Bluerock Residential Growth REIT, Inc. Announces Completion of Contribution Transactions and Entry into Material Agreements in Connection with Initial Public Offering

Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) (the “Company”) today announced that in connection with the completion of its initial public offering, the Company has consummated the acquisition of five additional real estate investments and entered into certain material agreements, each as discussed below.

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New York, NY (PRWEB) April 08, 2014

Acquisition of Indirect Interest in Village Green Apartments
The Company today announced that on April 2, 2014, the Company acquired an aggregate 48.6% indirect equity interest in the Village Green Apartments, a 520-unit multifamily property located in Ann Arbor, Michigan. The indirect interest in the Village Green property was acquired from Bluerock Special Opportunity + Income Fund II, LLC (“Fund II”) and Bluerock Special Opportunity + Income Fund III, LLC (“Fund III”), each an affiliate of the Company, in exchange for an aggregate of 486,084 unregistered shares of the Company’s Class A common stock with an approximate aggregate value of $7.0 million, subject to certain prorations and adjustments typical in a real estate transaction, based on the value of the proportionate ownership interest of each of Fund II and Fund III in the Village Green property as determined by an independent third party appraisal. As further consideration for the indirect interest in the Village Green property, the Company entered into a Consent Agreement to release Fund II and Fund III from their obligations under an existing guaranty related to an approximate $43.2 million loan that encumbers the Village Green property. The Company’s former advisor, Bluerock Multifamily Advisor, LLC (the “Former Advisor”) received an acquisition fee of approximately $700,000 under its advisory agreement with the Company, which was paid in the form of 48,357 special units of interest (“LTIP Units”) in the Company’s operating partnership, Bluerock Residential Holdings, L.P. (the “Operating Partnership”).

Acquisition of Indirect Interest in Villas at Oak Crest Apartments
The Company today also announced that on April 2, 2014, the Company acquired an aggregate 67.2% indirect equity interest in Villas at Oak Crest Apartments, a 209-unit apartment complex located in Chattanooga, Tennessee. The indirect interest in the Village at Oak Crest property was acquired from Fund II in exchange for 200,143 unregistered shares of the Company’s Class A common stock with an approximate value of $2.9 million, subject to certain prorations and adjustments typical in a real estate transaction, based on the value of the ownership interest of Fund II in the Villas at Oak Crest property as determined by an independent third party appraisal. The Former Advisor received an acquisition fee of approximately $300,000 under its advisory agreement with the Company, which was paid in the form of 19,343 LTIP Units.

Acquisition of Indirect Interest in Springhouse at Newport News
The Company further announced today that on April 2, 2014, the Company acquired an additional 36.8% indirect equity interest in Springhouse at Newport News, a 432-unit garden-style apartment community and one of the Company’s current investments, located in Newport News, Virginia. The additional interest in the Springhouse property was acquired from Bluerock Special Opportunity + Income Fund I, LLC (“Fund I”), an affiliate of the Company, in exchange for approximately $3.5 million in cash, subject to certain prorations and adjustments typical in a real estate transaction, based on the value of the ownership interest of Fund I in the Springhouse property as determined by an independent third party appraisal. As further consideration for the indirect interest in the Springhouse property, the Company entered into an Indemnity Agreement with R. Ramin Kamfar, our Chairman, CEO and President, and James G. Babb, III, the Chief Investment Officer of our manager, BRG Manager, LLC (the “Manager”), pursuant to which, subject to certain exceptions, the Company agreed to indemnify and hold Mr. Kamfar and Mr. Babb harmless from and against any loss, claim, liability or cost incurred thereby, pursuant to the terms of certain Guaranties provided by Mr. Kamfar and Mr. Babb in conjunction with the indebtedness encumbering the Springhouse property in the original principal amount of $23.4 million (the “Springhouse Loan”), and the terms of a certain Backstop Agreement pursuant to which Mr. Kamfar and Mr. Babb and other guarantors of the Springhouse Loan agreed to allocate amongst themselves liability which they might incur under the Guaranties or other guaranties provided in conjunction with the Springhouse Loan and to which the other guarantors are a party. The Former Advisor received an acquisition fee of approximately $300,000 under its advisory agreement with the Company, which was paid in the form of 20,593 LTIP Units.

