8-K 1 tv525436_8k.htm FORM 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): July 15, 2019

 

Bluerock Residential Growth REIT, Inc.
(Exact Name of Registrant as Specified in Its Charter)

  

Maryland   001-36369   26-3136483

(State or other jurisdiction of incorporation

or
organization)

  

(Commission File Number)

 

  

(I.R.S. Employer

Identification No.)

  

712 Fifth Avenue, 9th Floor

New York, NY 10019

(Address of principal executive offices)
 
(212) 843-1601
(Registrant’s telephone number, including area code)
 
None
(Former name or former address, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class Trading Symbol
 Name of each exchange
on which registered
Class A Common Stock, $0.01 par value per share BRG NYSE American
8.250% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share BRG-PrA NYSE American
7.625% Series C Cumulative Redeemable Preferred Stock, $0.01 par value per share BRG-PrC NYSE American
7.125% Series D Cumulative Preferred Stock, $0.01 par value per share BRG-PrD NYSE American

 

Securities registered pursuant to Section 12(g) of the Exchange Act:

 

Title of each class
Series B Redeemable Preferred Stock, $0.01 par value per share
Warrants to Purchase Shares of Class A Common Stock, $0.01 par value per share

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

 

Emerging growth company  ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

 

 

 

 

 

 

ITEM 2.01COMPLETION OF DISPOSITION OF ASSETS

 

On July 15, 2019, Bluerock Residential Growth REIT Inc., a Maryland corporation (the “Company”), through certain wholly-owned subsidiaries of its operating partnership, Bluerock Residential Holdings, LP (the “Operating Partnership”), closed on the previously announced sale of the Company’s interests in four of the five assets in a portfolio of properties (the “Topaz Portfolio”) pursuant to the terms and conditions of two separate purchase and sale agreements for an aggregate sale price of $273.7 million in cash. The sale of the fifth property in the Topaz Portfolio, the real property commonly known as ARIUM Palms at World Gateway Apartments, located at 9000 Avenue Pointe Circle, Orlando, Orange County, Florida 32821, is expected to close on or before August 29, 2019.

 

Sorrel Phillips Creek Ranch Apartments

 

On July 15, 2019, the Company, through a wholly-owned subsidiary of the Operating Partnership, closed on the Purchase and Sale Agreement, dated June 17, 2019, as amended (the “Sorrel Phillips Creek Ranch Purchase Agreement”), for the sale by BR Carroll Phillips Creek Ranch, LLC (“Sorrel Phillips Creek Ranch Owner”) to Sorrel/BO, L.L.C., a Delaware limited liability company, Sorrel SP-HP, L.L.C., a Delaware limited liability company, and Sorrel/Portad, L.L.C., a Delaware limited liability company, as tenants in common, all of which are unaffiliated third parties (collectively, the “Sorrel Phillips Creek Ranch Purchaser”), of Sorrel Phillips Creek Ranch Owner’s entire right, title and interest in the improved real property commonly known as Sorrel Phillips Creek Ranch Apartments, located at 5050 FM423, Frisco, Denton County, Texas 75036 (the “Sorrel Phillips Creek Ranch Property”) for a sale price of $57.9 million, subject to certain prorations and adjustments typical in a real estate transaction. The net proceeds to the Company, after payment of closing costs including mortgage payoff and fees, totaled $17.3 million.

 

The Sovereign Apartments, Leigh House Apartments and Preston View Apartments

 

