After falling short a few weeks ago of getting shareholder support to start trading, the $3.7 billion Bluerock Total Income + Real Estate Fund last week crossed the goal line and won investors’ approval to list its shares later this year.
The fund did not initially win shareholders’ approval during a first round of voting that was tallied on September 4. After that, the alternative asset manager’s CEO and founder, Ramin Kamfar, campaigned for clients to vote for the proposal.
The effort worked.
At a special meeting of shareholders last Thursday, over 81% of votes cast in favor of the initiative to list the fund, which is expected to begin trading on the NYSE by mid-December. In an earlier special meeting held on September 3rd, shareholders approved 13 additional proposals related to the listing.
“We are grateful for the trust our investors continue to place in us,” Kamfar said in a statement. “This transformative moment serves as a strong vote of confidence that shareholders share in our conviction that listing TI+ is the optimal path to unlocking full daily liquidity and enhanced shareholder value.”
The problem that Bluerock aced earlier in getting shareholder approval, according to industry observers, was that the fund, after a listing, could trade below its net asset value (NAV).
That means buyers of the fund’s shares would get a discount but the sellers, many of them long-time holders of the fund and retail investors, would get less per share than the fund has been offering in its limited quarterly purchases per share.
“It’s going to be curious as to where the fund trades,” said John Cox, CEO of Cox Capital Partners, which invests in non-traded alternatives in the secondary market via a proprietary fund. “Will Bluerock rip the band aid off and list all the shares at once or stagger the listing over time?”
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.
Interval funds have limited liquidity and typically buy back up to 5% of clients’ shares per quarter.
The fund’s class C shares on Friday had an NAV of $22.82 per share, according to the company’s website.
Investors in the Bluerock Total Income + Real Estate Fund should be ready for a hit once the company begins trading.
“This discount to NAV could be substantial, especially as some shareholders take advantage of newly available secondary market liquidity,” according to the fund’s proxy filing from July. “As such, we anticipate that at listing, the fund’s shares will trade as a substantial discount, and that this discount will likely be more pronounced for a period of time following the listing.”
“If a fund is trading at a discount, shareholders will receive less than the NAV per share of the fund if they sell their shares on the exchange,” according to the filing.
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