold ~~and~~two ~~assignment,~~of ~~the~~its ~~Company's~~remaining ~~stockholders~~three ~~will~~properties ~~receive interests~~ in ~~the~~July ~~liquidating~~2017 ~~trust. The~~and ~~liquidating~~anticipates ~~trust~~it will ~~pay~~sell orits ~~provide~~remaining ~~for~~property ~~all of the Company's liabilities~~ and ~~distribute~~pay ~~any~~its ~~remaining~~final ~~net~~liquidating ~~proceeds~~distribution ~~from~~to ~~the sale of~~ its ~~assets~~stockholders toby the ~~holders~~end of ~~interest in the liquidating trust~~2017.

The dissolution process and the amount and timing of distributions to stockholders involves risks and uncertainties. Accordingly, it is not possible to accurately predict the timing or aggregate amount which will ultimately be distributed to stockholders and no assurance can be given that the distributions will equal or exceed the estimate of net assets presented in the Condensed Consolidated Statement of Net Assets as of March 31, 2017.

The Company expects to continue to qualify as a REIT throughout the liquidation until such time as any remaining assets, if any, are transferred into a liquidating trust. The board of directors shall use commercially reasonable efforts to continue to cause the Company to maintain its REIT status, provided however, the board of directors may elect to terminate the Company's status as a REIT if it determines that such termination would be in the best interest of the stockholders.

CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2017

(UNAUDITED)


3.	Summary of Significant Accounting Policies

Basis of Presentation - As a result of the approval of the Plan of Dissolution by the stockholders in August 2016, the Company’s results of operations for the ~~three~~quarter and six months ended ~~March 31~~June 30, 2017 and 2016 are presented using two different presentations. The Company adopted the ~~liquidation basis of accounting (“~~Liquidation Basis of Accounting”) as of August 1, 2016 and for the periods subsequent to August 1, 2016. As a result, a Statement of Changes in Net Assets reflects changes in net assets from December 31, 2016 through the most recent period presented, as further described below.

Basis of Presentation Liquidation Basis of Accounting (Post Plan of Dissolution) – Effective with the adoption of the Liquidation Basis of Accounting, on August 1, 2016 assets were adjusted to their estimated net realizable value, or liquidation value, which represents the estimated amount of cash that the Company will collect on disposal of assets as it carries out its Plan of Dissolution. The liquidation value of the Company's operating properties are presented on an undiscounted basis. Estimated costs to dispose of assets have been presented separately from the related assets. Liabilities are carried at their contractual amounts due or estimated settlement amounts.

The Company accrues costs and income that it expects to incur and earn through the end of liquidation to the extent it has a reasonable basis for estimation. These amounts are classified as a liability for estimated costs in excess of estimated receipts during liquidation on the Condensed Consolidated Statement of Net Assets. Actual costs and income may differ from amounts reflected in the financial statements because of inherent uncertainty in estimating future events. These differences may be material. See Note 6, "Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation" for further discussion. Actual costs incurred but unpaid as of ~~March~~June 3130, 2017 are included in ~~accrued development costs,~~ accounts payable and other accrued expenses, due to related parties and other liabilities on the Condensed Consolidated Statement of Net Assets.

In liquidation, the non-controlling interests presentation for joint ventures historically consolidated under going concern accounting is determined based on the Company's planned exit strategy. The Company intends to sell all of its properties, rather than selling its interest in its properties, and therefore the properties are presented on a gross basis with a liability to the non-controlling interest holders. Amounts due to non-controlling interests in connection with the disposition of consolidated joint ventures have been accrued and are recorded as liability for non-controlling interests.

Net assets in liquidation represents the estimated liquidation value available to stockholders upon liquidation. Due to the uncertainty in the timing of the anticipated sale dates and the estimated cash flows, actual operating results and sale proceeds may differ materially from the amounts estimated.

Basis of Presentation Going Concern (Pre Plan of Dissolution) – All financial results and disclosures for periods prior to adopting the Liquidation Basis of Accounting are presented based on a going concern basis (“Going Concern Basis”), which contemplated the realization of assets and liabilities in the normal course of business. As a result, the statement of operations and the statement of cash flows for the ~~three~~quarter and six months ended ~~March~~June 3130, 2016 used the Going Concern Basis presentation, as further described below.

Prior to the adoption of the Liquidation Basis of Accounting, real estate consisting of buildings and improvements were depreciated on the straight-line method over their estimated useful lives, which generally were 39 years and 15 years, respectively. Furniture, fixtures and equipment were depreciated on the straight-line method over their estimated useful lives, which generally were three to five years. During the ~~three~~quarter and six months ended ~~March~~June 3130, 2016, the Company recorded depreciation expense of approximately $2.14 million and $4.4 million, respectively. Effective with the adoption of the Liquidation Basis of Accounting on August 1, 2016, all of the Company's real estate properties became held for sale and no further depreciation relating to the assets were recorded.

Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods, and the disclosures of contingent liabilities. Under the Liquidation Basis of Accounting, the Company is required to estimate all costs and income that it expects to incur and earn through the end of the liquidation, including the estimated amount of cash it will collect on the disposal of its assets and estimated costs incurred to dispose of assets. Actual results could differ from those estimates.

Income Taxes – The Company has elected and qualified as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, and related regulations beginning with the year ended December 31, 2010. As a REIT, the Company generally is not subject to federal corporate income taxes on distributed taxable income and may be subject to excise tax on undistributed taxable income. The Company and its subsidiaries may be subject to certain state and local taxes on its income and/or property.

CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2017

(UNAUDITED)


4.	Net Assets in Liquidation

Net assets in liquidation increased by approximately $36.57 million during the ~~three~~six months ended ~~March 31~~June 30, 2017. The primary reasons for the increase in net assets were (i) an increase in total estimated sales prices for the Company's remaining properties based on ~~revised~~actual ~~sales~~or ~~prices~~estimated ~~from~~purchase ~~potential~~and sale agreements with third party buyers, ~~and~~(ii) a decrease in estimated future development costs as four of the Company's development properties finalized construction under the amounts budgeted for construction and development per the respective development agreements and (iii) additional property net operating income primarily as a result of holding multiple properties for periods longer than estimated. These increases to net assets in liquidation were partially offset by an increase in estimated future liquidation transaction costs and estimated liability for non-controlling interests as a result of the higher estimated property sales prices.

The net assets in liquidation include projections of costs and expenses to be incurred during the period required to complete the Plan of Dissolution. There is inherent uncertainty with these projections, and they could change materially based on the timing of the sales, the performance of the underlying assets and any changes in the underlying assumptions of the projected cash flows.