On July 15, 2019, the Company, through certain wholly-owned subsidiaries of the Operating Partnership, closed on the Purchase and Sale Agreement, dated June 17, 2019, as amended (the “Three Property Purchase Agreement,” and together with the Sorrel Phillips Creek Ranch Purchase Agreement, the “Initial Closing Purchase Agreements”), for the sale (a) by BR Carroll Keller Crossing, LLC (“Sovereign Owner”) to KRE Topaz Sovereign Owner LLC, a Delaware limited liability company and unaffiliated third party, of Sovereign Owner’s entire right, title and interest in the improved real property commonly known as The Sovereign Apartments, located at 5301 North Tarrant Parkway, Fort Worth, Tarrant County, Texas 76244 (the “Sovereign Property”) for an allocated sale price of $53.0 million; (b) by BR-TBR Lake Boone NC Owner, LLC (“Leigh House Owner”) to KRE CH Leigh House Owner LLC, a Delaware limited liability company and unaffiliated third party, of Leigh House Owner’s entire right, title and interest in the improved real property commonly known as Leigh House Apartments, located at 2421 Landmark Drive, Raleigh, Wake County, North Carolina 27607 (the “Leigh House Property”) for an allocated sale price of $52.0 million; and (c) by BR Preston View, LLC (“Preston View Owner”) to KRE Topaz Preston View Owner LLC, a Delaware limited liability company and unaffiliated third party, of Preston View Owner’s entire right, title and interest in the improved real property commonly known as Preston View Apartments, located at 1000 Stony Court, Morrisville, Wake County, North Carolina 27560 (the “Preston View Property”) for an allocated sale price of $64.0 million. The aggregate sale price for the Sovereign Property, the Leigh House Property and the Preston View Property totaled $169.0 million, subject to certain prorations and adjustments typical in a real estate transaction. The aggregate net proceeds to the Company, after payment of closing costs including mortgage payoffs and fees, totaled $57.9 million.

 

The foregoing descriptions of the Initial Closing Purchase Agreements do not purport to be complete and are qualified in their entirety by reference to (i) the Sorrel Phillips Creek Ranch Purchase Agreement, which is filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 21, 2019 and is incorporated herein by reference, (ii) the First Amendment to the Sorrel Phillips Creek Ranch Purchase Agreement, which is filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 21, 2019 and is incorporated herein by reference, (iii) the Three Property Purchase Agreement, which is filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on June 21, 2019 and is incorporated herein by reference, (iv) the First Amendment to the Three Property Purchase Agreement, which is filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the SEC on June 21, 2019 and is incorporated herein by reference and (v) the Second Amendment to the Three Property Purchase Agreement, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.

 

ITEM 9.01FINANCIAL STATEMENTS

 

(a)Pro Forma Financial Information

 

Bluerock Residential Growth REIT, Inc.

 

Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2019 (unaudited)

 

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Notes to Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2019 (unaudited)

 

Pro Forma Condensed Consolidated Statement of Operations for the three months ended March 31, 2019 (unaudited)

 

Notes to Pro Forma Condensed Consolidated Statement of Operations for the three months ended March 31, 2019 (unaudited)

 

Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2018 (unaudited)

 

Notes to Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2018 (unaudited)

 

Statements in this Current Report on Form 8-K, including intentions, beliefs, expectations or projections relating to items such as the long-term performance of the Company’s portfolio are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based on current expectations and assumptions with respect to, among other things, future economic, competitive and market conditions and future business decisions that may prove incorrect or inaccurate. Important factors that could cause actual results to differ materially from those in the forward looking statements include the risks described under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2019 and its other filings with the SEC.

 

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BLUEROCK RESIDENTIAL GROWTH REIT, INC.

Unaudited Pro Forma Condensed Consolidated Financial Statements Information

 

The following unaudited pro forma condensed consolidated financial statements of Bluerock Residential Growth REIT, Inc. (together with its consolidated subsidiaries, the “Company,” “we,” “our” or “us”) should be read in conjunction with our historical audited consolidated financial statements as of and for the year ended December 31, 2018, and as of and for the three months ended March 31, 2019 (unaudited), and the related notes thereto.

 

The unaudited pro forma condensed consolidated balance sheet, as of March 31, 2019, and statement of operations for the year ended December 31, 2018, and three months ended March 31, 2019, have been prepared to provide pro forma financial information with regard to the dispositions of ARIUM Palms, Leigh House, Preston View, Sorrel, and Sovereign (collectively, the “Topaz Portfolio”), which the Company consolidated and includes pro forma information for each of the transactions described below. The unaudited pro forma financial information gives effect to:

      

  (1)

The sale of the Company’s interests in the Topaz Portfolio to non-affiliated buyers. The sales of Leigh House, Preston View, Sorrel, and Sovereign closed on July 15, 2019 and the sale of ARIUM Palms is anticipated to close on or about August 29, 2019. The pro forma financial statements do not reflect the net proceeds from the sale and the subsequent reinvestment.