Acquisition of Indirect Interest in Grove at Waterford Apartments
The Company today also announced that on April 2, 2014, the Company acquired an aggregate 60.0% indirect equity interest in Grove at Waterford Apartments, a 252-unit apartment complex located in Hendersonville, Tennessee. The indirect interest in the Grove property was acquired from Fund I and Fund II in exchange for $582,000 in cash to Fund I and 361,241 unregistered shares of the Company’s Class A common stock with an approximate value of $5.2 million to Fund II, subject to certain prorations and adjustments typical in a real estate transaction, based on the value of the proportionate ownership interest of each of Fund I and Fund II in the Grove property as determined by an independent third party appraisal. As further consideration for the indirect interest in the Grove property, the Company entered into an Assumption and Release Agreement to release Fund I and Fund II from their obligations under an existing guaranty related to an approximate $20.1 million loan that encumbers the Grove property. The Former Advisor received an acquisition fee of approximately $450,000 under its advisory agreement with the Company, which was paid in the form of 30,828 LTIP Units.

Acquisition of Indirect 100% Fee Simple Interest in North Park Towers
The Company also announced today that on April 3, 2014, the Company acquired an indirect 100% fee simple interest in North Park Towers, a 313-unit apartment complex located in Southfield, Michigan. The indirect 100% fee simple interest in the North Park Towers property was acquired from BR-NPT Springing Entity, LLC (“BR-NPT”), an affiliate of Bluerock Real Estate, L.L.C. (“Bluerock”), in exchange for 282,759 limited partnership interests in the Operating Partnership (“OP Units”) with an approximate value of $4.1 million, subject to certain prorations and adjustments typical in a real estate transaction, based on the value of the ownership interest of BR-NPT in the North Park Towers property as determined by an independent third party appraisal. As further consideration for the indirect interest in North Park Towers, the Company entered into a Joinder By and Agreement of New Indemnitor pursuant to which the Company and the Operating Partnership will serve as replacement guarantors and indemnitors to release R. Ramin Kamfar from his obligations under an existing Guaranty of Recourse Obligations and an existing Environmental Indemnity Agreement related to an approximate $11.5 million loan that encumbers the North Park Towers property. The Former Advisor received an acquisition fee of approximately $390,000 under its advisory agreement with the Company, which was paid in the form of 26,897 LTIP Units.

Entry into Material Agreements
The Company today announced that on April 2, 2014, the Company entered into a Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, of which the Company is the sole general partner.

The Company today also announced that on April 2, 2014, the Company entered into a management agreement with the Operating Partnership and the Manager, which is majority owned by Bluerock, an affiliate of Mr. Kamfar, pursuant to which the Manager will provide for the day-to-day management of the Company’s operations. Upon the Company’s entry into the Management Agreement, the Company concurrently terminated its advisory agreement with the Former Advisor.

The Company further announced today that on April 2, 2014, the Company entered into an investment allocation agreement with Bluerock and the Manager whereby none of Fund II, Fund III, or BR-NPT(collectively, the “Bluerock Funds”), nor any of their affiliates, will acquire institutional-quality apartment properties in the Company’s target markets and within the Company’s investment strategies without providing the Company with the right (but not the obligation) to contribute, subject to certain qualifications, at least 75% of the capital to be funded by such investment vehicles in Class A apartment properties in the Company’s target markets, subject to change if agreed upon by a majority of the Company’s independent directors.

The Company also announced today that on April 2, 2014, the Company entered into pledge agreements with Fund I and the Bluerock Funds that provide security for their indemnification obligations for representations and warranties by Fund I, the Bluerock Funds or their nominees regarding the equity interests and assets contributed in the Company’s real estate acquisitions in connection with its initial public offering, as described above, and for any losses incurred by the Company related to its ownership of such contributed assets arising prior to the consummation of such acquisitions, or the failure of Fund I or the Bluerock Funds to perform under their respective contribution agreements for a one-year period after the closing of such acquisitions.

