A fund managed by alternative asset management firm Harbert Management Corp. called on Bluerock Residential Growth REIT Inc. to launch a review of strategic alternatives, including a potential sale of the multifamily real estate investment trust.

In a March 18 letter to Bluerock President, CEO and Chairman Ramin Kamfar, Harbert Special Opportunity Fund LP Managing Directors Todd Jordan and John Bryant said Bluerock's board has refused to respond to the fund's multiple bona fide offers to acquire the REIT. The fund's efforts to engage with the REIT and its board have been shrugged off since the company rejected the fund's second offer of $12.25 per share, the pair said.

"Despite the recent positive underlying operating performance of these best-in-class assets, the intrinsic value of the real estate has not translated into consistent value appreciation for your shareholders," Jordan and Bryant said in the letter.

Jordan and Bryant also noted Bluerock's prolonged issuance of its series B redeemable preferred stock, saying the program "causes a mismatch in cash flows, creates a complex web of related party transactions and is an expensive, dilutive, and suboptimal form of financing."

"Bluerock's structural issues cannot be fixed by strong same store performance and/or the realization of the value add program, and the Series B Preferred shares pose more risk than benefit," the pair said.

To address these and other concerns, Jordan and Bryant said they are formally requesting that Bluerock's board "immediately hire a nationally recognized investment bank and commence a comprehensive strategic review," which they said is the "only objective way to determine the best path to create shareholder value."

Harbert Special Opportunity Fund said it is the third-largest shareholder of Bluerock, owning 5.56% of the REIT's common shares.

Bluerock did not immediately respond to a request for comment from S&P Global Market Intelligence.