5.	Property Dispositions

In February 2017, the Company, through one of its joint ventures, completed the sale of the Oxford Square property for gross sales proceeds of approximately $65.7 million, which equaled its liquidation value as of December 31, 2016. The Company received proceeds, net of closing costs, of approximately $65.3 million and used a portion of the net sales proceeds to repay the construction note payable of approximately $35.2 million related to this property. The Company also distributed approximately $4.9 million of the net sales proceeds to its co-venture partner for its disproportionate share of proceeds from the capital event in accordance with the terms of the corresponding joint venture agreement. No disposition fee was payable to the Advisor on the sale of this property.

In June 2017, the Company, through two separate joint ventures, completed the sales of the Aura on Broadway and Premier at Spring Town Center properties for gross sales proceeds of approximately $41.8 million and $49.8 million, respectively, which equaled their liquidation values as of March 31, 2017. The Company received proceeds, net of closing costs, of approximately $41.5 million and $49.4 million, respectively, and used a portion of the net sales proceeds to repay the construction notes payable of approximately $19.5 million and $31.3 million, respectively. In addition, the Company distributed approximately $7.6 million and $0.9 million, respectively, of the net sales proceeds to its co-venture partners for their disproportionate share of proceeds from the capital events in accordance with the terms of the corresponding joint venture agreements. No disposition fee was payable to the Advisor on the sale of these properties.

In June 2017, the Company also sold its 90% membership interest in the net assets of the joint venture which owned the Bainbridge 3200 property (the "Bainbridge Joint Venture") for approximately $14.8 million. No disposition fee was payable to the Advisor on the sale of the Company's membership interest in the Bainbridge Joint Venture.

As of June 30, 2017, the Company, through three of its joint ventures, had entered into purchase and sale agreements for the sale of its remaining three properties. In July 2017, the Company, through two of its joint ventures, completed the sale of two of its remaining properties as further described in Note 9, "Subsequent Events."


6.	Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation

The Liquidation Basis of Accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with implementing and completing the Plan of Dissolution. The Company currently estimates that it will have costs in excess of estimated receipts during ~~the~~ liquidation. These amounts can vary significantly due to, among other things, the timing and estimates for lease-up, the timing of property sales, direct costs incurred to complete the sales, the timing and amounts associated with discharging known and contingent liabilities and the costs associated with the winding up of operations. These costs are estimated and are anticipated to be paid out over the liquidation period.

The change in the liability for estimated costs in excess of estimated receipts during liquidation for the ~~period~~six months ended ~~March 31~~June 30, 2017 is as follows:

	December 31, 2016			Cash Payments (Receipts)			Remeasurement of Assets and Liabilities			March 31, 2017
Assets:
Estimated net inflows from investments in real estate	$	4,537,620		$	(2,648,578	)	$	950,987		$	2,840,029
Estimated net outflows from development costs	(3,528,450		)	135,816			3,392,634			—
	1,009,170			(2,512,762		)	4,343,621			2,840,029
Liabilities:
Liquidation transaction costs	(8,114,094		)	450,688			(1,168,799		)	(8,832,205		)
Corporate expenditures	(4,202,073		)	1,486,763			(104,430		)	(2,819,740		)
	(12,316,167		)	1,937,451			(1,273,229		)	(11,651,945		)
Total liability for estimated costs in excess of estimated receipts during liquidation	$	(11,306,997	)	$	(575,311	)	$	3,070,392		$	(8,811,916	)

CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2017

(UNAUDITED)


6.	Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation (continued)



	December 31, 2016			Cash Payments (Receipts)			Remeasurement of Assets and Liabilities			June 30, 2017
Assets:
Estimated net inflows from investments in real estate	$	4,537,620		$	(4,488,068	)	$	1,059,286		$	1,108,838
Estimated net outflows from development costs	(3,528,450		)	135,816			3,392,634			—
	1,009,170			(4,352,252		)	4,451,920			1,108,838
Liabilities:
Liquidation transaction costs	(8,114,094		)	1,536,041			(1,094,213		)	(7,672,266		)
Corporate expenditures	(4,202,073		)	2,409,816			34,226			(1,758,031		)
	(12,316,167		)	3,945,857			(1,059,987		)	(9,430,297		)
Total liability for estimated costs in excess of estimated receipts during liquidation	$	(11,306,997	)	$	(406,395	)	$	3,391,933		$	(8,321,459	)


7.	Indebtedness

During the ~~three~~six months ended ~~March~~June 3130, 2017, the Company borrowed approximately $3.2 million under its construction loans in connection with its multifamily development projects. The Company, through joint ventures formed to make investments, borrowed on a non-recourse basis to fund construction. The use of non-recourse financing allows the Company to limit its exposure on any investment to the amount invested. Non-recourse indebtedness means that the indebtedness of the borrower or its subsidiaries is collateralized only by the assets to which such indebtedness relates, without recourse to the Company or any of its subsidiaries.

The Company repaid mortgage and construction notes payable of approximately $3586.21 million during the ~~three~~six months ended ~~March~~June 3130, 2017, ~~primarily~~including approximately $86.0 million related to the sales of the Oxford ~~Property~~Square, ~~loan~~Aura ~~payable~~on ~~that~~Broadway ~~was~~and Premier at Spring Town Center properties. These construction loan payables were repaid at the time of the ~~sale~~properties were sold in February 2017 and June 2017 using net sales proceeds. In June 2017, the Company also sold its membership interest in the net ~~proceeds~~assets ~~from~~of the Bainbridge Joint Venture which owned the Bainbridge 3200 property and in conjunction with the sale, the buyer assumed the outstanding construction loan payable of approximately $24.5 million.

In April 2017, the Company, through one of its consolidated joint ventures, modified the construction loan related to the Aura at the Rim property. ~~See~~As part of the modification, the Company extended the original maturity by six months to October 2017, increased the interest rate to LIBOR plus 2.75% and in May 2017 began making required monthly principal payments of $29,200. No other terms of the construction loan were modified. This loan was repaid in July 2017 at the time of the sale of the Aura at the Rim Property, as described further in Note 9, "Subsequent Events~~" for additional information~~."

Mortgage and construction loans are carried at their contractual amounts as of ~~March~~June 3130, 2017 under Liquidation Basis of Accounting. As of ~~March~~June 3130, 2017 and December 31, 2016, the estimated fair value of the Company's debt was approximately $~~146~~71.76 million and $178.3 million, respectively.