In addition, the Company announced today that on April 2, 2014, the Company entered into a registration rights agreement with Fund II, Fund III and their respective managers pursuant to which, subject to certain limitations, the Company may become obligated to file a registration statement for the resale of certain of the shares of Class A common stock held by such entities as a result of the contribution transactions. The Company also announced today that on April 2, 2014, the Company entered into a registration rights agreement with BR-NPT and Bluerock Property Management, LLC, an affiliate of Mr. Kamfar, pursuant to which, subject to certain limitations, the Company may become obligated to file a registration statement for the resale of its shares of Class A common stock into which the OP Units held by such entities as a result of the contribution transactions are redeemable. Both of the registration rights agreements provide that, subject to certain conditions, such entities may also have piggyback registration rights to participate as selling stockholders in any follow-on public offering by the Company of at least $30.0 million.

The Company further announced today that on April 2, 2014, the Company and the Operating Partnership entered into a tax protection agreement with BR-NPT pursuant to which the Operating Partnership agreed to indemnify BR-NPT against adverse tax consequences to certain of its members until the sixth anniversary of the closing of the Operating Partnership’s acquisition of the North Park Towers property in connection with the Operating Partnership’s failure to provide BR-NPT the opportunity to guarantee a portion of the outstanding indebtedness of the Operating Partnership during such period, or following such period, the Operating Partnership’s failure to use commercially reasonable efforts to provide such opportunity, subject to certain exceptions and limitations.

The Company also announced today that on April 2, 2014, the Company entered into indemnification agreements with each of its current directors and executive officers. The indemnification agreements clarify and supplement indemnification provisions already contained in the Company’s charter and bylaws, and generally provide that the Company will indemnify its directors and executive officers to the maximum extent permitted by the charter, the bylaws and Maryland law, subject to certain exceptions.

Amendment and Termination of Third Amended and Restated Advisory Agreement
The Company also announced today that on March 26, 2014, the Company’s Board of Directors (the “Board”), including its independent directors, approved a second amendment to the Third Amended and Restated Advisory Agreement dated February 27, 2013 (the “Advisory Agreement”) between the Company, the Former Advisor and the Operating Partnership. Pursuant to the Advisory Agreement, the Former Advisor was entitled to receive certain acquisition fees in connection with the closing of the contribution transactions. Pursuant to the second amendment to the Advisory Agreement (the “Second Amendment”), in lieu of cash payment, the Former Advisor agreed to receive such acquisition fees in the form of LTIP Units. Pursuant to its terms, the Advisory Agreement, as amended by the Second Amendment, automatically terminated upon the completion of the Company’s initial public offering on April 2, 2014.

Effectiveness of Resignation of Director and Chairman of Investment Committee and Appointment of Director and Chairman of Investment Committee
The Company further announced today that upon the closing of its initial public offering on April 2, 2014, the resignation of James G. Babb, III as a director of the Company became effective. Mr. Babb was replaced on the Board by Gary T. Kachadurian, who is the Vice Chairman of the Manager and was previously selected by the Board to replace Mr. Babb. Mr. Kachadurian will serve as a member of the Board and as the Chairman of the Board’s Investment Committee. The resignation of Mr. Babb as a director of the Company and the Chairman of the Investment Committee, and the appointment of Mr. Kachadurian as the new Chairman of the Investment Committee, were previously disclosed in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 3, 2013. Mr. Babb will continue to serve as Chief Investment Officer of the Manager and Chairman of its investment committee.

The foregoing items were addressed and disclosed by the Company in a Current Report on Form 8-K filed today with the Securities and Exchange Commission.

About Bluerock Residential Growth REIT, Inc.
Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) is a real estate investment trust formed to acquire a diversified portfolio of institutional-quality apartment properties in demographically attractive growth markets throughout the United States. The Company 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. 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” section of the prospectus dated March 28, 2014 and filed by the Company with the Securities and Exchange Commission (“SEC”) on April 1, 2014, and subsequent filings by the Company with the SEC.


Contact

  • Joshua Hoffman
    Bluerock Real Estate
    +1 (208) 475-2380
    Email