RALEIGH, NC - Bluerock Residential Growth REIT announced its investment in a joint venture to acquire and develop Villages at Lake Boone, a Class A, 245-unit luxury apartment property planned on 7.3 acres in Northwestern Raleigh, NC. The development will be adjacent to the expanding 660-bed REX hospital, which employs a staff of approximately 5,400, and is part of a larger mixed use development planned for other, adjacent tracts. Total projected development costs are estimated at approximately $40 million, or $163,200 per unit.
Bluerock's underwriting projects a return on cost of approximately 7.1% at stabilization, based on expected development costs and projected rental income. This compares favorably to estimated market cap rates of 4.75%-5.25% for comparable product in the Raleigh market.
"The Raleigh-Durham market is among the most vibrant economies in the country and we are pleased to be expanding our portfolio of holdings in the area," said Ramin Kamfar, CEO of BRG. "Our relationship with TriBridge and innovative deal structuring made it possible for us to acquire the Villas at Lake Boone property at the seller's original cost basis, which we expect will enable the Venture to bring a luxurious and well-constructed product to the market at a highly favorable cost basis and yet draw very attractive rents."
The Villages at Lake Boone will feature studio, one-, two- and three-bedroom unit layouts designed to target established professionals likely to work in the adjacent medical center, or surrounding areas. Units will average approximately 821 square feet and will offer upscale, condominium-quality interiors including nine-foot ceilings, high-end stainless steel appliances, granite countertops, upgraded lighting, and luxurious baths. Community spaces will feature best-in-class amenities including a resort-style pool and fitness center, as well as business and media centers and surface parking. Four existing retail outparcels, which are not included in the acquisition, will front the development.
Among the fastest growing metro areas in the U.S., Raleigh's strong economy and high quality of life are a draw for relocating corporations and organic job growth creation with 48,000+ jobs added over the past two years alone. A recent IHS Global Insight study ranked Raleigh as 6th among 18 metro areas that will see the most economic growth (GDP) in 2016, with a projected growth rate of 4.3%. Downtown Raleigh has emerged as a science, technology, engineering and math ("STEM") employment hub with Research Triangle Park, Duke University, the University of North Carolina, and North Carolina State attracting a highly-educated and expanding STEM-focused workforce. The area boasts 3.5 times the national job growth rate in the biosciences, is home to 60% of the country's top Crop Science companies' headquarters, and has job growth that is above the national average.