Steve Baffico, Executive Vice President and head of listed products at Bluerock, which runs the Bluerock Private Real Estate fund, expects the real estate market to benefit as money moves from private credit , business-development companies and direct-lending strategies in pursuit of something with “hard assets and low obsolescence.” That HALO trade should drive growth moving forward; Baffico discusses what the fund is focused on as it continues its transition from an interval fund to being a closed-end fund. That journey has included four hikes in distributions over the last four months, and Baffico says he explains what the firm is doing to quickly reach its target distribution rate of 8 to 8.5 percent.
CHUCK JAFFE: We’re getting an update on the private real estate market with Steven Baffico, he’s head of listed products at Bluerock, welcome to The NAVigator. This is The NAVigator, where we talk about all-weather active investing and plotting a course to financial success with the help of closed-end funds. The NAVigator is brought to you by the Active Investment Company Alliance, an industry organization representing the entire closed-end business, from investors and users up to fund managers, sponsors, and creators. If you’re looking for excellence beyond indexing, The NAVigator will point you in the right direction. And today we’re pointing towards private real estate with Steven Baffico, executive vice president and head of listed products at Bluerock, which runs the Bluerock Private Real Estate fund, ticker BPRE, which you can learn about at Bluerock.com. And you can learn more generally about closed-end funds, interval funds, and business-development companies by going to AICAlliance.org, the website for the Active Investment Company Alliance. Steve Baffico, welcome to The NAVigator.
STEVE BAFFICO: Chuck, great to be with you. Thank you so much for having us back.
CHUCK JAFFE: I mentioned BPRE, and Ryan MacDonald, the fund’s manager, well, he was with us on The NAVigator in early March right after the fund launched. At the time, he said that private real estate was approaching valuation levels not seen since the depths of the 2008 Financial Crisis. You guys had a big war chest that was building up as you launched the fund, if valuations were that good and entry point was critically important, which is another thing that Ryan was emphasizing, give us an update on how much of those assets you’ve put to work and how you’ve been putting it to work.
STEVE BAFFICO: So Chuck, as you referenced, when Ryan was on the show in March, BPRE had really just recently listed on the NYSE and the team was laying out our roadmap, and that plan had three pillars if you remember. Number one, rotate the legacy portfolio into what we described as next generation direct real estate. Two, grow the distribution yield toward 8-8.5% on NAV. And three, close the price to NAV gap over time. So here we are several months into active execution, the investment team’s committed roughly $400 million of capital to direct real estate investments, and if you combine that with the origination pipeline, you’re talking about total activity reaching about $700 million to date, so roughly 20% of the NAV in various stages of active deployment. That deployment to date has been across 13 individual investments and across the three target sectors that we talked about last time. Now part of executing on that roadmap has also been building out the team to support that strategy, we recently brought on Tyler Kimball, he’s our new head of real estate credit here at Bluerock, great add, Tyler’s got more than 15 years of experience in real estate credit, so lending, structured credit, special sits, most recently 10 years at Axonic Capital, where he was part of a team on the real estate credit side that sourced and executed over $10 billion in real estate transactions. So we think we’re really well positioned with Tyler, I’ve been working with PMs for 30 years, you can separate wheat from chaff pretty quickly, Chuck, this is one of the good ones. Tyler’s really gotten off to a fast start, and I think he’s been a positive force multiplier for the credit platform. Number one, building on strong heritage on the vertical at Bluerock, and I think two, his depth of market knowledge, sector, network, it really accelerates our ability to scale into the credit vertical at this moment, which is important. Distributions, we talked a little bit about four distribution increases since December ‘25, since the listing date, so our distribution rates moved from 5.25% on NAV at the time of listing to 7% as of June. If you remember, the team’s stated target is to achieve an 8-8.5% distribution on NAV, so we’re in flight there. On timeline, you asked about that, our original roadmap I think was very conservative on portfolio repositioning timeline, this is a large legacy portfolio, it’s about $3.5 billion, is has to be unwound and then reinvested basically as close to one to one relationship as possible. So it does take a little time to queue up that origination pipeline properly, and I think we’ve done that largely to date here. What I’m seeing now a few months into the process is that we’re generally on pace with prior guidance, but what I’m most enthusiastic about is we seem to be accelerating on the execution and close rate piece of this, and that’s really important. I think the current expectation is six to eight quarters to substantially complete this asset rotation, and look, frankly, I’ve always believed that it’s under promise and overdeliver on these kind of items. So I think what it means for investors is we laid the strategy out in March, we’re executing on pace, starting to accelerate, team’s been augmented to support that effort, and we’re highly engaged with the market around the investment thesis and the entry point you talked about and the opportunity here. Make no mistake, we’ve got a lot of work to do here to get to scale and ultimately where we need to be, but I think we’ve made a good start and we’re seeing some tangible results from those efforts.
