Bluerock Residential Growth REIT Inc. and its external manager, BRG Manager LLC, entered into a definitive agreement to bring the company's management in-house.
BRG Manager's existing management team and certain employees will remain with the company.
The consideration for the transaction will be calculated pursuant to a formula set at the company's IPO and is expected to total approximately $41 million to $42 million, with 99.9% being paid through limited partnership interest in the company's operating partnership and shares of class C common stock. The recipients agreed to limit their voting rights to 9.9% of the outstanding voting rights at the time of the IPO.
The agreement was negotiated and approved by a special committee comprised of independent and disinterested members of Bluerock Residential's board. The committee believes the internalization will reduce company expenses and align the interests of management, the board and stockholders, according to a release.
Excluding the costs associated with the internalization, the company expects savings of approximately $3.8 million over the first 12 months, based on the annualized run rate for the third quarter.
Bluerock Residential's board will also review the company's dividend policy for its class A common stock.
Duff & Phelps LLC acted as financial adviser to the special committee and issued a fairness opinion to the committee in connection with the transaction.