8. Related Party Arrangements

During the three months ended March 31, 2017 and 2016, the Company incurred the following fees and reimbursable expenses due to the Advisor, its affiliates and other related parties:

	2017		2016
Reimbursable expenses:
Investor administrative service fees(1)	$	33,750	$	33,750
Other operating and acquisition expenses(1)	311,256		245,693
	345,006		279,443
Investment Service Fee	—		21,919
Asset management fees(2)	504,670		849,566
Property management fees	12,354		16,388
	$	862,030	$	1,167,316

FOOTNOTES:

(1) Prior to the adoption of Liquidation Basis of Accounting in August 2016, investor administrative service fees and all other operating and acquisition expenses were included in general and administrative expenses in the accompanying condensed consolidated statement of operations.

(2) Prior to the adoption of Liquidation Basis of Accounting in August 2016, approximately $0.2 million of asset management fees incurred by the Company above for the three months ended March 31, 2016 were capitalized as part of the cost of development properties. Asset management fees, net of amounts capitalized, were included in asset management fees in the accompanying condensed consolidated statement of operations for the three months ended March 31, 2016.

Amounts due to related parties for fees and reimbursable costs and expenses, as described above, were as follows as of:

	March 31, 2017		December 31, 2016
Due to Property Manager:
Property management fees	$	12,354	$	15,049
Due to the Advisor and its affiliates:
Reimbursable operating expenses	1,879,286		1,797,560
	$	1,891,640	$	1,812,609

CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2017

(UNAUDITED)

8. Related Party Arrangements ~~(continued)~~

InDuring ~~connection with~~ the ~~adoption~~quarters ofand ~~the~~six ~~Liquidation~~months ~~Basis~~ended ofJune ~~Accounting~~30, ~~the~~2017 ~~Company~~and ~~accrues costs it expects to incur through the end of the liquidation. As of March 31~~2016, ~~2017,~~ the Company ~~accrued~~incurred ~~future~~the ~~estimated~~following ~~asset management~~ fees ofand ~~approximately~~reimbursable ~~$0.5~~expenses ~~million,~~due ~~property~~to ~~management~~the ~~fees of approximately $0.01 million~~Advisor, ~~reimbursement~~its ofaffiliates ~~operating expenses of approximately $0.9 million~~ and aother ~~subordinated~~related ~~incentive fee of approximately $4.0 million in the liability for estimated costs in excess of estimated receipts in the accompanying condensed consolidated statement of net assets.~~ parties:



	Quarter Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Reimbursable expenses:
Investor administrative service fees⁽¹⁾	$	33,750	$	33,750	67,500		67,500
Other operating⁽¹⁾	288,156		380,157		599,412		625,850
	321,906		413,907		666,912		693,350
Investment service fee	—		8,793		—		30,712
Asset management fees⁽²⁾	428,782		900,861		933,452		1,750,427
Property management fees	11,223		15,706		23,568		32,094
	$	761,911	$	1,339,267	$	1,623,932	$	2,506,583

FOOTNOTES:


(1)	Prior to the adoption of Liquidation Basis of Accounting in August 2016, investor administrative service fees and all other operating expenses for the quarter and six months ended June 30, 2016, were included in general and administrative expenses in the accompanying condensed consolidated statement of operations.

(2)

Prior to the adoption of Liquidation Basis of Accounting in August 2016, approximately $0.2 million and $0.4 million of asset management fees incurred by the Company above for the quarter and six months ended June 30, 2016, respectively, were capitalized as part of the cost of development properties. Asset management fees, net of amounts capitalized, were included in asset management fees in the accompanying condensed consolidated statement of operations for the quarter and six months ended June 30, 2016.

Amounts due to related parties for fees and reimbursable costs and expenses, as described above, were as follows as of:



	June 30, 2017		December 31, 2016
Due to Property Manager:
Property management fees	$	11,214	$	15,049
Due to the Advisor and its affiliates:
Reimbursable operating expenses	1,819,359		1,797,560
	$	1,830,573	$	1,812,609

In connection with the adoption of the Liquidation Basis of Accounting, the Company accrues costs it expects to incur through the end of the liquidation. As of June 30, 2017, the Company accrued future estimated asset management fees of approximately $0.1 million, property management fees of approximately $3 thousand, reimbursement of operating expenses of approximately $0.4 million and a subordinated incentive fee of approximately $5.4 million in the liability for estimated costs in excess of estimated receipts in the accompanying condensed consolidated statement of net assets.


9.	Subsequent Events

In ~~April~~July 2017, the Company, through one of its ~~consolidated~~ joint ventures, ~~modified~~sold the ~~original construction loan relating to the~~ Aura at the Rim ~~Property~~property ~~to extend the original maturity by six months to October 2017 and to provide~~ for ~~one~~approximately ~~additional~~$47.8 ~~six~~million, ~~month~~which ~~extension~~equaled ~~option~~its ifliquidation ~~certain~~value ~~conditions~~as ~~are~~of ~~met. Additionally~~June 30, ~~the~~2017, ~~interest rate was increased to LIBOR plus 2.75%~~ and ~~beginning~~repaid ~~in May 2017~~ the ~~Company~~outstanding ~~will~~construction benote ~~required~~payable tocollateralized ~~make~~by ~~monthly~~this ~~principal~~property ~~payments~~ of approximately $~~29,200~~27. No6 ~~other terms of the construction loan were modified~~million.

In ~~April~~July 2017, the Company, through one of its joint ventures, ~~entered~~sold ~~into a purchase and sale agreement for~~ the ~~sale~~Fairfield ofRanch ~~the Aura on Broadway~~ property for ~~a gross sales price of~~ approximately $4139.89 million, which equaled its liquidation value as of ~~March~~June 3130, 2017, and repaid the outstanding construction note payable collateralized by this property of approximately $19.6 million.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

The following discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the notes thereto, as well as, the audited consolidated financial statements, notes and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2016. Capitalized terms used in this Item 2 have the same meaning as in the accompanying unaudited condensed consolidated financial statements in Item 1 unless otherwise defined herein.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements contained under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”) that are not statements of historical or current fact may constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. The Company intends that such forward-looking statements be subject to the safe harbor created by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are statements that do not relate strictly to historical or current facts but reflect management’s current understandings, intentions, beliefs, plans, expectations, assumptions and/or predictions regarding the future of the Company’s business and its performance, the economy, and other future conditions and forecasts of future events, and circumstances. Forward-looking statements are typically identified by words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plans,” “continues,” “pro forma,” “may,” “will,” “seeks,” “should” and “could,” and words and terms of similar substance in connection with discussions of future operating or financial performance, business strategy and portfolios, ~~projected growth prospects,~~ cash flows, costs and financing needs, legal proceedings, amount and timing of anticipated future distributions, estimated per share net asset value of the Company’s common stock, and/or other matters. The Company’s forward-looking statements are not guarantees of future performance. While the Company’s management believes its forward-looking statements are reasonable, such statements are inherently susceptible to uncertainty and changes in circumstances. As with any projection or forecast, forward-looking statements are necessarily dependent on assumptions, data and/or methods that may be incorrect or imprecise, and may not be realized. The Company’s forward-looking statements are based on management’s current expectations and a variety of risks, uncertainties and other factors, many of which are beyond the Company’s ability to control or accurately predict. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Company’s actual results could differ materially from those set forth in the forward-looking statements due to a variety of risks, uncertainties and other factors. Given these uncertainties, the Company cautions you not to place undue reliance on such statements.