 

The corresponding paydown of the mortgages payable, which were included in the Company’s historical consolidated balance sheet, as follows (in thousands):

  

Property  Mortgage Payable 
ARIUM Palms  $29,703 
Preston View   41,283 
Sorrel   38,522 
Sovereign   27,966 
Total  $137,474 

 

The sale of the preferred interest in Leigh House included the payoff of its unconsolidated debt of $25.0 million.

 

The pro forma condensed consolidated balance sheet assumes that the disposition transactions referred to above occurred on March 31, 2019.

 

The pro forma consolidated statement of operations assumes the transactions referred to above occurred on January 1, 2018.

 

Our pro forma financial information is not necessarily indicative of what our actual financial position and results of operations would have been as of the date and for the periods indicated, nor does it purport to represent our future financial position or results of operations.

 

These unaudited pro forma condensed consolidated financial statements are prepared for informational purposes only. In management’s opinion, all material adjustments necessary to reflect the effects of the transactions referred to above, have been made. Our pro forma condensed consolidated financial statements are based on assumptions and estimates considered appropriate by the Company’s management. However, they are not necessarily indicative of what our consolidated financial condition or results of operations actually would have been assuming the transactions referred to above had occurred as of the dates indicated, nor do they purport to represent our consolidated financial position or results of operations for future periods.

 

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BLUEROCK RESIDENTIAL GROWTH REIT, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 2019

(In thousands, except share and per share amounts)

 

   Bluerock
Residential
Growth REIT,
Inc. Historical (a)		   Topaz
Portfolio
Sale
(b)		   Pro Forma
Total		 
ASSETS               
Net Real Estate Investments               
Land  $200,114   $(22,340)  $177,774 
Building and improvements   1,548,167    (163,916)   1,384,251 
Furniture, fixtures and equipment   58,422    (9,312)   49,110 
Construction in progress   659    -    659 
Total Gross Real Estate Investments   1,807,362    (195,568)   1,611,794 
Accumulated depreciation   (124,605)   21,460    (103,145)
Total Net Real Estate Investments   1,682,757    (174,108)   1,508,649 
Cash and cash equivalents   24,337    (2,321)   22,016 
Restricted cash   22,659    (1,700)   20,959 
Notes and accrued interest receivable from related parties   174,068    -    174,068 
Due from affiliates   3,123    (190)   2,933 
Accounts receivable, prepaids and other assets   12,332    (895)   11,437 
Preferred equity investments and investments in unconsolidated real estate joint ventures   93,728    (14,174)   79,554 
In-place lease intangible assets, net   443    -    443 
Total Assets  $2,013,447   $(193,388)  $1,820,059 
                
LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY               
Mortgages payable  $1,204,905   $(137,474)  $1,067,431 
Revolving credit facilities   78,000    -    78,000 
Accounts payable   1,215    (57)   1,158 
Other accrued liabilities   25,444    (2,255)   23,189 
Due to affiliates   798    -    798 
Distributions payable   12,317    -    12,317 
Total Liabilities   1,322,679    (139,786)   1,182,893 
8.250% Series A Cumulative Redeemable Preferred Stock   139,698    -    139,698 
6.000% Series B Redeemable Preferred Stock   311,555    -    311,555 
7.625% Series C Cumulative Redeemable Preferred Stock   56,545    -    56,545 
Equity               
Stockholders' Equity               
Preferred stock, $0.01 par value, 229,900,000 shares authorized; no shares issued and outstanding   -    -    - 
7.125% Series D Cumulative Preferred Stock, liquidation preference $25.00 per share, 4,000,000 shares authorized; 2,850,602 shares issued and outstanding, historical and pro forma   68,705    -    68,705 
Common stock - Class A, $0.01 par value; 747,509,582 shares authorized; 22,861,084 shares issued and outstanding, historical and pro forma   228    -    228 
Common stock - Class C, $0.01 par value; 76,603 shares authorized; 76,603 shares issued and outstanding, historical and pro forma   1    -    1 
Additional paid-in-capital   300,407    -    300,407 
Distributions in excess of cumulative earnings   (234,363)   (52,579)   (286,942)
Total Stockholders' Equity   134,978    (52,579)   82,399 
Noncontrolling Interests               
Operating partnership units   21,143    -    21,143 
Partially owned properties   26,849    (1,023)   25,826 
Total Noncontrolling Interests   47,992    (1,023)   46,969 
Total Equity   182,970    (53,602)   129,368 
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY  $2,013,447   $(193,388)  $1,820,059 

