Bluerock Residential Surges 76.2% on $3.6B Takeover Agreement

Shares of Bluerock Residential Growth REIT, Inc. (BRG) jumped 76.2% on Monday to close at $27.20, after the company announced that it has signed an agreement to be acquired by Blackstone Real Estate Advisors LP for $3.6 billion.

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New York-based Bluerock is a real estate investment trust (REIT) engaged in developing and acquiring apartment properties.

Transaction Details

As per the agreement, Blackstone’s affiliates will buy all outstanding common shares of Bluerock for $24.25 per share in cash.

Blackstone will also acquire a loan book of Bluerock, which is secured by 24 multifamily assets, and 30 multifamily properties comprising around 11,000 units. Most of these properties are situated in Atlanta, Phoenix, Orlando, Denver and Austin.

Meanwhile, Bluerock plans to spin off its single-family rental business by distributing all the outstanding common shares of the new REIT called Bluerock Homes Trust, Inc. (BHOM) to the company’s shareholders.

BHOM, which will hold stakes in nearly 3,400 homes, will be managed externally by an affiliate of Bluerock Real Estate. The new REIT’s shares are expected to have a Net Asset Value of $5.60 per share.

The completion of the acquisition, which is expected in the second quarter of next year, is subject to the spinoff of BHOM.

Management’s Comments

The Senior Managing Director at Blackstone Real Estate, Asim Hamid, said, “Bluerock’s portfolio consists of high-quality multifamily properties in markets across the U.S. experiencing some of the strongest fundamentals. We look forward to bringing our best-in-class management to these properties to ensure they continue to be operated at the highest standards for the benefit of tenants and the surrounding communities.”

Wall Street’s Take

Following the announcement, JMP Securities analyst Aaron Hecht downgraded the rating on the stock from Buy to Hold. However, he did not provide a price target.

Further, Colliers Securities analyst Barry Oxford maintained a Hold rating on Bluerock with a price target of $29.85 (9.7% upside potential).

Overall, the stock has a Hold consensus rating based on 3 Holds. The average Bluerock Residential Growth REIT stock forecast of $29.85 implies 9.7% upside potential. Shares have gained 174.2% over the past six months.

Risk Analysis

According to TipRanks’ Risk Factors tool, Bluerock is at risk mainly from one factor: Finance & Corporate, which accounts for 69% of the total 120 risks identified for the stock. Under the Finance & Corporate risk category, Bluerock has 83 risks, details of which can be found on the TipRanks website.