ITEM 2.03
|
CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF BALANCE SHEET ARRANGEMENT OF REGISTRANT
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Entry into
Senior
Secured Revolving Credit Facility
with KeyBank National Association
On
October
4
, 2017, Bluerock Residential Growth REIT, Inc. (the “Company”), through its operating partnership, Bluerock
Residential Holdings, L.P., a Delaware limited partnership (the “Operating Partnership”), entered into a credit agreement
(the “Credit Agreement”) w
ith KeyBank National Association (“KeyBank”)
as both agent and lender, and the other lender parties thereto (together with KeyBank and any other lenders that may become parties,
the “Lenders”).
The Credit Agreement
provides for a senior
secured revolving credit facility
with an initial commitment
amount of $150 million, which commitment may be increased under certain circumstances up to a maximum total commitment of $250
million
(the “Credit Facility”).
The availability of borrowings under
the
Credit Facility
will be based on the value of a pool of eligible multifamily
real estate assets owned, directly or indirectly and from time to time, by the Operating Partnership (each such eligible multifamily
real estate asset, a “Collateral Property,” and such pool of eligible multifamily real estate assets, the “Collateral
Pool”), and compliance with various ratios related to those assets as set forth in the Credit Agreement. The Collateral
Properties comprising the Collateral Pool at any point in time constitute security for all of the then outstanding borrowings
(and/or the subsidiary guaranty of such borrowings) under the Credit Facility.
The Company has guaranteed
the obligations of the Operating Partnership under the Credit Agreement pursuant to a guaranty (the “Guaranty”), and
the Company, the Operating Partnership and the Company’s external manager, BRG Manager, LLC (the “Manager”),
have subordinated their interests in the Management Agreement to which each is a party pursuant to a subordination of advisory
contract (the “Subordination of Advisory Contract”).
The Credit Facility is further
evidenced by a series of three promissory notes (the “Notes”), each issued by the Operating Partnership to one of the
three initial Lenders, and will hereafter be evidenced and/or secured by an
Environmental Compliance and Indemnity Agreement
and by various property-specific instruments, including deeds of trust, mortgages, assignments of leases and rents, assignment
of contracts, and assignments of management agreements
. The proceeds of loans made under
the Credit Facility may be used,
among other things,
to finance the acquisition of
properties
and redevelopment and/or development projects
, to fund capital
and
construction expenditures, tenant improvements, leasing commissions and property and equipment acquisitions
,
and for general working capital purposes.
The
initial term of the Credit Facility is thirty-six (36) months from the closing date, maturing on October 4
, 2020
,
which may be extended by one 12-month period subject to the satisfaction of certain conditions, including payment of an extension
fee equal to 0.15% of the total
commitment amount in effect on the then-applicable maturity date
.
Amounts owed under the Credit Facility will be evidenced by promissory notes that will each be substantially similar, other than
identification of each Lender and the amount committed by such Lender.
The Credit Agreement
also provides
the Operating Partnership
with the ability to obtain letters of credit
of up to $50 million in the aggregate.
Amounts borrowed under the Credit Facility may be repaid and reborrowed, subject
to the terms of the Credit Agreement, and are determined from time to time by book entry.
Borrowings
under the Credit Facility may be undertaken as either base rate loans or, subject to various limitations, LIBOR based loans. Such
borrowings will bear interest at a variable rate per annum based on an applicable margin that varies based on the ratio of consolidated
total indebtedness and the consolidated total asset value of the Company, the Operating Partnership, and their subsidiaries as
disclosed in the periodic compliance certificate provided to KeyBank each quarter, plus, as applicable, either (i) LIBOR, as applicable
to the currency being borrowed, in the case of LIBOR based borrowings or (ii) a “base rate” equal to the greater of
(a) KeyBank’s “prime rate,” (b) 0.5% above the Federal Funds Effective Rate, or (c) 1.0% above one-month LIBOR,
in the case of base rate borrowings. The applicable interest rate margin will initially be determined based on a range from 0.80%
to 1.45% per annum with respect to base rate borrowings and 1.80% to 2.45% per annum with respect to LIBOR borrowings.
The
Credit Agreement requires the payment of various fees, including an unused fee per annum of 0.25% of the unused balance of the
Credit Facility if the unused balance is less than 50%, and an unused fee per annum of 0.20% of the unused balance of the Credit
Facility if the unused balance is greater than or equal to 50%.
The
Operating Partnership may reduce the amount committed under the Credit Facility in minimum increments of $25 million, and may repay
outstanding borrowings thereunder, in whole or in part, at any time without premium or penalty, other than customary “breakage”
costs payable on LIBOR borrowings.
The Credit Agreement
requires the Operating Partnership, on behalf of itself and in certain circumstances the Company, to make certain customary representations
and warranties. The Credit Agreement also imposes certain affirmative and negative covenants on the Company and the Operating Partnership,
including restrictive covenants with respect to, among other things, maintenance of the Company’s REIT status, indebtedness,
liens, investments, mergers and asset sales, and distributions, as well as financial covenants requiring the Company and the Operating
Partnership to maintain, among other things, ratios related to leverage, secured leverage, liquidity and unencumbered debt service,
as well as a minimum consolidated tangible net worth and a maximum collateral loan to value ratio.
The terms of the Credit
Agreement also provide for events of default relating to customary matters, including, among other things, payment defaults, covenant
defaults, acceleration of other indebtedness, bankruptcy events, and change of control events. If an event of default shall occur
and be continuing under the Credit Facility, the commitments thereunder may be terminated and the principal amount outstanding
under the Credit Facility, together with all accrued and unpaid interest and other amounts owing in respect thereof, may be declared
immediately due and payable by the Lenders.
The foregoing description
of the Credit Facility, the Credit Agreement, the Guaranty, the Subordination of Advisory Contract and the Notes is a summary,
and is qualified in its entirety
by the terms of
the Credit Agreement, the Guaranty,
the Notes, and the Subordination of Advisory Contract, copies of which are filed herewith as Exhibit 10.1, Exhibit 10.2, Exhibits
10.3 through 10.5, and Exhibit 10.6, respectively,
to this Current Report on Form 8-K and
are incorporated by reference into this Item 2.03
.