AUSTIN, TX - Bluerock Residential Growth REIT announced that it has entered into an agreement to acquire the Fox Hill Apartments, a 288-unit Class A apartment community in Austin, Texas. 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.