Important factors that could cause the Company’s actual results to vary materially from those expressed or implied in its forward-looking statements include, but are not limited to, government regulation, economic, strategic, political and social conditions, and the following: risks associated with the timing and implementation of the Company's Plan of Dissolution; a worsening economic environment in the U.S. or globally, including financial market fluctuations; risks associated with real estate markets, including declining real estate values; risks associated with the Company’s limited capital resources, including the risk of the Company’s failure to ~~obtain,~~ renew or extend necessary financing or to access the debt market; the use of debt to finance the Company’s business activities, including refinancing and interest rate risk and the Company’s failure to comply with debt covenants; ~~risks related to development projects, including construction delays, construction cost overruns, the Company’s inability to obtain necessary permits, and/or public opposition to these activities;~~ competition for tenants; defaults on or non-renewal of leases by tenants; failure to lease properties on favorable terms or at all; the impact of current and future environmental, zoning and other governmental regulations affecting the Company’s properties; the impact of changes in accounting rules; the impact of regulations requiring periodic valuation of the Company on a per share basis; inaccuracies of the Company’s accounting estimates; unknown liabilities of acquired properties or liabilities caused by property managers or operators; material adverse actions or omissions by any Joint Venture partners; consequences of the Company’s net operating losses; increases in operating costs and other expenses; uninsured losses or losses in excess of the Company’s insurance coverage; the impact of outstanding and/or potential litigation; risks associated with the Company’s tax structuring; and failure to qualify for and maintain the Company’s qualification as a REIT for federal income tax purposes.

For further information regarding risks and uncertainties associated with the Company’s business, and other important factors that could cause the Company’s actual results to vary materially from those expressed or implied in its forward-looking statements, please refer to the factors listed and described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Risk Factors” sections of the Company’s documents filed from time to time with the U.S. Securities and Exchange Commission, including, but not limited to, the Company's Annual Report on Form 10-K for the year ended December 31, 2016 and the Company’s quarterly reports on Form 10-Q, copies of which may be obtained from the Company’s website at www.cnlgrowthproperties.com.

All written and oral forward-looking statements attributable to the Company or persons acting on its behalf are qualified in their entirety by this cautionary note. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to, and expressly disclaims any obligation to, publicly release the results of any revisions to its forward-

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~~All written and oral forward-~~looking statements ~~attributable~~ to the Company or persons acting on its behalf are qualified in their entirety by this cautionary note. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to, and expressly disclaims any obligation to, publicly release the results of any revisions to its forward-looking statements to reflect new information, changed assumptions, the occurrence of unanticipated subsequent events or circumstances, or changes to future operating results over time, except as otherwise required by law.

OVERVIEW

CNL Growth Properties, Inc. was organized as a Maryland corporation on December 12, 2008 and has elected to be taxed, and currently qualifies as a real estate investment trust (“REIT”) for federal income tax purposes. The terms “us,” “we,” “our,” “our Company” and “CNL Growth Properties, Inc.” include CNL Growth Properties, Inc. and each of its subsidiaries.

On August 4, 2016, we obtained our stockholders' approval of the Plan of Dissolution authorizing us to undertake an orderly liquidation. In an orderly liquidation, we will sell of all of our remaining assets, pay all of our known liabilities, provide for the payment of our unknown or contingent liabilities, distribute our remaining cash to our stockholders as liquidating distributions, wind-up our operations and dissolve the Company in accordance with Maryland law. See the Company's Form 8-K filed on August 5, 2016 for additional details.

As a result of the approval of the Plan of Dissolution by the stockholders in August 2016, we adopted the Liquidation Basis of Accounting, as described further in Note 1. “Business and Organization” to the financial statements.

