BLUEROCK RESIDENTIAL GROWTH REIT, INC. Item 8.01. Other Events.
As previously disclosed, onDecember 20, 2021 ,Bluerock Residential Growth REIT, Inc. ("Bluerock Residential" or the "Company"), entered into an Agreement and Plan of Merger (the "Merger Agreement") withBadger Parent LLC ("Parent") andBadger Merger Sub LLC ("Merger Sub"). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, the Company will be merged with and into Merger Sub (the "Merger"), with Merger Sub surviving the Merger. The Merger and the other transactions contemplated by the Merger Agreement were unanimously approved by the Company's board of directors. Parent and Merger Sub are affiliates ofBlackstone Real Estate Partners IX L.P. , an affiliate of Blackstone Inc. In addition, as previously disclosed, prior to the consummation of the Merger, the Company will complete the separation of its single-family residential real estate business (the "Single-Family Business") from the Company's multi-family residential real estate business (the "Separation"). Following the Separation, the Single-Family Business will be indirectly held byBluerock Homes Trust, Inc. , aMaryland corporation ("Bluerock Homes "), and, prior to the consummation of the Merger, the Company will distribute the common stock ofBluerock Homes to the Company's common stockholders as of the record date for such distribution in a taxable distribution (the "Distribution"). In connection with the proposed Merger, Bluerock Residential filed with theSecurities and Exchange Commission (the "SEC") a definitive proxy statement (the "Proxy Statement"), which Bluerock Residential first mailed to its stockholders on or aboutMarch 11, 2022 .
Following the announcement of the Merger Agreement, as of the date of this Current Report on Form 8-K, four lawsuits challenging the Merger have been filed (each, a "Lawsuit" and, collectively, the "Lawsuits"). The Lawsuits are captioned (i)Samuel Marchese v.Bluerock Residential Growth REIT, Inc. , et al., No. 1:22-cv-01234, filed in theU.S. District Court for the Southern District of New York onFebruary 15, 2022 ; (ii)Matthew Whitfield v.Ramin Kamfar , et al., No. 24C22001079, filed in theCircuit Court for Baltimore City , Maryland onFebruary 25, 2022 ; (iii)Robert Garfield v.Robert Ramin Kamfar , et al., No. 602620/2022, filed in theSupreme Court of the State of New York onMarch 1, 2022 ; and (iv)Stephen Bushansky v.Bluerock Residential Growth REIT, Inc. , et al., No. 1:22-cv-02482, filed in theU.S. District Court for the Southern District of New York onMarch 28, 2022 . In addition, Bluerock Residential received demand letters from counsel representing individual stockholders of the Company (the "Demand Letters" and, together with the Lawsuits, the "Matters"). The Matters each allege, among other things, that the defendants disseminated a materially incomplete and misleading Proxy Statement relating to the proposed Merger in violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder. The Company believes that the claims asserted in the Matters are without merit and supplemental disclosures are not required or necessary under applicable laws. However, in order to avoid the risk that the Matters delay or otherwise adversely affect the Merger, to minimize the costs, risks and uncertainties inherent in defending the lawsuits, and to provide additional information to stockholders, and without admitting any liability or wrongdoing, the Company has agreed to supplement the Proxy Statement as described in this Current Report on Form 8-K. Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary, the Company specifically denies all allegations in the Matters that any additional disclosure was or is required. The inclusion in this Current Report on Form 8-K of certain information should not be regarded as an indication that any of the Company or its affiliates, officers, directors or other representatives, or any other recipient of this information, considered, or now considers, it to be material, and such information should not be relied upon as such. Supplemental Disclosures to Proxy Statement in Connection with the Matters The additional disclosures set forth below (the "Supplemental Disclosures") in this Current Report on Form 8-K supplement the disclosures contained in the Proxy Statement and should be read in conjunction with the disclosures contained in the Proxy Statement, which should be read in its entirety. To the extent that information set forth in the Supplemental Disclosures differs from or updates information contained in the Proxy Statement, the information in this Current Report on Form 8-K shall supersede or supplement the information contained in the Proxy Statement. All page references are to the Proxy Statement and terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Proxy Statement. 1. The disclosure on page 35 of the Proxy Statement, sixth full paragraph under the heading "Background of the Merger," is hereby amended and restated as follows: OnSeptember 16, 2021 , Bloomberg reported that the Company was evaluating strategic alternatives (the "September 16 Bloomberg article"). Thereafter, 38 additional parties contacted the Company, Morgan Stanley or Eastdil regarding a potential transaction. The Company and our financial advisors invited all such parties to enter into non-disclosure agreements. Of the 55 total parties (including Party A), 28 executed nondisclosure agreements with the Company, each of which included a standstill obligation with a "don't ask, don't waive" provision, subject in six cases to exceptions for non-public proposals.
2. The following disclosure is added on page 40 of the Proxy Statement,
immediately after the last paragraph under the heading "Background of
the Merger":
Blackstone and the Company have agreed that neither the Company nor the
surviving company will enforce any standstill provision to the extent it would
operate to preclude a party to a nondisclosure agreement from making non-public
company takeover proposals to the board of directors.
