At 38% Discount, $3.6B Bluerock Listing Puts Private CRE Valuations To The Test

After three years of negative returns, a $3.6B private real estate fund listed on the New York Stock Exchange this week, giving frustrated investors a long-awaited exit. 

The Bluerock Total Income+ Real Estate Fund launched in 2012 and invests in other private real estate funds. Its public listing was closely watched as a test of how private fund managers value their holdings versus what public markets are willing to pay.

The results were brutal.

New York-based alternative asset manager Bluerock pegged the fund’s net asset value at $25.52 per share ahead of its market debut. Within minutes of opening for trading, the fund — now called the Bluerock Private Real Estate Fund and trading under the ticker BPRE — fell below $15 per share, pricing it at roughly a 38% discount to its stated NAV.

The outcome was not entirely unexpected. For more than two years, most investors seeking to redeem shares from the fund have been unable to do so, after Bluerock limited redemptions to avoid selling assets to fund payouts.

“The discount upon listing is a common dynamic for listed [closed-end funds] because selling demand immediately presents itself upon listing, but buying demand generally plays out over time as sophisticated investors wait out peak selling to try to purchase at the most attractive market bottom price,” Bluerock Chief Investment Officer Ryan MacDonald told Bisnow in an email via a spokesperson. 

The fund has also posted losses, with returns of negative 7.9% over the past three years. Over the same period, the MSCI REIT Index, a measure of publicly traded real estate companies, is up roughly 7.4%.

Many privately managed, semi-liquid real estate funds restricted share redemptions after interest rates began rising in 2022 and have posted flat or negative returns amid the industry’s downturn.

But unlike nontraded REITs managed by firms such as Blackstone, Brookfield and KKR, Bluerock’s fund invests primarily in other private funds rather than directly in properties, a structure that can make exits more difficult.

As of this fall, all major nontraded REITs except Starwood’s had cleared their redemption backlogs. As of June, Bluerock’s fund was still redeeming less than half of investor share repurchase requests, according to Accredited Investor Insights analyst Leyla Kunimoto.

Amid pressure to return capital to investors, Bluerock moved to convert the interval fund into a listed closed-end fund — a vehicle it said in Securities and Exchange Commission filings would likely be the largest of its kind globally.

The move was approved by roughly 80% of the fund’s investors, who can now sell their shares freely on the public market — though at prices far below the values Bluerock has been reporting.

“Worst fears confirmed for Bluerock investors,” Boaz Weinstein, founder of hedge fund Saba Capital Management, wrote on X on Tuesday after the listing.

“Bluerock management chose to entrench themselves in a closed-end fund conversion. Shareholders approved, not realizing the disaster that awaited them. From $24 to $15 in the blink of a greedy eye.”

MacDonald said the “opening discount is very much in the middle of the curve” compared with other closed-end funds at listing, adding that the fund’s scale makes it more likely to eventually trade closer to NAV. He also noted that BPRE shares rose about 10% in Thursday trading to $15.50, still roughly 36% below the fund’s current NAV of $24.37. 

Investors such as Weinstein and Kunimoto have been watching Bluerock’s listing for months as a test of how private fund managers value their holdings relative to public markets. While managers often argue that alternative funds are less volatile than public equities, critics note that those funds also control how assets are valued and when returns are distributed.

Blackstone faced heavy criticism in 2023 and 2024 over how it measured returns and handled redemptions in its nontraded real estate funds.

Wall Street Journal columnist Jason Zweig called that argument “bogus” in a June column examining Bluerock's anticipated fund listing.

MacDonald said BPRE’s NAV is calculated and vetted by third-party appraisers, in contrast to private credit funds, “where valuations are generally determined by the fund manager and standards are far less rigorous.”

BPRE’s lagging performance can be traced in large part to its biggest bet: life sciences developer IQHQ. The fund’s listing materials say its stake in IQHQ accounts for 15% of gross assets, but that figure understates its overall exposure.

In addition to holding a $488M equity stake in IQHQ, BPRE also owns more than $420M in debt and preferred equity tied to the Boston-based developer. In total, BPRE’s roughly $909M investment in IQHQ represents more than 25% of the fund’s $3.6B net asset value. 

The investment has so far performed poorly. BPRE initially invested $650M in IQHQ when the developer was founded in 2019, a stake the fund has since written down by about 85% and now values at $100.3M, according to MacDonald. The fund also invested in credit backed by the developer, and warrants tied to that debt have been exercised in recent months, granting BPRE additional equity.

BPRE now owns about 19% of IQHQ, MacDonald said.

But the life sciences market in which IQHQ specializes has been hit by oversupply and weak demand. Its $1.9B Research and Development District project in San Diego has signed just one life sciences tenant since opening in 2024. Last month, the developer halted construction on a $1B Boston project and took a loss on at least one sale of a planned development site.

Another IQHQ investor, Aimco, wrote down its investment in the developer by 94% last year.

IQHQ raised $900M in equity late last year to support leasing at its projects, but the capital proved insufficient. The company later secured a $100M line of credit and sold $170M of preferred stock to a cannabis-focused REIT.

The outlook for the sector in 2026 remains challenging. Venture capital funding declined this year, federal research funding was reduced, and lab vacancy across IQHQ’s core markets — Boston, San Diego and San Francisco — is hovering around 30%, with asking rents trending lower.

“IQHQ has raised accretive third-party capital, leasing velocity has accelerated and the company is strategically positioned to take advantage of the rebound in life science leasing with its cutting-edge, Class AA new developments as market headwinds recede,” MacDonald said. He also serves as co-chairman of IQHQ.