CHUCK JAFFE: The strategy, you mentioned three target sectors, and Ryan had talked about them when he was with me back in March, if I recall them correctly they are manufacturing reshoring, ecommerce growth, and the change, or the retreat, if you will, from brick and mortar banking. I think I have those right. Why those three? And maybe why not data centers and the things that are sucking the oxygen out of the real estate conversation these days?
STEVE BAFFICO: Yeah, and you are largely right on. So from an investment perspective, it’s probably best articulated as a barbell, right? And so contractual income at one end, growth at the other, and an all-weather yield component in the middle. I guess your question is why these sectors specifically? I think it’s pretty straightforward, we look for durable, secular tailwinds, so long-term trends that support those investment theses. So each of these sectors, as you referenced, it’s got a theme that we believe in. Manufacturing or reshoring of US manufacturing, which is really focused around the triple net lease sector, that’s a multi-decade trend, it’s supported by over a trillion dollars in announced US manufacturing investment, so we think that’s a really good anchor for the triple net lease space. You mentioned ecommerce, when we talk about shallow bay industrial, it’s really the Amazon boxes on your front porch, that’s the story, ecommerce growth supporting the shallow bay as a secular shift. And to your point around real estate credit, a huge refinancing wall in the existing real estate debt market, a lot of product that has to be refinanced in the next two years, two trillion in fact, and that demand pull, which is quite unique, is coming up against a capacity constraint as far as credit goes, and in traditional bank credit for that matter. So think about those three as good examples of durable trends, it’s one of the reasons we’re enthusiastic about our progress here to date.
CHUCK JAFFE: So I’ve got a good idea of how the sectors mix together and why you need them to achieve your goals. Credit itself is on a bit of a tear, what’s happening in this market that’s drawing private capital in?
STEVE BAFFICO: Yeah, I think there are a couple of unique elements to the real estate credit story. I mentioned them briefly in the last question, but I think three things are happening here that make an attractive entry point. One, valuation, right? So the commercial real estate market has turned significantly, values today have repriced down 20-30% from the 2022 peaks, so what that’s done has really engendered the re-opening of capital markets, and transaction activity in the real estate market is accelerating. So I think it tells you that the market is much healthier and more active today, that’s a very important precursor. Second, we talked a little bit about demand pull, now there’s roughly two trillion in commercial real estate debt maturing between now and 2028, so I think what it tells us is that there is a huge need/demand for fresh capital in this space from experienced lenders. So I think as it relates to the current BPRE portfolio rotation, it’s quite compelling now given that unique demand pull characteristic in the space. And then the third thing I’d share is capital supply constraints, you mentioned it, banks have only come back selectively. Now they are lending and they are growing market share, but it’s different this time around, they’re doing so at materially lower leverage points than in the past cycle. So what it’s done is actually created a pretty significant structural gap in the capital stack, and that is a gap or an opportunity that private capital can fill effectively. So we think it sets up really well for players like Bluerock who understand how to navigate these structures, attachment points, etcetera, Obviously, bringing on Tyler as head of real estate credit further allows us to exploit that. Chuck, the one other thing I’d share about real estate credit, which is really an all-weather sector kind of wedge in this portfolio, and I think it’s a major theme that you’re going to be hearing about broadly over the next couple of years, we use the acronym HALO or hard asset, light obsolescence risk. So what does that mean? Real estate credit offers very unique risk-return characteristics. We believe that private credit funds are going to be in a net redemption period for the next couple of years. Why is that important? Well, because simple asset-based lending strategies with compelling yield and total return, as well as stable collateral, so i.e. real estate credit, those become very critical replacement trades for those investor assets.
