Different from several multifamily REITs, Bluerock Residential Growth REIT hasn’t seen its share price soar in 2016. It also has a noticeably higher yield than its peers. Eventually, the company has faced the challenges typical of other similar, small cap REITs, including higher leverage, frequent public offerings, and building a long-term investor base.
Even with the steep growth over the past quarters, it has been eye-catching that the share hasn’t managed to make up some ground. In fact, its share price has fallen by 14% over the past year, while the company doubled its net operating income. Today, the stock is trading with a dividend yield close to 10%, which always tops our dividend yield ranking for the sector.
In order to fuel its expansion, the company hasn’t been shy, opting to capitalize on several funding fronts. In 2015, they performed three public offerings. In addition, they have diversified their sources of funding by issuing preferred shares. They also pushed the debt levels up higher and closed Q1 with a total debt to total enterprise value of 58%.
With a market cap just under $300 million, the company is looking to form a solid institutional investor base that can support its continued growth. Currently, less than 50% of the shares are held by institutional and mutual fund owners. As a result, it appears that the company still has a long way to go to complete its task compared to established REITs.
There are reasons to believe this REIT might struggle to get more support, primarily because it is externally advised and it makes distributions beyond its adjusted funds from operations. On the other hand, the company has made its presence known in sunbelt markets, where job growth has been prominent.
To summarize, Bluerock Residential is hungry to grow and seems to be hitting the right nails. However, due to its shortcomings, it hasn’t managed to convince enough investors to back its aggressive growth plans yet. The stock is a patient buy.
Source: Bluerock Residential Growth RE(AMEX:BRG), Fast Graphs, Yahoo!Finance
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