3. The disclosure on page 45 of the Proxy Statement, fifth full
paragraph, under the heading "Forward-Looking FinancialInformation,"
is hereby amended and restated as follows:
Because the financial projections reflect subjective judgment in many respects,
they are susceptible to multiple interpretations and frequent revisions based on
actual experience and business developments. The financial projections also
cover multiple years, and such information by its nature becomes less predictive
with each succeeding year. The estimates and assumptions underlying the
financial projections involve judgments with respect to, among other things,
economic, competitive and financial market conditions and future business
decisions that may not be realized and that are inherently subject to
significant business, economic and competitive uncertainties and contingencies,
including, among other things, the inherent uncertainty of the business and
economic conditions affecting the industries in which we operate. Such judgments
reflect, among other things, the input and assessments of the Company's leasing
and property management professionals. The financial projections constitute
forward-looking information and are subject to a wide variety of significant
risks and uncertainties that could cause the actual results to differ materially
from the projected results. For additional information on factors that may cause
future financial results to materially vary from the projected results
summarized below, see the section entitled "Cautionary Statement Regarding
Forward-Looking Statements," beginning on page 22. Accordingly, there can be no
assurance that the projected results summarized below will be realized or that
actual results will not differ materially from the projected results summarized
below, and the financial projections cannot be considered a guarantee of future
operating results and should not be relied upon as such. Neither we nor our
affiliates or advisors or any other person has made any representation to any of
our stockholders or any other person regarding our actual performance compared
to the results included in the financial projections. We have not made any
representation to Parent or its affiliates, in the merger agreement or
otherwise, concerning the projections.
4. The disclosure on page 47 of the Proxy Statement, first full
paragraph, under the heading "Financial Projections," is hereby
amended and restated as follows:
In connection with its financial analyses and fairness opinion, Morgan Stanley
derived from the Company financial projections and disclosed to the board of
directors forecasted unlevered free cash flow of the Company of $13 million , $99
million , $106 million , $108 million and $111 million for the 12-month periods
ending September 30, 2022 , 2023, 2024, 2025 and 2026, respectively. In addition,
in connection with its financial analyses and fairness opinion, Morgan Stanley
calculated and disclosed to the board of directors forecasted net operating
income ("NOI") of the Company of $169 million for the 12 months ending
September 30, 2027 by applying, at the direction of our management, a 3% annual
growth rate to the NOI of the Company of $164 million for the 12 months ending
September 30, 2026 included in the Company financial projections.
5. The disclosure on page 47 of the Proxy Statement, fourth full
paragraph, under the heading "Financial Projections," is hereby
amended and restated as follows:
The Company also provided financial projections to the board of directors and to
Stanger in connection with its fairness opinion that included $0 in incentive
fees payable to the Manager under the Management Agreement under three scenarios
assuming capital raises of $1 billion , $1.25 billion and $1.5 billion . These
financial projections included for Bluerock Homes' operating portfolio of real
estate assets, stabilized EBITDA of $22.7 million , $62.7 million , $71.4 million
and $80.2 million under the $0 , $1 billion , $1.25 billion and $1.5 billion
equity raise scenarios, respectively. These financial projections additionally
included stabilized externally advised adjusted funds from operations of $8.4
million , $36.3 million , $43.8 million and $51.3 million under the $0 , $1
billion , $1.25 billion and $1.5 billion equity raise scenarios, respectively.
6. The following disclosure is added on page 50 of the Proxy Statement,
after the second paragraph under the heading "Comparable Public
Companies Analysis":
The table below sets forth the metrics for each of the selected companies and
the Company:
Premium / Premium /
(Discount) (Discount)
to Mean to Mean
P / 2022E P / 2023E P / 2022E P / 2023E Street Street
FFO FFO AFFO AFFO Consensus Consensus
Company Multiples Multiples Multiples Multiples NAV GAV
Preferred Apartment
Communities Inc. 15.8 x 13.3 x 22.1 x 16.4 x 1.5 % 0.2 %
BRT Apartments Corp. 14.9 x 13.4 x 13.9 x 12.8 x (33.6 )% (25.0 )%
Centerspace 24.9 x 23.6 x 29.5 x 28.5 x 3.0 % 1.9 %
Independence Realty Trust
Inc. 25.7 x 22.6 x 26.7 x 23.4 x 5.3 % 3.7 %
NexPoint Residential Trust
Inc. 29.0 x 24.8 x 26.9 x 22.9 x 3.0 % 1.7 %
The Company* 19.3 x 16.5 x 21.3 x 18.7 x (5.3 )% (1.1 )%
* The Company is included for reference, but was not used as a selected company for purposes of these calculations.
