Bluerock seeks to list real estate fund with investors already heading for the exits

As a steady number of investors look to sell their shares back to the company, an interval fund, the $4.1 billion Bluerock Total Income+ Real Estate Fund, is moving to list its shares later this year with an eye on eventually boosting its dividend.

The alternative investment industry, which has seen spectacular growth the past decade, is riddled with examples of illiquid real estate funds limping to the finish line if they seek to begin daily trading on the NYSE or NASDAQ. Such a move allows investors to cash out shares, but the risk is not knowing at what price.  

The Bluerock Total Income+ Real Estate Fund on July 3 said in a press release it was seeking shareholder approval for the liquidity event, which would convert the fund from a closed-end interval fund to a listed closed-end fund, traded on the New York Stock Exchange.

Interval funds have limited liquidity and typically buy back up to 5% of clients’ shares per quarter.

The current hurdle facing the fund, according to analysts, is the volume of clients seeking to redeem – or sell back – shares. The concern is redemptions push the company to sell real estate assets to generate cash to buy those shares from clients.

“The Bluerock share redemptions are outrunning fund raising, so they either have to liquidate holdings or get it trading,” said Kevin Gannon, chair and CEO, Robert Stanger & Co. Inc. “Bluerock thinks expenses will be significantly less as a listed company. I can’t imagine it will be treated kindly in the public markets.”

“Since early 2023, the fund has had multiple repurchase offers that have been oversubscribed, consistent with a broader liquidity crunch experienced by multiple real estate focused interval funds and nontraded REITs since the Federal Reserve began an interest rate tightening cycle in 2022,” according to FactRight.

“This proposal is the result of thoughtful deliberation and direct engagement with our investors,” said Ramin Kamfar, CEO Bluerock, the fund’s sponsor, in a statement.

Financial advisors often sell clients interval real estate funds or nontraded real estate investment trusts in order to diversify portfolios and deliver steady yields. Real estate funds of all stripes, however, were hit by rising interest rates since the start of 2023. Higher interest rates hurt real estate investors because the cost of capital rises.

The Bluerock Total Income+ Real Estate Fund fund was launched in 2018 and had a net asset value for its A shares reach $38 in the summer of 2022 before beginning to slide as interest rates rose. The NAV per share value was $25.25 on Monday, according to investor website Seeking Alpha.

In its announcement for a listing, the company did not include a potential price per share.

The Bluerock Total Income+ Ral Estate Fund, with $4.1 billion in assets, is one of the five largest real estate or infrastructure funds with limited liquidity, according to a recent report by Morningstar.

It’s been a slog for such funds, according to the fund tracker.

“The asset class has been in net outflows since the end of 2022, when Blackstone Real Estate Income Trust began limiting the amount of money investors could withdraw,” according to Morningstar.