Behringer Harvard Nears Launch of $1.5B REIT

DALLAS-With one year invested into building a portfolio, Behringer Harvard Multifamily REIT I Inc. has filed a pre-effective amendment with the feds to roll out a $1.48-billion fund-raising campaign. The drive is seeded with stakes in eight multifamily projects with 2,377 existing or to-be-developed units in six states.

The locally based investment group will be selling 120 million shares of common stock for $10 each in a primary offering. Another 30 million shares of common stock will be sold for $9.50 apiece as a distribution reinvestment plan. In the SEC filing, the REIT hasn’t set a date, but the pre-effective amendment and pricing mean it’s ready to launch. In keeping with the norm, the blind-pool offering has a two-year window. And in line with offering regulations, comment is unavailable from the investment group’s camp, led by founder and CEO Robert M. Behringer.

The REIT’s acquisition plan runs the full gamut of the multifamily industry: high-quality rental projects, student housing, age-restricted and mixed use. The SEC filing caps debt at 75%, with exceptions possible on a case-by-case basis, and long-term leverage at 60%, which is Behringer Harvard’s preferred level. It also spans the full investment spectrum of wholly owned, mezzanine loans, tenants in common and joint ventures, including other Behringer Harvard-sponsored buying pools.

The REIT has spent one year building the portfolio for the launch. To date, it’s acquired interests in the 210-Reserve at Johns Creek Walk in Fulton County, GA; 330-unit Eldridge at Briar Forest in Houston, which will deliver in December; 155-unit Lovers Lane Townhomes in Dallas, eyed for a June 2009 completion; 234-unit Fairfield at Columbia Village in Arlington County, VA, which will be finished in August 2009; 279-unit Satori in Broward County, FL, also to be done in August 2009; 414-unit Fairfield at Bailey’s Crossroads in Fairfax and Arlington counties, VA, slated for a November 2009 delivery; 325-unit Fairfield at Cameron House in Silver Spring, MD, set to deliver in December 2009; and 430-unit Alexan St. Rose in Clark County, NV, which will come on line in September 2010.

The REIT’s only wholly owned mezzanine loan in the lot is a $3.22-million piece of the 6.3-acre Dallas development at the corner of East Lovers Lane and Skillman Street by local developer, Greystar Development Group. The REIT and its JV partner, Dutch pension fund PGGM, jointly advanced $2.99 million toward the project and plan to invest a total of $6.63 million. When the project delivers, the REIT is set up to acquire 100% of the townhouse project.

The JV partners provided mezz loans of $8.14 million for Eldridge at Briar Forest; $22.13 million for Fairfield at Bailey’s Crossroads in Virginia; $11.35 million for Alexan St. Rose; $19.95 million for the Fairfield at Columbia Village; $14.77 million for Satori; and $19.33 million into Cameron House. All mezz loans mature in 2012 and include options for buy-in percentages to the projects. In addition, the SEC filing reports the REIT has 50% to 80% equity in Eldridge at Briar Forest, Reserve at Johns Creek Walk, Fairfield at Columbia Village and Satori.

If the $1.48 billion is raised and no shares are reallocated from the distribution reinvestment plan, the REIT plans to use up to 91.1% of the gross proceeds to buy or fund development, redevelopment and existing residential rental properties. Under a master co-investment agreement, Behringer Harvard’s sponsor or an affiliate will provide 55% of the capital for each investment and the co-investment partner, which is 99% owned by PGGM and 1% indirectly by the sponsor, will fund the remaining 45%.

PGGM has pledged up to $200 million, but can bump it to $300 million before Nov. 9, 2011. To date, it has committed $67 million for the JV’s deals. The SEC filing reports that Behringer Harvard’s board has agreed to increase the commitment to $370 million if PGGM raises its ante to $300 million.

PGGM has a right of first refusal for all co-investments. “This arrangement makes it unlikely that we will pursue on our own multifamily-development investment opportunities of the type targeted b the master co-investment arrangement until the capital commitment of PGGM has been substantially invested,” reports the REIT in its filing.