Our Exit Strategy

~~Due~~During ~~to the completion of our initial public offering and follow-on offerings (collectively, the "Offerings") in April 2014, the completion of our acquisition phase in April~~ 2015 ~~and the estimated time needed to complete our development phase and have our assets substantially stabilize~~, our Advisor began to explore strategic alternatives. In August 2015, our board of directors appointed a special committee comprised of our independent board members (the “Special Committee”) to oversee the process of exploring strategic alternatives for future stockholder liquidity, including opportunities to merge with another company, the listing of our common stock on a national securities exchange, our sale or the sale of all of our assets. InAs ~~September~~previously ~~2015~~reported in our December 31, we2016 ~~engaged~~Form ~~CBRE~~10-K ~~Capital~~filed ~~Advisors,~~with ~~Inc.~~the ~~(“CBRE~~Securities ~~Cap”)~~& toExchange ~~act~~Commission ason ~~our~~March ~~exclusive~~17, 2017, in September 2015, we engaged a financial advisor ~~and~~to assist us and the Special Committee with this process. InFrom ~~the~~September ~~ordinary~~2015 ~~course~~through ofDecember ~~CBRE Cap’s business~~2016, ~~CBRE~~we ~~Cap,~~sold ~~its~~nine ~~affiliates,~~properties ~~directors~~ and ~~officers,~~used ~~may~~the ~~trade~~net orsales ~~otherwise~~proceeds ~~structure~~of ~~and~~approximately ~~effect~~$494.1 ~~transactions~~million into ~~our~~repay ~~shares~~approximately or$243.3 ~~assets~~million ~~for~~of ~~its~~indebtedness ~~own~~related ~~account~~to orour ~~for~~properties, ~~the~~paid ~~accounts~~distributions of ~~its~~$111.0 ~~customers~~million ~~and~~to ~~accordingly,~~our ~~may~~co-venture atpartners, ~~any~~and ~~time~~made ~~hold~~special acash ~~long~~distributions orof ~~short~~$67.6 ~~position,~~million ~~finance~~and ~~positions,~~liquidating ordistributions ~~otherwise~~of ~~structure~~$104.7 ~~and~~million ~~effect~~to ~~transactions in~~ our ~~shares or assets~~stockholders. ~~CBRE~~From ~~Cap~~January isthrough anJuly ~~affiliate~~2017, ofwe ~~CBRE~~sold ~~Group,~~five ~~Inc.~~additional ~~(“CBRE”)~~properties, ~~the~~as ~~parent~~further ~~holding~~described ~~company~~below ofunder ~~affiliated~~"Our ~~companies~~Real ~~that~~Estate ~~are~~Portfolio". As ~~engaged~~of inAugust 1, ~~the~~2017, ~~ordinary~~we, ~~course~~through ofour ~~business~~remaining injoint ~~many~~venture, ~~areas~~have ~~related~~entered tointo ~~commercial~~a ~~real~~purchase ~~estate~~ and ~~related~~sale ~~services.~~agreement ~~Through~~for ~~CBRE’s~~the ~~affiliates,~~sale ~~CBRE~~of ~~may~~our ~~have~~remaining inproperty ~~the past,~~ and ~~may~~we ~~from~~anticipate ~~time~~we towill ~~time~~complete in the ~~future,~~sale ~~perform~~of ~~one~~this orproperty ~~more~~by ~~roles~~the inend ~~our~~of ~~transactions~~2017. However, ~~From~~certain ~~September~~conditions ~~2015~~precedent ~~through~~to ~~December~~the ~~2016,~~consummation weof ~~sold~~the ~~nine~~purchase ~~properties~~ and ~~used~~sale ~~the~~agreement ~~net~~must ~~sales~~be ~~proceeds~~satisfied ~~of approximately $494.1 million~~ to ~~repay~~complete ~~approximately~~the ~~$243~~sale.3 If ~~million~~these ofconditions ~~indebtedness~~are ~~related~~not ~~to our properties~~met, ~~paid~~we ~~distributions~~may ofnot ~~$111.0~~be ~~million~~able to ~~our~~complete ~~co-venture~~the ~~partners,~~sale ~~and made special cash distributions~~ of ~~$67.6~~the ~~million~~property ~~and~~by ~~liquidating~~the ~~distributions~~end of ~~$104.7~~2017 ~~million~~or tofor ~~our~~an ~~stockholders. Refer~~amount towhich ~~“Our~~equals ~~Real~~or ~~Estate~~exceeds ~~Portfolio”~~the ~~below~~current ~~for~~liquidation avalue ~~discussion~~of onthe ~~properties sold during 2017~~property.

~~Although~~Our ~~our~~ stockholders approved our Plan of Dissolution on August 4, 2016~~, there is no assurance we will have a final liquidity event in the near term~~. The Wedissolution ~~expect~~process toand ~~distribute all of~~ the ~~net~~amount ~~proceeds~~and ~~from~~timing ~~the sale~~ of ~~our~~distributions ~~assets~~ to ~~our~~ stockholders ~~within~~involves 24risks ~~months~~and ~~after the stockholder approval of our Plan of Dissolution~~uncertainties. ~~However,~~We ifanticipate weselling ~~cannot sell our assets and pay our debts within 24 months, or if our board and~~ the ~~Special~~remaining ~~Committee~~property ~~determine that it is otherwise advisable to do so, we may transfer~~ and ~~assign~~anticipate ~~our~~making ~~remaining assets to~~ a final liquidating ~~trust.~~distribution ~~Upon~~to ~~such transfer and assignment,~~ our stockholders ~~will~~by ~~receive interests in~~ the ~~liquidating~~end ~~trust. The liquidating trust will pay or provide for all~~ of ~~our liabilities and distribute any remaining net proceeds from the sale of its assets to the holders of interests in the liquidating trust~~2017.

The dissolution process and the amount and timing of distributions to stockholders involves risks and uncertainties. Accordingly, it is not possible to predict the timing or aggregate amount which will ultimately be distributed to stockholders and no assurance can be given that the distributions will equal or exceed the estimate of net assets presented in the Consolidated Statement of Net Assets (Liquidation Basis of Accounting).

We expect to continue to qualify as a REIT throughout the liquidation until such time as any remaining assets, if any, are transferred into a liquidating trust. Our board shall use commercially reasonable efforts to continue to cause us to maintain our REIT status, provided however, our board may elect to terminate our status as a REIT if it determines that such termination would be in the best interest of our stockholders.

Our Real Estate Portfolio

During the six months ended June 30, 2017, we, through three of our consolidated joint ventures, sold three real estate properties. In addition, we sold our membership interest in another of our joint ventures. As of June 30, 2017, we owned interests in three Class A multifamily properties and had entered into three separate sale agreements with unrelated third party buyers. In July 2017, we, through two of our consolidated joint ventures, sold two additional properties and as of August 1, 2017, owned one remaining property through a joint venture. We anticipate we will complete the sale by the end of 2017, subject to certain conditions as described above under "Our Exit Strategy."

Our multifamily properties were owned through separate joint ventures in which we co-invested with an affiliate of a national or regional multifamily developer. Under the terms of the limited liability company agreements of each joint venture, operating cash flows were generally distributed to the members of the joint venture on a pro rata basis. Generally, in a capital event, such as a sale of the joint venture’s property, net proceeds were distributed pro rata to each member until each member’s invested capital was returned and a minimum return on capital was achieved, and thereafter our joint venture partner received a disproportionately higher share of any proceeds at varying levels based on our having received certain minimum threshold returns. We distributed operating cash flows on a pro rata basis and net proceeds from sales of properties to our non-controlling co-venture partners, as described below under "Liquidation and Capital Resources – Distributions to Noncontrolling Interests."

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Our Real Estate Portfolio

During the three months ended March 31, 2017, we, through one of our consolidated joint ventures, sold one real estate property for its liquidation value. As of March 31, 2017, we owned interests in six Class A multifamily properties in the southeastern and sunbelt regions of the United States, all of which had completed development and four of which were stabilized. We had a total of 1,712 completed apartment units as of March 31, 2017. We generally expect our multifamily properties to reach stabilization within 24 months after completion.

Our multifamily properties are owned through a joint venture in which we have co-invested with an affiliate of a national or regional multifamily developer. As of March 31, 2017, we had co-invested in six separate joint ventures with five separate developers or affiliates thereof. Our joint ventures are structured such that we serve as the managing member and own a majority interest. Under the terms of the limited liability company agreements of each joint venture, operating cash flow is generally distributed to the members of the joint venture on a pro rata basis. Generally, in a capital event, such as a sale or refinancing of the joint venture’s property, net proceeds will be distributed pro rata to each member until each member’s invested capital is returned and a minimum return on capital is achieved, and thereafter our joint venture partner will receive a disproportionately higher share of any proceeds at varying levels based on our having received certain minimum threshold returns. Prior to adopting the Liquidation Basis of Accounting, we determined that all of the joint ventures in which we had co-invested were variable interest entities in which we were the primary beneficiary. As such, the transactions and accounts of the joint ventures were consolidated in our accompanying condensed financial statements under the going concern basis of accounting.