CHUCK JAFFE: We’ve got to talk about that distribution policy. As you pointed out, the distribution rate has changed four times in very short order, and it’s still below where you hoped you’d get it to. Now by pace, if you just keep it up then you’ll be more than past 8% if you kept the pace going. So what’s the likelihood of the distribution continuing to grow, and is there a target for hitting your target?
STEVE BAFFICO: Obviously a vital signal and benchmark in the listed funds market is distribution yield, we’ve had four distribution increases in about six months. Prior to the listing, the distribution rate on the interval fund structure was 5.25% on NAV. As of today, June, it’s 7% on NAV, that’s been accomplished through incremental increases on a monthly basis, as you’ll see from our press releases. What’s underpinning that earnings growth? Important for your audience to know three things. First, the portfolio rotation is a major rotation, and it’s replacing legacy assets with higher yielding direct real estate investments, so the new investments are being underwritten to project mid-teen type of IRRs, now that’s meaningfully higher from what the legacy portfolio was generating, so that’s an important starting point. Second, cost savings, we haven’t talked about this but I think it’s worthy of mention. We’re starting to see realization of cost savings in a couple of areas, so savings in the conversation from interval to closed-end fund structure, savings on underlying submanager fees going from a fund of funds to a direct strategy, and savings from lower interest expense. So all in you’re talking roughly $50 million a year in total realized annual savings. So I think cost savings, good start, a starting point, not an end point in that respect, but another important contributor. And then the third piece of this, again I go back to real estate credit, the credit allocation targets about a 12% income return, as credit becomes a larger share proportionally of the portfolio mix it really pulls the blended distribution capacity up. So having said that, Chuck, keep in mind this is a marathon, it’s not a sprint, it’s a large legacy portfolio at about $3.5 billion that we’re moving. It’s going to take time to deploy the assets, we want to do that expediently, but we want to do that with the right assets at the right price and in the right [inaudible 0:14:39]. I believe we have the right sector approach here, so now it really becomes a surety of execution story on the investment side.
CHUCK JAFFE: And as you mentioned, we’re at a starting point in terms of what we’re seeing with the change in distribution and the rest, unfortunately for us we’re at an ending point when it comes this interview. Steve, I really appreciate you taking the time, thanks so much for joining me. I’m sure we’ll check in with you again down the line as we continue to see this conversion from interval fund to listed closed-end fund.
STEVE BAFFICO: Thanks Chuck, great to be here.
CHUCK JAFFE: The NAVigator is a joint production of the Active Investment Company Alliance and Money Life with Chuck Jaffe. I’m Chuck Jaffe, you can check out my show on your favorite podcast app or at MoneyLifeShow.com. You can get more information on closed-end funds, interval funds, and business-development companies at AICAlliance.org, the website for the Active Investment Company Alliance. Thanks to my guest Steven Baffico, he’s executive vice president and head of listed products at Bluerock, which runs the Bluerock Private Real Estate fund, it’s ticker BPRE, you can learn about it at Bluerock.com. The NAVigator podcast has something new for you every Friday, so make plans to join us again next week for some more closed-end fund fun. And until then, happy investing, everybody.
Disclosure:
Past performance is not a guarantee of future results.
Investing in the Fund involves risks, including the risk that you may receive little or no return on your investment or that you may lose part or all of, your investment.
Distributions are paid if and when declared by the board and there can be no assurances as to future distributions.
There is no guarantee that underwritten return targets will be realized.
Total activity reaching about $700 million to date represents investments include closed, under contract, LOI, under exclusive negotiations or in pipeline.
Estimated timeline is measured since Bluerock’s Strategic Roadmap announcement in March 2026. Target distributions are forward-looking and not guaranteed. Rates calculated by annualizing monthly distributions divided by the ex-date NAV of each month; May is based on the May distribution amount of $0.1208/share and the 5.12.26 NAV/share of $23.50 and June is based on the newly declared June distribution amount of $0.1371/share and the 5.12.26 NAV/share of $23.50. Past performance is not a guarantee of future results.
Target metrics are forward-looking, based on assumptions and estimates, and are not guaranteed. Actual results may differ materially. Asset-level returns are only one factor in the Fund’s total returns and as such should not be read as a projection of future investor returns or Fund-level returns. Past performance is not a guarantee of future results.