7. The disclosure on page 52 of the Proxy Statement, first full
paragraph, second to last sentence, under the heading "Net Asset Value
Analysis," is hereby amended and restated as follows:
An implied per share equity value reference range for the Company was then calculated based on the range of our net asset values derived from such analysis divided by the number of fully diluted shares of Common Stock outstanding as ofSeptember 30, 2021 , totaling approximately 38.87 million shares (including incremental shares associated with the dilution by Company Warrants outstanding as ofDecember 14, 2021 ). 8. The table on page 52 of the Proxy Statement, titled "Selected Precedent Transactions," under the heading "Premiums Paid
Analysis,"
is hereby amended and restated as follows:
Premium Paid toTransaction Announcement Date Target
Acquiror Unaffected Stock Price
July 2019 Pure Multi-Family REIT Cortland Partners 15.0 %
July 2017 Monogram Residential Trust Greystar-led consortium 22.4 %
January 2017 Milestone Apartments Starwood Capital Group 8.9 %
August 2016 Post Properties Mid-America Apartment Communities 16.6 %
June 2015 Home Properties Lone Star Americas Acquisitions 9.2 %
. . .
Item 9.01. Financial Statements and Exhibits
(d) Exhibits.
Exhibit No. Description
104 Cover Page Interactive Data File - the cover page XBRL tags are
embedded within the Inline XBRL document
Additional Information and Where to Find It
In connection with the Merger, the Company has filed relevant materials with theSEC , including the Proxy Statement. In addition, in connection with the Separation and the Distribution,Bluerock Homes has filed a registration statement on Form 10. This communication is not a substitute for the Proxy Statement or any other document that the Company may file with theSEC or send to its shareholders in connection with the proposed transactions. BEFORE MAKING ANY VOTING DECISION, SHAREHOLDERS OF THE COMPANY ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THESEC , INCLUDING THE PROXY STATEMENT, BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTIONS. Investors and security holders may obtain the documents free of charge at theSEC's website, http://www.sec.gov, and the Company's website, www.bluerockresidential.com. In addition, the documents may be obtained free of charge by accessing the Investor Relations section of the Company's website at ir.bluerockresidential.com or by contacting the Company's Investor Relations by email at investor.relations@bluerockre.com.
Participants in the Solicitation
The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the holders of Company common stock in respect of the proposed transaction. Information about the directors and executive officers of the Company is set forth in the proxy statement for the Company's 2021 annual meeting of stockholders, which was filed with theSEC onJune 25, 2021 , in the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 , which was filed with theSEC onMarch 11, 2022 and in other documents filed by the Company with theSEC . Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, are contained in the Proxy Statement and other relevant materials filed with theSEC in respect of the proposed transaction. Investors should read the Proxy Statement carefully before making any voting or investment decisions. Forward-Looking Statements This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws and may be identified by words such as "will," "expect," "believe," "plan," "anticipate," "intend," "goal," "future," "outlook," "guidance," "target," "estimate" and similar words or expressions, including the negative version of such words and expressions. These forward-looking statements are based upon the Company's present expectations, estimates and projections about the industry and markets in which the Company operates and beliefs of and assumptions made by Company management, involve uncertainty that could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements and are not guaranteed to occur. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Investors should not place undue reliance upon these forward-looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions, the Company's actual results and performance could differ materially from those set forth in these forward-looking statements due to numerous factors. Factors that could have a material adverse effect on our operations, future prospects, the Merger and the Separation and the Distribution include, but are not limited to: the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement; the failure to obtain stockholder approval of the Merger or the failure to satisfy any of the other conditions to the completion of the Merger or the Separation or the Distribution; the risks that the market does not valueBluerock Homes shares at NAV; the failure to recognize the potential benefits of the Separation and the Distribution due to, among other reasons,Bluerock Homes' lack of liquidity, small market size or inability to grow and expand revenues and earnings following the Distribution; shareholder litigation in connection with the Merger, the Separation or the Distribution, which may affect the timing or occurrence of the Merger, the Separation or the Distribution or result in significant costs of defense, indemnification and liability; the effect of the announcement of the Merger and the Separation and the Distribution on the ability of the Company to retain and hire key personnel and maintain relationships with its tenants, vendors and others with whom it does business, or on its operating results and businesses generally; risks associated with the disruption of management's attention from ongoing business operations due to the Merger and the Separation and the Distribution; the ability to meet expectations regarding the timing and completion of the Merger and the Separation and the Distribution; the possibility that any opinions, consents or approvals required in connection with the Separation and the Distribution will not be received or obtained in the expected time frame, on the expected terms or at all; and significant transaction costs, fees, expenses and charges. There can be no assurance that the Merger, the Separation, the Distribution or any other transaction described above will in fact be consummated in the expected time frame, on the expected terms or at all. There can be no assurance as to the impact of COVID-19 and other potential future outbreaks of infectious diseases on the Company's orBluerock Homes' financial condition, results of operations, cash flows and performance and those of their respective tenants as well as on the economy and real estate and financial markets, which may impact the timing or occurrence of the Merger, the Separation or the Distribution. For further discussion of the factors that could affect outcomes, please refer to the risk factors set forth in Item 1A of the Company's Annual Report on Form 10-K filed by the Company with theSEC onMarch 11, 2022 , and subsequent filings by the Company with theSEC . Any forward-looking statement speaks only as of the date on which it is made, and the Company assumes no obligation to update or revise such statement, whether as a result of new information, future events or otherwise, except as required by applicable law. The Company claims the safe harbor protection for forward looking statements contained in the Private Securities Litigation Reform Act of 1995.
© Edgar Online, source