LIQUIDITY AND CAPITAL RESOURCES

As of ~~March~~June 3130, 2017, ~~our~~we had total cash ~~totaled~~of approximately $4287.62 million, ~~and~~which included our net sales proceeds related to the sale of ~~our~~the Oxford ~~Property~~Square, Aura on Broadway, and Premier at Spring Town Center properties in February 2017 and June 2017, after ~~repayment~~repayments of indebtedness and adistributions ~~distribution~~ to our co-venture ~~partner~~partners for ~~its~~their disproportionate share of proceeds from the capital ~~event~~events, as well as net sales proceeds from the sale of ~~approximately~~our ~~$25.6~~membership ~~million~~interest in net assets of the Bainbridge Joint Venture which owned the Bainbridge 3200 property in June 2017, as described further below in "Sources of Liquidity and Capital Resources – Net Sales Proceeds from Sales of Real Estate and Membership Interest". We will use our cash on hand and net sales proceeds received from the sale of real estate to pay all obligations, pay liquidating distributions and any other corporate purposes deemed appropriate. Our total assets and net assets in liquidation were $~~312~~230.60 million and $~~118~~121.57 million, respectively, at ~~March~~June 3130, 2017. Our ability to meet our obligations is contingent upon the disposition of our assets in accordance with our Plan of Dissolution. We believe that cash flows provided by operating activities along with sale proceeds will continue to provide adequate capital to fund our operating, administrative and other expenses incurred during liquidation as well as debt service obligations~~, however, we cannot provide any assurance as to the prices or net proceeds we will receive from the disposition of our assets~~. As a REIT, we must distribute annually at least 90% of our REIT ordinary taxable income.

Sources of Liquidity and Capital Resources

Net Sales Proceeds from ~~Sale~~Sales of Real Estate and Membership Interest

During February 2017, we, through one of our joint ventures, completed the sale of the Oxford Square property for gross sales proceeds of approximately $65.7 million, which equaled its liquidation value as of December 31, 2016. We received proceeds, net of closing costs, of approximately $65.3 million and used a portion of the net sales proceeds to repay the construction note payable of approximately $35.2 million related to this property.

During June 2017, we through two of our joint ventures, completed the sales of the Aura on Broadway and Premier at Spring Town Center properties for gross sales proceeds of approximately $41.8 million and $49.8 million, respectively, which equaled their liquidation values as of March 31, 2017. We received proceeds, net of closing costs, of approximately $41.5 million and $49.4 million, respectively, and used a portion of the net sales proceeds to repay the construction notes payables of approximately $19.5 million and $31.3 million, respectively, related to these two properties.

During June 2017, we sold our 90% membership interest in the net assets of the joint venture which owned the Bainbridge 3200 property (the "Bainbridge Joint Venture") for approximately $14.8 million. The net consideration we received from the sale of our membership interest in the Bainbridge Joint Venture was equal the amount that we would have received under the Bainbridge Joint Venture limited liability company agreement if the buyer had purchased the property for approximately $44.0 million, which exceeded the liquidation value of the Bainbridge 3200 property as of March 31, 2017.

In July, we, through two of our joint ventures, completed the sale of the Aura at the Rim and Fairfield Ranch properties for gross sales proceeds of approximately $87.7 million, which equaled their liquidation value as of June 30, 2017. We received proceeds, net of closing costs, of approximately $86.8 million and used a portion of the net sales proceeds to repay the construction note payables of approximately $47.2 million related to these two properties.

Borrowings

During the ~~three~~six months ended ~~March~~June 3130, 2017 and 2016, we borrowed approximately $3.2 million and $2548.38 million, respectively, under our various construction loans to pay for development costs relating to several of our properties.

Net Cash Provided by Operating Activities

Prior to the adoption of Liquidation Basis of Accounting, our net cash flows provided by operating activities was approximately $0.902 million for the ~~three~~six months ended ~~March~~June 3130, 2016.

Uses of Liquidity and Capital Resources

Development of Properties

In connection with our development projects, we funded approximately $3.01 million and $48.7 million in development costs during the ~~three~~six months ended ~~March~~June 3130, 2017 and 2016, respectively. As of ~~March~~June 3130, 2017, all of our properties had finalized construction and no additional development costs are expected.

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Debt Service

We, along with our joint venture partners, may extend the maturity dates and amend the construction loans on our development properties as our properties’ operations stabilize and as we negotiate purchase and sale agreements. However, our ability to continue to obtain indebtedness could be adversely affected if our joint venture partners do not agree to the extension or by credit market conditions, which result in lenders reducing or limiting funds available for loans, including loans collateralized by real estate.

~~During~~As ~~the~~our ~~three~~indebtedness ~~months~~approached ~~ended March 31~~maturity, ~~2017~~we, wealong ~~paid~~with ~~$35.2~~our ~~million~~joint ofventure ~~mortgage~~partners, extended and refinanced the construction loans ~~payable~~on our development properties, ~~related~~or ~~primarily~~determined to sell the ~~early~~property ~~repayment~~as part of ~~debt~~our ~~using~~Plan aof ~~portion~~Dissolution and used the proceeds from the sale to repay the indebtedness. In April 2017, we, through one of our consolidated joint ventures, modified the ~~net~~original ~~sales~~construction ~~proceeds~~loan ~~from~~relating to our Aura at the Rim Property to extend the original maturity by six months to October 2017. In July 2017, we repaid this loan in conjunction with the sale of the ~~Oxford~~Aura ~~Square~~at the Rim property as previously reported on Form 8-K on July 18, 2017.

