New York, NY (March 11, 2015) – Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) (“BRG” or “the Company”) announced today that it has entered into an agreement to acquire the Fox Hill Apartments, a 288-unit Class A apartment community in Austin, Texas (“Fox Hill”). The Company’s board of directors approved the acquisition earlier this month.
The Company expects to make an equity investment of approximately $10.6 million to acquire an aggregate 85.6% indirect joint venture interest in Fox Hill. The joint venture is expected to acquire Fox Hill for a purchase price of $38.15 million, which the Company believes is approximately 10% – 20% below replacement cost, and at a nominal stabilized cap rate that compares favorably to local market cap rates of 5.0% – 5.3%. The Company believes it can achieve a stabilized cap rate of 6.25% solely by bringing existing rents, which it estimates to be approximately 15.0% below market, up to market. As a result, BRG is projecting in-place AFFO to increase from 8.5% to more than 11.0% on stabilization.
The acquisition is further expected to be capitalized with a senior mortgage from Fannie Mae in the amount of $26.7 million. The loan has a term of seven years, will bear interest at a fixed rate of 3.57%, and will be interest only for the first 48 months. BRG’s third-party joint venture partners in the transaction are expected to contribute approximately 4.44% of the equity.
“This prospective acquisition has benefitted from a pre-existing relationship with the seller, with whom we have executed successfully in the past. As a result, we were able to negotiate directly with the seller and come to terms quickly and efficiently at what we believe to be attractive pricing,” said Ramin Kamfar, Chairman and CEO of Bluerock.
Built in 2010, Fox Hill is a Class-A multifamily community featuring one-, two- and three-bedroom unit layouts, averaging 1,066 square feet. The community sits on 44 acres in Austin’s Hill Country and features an abundance of amenities including a resort style pool, fitness center, children’s playground, sand volleyball court, communal vegetable and herb garden, hiking, biking and walking trails, a dog-park, an outdoor BBQ/fire pit, and business and media centers. The property is located approximately 20 minutes southwest of the Austin Central Business District, and is also in close proximity to the area’s office and technology corridors.
Fox Hill is expected to be the third multifamily investment in the Austin market by the Company’s sponsor, Bluerock Real Estate, L.L.C. since 2010. Other investments included Bluerock’s Archstone Tech Ridge and the Meadows Apartments.
There is no assurance the acquisition of Fox Hill will occur or be completed as the Company intends.
About Bluerock Residential Growth REIT, Inc.
Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) is a real estate investment trust. The Company focuses on acquiring a diversified portfolio of Class A institutional-quality apartment properties in demographically attractive growth markets to appeal to the renter by choice category. BRG works with a network of strategic regional partners that includes some the largest and best private owner-operators in the United States. The Company generates value through off-market/relationship-based transactions and, at the asset level, through improvements to operations and properties. BRG has elected to be taxed as a real estate investment trust (REIT) for U.S. federal income tax purposes.
Forward Looking Statements
This press release contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Forward looking statements are statements that are not historical, including statements regarding management’s intentions, beliefs, expectations, representations, plans or predictions of the future, and are typically identified by such words as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “will,” “should” and “could.” Because such statements include risks, uncertainties and contingencies, actual results may differ materially from those expressed or implied by such forward looking statements. These forward looking statements are based upon the Company’s present expectations, but these statements are not guaranteed to occur, including the property’s ability to generate AFFO as projected. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Investors should not place undue reliance upon forward looking statements. For further discussion of the factors that could affect outcomes, please refer to the “Risk Factors” attached as Exhibit 99.1 to Form 8-K filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on November 18, 2014, and subsequent filings by the Company with the SEC. We claim the safe harbor protection for forward looking statements contained in the Private Securities Litigation Reform Act of 1995.