DURHAM, NC - Bluerock Residential Growth REIT announced that it has acquired, through a joint venture, a 204-unit Class AA new construction apartment community known as Whetstone Apartments in Durham, North Carolina. The property is located within walking distance of Durham's top restaurants and is in close proximity to Research Triangle Park and the area's many universities.
BRG made a convertible preferred equity investment of $12.2 million to acquire an indirect interest in the joint venture, which acquired Whetstone for a purchase price of $35.6 million. Under BRG's current Invest-to-Own structure, the Company will be entitled to a current-pay preferred return on investment of 15% per year, and once the project is stabilized, will have the right to convert its preferred equity investment into a majority equity position in the property. BRG sourced this transaction through an existing operating partner who was able to negotiate a favorable purchase price in a direct off-market negotiation with the seller.
According to the Company's underwriting, the per-unit purchase price of approximately $175,000 per unit, which represents a nominal stabilized cap rate of approximately 6%, compares very favorably to sales of comparable assets in the market exceeding $200,000 per unit and cap rates of 4.75% - 5.0%. The property is projected to reach stabilization in or about the fourth quarter of 2015.
BRG's operating partner on the Whetstone investment is Atlanta-based TriBridge Residential. TriBridge is a full service, multifamily investment, management and development company and will, acting through one of its affiliates, also serve as property manager for Whetstone.
"We are very pleased with the Whetstone acquisition. We believe that this will be a productive asset from the outset and that it will add significant value to BRG's portfolio," said Ramin Kamfar, Chairman and CEO of Bluerock.
Whetstone is a new-construction, Class AA multifamily community featuring studio, one and two-bedroom unit layouts averaging 718 square feet with upscale amenities that include a resort style pool, a garden courtyard with grill and fireplace, state of the art fitness center and covered/controlled-access parking, as well as business and media centers. High-grade unit interiors include nine-foot ceilings, gourmet kitchens with stainless steel appliances, and upscale bathroom design and finishes.
The property is located in North Carolina's Raleigh-Durham MSA, home to an estimated two million residents, spanning Raleigh, Durham, Cary and Chapel Hill. In the last year, the MSA's Triangle region alone added more than 25,000 new jobs, while unemployment dropped to its pre-recession level of only 4.3%.