AsDuring ~~our~~the ~~indebtedness~~six ~~approaches~~months ~~maturity~~ended June 30, we2017, ~~along~~we ~~with~~repaid ~~our~~approximately ~~joint~~$86.1 ~~venture~~million ~~partners,~~of ~~may~~mortgage ~~extend~~ and ~~refinance the~~ construction loans onpayable, ~~our~~including ~~development~~approximately ~~properties,~~$86.0 ormillion ~~may~~related ~~determine~~primarily to ~~sell~~ the ~~property~~early asrepayment ~~part~~ of ~~our~~debt ~~Plan~~using ofa ~~Dissolution~~portion ~~and~~of ~~will~~the ~~use~~net sales proceeds from the ~~sale~~sales toof ~~repay~~ the ~~indebtedness. In~~Oxford ~~April 2017~~Square, ~~we,~~Aura ~~through~~on ~~one~~Broadway ofand ~~our~~Premier ~~consolidated joint ventures, modified the original construction loan relating to our Aura~~ at ~~the~~Spring ~~Rim~~Town ~~Property~~properties. In toJune ~~extend~~2017, the ~~original~~Company ~~maturity~~also bysold ~~six~~its ~~months~~membership tointerest ~~October~~in ~~2017~~the ~~and~~Bainbridge toJoint ~~provide~~Venture ~~for~~which ~~one~~owned ~~additional six month extension option if certain conditions are met. Additionally,~~ the ~~interest~~Bainbridge ~~rate~~3200 ~~was~~property ~~increased to LIBOR plus 2.75%~~ and ~~beginning~~ in ~~May~~conjunction ~~2017~~with wethe ~~will~~sale bethe ~~required~~buyer toassumed ~~make~~the ~~monthly~~outstanding ~~principal~~construction ~~payments~~note payable of approximately $~~29,200~~24. No5 ~~other terms of the construction loan were modified~~million.

As of June 30, 2017, we had $71.8 million of indebtedness. In July 2017, we repaid $47.2 million upon the sale of two properties. We anticipate selling our last property and anticipate repaying the remaining $24.6 million of indebtedness by the end of 2017.

Distributions to Noncontrolling Interests

The terms of each joint venture structure were generally market driven and considered the assumption of certain risks by our joint venture partners, including; entitlements, permitting, exposure to costs in excess of the project budget, interest rates, and lender guarantees. In accordance with preferred return provisions in the respective joint venture agreements, upon a sale of the joint venture’s property, the joint venture partner may be entitled to a disproportionately higher share of proceeds than their member interest if certain threshold returns are met. Each structure was individually negotiated and terms of the waterfall structure were influenced by market size and attractiveness of the investment fundamentals, leverage assumptions, and equity contributions from our joint venture partners.

During the ~~three~~six months ended ~~March~~June 3130, 2017, our consolidated joint ventures paid distributions of approximately $415.71 million to our co-venture partners, including $0.23 million representing their pro rata share of positive operating cash flows, plus approximately $414.58 million from a disproportionate share of proceeds from ~~the~~ capital ~~event~~events relating to net sales proceeds from the ~~sale~~sales of ~~the~~properties, ~~Oxford~~including ~~Square~~approximately ~~property~~$1.4 million related to properties sold prior to 2017, in accordance with the terms of the corresponding joint venture ~~agreement~~agreements.

In July 2017, our consolidated joint ventures paid distributions of approximately $14.8 million to our co-venture partners representing their disproportionate share of proceeds from capital events relating to the sale of the Aura at the Rim and Fairfield Ranch properties, as described above under "Sources of Liquidity and Capital Resources – Net Sales Proceeds from Sales of Real Estate and Membership Interest."

The following discussion and analysis should be read in conjunction with the accompanying condensed consolidated financial statements and the notes thereto.

RESULTS OF OPERATIONS

In light of the adoption of Liquidation Basis of Accounting on August 1, 2016, the results of operations for the current year period are not comparable to the prior year period. Our remaining assets which had completed construction and reached stabilization in prior periods continue to perform in a manner that is relatively consistent with prior reporting periods and we have experienced no significant changes in leased percentages or rental rates at these properties. Our remaining assets which had not ~~completed construction or~~ reached stabilization in prior periods have continued to ~~place additional units into service and~~ increase overall leased percentages.

Due to the adoption of the Plan of Dissolution we are no longer reporting funds from operations as we no longer consider this to be a key performance measure.

Changes in Net Assets in Liquidation

Period from December 31, 2016 through ~~March~~June 3130, 2017

Net assets in liquidation increased by approximately $36.57 million during the period December 31, 2016 through ~~March~~June 3130, 2017. The primary reasons for the increase in net assets were (i) an increase in total estimated sales prices for our remaining properties based on revised sales prices from potential third party buyers and a decrease in our liability for estimated future development costs as four of our development properties finalized construction under the amounts budgeted for construction and development per the respective development agreements. These increases to net assets in liquidation were partially offset by an increase in estimated future liquidation transaction costs and estimated liability for non-controlling interests as a result of the higher estimated property sales prices.

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based on actual or estimated purchase and sale agreements with third party buyers, (ii) a decrease in estimated future development costs as four of our development properties finalized construction under the amounts budgeted for construction and development per the respective development agreements and (iii) additional property net operating income primarily as a result of holding multiple properties for periods longer than estimated. These increases to net assets in liquidation were partially offset by an increase in estimated future liquidation transaction costs and estimated liability for non-controlling interests as a result of the higher estimated property sales prices.

RELATED PARTY ARRANGEMENTS

We have entered into agreements with our Advisor and its affiliates, whereby we agree to pay certain fees to, or reimburse certain expenses of, our Advisor or its affiliates for advisory services, asset and property management fees and reimbursement of operating costs. See Note 8. “Related Party Arrangements” in the accompanying condensed consolidated financial statements and “Item 13. Certain Relationships and Related Transactions, and Director Independence” in our Form 10-K for the year ended December 31, 2016 for a discussion of the various related party transactions, agreements and fees.

OFF BALANCE SHEET ARRANGEMENTS

As of ~~March~~June 3130, 2017, we had no off balance sheet arrangements.

CONTRACTUAL OBLIGATIONS

As of ~~March~~June 3130, 2017, we were subject to contractual payment obligations as described in the table below.

	Payments Due by Period
	2017		2018-2019		2020-2021		More than5 years		Total
Development contracts on development properties (1)	$	58,955	$	—	$	—	$	—	$	58,955
Construction notes payable (principal and interest) (1)(2)	$	48,206,489	$	24,891,309	$	—	$	—	$	73,097,798
Construction notes payable (principal and interest) (2)	100,503,583		49,588,718		—		—		150,092,301
	$	100,562,538	$	49,588,718	$	—	$	—	$	150,151,256

FOOTNOTES:

(1) ~~The~~For ~~amounts~~purposes ~~presented~~of ~~above~~this ~~represent~~table, ~~accrued~~management ~~development~~has ~~costs~~assumed the mortgage and construction notes payable are repaid as of ~~March~~the ~~31,~~initial ~~2017~~maturity dates and are not extended beyond such dates as allowed pursuant to the ~~expected~~loan ~~timing~~agreements. Additionally, management has calculated estimated interest payments based on interest rates of ~~such~~our ~~costs~~mortgage and construction notes payables as of June 30, 2017.

