DALLAS, TX - Bluerock Residential Growth REIT, Inc. announced that it has made a preferred equity investment in a joint venture controlled by the REIT and its affiliates to acquire and develop Domain Phase 1, a Class A, 301-unit apartment property in Garland, Texas. The luxury multifamily rental community will be set on 10 acres in the high-growth, Dallas-Fort Worth locale, which is among the top regional economies in the United States. Total projected development costs are estimated at approximately $47 million, or $157,000 per unit.
The Domain Phase 1 transaction is one component of a broader strategic venture with ArchCo Residential to co-develop multiple properties in Texas, Florida and North Carolina. ArchCo Residential is a multifamily development firm formed by Neil Brown, the former Chief Development Officer of Archstone Residential, with an experienced team that has developed more than $8 billion of multifamily properties with more than 37,000 units nationwide.
ArchCo's underwriting projects a return on cost for Domain Phase 1 of 7.0 – 7.5% at stabilization, based on expected development cost and projected rental income. This compares very favorably to estimated market cap rates of 4.75%-5.25% for comparable product.
"Domain Phase 1 and the future projects planned under the BRG/ArchCo venture are well located within attractive markets in BRG's strategic growth footprint. We believe the venture will allow us to leverage ArchCo's deep and seasoned management team and access proprietary opportunities to deliver strong returns to our investors," said Ramin Kamfar, Chairman and CEO of BRG.
Domain Phase 1 will be a Class A multifamily rental community consisting of three-story, wood-frame, garden-style buildings with a mix of surface parking and attached and detached garages. Amenities within the community will include a resort-style pool and spa, fitness center, business center and substantial open space. The site is located in Garland, TX, one of the more populous cities within the high-growth Dallas-Fort Worth metroplex. It is in close proximity to major employment centers including CityLine and Legacy Business Park, two of the leading headquarters sites for Fortune 500 companies entering Dallas.
For Domain Phase 1, BRG expects to initially invest approximately $9 million of preferred equity. Under BRG's invest-to-own structure, the Company will be 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 control-position common membership interest in the controlling member of the joint venture.
Simultaneously with acquisition of the land for Phase 1, the BRG/ArchCo venture entered into options to acquire an additional 126 acres of property contiguous to Domain Phase 1, of which 34 acres are developable and, after required permitting, are planned to add approximately 724 units as Domain Phase 2 and Domain Phase 3 if subsequently acquired and developed.