UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
The
Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): April 9, 2010
BLUEROCK
ENHANCED MULTIFAMILY TRUST, INC.
(Exact
Name of Registrant as Specified in Its Charter)
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Maryland
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333-153135
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26-3136483
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(State
or other jurisdiction of
incorporation
or organization)
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(Commission
File Number)
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IRS
Employer
Identification
No.
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399
Park Avenue, Suite 3200
New
York, NY 10022
(Address
of principal executive offices)
Registrant’s telephone number,
including area code: (212) 843-1601
Not
Applicable
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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¨
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
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ITEM 1.01
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ENTRY
INTO MATERIAL DEFINITIVE AGREEMENT
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The information in this Report set
forth under Items 2.01 and 2.03 is incorporated herein by
reference.
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ITEM 2.01
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COMPLETION
OF ACQUISITION OR DISPOSITION OF
ASSETS
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On April
9, 2010, through a wholly owned subsidiary, Bluerock Enhanced Multifamily Trust,
Inc. (the “Company”) completed an investment in a joint venture along with
Bluerock Special Opportunity + Income Fund, LLC (“BEMT Co-Investor ”), Bluerock
Special Opportunity + Income Fund II, LLC (“BEMT Co-Investor II”), both of which
are affiliates of the Company’s sponsor, and Bell Partners, Inc. (“Bell”), an
unaffiliated entity, to acquire a 258-unit multifamily community known as The
Apartments at Meadowmont (the “Meadowmont Property”), located in Chapel Hill,
North Carolina from Meadowmont Apartments Associates, LLC, an unaffiliated
entity. The material features of the investment in the joint venture,
the property acquisition, and the acquired property are described
below. The related financings are described under Item
2.03.
Joint
Venture Parties and Structure
The
Company invested $1.52 million to acquire a 32.5% equity interest in BR
Meadowmont Managing Member, LLC (the “Meadowmont Managing Member JV Entity”)
through a wholly owned subsidiary of its operating partnership, BEMT Meadowmont,
LLC (“BEMT Meadowmont”). BEMT Co-Investor invested $1.17 million to
acquire a 25% interest and BEMT Co-Investor II invested $1.98 million to acquire
the remaining 42.5% interest in the Meadowmont Managing Member JV
Entity. BEMT Meadowmont, BEMT Co-Investor and BEMT Co-Investor II are
co-managers of the Meadowmont Managing Member JV Entity. Under the
terms of the operating agreement for the Meadowmont Managing Member JV Entity,
certain major decisions regarding the investments of the Meadowmont Managing
Member JV Entity require the unanimous approval of the Company (through BEMT
Meadowmont), BEMT Co-Investor and BEMT Co-Investor II. If the
Company, BEMT Co-Investor and BEMT Co-Investor II are not able to agree on a
major decision or at any time after April 9, 2013, any party may initiate a
buy-sell proceeding. Additionally, any time after April 9, 2013, any
party may initiate a proceeding to force the sale of the Meadowmont Managing
Member JV Entity’s interest in the Meadowmont JV Entity to a third party, or, in
the instance of the non-initiating parties’ rejection of a sale, cause the
non-initiating parties to purchase the initiating party’s interest in the
Meadowmont Managing Member JV Entity.
The
Meadowmont Managing Member JV Entity contributed $4.65 million of equity capital
to acquire a 50% equity interest in Bell BR Meadowmont JV, LLC (the “Meadowmont
JV Entity”). An affiliate of Bell, Fund III Meadowmont Apartments,
LLC, invested $4.65 to acquire the remaining 50% interest in the Meadowmont JV
Entity. The Meadowmont Managing Member JV Entity and Bell are
co-managers of the Meadowmont JV Entity. The Meadowmont JV Entity is the sole
owner of Bell BR Meadowmont, LLC, a special-purpose entity that holds title to
the Meadowmont Property (“BR Meadowmont”). Under the terms of the
operating agreement of the Meadowmont JV Entity, decisions with respect to the
joint venture or the Meadowmont Property are made by unanimous approval of the
managers. Further, to the extent that the Meadowmont Managing Member
JV and Bell are not able to agree on certain major decisions, either party may
initiate a buy-sell proceeding. Additionally, any time after April 9,
2013, either party may initiate a proceeding to force the sale of the Meadowmont
Property to a third party, or, in the instance of the non-initiating party’s
rejection of a sale, cause the non-initiating party to purchase the initiating
party’s interest in the Meadowmont JV Entity.
As a
result of the structure described above, the Company holds a 16.25% indirect
equity interest, BEMT Co-Investor holds a 12.5% indirect equity interest and
BEMT Co-Investor II holds a 21.25% indirect equity interest in the Meadowmont
Property (50% in the aggregate), and Bell holds the remaining 50% indirect
equity interest. The Company, BEMT Co-Investor, BEMT Co-Investor II
and Bell will each receive current distributions from the operating cash flow
generated by the Meadowmont Property in proportion to these respective
percentage equity interests.
The Company’s equity capital investment
in the joint venture was funded with the proceeds of a related-party loan from
BEMT Co-Investor II to BEMT Meadowmont, the terms of which are described below
under Item 2.03.
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The
Meadowmont Property
The
aggregate purchase price for the Meadowmont Property was approximately $37
million, plus closing costs. The acquisition was funded with
approximately $9.3 million of gross equity from the Meadowmont JV Entity, and a
$28.5 million senior mortgage loan to
BR Meadowmont. The terms of the senior mortgage loan are described
below under Item 2.03.
