Bluerock Residential Growth REIT Sells a Preferred Offering

Apartment REIT, Bluerock Residential Growth REIT (NYSE:BRG) has sold a new cumulative preferred stock offering.

BRG is a owner of apartment communities.  The REIT many times will provide financing for the construction of new apartment buildings and negotiate an option to purchase a percentage or the entirety of the building upon construction completion.  To date this has given them a method by which to acquire new units at a favorable price. Virtually all of their properties are in the southern states.

The new offering has a coupon of 7.625%, which all things considered, is a decent coupon.  Additionally BRG, which has one other preferred stock issue outstanding, adds some nice “kickers” to their preferred issues.  1st off the company must maintain a 200% asset coverage ratio. 2ndly owners of the preferreds can “put” the shares back to the company at $25/share plus accrued dividends starting July 19, 2023, which makes the shares essentially “term preferreds” (preferred stock with redemption dates) which is a favorable attribute. Lastly, starting on the same date the coupon will step up by 2% if not redeemed and will continue to increase 2% annually up to a maximum of 14%.  Some would call this a penalty rate, which it truly is, unless interest rates skyrocket prior to that time. So if one plans to “buy and hold” a preferred these shares are pretty good candidates for purchase–the main consideration is whether the REIT remains financially healthy over this time frame.

The shares will begin trading today on the OTC Grey Market under the ticker symbol BRESP  (ticker changed by OTC from BRESV). For those not familiar with the OTC Grey Market we have a short primer here.

Further details of this new issue are available here.