The Origins of Broadstone’s Real Estate Interval Fund: Client Challenge, Accepted and Met!

Real Estate Interval Fund

Broadstone Real Estate, LLC (“Broadstone”) has proudly built its reputation on bringing institutional quality real estate investments to the individual investor. Our commercial (Broadstone Net Lease, “BNL”) and residential (Broadtree Residential, “BTR” or “Broadtree”) strategies are constructed with the objective of making private and diversified commercial real estate ownership available to individual investors, institutions, and wealth advisors. The REITs employ long-term buy and hold approaches when acquiring properties. Each fund employs conservative levels of leverage (for its respective asset type) and seeks to generate income. The vehicles are evergreen structures with redemption programs allowing the individual investor to decide on the right time for liquidity.  Broadstone offers investors a portfolio of real estate funds that meets the needs of the high net worth investor; this investor segment has demonstrated increasing demand for alternative investments over the past decade. These products have also been embraced by wealth managers and RIAs who function as fiduciaries and operate on a fee-only basis with no commissions charged to their clients.

BNL and Broadtree have been successful endeavors, however, these vehicles are not a fit for every investor’s portfolio. The funds are Regulation D private placement offerings, which means that investors must be “accredited” in order to invest. In addition, we have maintained substantial minimum investment levels to ensure investor suitability. Finally, while the strategies are diversified, the funds only invest in a single asset type or property segment.

We formed the Broadstone Real Estate Access Fund (“BDREX” or “the Fund”) at the request of our key RIA relationships. Their challenge to Broadstone was to create a product that could fit nearly any client’s portfolio, no matter the size. On the wish list was incremental liquidity, broader diversification, and a lower minimum investment level for clients. The RIAs still desired a conservative investment approach with a focus on current income generation, a non-commissioned product, and a fair fee schedule. In other words – bring the Broadstone Way to everyone!

As our team surveyed the landscape and considered how we could develop a product to meet these requests, we started to learn more about interval funds. Ultimately, the interval fund structure proved to be the best wrapper to deliver our next product. Interval funds are continuously offered, closed-end vehicles registered under the Investment Company Act of 1940. What makes the structure compelling is that investments can be made daily at a published net asset value. Redemptions are permitted on a quarterly basis with up to 20% of shares available for liquidity each year. This format, with some additional structuring, is an excellent mechanism for investors to access a host of less liquid, diversified real estate investments in the public and private space.

After we had our structure for BDREX, the Broadstone team spent an extensive amount of time considering what types of real estate investments best fit the Fund. Ultimately, we selected three distinct segments for the portfolio. The first segment is a public REIT equities strategy that is managed by Heitman Real Estate Securities, LLC (“Heitman”). Heitman is an international manager of real estate equities and real asset funds. The firm is implementing a public REIT equities investment plan for BDREX while utilizing a covered call strategy designed to increase current income. The second segment of the portfolio is a fund of funds approach to real estate investing. BDREX’s portfolio manager, Kate Davis, leads these efforts and allocates capital to a host of institutional funds. The funds often have $10 million+ minimum investment levels and are normally only accessible to the largest institutional investors. This component of the portfolio allows BDREX investors to tap some of the best managers in the world while having exposure to pieces of core assets in major markets. The final segment of the portfolio is dedicated to directly owning hard assets such as buildings in the office and retail sectors as well as multifamily and industrial properties. Every day Broadstone casts a wide net in search of properties; most years we are buying and selling more than $1 billion in real estate. Our investment process often produces interesting opportunities that may not fit with BNL and BTR’s investment mandates. We believe BDREX is an ideal spot to hold these assets and our intention is to bring our in-house sourcing, acquisition, and asset management skills to allow BDREX to build out a portfolio of real estate within its broader holdings.

The management team at Broadstone feels that we have created a product in BDREX that met the challenge our clients set before us. The interval fund structure seeks to provide the flexibility and liquidity mechanisms desired. The portfolio is diverse in its strategies and gives investors broader exposure to the world of commercial real estate, without over concentration in a single strategy or asset type. Finally, we have built a team and structure that can grow with the Fund and meet investor expectations.

Challenge accepted and met!

To learn more about investment opportunities in BDREX:

Download Investor Kit

Please see important disclosures below about BDREX.

About The Author

BDREX is a continuously offered, closed-end interval fund, registered under the Investment Company Act of 1940.