The
Meadowmont Property is located in Chapel Hill, North Carolina and is located
directly east of the 749-acre campus of the University of North Carolina
(UNC). The property is comprised of 258 units, featuring one-, two-
and three-bedroom layouts in 19 two- and three-story buildings situated on
approximately 20 acres. Built in 2000, the property contains
approximately 296,180 rentable square feet and the average unit size is 1,148
square feet. The community features include a clubhouse, a fitness
center, a resort-style swimming pool and cabanas, a laundry center, playgrounds
and private walking trails.
Bell will
be responsible for providing day-to-day property management services to the
property. Bell will receive a management fee of 3% of monthly gross
receipts generated by the Meadowmont Property. Under the property
management agreement, Bell will also be entitled to receive a construction
management fee of 5% of the cost of any approved capital project exceeding
$10,000. In addition, Meadowmont Managing Member JV Entity is being
charged a property management oversight fee equal to 1% of its proportional
share (50%) of the monthly gross property collections, which fee shall be
allocated 32.5% to Bluerock Enhanced Multifamily Advisor, LLC, our advisor, and
67.5% to Bluerock property Management, LLC, an indirect wholly owned subsidiary
of our sponsor.
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ITEM 2.03
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CREATION
OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF BALANCE
SHEET ARRANGEMENT OF REGISTRANT
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Senior
Financing related to the Meadowmont Property
The
acquisition was funded with $9.3 million of gross equity from the Meadowmont JV
Entity, and a $28.5 million senior mortgage loan made to BR Meadowmont by
CWCapital LLC and subsequently sold to the Federal Home Loan Mortgage
Corporation (Freddie Mac) (the “Senior Loan”), which Senior Loan is secured by
the Meadowmont property. The Senior Loan has a 10-year term, maturing
on May 1, 2020. The effective interest rate on the loan is fixed at 5.55% per
annum, with interest-only payments for the first two years and fixed monthly
payments of approximately $162,715 based on a 30-year amortization schedule
thereafter.
Prepayment
terms of the Senior Loan depend on whether the loan is securitized on or before
May 1, 2011. If the loan is securitized, then a two-year lockout
period from the date the Senior Loan is assigned to a REMIC trust applies, with
BR Meadowmont having the right to defease after the lockout period up to the
third month prior to the maturity date, after which the loan may be prepaid in
full without penalty. If the Senior Loan is not securitized on or
before May 1, 2011, then yield maintenance payments will be required to the
extent prepaid before the sixth month prior to the maturity date and during the
period from the sixth month prior to the maturity date to the third month prior
to the maturity date, a prepayment premium of 1% of the loan amount will be
required, and thereafter the loan may be prepaid without penalty.
R. Ramin
Kamfar and James G. Babb, III, who are executive officers and members of the
board of directors of the Company, Bell and Bell Fund III, Inc., an affiliate of
Bell, have guaranteed all recourse liabilities of BR Meadowmont under the Senior
Loan, including environmental indemnities.
Affiliate
Loan for the Company’s Investment in the Joint Venture
In connection with the Company’s
investment in the joint venture, on April 9, 2010, BEMT Meadowmont entered into
a loan agreement with BEMT Co-Investor II pursuant to which it was authorized to
borrow up to $2.6 million (the “BEMT Co-Investor II Loan”), with respect to
which BEMT Co-Investor II advanced $1.4 million with respect to the
acquisition. The BEMT Co-Investor II Loan has a six-month term,
maturing October 9, 2010, and may be prepaid without penalty. It
bears interest compounding monthly at a rate of 30-day LIBOR + 5.00%, subject to
a minimum rate of 7.00%, annualized. Interest on the loan will be
paid on a current basis from cash flow distributed to the Company from the
Meadowmont Managing Member JV Entity. The BEMT Co-Investor II Loan is secured by
a pledge of the Company’s membership interest in BEMT Meadowmont and a pledge of
BEMT Meadowmont’s membership interest in the Meadowmont Managing Member JV
Entity. In accordance with the requirements of the Company’s charter,
the BEMT Co-Investor II Loan was reviewed and approved by a majority of the
board of directors (including a majority of the independent directors) as being
fair, competitive, and commercially reasonable and no less favorable to the
Company than loans between unaffiliated parties under the same
circumstances. Furthermore, due to the unique investment opportunity
presented by the Meadowmont Property, including the opportunity to distinguish
the Company competitively from other early-stage non-traded REITs, the board of
directors expressly considered and approved leverage in excess of the Company’s
general charter-imposed limitations in connection with entering into the BEMT
Co-Investor II loan.
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ITEM 9.01
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FINANCIAL
STATEMENTS AND EXHIBITS
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(a)
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Financial
Statements of Real Estate Acquired.
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Since it
is impracticable to provide the required financial statements for the acquired
real property described in Item 2.01 at the time of this filing and no
financials (audited or unaudited) are available at this time, the Company hereby
confirms that it intends to file the required financial statements on or before
June 25, 2010, by amendment to this Form 8-K.
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(b)
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Pro
Forma Financial Information. See paragraph (a)
above.
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
BLUEROCK ENHANCED MULTIFAMILY TRUST,
INC.
DATE:
April 15,
2010 /s/ R.
Ramin
Kamfar
Chief
Executive Officer and Chairman of the Board
(Principal
Executive Officer)
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