The ability of the Fund to achieve its investment objective depends, in part, on the ability of the Advisor to allocate effectively the Fund’s assets across the various asset classes in which it invests and to select investments in each such asset class. There can be no assurance that the actual allocations will be effective in achieving the Fund’s investment objective or delivering positive returns.
The Fund will concentrate its investments in real estate sector securities. The value of the Fund’s shares will be affected by factors affecting the value of real estate and the earnings of companies engaged in the real estate sector. These factors include, among others: (i) changes in general economic and market conditions; (ii) changes in the value of real estate properties; (iii) risks related to local economic conditions, overbuilding and increased competition; (iv) increases in property taxes and operating expenses; (v) changes in zoning laws; (vi) casualty and condemnation losses; (vii) variations in rental income, neighborhood values or the appeal of property to tenants; (viii) the availability of financing, (ix) climate change, and (ix) changes in interest rates. Many real estate companies utilize leverage, which increases investment risk and could adversely affect a company’s operations and market value in periods of rising interest rates. The value of securities of companies in the real estate sector may go through cycles of relative under-performance and over-performance in comparison to equity securities markets in general.
An investment in shares represents an indirect investment in the securities owned by the Fund. The value of these securities, like other market investments, may move up or down, sometimes rapidly and unpredictably. The Fund is “non-diversified” under the Investment Company Act of 1940 and therefore may invest more than 5% of its total assets in the securities of one or more issuers. As such, changes in the financial condition or market value of a single issuer may cause a greater fluctuation in the Fund’s net asset value than in a “diversified” fund. The Fund is not intended to be a complete investment program.
The Fund is subject to the risk that geopolitical and other similar events will disrupt the economy on a national or global level. For instance, war, terrorism, market manipulation, government defaults, government shutdowns, political changes or diplomatic developments, public health emergencies (such as the spread of infectious diseases, pandemics and epidemics)
and natural/environmental disasters can all negatively impact the securities markets.
Shares of closed-end investment companies like the Fund frequently trade at prices lower than their NAV. This characteristic is a risk separate and distinct from the risk that the Fund’s NAV could decrease as a result of investment activities. Whether investors will realize gains or losses upon the sale of the common shares will depend not upon the Fund’s NAV but entirely upon whether the market price of the common shares at the time of sale is above or below the investor’s purchase price for the common shares. Because the market price of the common shares will be determined by factors such as relative supply of and demand for the common shares in the market, general market and economic circumstances, and other factors beyond the control of the Fund, the Fund cannot predict whether the common shares will trade at, below or above NAV. The common shares are designed primarily for long-term investors, and you should not view the Fund as a vehicle for short-term trading purposes.
For additional information with respect to the risks associated with the Fund, investors should review the Fund’s public filings available free of charge through the U.S. Securities and Exchange Commission’s Electronic Data Gathering, Analysis, and Retrieval system (EDGAR) at www.sec.gov/edgar. These filings contain important information about the Fund’s investment objectives, risks, charges, expenses, and financial condition that investors should consider carefully.
Cautionary Note Regarding Forward-Looking Statements
Statements included herein may constitute “forward-looking” statements as that term is defined in Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995, including statements with regard to future events or the future performance or operations of the Fund, including but not limited to, the price at which the common shares of the Fund may trade on the NYSE. Words such as “intends,” “will,” “believes,” “expects,” and “may” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements. Factors that could cause actual results to differ materially include changes in the economy, geo-political risks, risks associated with possible disruption to the Fund’s operations or the economy generally due to hostilities, terrorism, natural disasters or pandemics, future changes in laws or regulations and conditions in the Fund’s operating area, unexpected costs, and such other factors that are disclosed in the Fund’s filings with the Securities and Exchange Commission (the “SEC”). The inclusion of forward-looking statements should not be regarded as a representation that any plans, estimates or expectations will be achieved. Any forward-looking statements speak only as of the date of this communication. Except as required by federal securities laws, the Fund undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on any of these forward-looking statements. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund.
Investors should carefully consider the investment objectives, risks, charges, and expenses of BPRE.
Not FDIC Insured | No Bank Guarantee | May Lose Value
Recorded on Jun 5th, 2026