(2) ~~For~~During ~~purposes~~July ~~of this table~~2017, ~~management has assumed~~ the ~~mortgage~~Company ~~and~~repaid ~~construction~~$47.2 ~~notes~~million ~~payable~~related ~~are~~to ~~repaid~~the assale of ~~the~~two ~~initial~~properties. ~~maturity~~The ~~dates~~Company ~~and~~anticipates ~~are~~it ~~not~~will ~~extended~~pay ~~beyond~~the ~~such~~remaining ~~dates~~balance asof ~~allowed~~$24.6 ~~pursuant~~million toupon the ~~loan~~sale ~~agreements. Additionally, management has calculated estimated interest payments based on interest rates~~ of ~~our~~its ~~mortgage~~remaining ~~and~~property ~~construction~~by ~~notes~~the ~~payables~~end as of ~~March 31,~~ 2017.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

See Note 3, "Summary of Significant Accounting Policies" within Item 1. “Financial Statements” and our Annual Report on Form 10-K for the year ended December 31, 2016 for a summary of our Critical Accounting Policies and Estimates.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

None.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We may be exposed to interest rate changes primarily as a result of long-term debt used to acquire and develop properties. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. With regard to variable rate financing, we assessed interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. As ~~of March 31, 2017, we had entered into a LIBOR based interest rate cap agreement to hedge against increases in the interest rate on one construction loan.~~

The following is a schedule of our variable rate debt maturities for each of the next five years, and thereafter, assuming the terms of the loans are not extended (principal maturities only):

	2017			2018			2019			2020			2021			Thereafter			Total			ApproximateFair Value
Variable rate debt	$	98,089,030		$	48,990,701		$	—		$	—		$	—		$	—		$	147,079,731		$	146,740,000
Variable rate debt(1)	$	47,219,158		$	24,580,317		$	—		$	—		$	—		$	—		$	71,799,475		$	71,555,000
Average interest rate(1)	3.35		%	3.07		%	—		%	—		%	—		%	—		%	3.26		%
Average interest rate	3.93		%	3.37		%	—		%	—		%	—		%	—		%	3.74		%

FOOTNOTE:

(1) AsDuring July 2017, the Company repaid $47.2 million related to the sale of ~~March~~two ~~31,~~properties. ~~2017,~~The weCompany ~~were~~anticipates ~~paying~~it will pay the ~~interest~~remaining ~~rate~~balance ~~floor~~of on$24.6 ~~certain~~million upon the sale of ~~our~~its ~~variable~~remaining ~~rate~~property ~~debts~~by the end of 2017.

Management estimates that a hypothetical one-percentage point increase in LIBOR compared to the LIBOR rate as of ~~March~~June 3130, 2017, would increase interest expense by approximately $0.32 million and $0.4 million on our variable rate debt for the ~~three~~quarter and six months ended ~~March 31~~June 30, 2017, respectively. This sensitivity analysis contains certain simplifying assumptions, and although it gives an indication of our exposure to changes in interest rates, it is not intended to predict future results and our actual results will likely vary.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Exchange Act, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to provide reasonable assurance that material information required to be included in our periodic SEC reports is recorded, processed, summarized and reported within the time periods specified in the relevant SEC rules and forms.

Changes in Internal Control over Financial Reporting

During the most recent fiscal quarter, there was no change in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings – None.

Item 1A. Risk Factors – There have been no material changes in our assessment of our risk factors from those set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds – None

Item 3. Defaults Upon Senior Securities – None

Item 4. Mine Safety Disclosures – Not applicable

Item 5. Other Information – None

Item 6. Exhibits

The exhibits required by this item are set forth in the Exhibit Index attached hereto and are filed or incorporated as part of this report.

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SIGNATURES

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 thereunto duly authorized, on the ~~9th~~4th day of ~~May~~August, 2017.




			CNL GROWTH PROPERTIES, INC.

	By:		/s/ Stephen H. Mauldin
			STEPHEN H. MAULDIN
			Chief Executive Officer and President
			(Principal Executive Officer)

	By:		/s/ Tammy J. Tipton
			TAMMY J. TIPTON
			Chief Financial Officer and Treasurer
			(Principal Financial Officer)

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EXHIBIT INDEX

The following documents are filed or incorporated as part of this report.


Exhibit No.	Description

10.1 Purchase and Sale Agreement, dated as of ~~January~~April 1824, 2017, between GGT ~~Oxford~~TRG ~~Venture~~Broadway MDAZ, LLC and ~~Howard~~Dedicated ~~County~~Broadway ~~Housing~~Tempe ~~Commission~~LP (Filed herewith.)


10.2	Agreement of Purchase and Sale, dated as of May 17, 2017, between GGT AHC Fairfield TX, LLC and Ilan Investments, LLC (Filed herewith.)


10.3	Purchase and Sale Agreement, dated as of May 19, 2017, between GGT TRG RIM TX, LLC and BES Acquisitions, LLC (Filed herewith.)


10.4	First Amendment to Purchase and Sale Agreement, dated June 12, 2017, between GGT TRG RIM TX, LLC and BES Acquisitions, LLC (Filed herewith.)


10.5	Purchase and Sale Agreement, dated as of May 23, 2017, between GGT Spring Town TX, LLC and Abbey Residential, LLC (Filed herewith.)


10.6	Agreement of Sale and Purchase of Membership Interest, dated as of June 9, 2017, among GGT Hampton Roads VA Holdings, LLC, Bainbridge Prices Fork Members, LLC and Amzak Prices Fork Holdings, LLC (Filed herewith.)


10.7	Purchase and Sale Agreement, dated as of June 30, 2017, between GGT Daniel SC Venture, LLC and MSP RE Holdings, LLC (Filed herewith.)


31.1	Certification of Chief Executive Officer of CNL Growth Properties, Inc., Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)


31.2	Certification of Chief Financial Officer of CNL Growth Properties, Inc., Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)


32.1	Certification of Chief Executive Officer and Chief Financial Officer of CNL Growth Properties, Inc., Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)

101 The following materials from CNL Growth Properties, Inc. Quarterly Report on Form 10-Q for the ~~three~~six months ended ~~March~~June 3130, 2017, formatted in XBRL (Extensible Business Reporting Language); (i) Condensed Consolidated Statements of Net Assets, (ii) Condensed Consolidated Statement of Changes in Net Assets, (iv) Condensed Consolidated Statement of Operations, (v) Condensed Consolidated Statement of Equity, (vi) Condensed Consolidated Statement of Cash Flows, and (vii) Notes to the Condensed Consolidated Financial Statements.

Filing Compare · CNL Growth Properties, Inc.