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Summary

  • BRG is an owner of apartment properties in the southeastern United States, with a total of 2620 units in Virginia, Tennessee, Georgia, Florida, Michigan, and Illinois.
  • BRG plans to raise $50.0 million in its upcoming IPO, offering 3.3 million shares at a price of $15 per share.
  • We plan to avoid this IPO as BRG is quickly losing money, and investor confidence in the real estate market has been shaky post-crash.

Bluerock Residential Growth REIT Inc. (NYSEMKT:BRG), an owner of apartment properties in the southeastern United States, plans to raise $50.0 million in its upcoming IPO. The New York, New York-based firm will offer 3.3 million shares at a price of $15 per share. If the IPO is successful, BRG will command a market value of $81 million.

BRG filed on November 27, 2013.

Lead Underwriter: Wunderlich Securities Inc.

Underwriter: BB&T Capital Markets, Boenning and Scattergood Inc., National Securities Corp.

Summary

BRG is a REIT, focused on acquiring apartment properties in demographically attractive growth markets in the US.

The firm pursues properties based on several different strategies, including undervalued properties, properties that offer stable cash flows and potential rent growth, and properties that can be improved in value through repositioning or renovation. BRG balances its use of these strategies to create a diversified portfolio of properties, and generally invests in joint ventures with local strategic partners, with BRG in a controlling position.

The firm implements what it calls "Bluerock Lifestyle Initiatives" at each of its properties to provide customized amenities and services to its tenants, often using the expertise of its strategic partners at a given location to cater to the tenants in question. Upon completion of this IPO, BRG will own interests in nine apartment properties with a total of 2620 units in Virginia, Tennessee, Georgia, Florida, Michigan, and Illinois.

Valuation

BRG offers the following figures in its S-11 balance sheet for the year ended December 31, 2013:

Revenue: $8,884,746.00

Net Loss: ($4,413,553.00)

Total Assets: $172,526,092.00

Total Liabilities: $126,443,873.00

Noncontrolling Interest: $34,100,000.00

Stockholders' Equity: ($12,001,393.00)

Business

BRG faces competition for tenants and for real estate investments from other REITs, finance companies, banks, hedge funds, governmental organizations, and many other groups involved in real estate investments. Many of these competitors have access to far greater financial resources than BRG.

Management

President, CEO and Chairman R. Ramin Kamfar has some 25 years of experience in real estate, mergers and acquisitions, private equity investing, investment banking, and public and private financings. Mr. Kamfar previously worked as an investment banker at Lehman Brothers Inc. and as an active investor, advisor and member of the board of Vsource, Inc. He holds an M.B.A. from The Wharton School of the University of Pennsylvania, located in Philadelphia, Pennsylvania, and a B.S. degree from the University of Maryland.

Conclusion

We plan to avoid this IPO.

BRG is losing money fast, and it isn't clear when the REIT will be able to make its way into the black.

We are not impressed with the second tier underwriting group.

Investor confidence in real estate offerings has remained shaky since the recent housing crash, and we see little reason to think that BRG will be an exception.

BRG does boast an impressive management team, and its investment strategies may pay off in the long run; however, we don't foresee strong returns from this IPO in the near-term.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Bluerock Residential Growth REIT: An IPO We Plan To Avoid