New York, NY (January 15, 2015) – Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) (“the Company” or “BRG”), today announced its investment in a joint venture (the “Venture”) to acquire and develop Villages at Lake Boone, a Class A, 245-unit luxury apartment property planned on 7.3 acres in Northwestern Raleigh, NC. The development will be adjacent to the expanding 660-bed REX hospital, which employs a staff of approximately 5,400, and is part of a larger mixed use development planned for other, adjacent tracts. Total projected development costs are estimated at approximately $40 million, or $163,200 per unit.
Bluerock’s underwriting projects a return on cost of approximately 7.1% at stabilization, based on expected development costs and projected rental income. This compares favorably to estimated market cap rates of 4.75%-5.25% for comparable product in the Raleigh market.
“The Raleigh-Durham market is among the most vibrant economies in the country and we are pleased to be expanding our portfolio of holdings in the area,” said Ramin Kamfar, CEO of BRG. “Our relationship with TriBridge and innovative deal structuring made it possible for us to acquire the Villas at Lake Boone property at the seller’s original cost basis, which we expect will enable the Venture to bring a luxurious and well-constructed product to the market at a highly favorable cost basis and yet draw very attractive rents.”
The Villages at Lake Boone will feature studio, one-, two- and three-bedroom unit layouts designed to target established professionals likely to work in the adjacent medical center, or surrounding areas. Units will average approximately 821 square feet and will offer upscale, condominium-quality interiors including nine-foot ceilings, high-end stainless steel appliances, granite countertops, upgraded lighting, and luxurious baths. Community spaces will feature best-in-class amenities including a resort-style pool and fitness center, as well as business and media centers and surface parking. Four existing retail outparcels, which are not included in the acquisition, will front the development.
Among the fastest growing metro areas in the U.S., Raleigh’s strong economy and high quality of life are a draw for relocating corporations and organic job growth creation with 48,000+ jobs added over the past two years alone. A recent IHS Global Insight study ranked Raleigh as 6th among 18 metro areas that will see the most economic growth (GDP) in 2016, with a projected growth rate of 4.3%. Downtown Raleigh has emerged as a science, technology, engineering and math (“STEM”) employment hub with Research Triangle Park, Duke University, the University of North Carolina, and North Carolina State attracting a highly-educated and expanding STEM-focused workforce. The area boasts 3.5 times the national job growth rate in the biosciences, is home to 60% of the country’s top Crop Science companies’ headquarters, and has job growth that is above the national average.
BRG initially funded 9.9MM in preferred equity and expects the capital commitment to grow to 11.9MM. An affiliate of Bluerock Real Estate, LLC (“Bluerock”) made a common equity investment in the Bluerock-controlled member of the Venture, which invested 90% of the required equity for the development. The balance of the equity required by the Venture was contributed by an affiliate of Atlanta-based TriBridge Residential, which is also serving as the Company’s development partner on the project. Under an invest-to-own structure, BRG is entitled to a current-pay preferred return on investment of 15% per year with the right, once the project is developed and stabilized, to convert its preferred equity investment into a majority common membership interest.
About Bluerock Residential Growth REIT, Inc.
Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) is a real estate investment trust that 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. The Company’s objective is to generate value through off-market/relationship-based transactions and, at the asset level, through improvements to operations and properties. BRG generally invests with strategic regional partners, including some of the best-regarded, private owner-operators in the United States, making it possible to operate as a local sharpshooter in each of its markets while enhancing off-market sourcing capabilities. The Company is included in the Russell 2000 and Russell 3000 Indexes. BRG has elected to be taxed as a real estate investment trust (REIT) for U.S. federal income tax purposes. For more information, please visit our website at: www.bluerockresidential.com.
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. These forward-looking statements are based upon the Company’s present expectations, but these statements are not guaranteed to occur. 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 set forth in Item 1A of the Company’s Annual Report on Form 10-K filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on March 4, 2015, 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.