  

See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet

 

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BLUEROCK RESIDENTIAL GROWTH REIT, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 2019

 

(a)Historical consolidated financial information derived from the Company’s Quarterly Report on Form 10-Q as of March 31, 2019.

 

(b)Reflect the sale of the Company’s interest in the Topaz Portfolio properties, to a non-affiliated buyer, and the paydown of the mortgages payable, which were included in the Company’s historical consolidated balance sheet. The pro forma financial statements do not reflect the net proceeds from the sale of the Topaz Portfolio assets and the subsequent reinvestment.

 

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BLUEROCK RESIDENTIAL GROWTH REIT, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2019

 

       Pro Forma
Adjustments for		     
   Bluerock
Residential
Growth
REIT, Inc.
Historical
(a)		   Topaz Portfolio Sale
(b)		   Pro Forma
Total		 
Revenues               
Rental and other property revenues  $45,690   $(4,404)  $41,286 
Interest income from related parties   5,776    (498)   5,278 
Total revenues   51,466    (4,902)   46,564 
Expenses               
Property operating   18,602    (2,182)   16,420 
Property management fees   1,215    (135)   1,080 
General and administrative   5,627    -    5,627 
Acquisition and pursuit costs   58    -    58 
Depreciation and amortization   17,230    (1,802)   15,428 
Total expenses   42,732    (4,119)   38,613 
Operating income   8,734    (783)   7,951 
Other (expense) income               
Preferred returns on unconsolidated real estate joint ventures   2,289    (524)   1,765 
Gain on sale of non-depreciable real estate investments   679    -    679 
Interest expense, net   (16,067)   1,978    (14,089)
Total other (expense) income   (13,099)   1,454    (11,645)
Net loss   (4,365)   671    (3,694)
Preferred stock dividends   (10,384)   -    (10,384)
Preferred stock accretion   (1,887)   -    (1,887)
Net loss attributable to noncontrolling interests               
Operating partnership units   (4,051)   160   (3,891)
Partially-owned properties   (492)   34    (458)
Net loss attributable to noncontrolling interests   (4,543)   194    (4,349)
Net loss attributable to common stockholders  $(12,093)  $477   $(11,616)
                
Net Loss Per Common Share – Basic (c)  $(0.53)       $(0.50)
Net Loss Per Common Share – Diluted (c)  $(0.53)       $(0.50)
                
Weighted Average Basic Common Shares Outstanding   23,123,616         23,123,616 
Weighted Average Diluted Common Shares Outstanding   23,123,616         23,123,616 

 

See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations

 

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BLUEROCK RESIDENTIAL GROWTH REIT, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2019

 

(a)Historical consolidated financial information derived from the Company’s quarterly report on Form 10-Q for the three months ended March 31, 2019.

 

(b)Reflect the sale of the Company’s interest in the Topaz Portfolio properties, to a non-affiliated buyer, which was included in the Company’s historical consolidated statement of operations.

 

(c)Loss per share is calculated in accordance with Accounting Standards Codification 260 – “Earnings per Share.” The historical loss per share amounts are the amounts reported in the Registrant’s Form 10-Q for the three months ended March 31, 2019.

