HOUSTON, TX - Bluerock Residential Growth REIT, Inc. announced that it has made a convertible preferred equity investment in a joint venture with Trammell Crow Residential, which was formed to develop a Class A rental apartment community known as Alexan CityCentre. Sized at approximately 340 units, the development is centrally located within the Houston, Texas Energy Corridor submarket, adjacent to CityCentre, a prominent 37-acre mixed use development complex encompassing 1.8 million square feet of office, hotel, retail, and residential space.
BRG’s underwriting projects a trended return on cost for the project of over 7.0% at stabilization, for value creation of 200 to 250 basis points versus sales of comparable multifamily communities in the Houston, Texas area at 4.5% - 5.0%, the Company said. The investment is forecast to generate a 15% AFFO yield during the development phase.
BRG expects to invest approximately $6.5 million of preferred equity, and together with affiliates of Bluerock Real Estate LLC, will contribute approximately 90% of the required equity for the development, with the balance contributed by TCR. Once the project is developed and 70% leased, BRG will have a right to convert its preferred equity investment into a control-position common membership interest in the managing member of the joint venture. Pending exercise of this conversion right, BRG will be entitled to a current-pay preferred return on its investment of 15% per year.
“TCR is a premier developer and a preferred builder in major markets across the country, with a track record of delivering measurable value, both strategic and operational, to the developments with which it is associated. We are extremely pleased to be able to work with them to bring this project to life,” said Ramin Kamfar, Chairman and CEO of BRG.
Alexan CityCentre will be situated in close commuting proximity to two West Houston employment nodes: the Energy Corridor, which houses 20.3 million square feet of office space and a reported 84,000 employees, as well as the Westchase District, which has approximately 14.3 million square feet of office space and 82,000 employees. Companies within these employment centers include BP America, Citgo, ConocoPhillips, Dow Chemical, ExxonMobil Chemical, Shell Oil Exploration and Production, Sysco and WorleyParsons, among others.
To attract the high income demographic working in the Energy Corridor and Westchase District, and to best leverage its location, the venture plans to build product that is considered high end for the submarket, featuring approximately 277 one-bedroom units and approximately 63 two-bedroom units, averaging 829 square feet. In addition to premium finishes and appliances, the complex will feature high-quality community amenities such as a resort quality pool, state of the art fitness facility, concierge, and business center.