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BLUEROCK RESIDENTIAL GROWTH REIT, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2018

 

       Pro Forma
Adjustments for		     
   Bluerock
Residential
Growth REIT,
Inc. Historical
(a)		   Topaz Portfolio Sale
(b)		   Pro Forma
Total		 
Revenues               
Rental and other property revenues  $162,461   $(17,814)  $144,647 
Interest income from related parties   22,255    (2,036)   20,219 
Total revenues   184,716    (19,850)   164,866 
Expenses               
Property operating   67,997    (8,923)   59,074 
Property management fees   4,391    (541)   3,850 
General and administrative   19,553    -    19,553 
Acquisition and pursuit costs   116    -    116 
Weather-related losses, net   288    (200)   88 
Depreciation and amortization   62,683    (7,040)   55,643 
Total expenses   155,028    (16,704)   138,324 
Operating income   29,688    (3,146)   26,542 
Other (expense) income               
Preferred returns on unconsolidated real estate joint ventures   10,312    (1,910)   8,402 
Loss on extinguishment of debt and debt modification costs   (2,277)   563    (1,714)
Interest expense, net   (52,998)   6,862    (46,136)
Total other (expense) income   (44,963)   5,515    (39,448)
Net loss   (15,275)   2,369    (12,906)
Preferred stock dividends   (35,637)   -    (35,637)
Preferred stock accretion   (5,970)   -    (5,970)
Net loss attributable to noncontrolling interests               
Operating partnership units   (12,839)   567   (12,272)
Partially-owned properties   (1,284)   110    (1,174)
Net loss attributable to noncontrolling interests   (14,123)   677    (13,446)
Net loss attributable to common stockholders  $(42,759)  $1,692   $(41,067)
                
Net Loss Per Common Share - Basic (c)  $(1.82)       $(1.72)
Net Loss Per Common Share - Diluted (c)  $(1.82)       $(1.72)
                
Weighted Average Basic Common Shares Outstanding   23,845,800         23,845,800 
Weighted Average Diluted Common Shares Outstanding   23,845,800         23,845,800 

 

See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations

 

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BLUEROCK RESIDENTIAL GROWTH REIT, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2018

 

(a)Historical consolidated financial information derived from the Company’s annual report on Form 10-K for the year ended December 31, 2018.

 

(b)Reflect the sale of the Company’s interest in the Topaz Portfolio properties, to a non-affiliated buyer, which was included in the Company’s historical consolidated statement of operations.

 

(c)Loss per share is calculated in accordance with Accounting Standards Codification 260 – “Earnings per Share.” The historical earnings per share amounts are the amounts reported in the Registrant’s Form 10-K for the year ended December 31, 2018.

 

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(d)  Exhibits.

 

Exhibit No.   Description
     
10.1   Second Amendment to Purchase and Sale Agreement, dated as of July 15, 2019, by and among BR Carroll Keller Crossing, LLC, BR-TBR Lake Boone NC Owner, LLC, Tribridge Co-Invest 29 Lake Boone Owner, LLC, LB One Leigh House Owner, LLC, Coyote Leigh House Capital Owner, LLC, TBR LHP TIC, LLC, BR Preston View LLC and KRE Topaz Portfolio Investor, LLC

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  BLUEROCK RESIDENTIAL GROWTH REIT, INC.
     
DATE: July 19, 2019 /s/ Christopher J. Vohs  
  Christopher J. Vohs  
  Chief Financial Officer and Treasurer  

 

 

 

 

Exhibit Index

 

Exhibit No.   Description
     
10.1   Second Amendment to Purchase and Sale Agreement, dated as of July 15, 2019, by and among BR Carroll Keller Crossing, LLC, BR-TBR Lake Boone NC Owner, LLC, Tribridge Co-Invest 29 Lake Boone Owner, LLC, LB One Leigh House Owner, LLC, Coyote Leigh House Capital Owner, LLC, TBR LHP TIC, LLC, BR Preston View LLC and KRE Topaz Portfolio Investor, LLC