BlueRock Portfolio Q2/2020

Generally, Covid-19 had no significant impact on our ongoing investments during Q2 2020. It seems that our investment philosophy and methodology were able to withstand the immediate impact of the pandemic.

Our investments in office buildings have held up remarkably well, even generating a slight valuation increase in most cases. Our tenants mainly operate in the technology, media, telecommunication and healthcare industries, which have been less affected by the economic downturn.

In the Bluerock Fund, Cell G (Cologne, Pfeifer & Langen), Cell J (Cologne, Neven DuMont) and Cell XIII (Nuremberg, Deutsche Telekom) all have single tenants who were not at all affected by Corona.

They have paid their rent in full and Covid-19 poses no threat to the their businesses.

Cell H (Berlin, Residential), Cell XI (Copenhagen, Residential) and Cell XIV (Berlin, Office) are all value-add strategies and there some elements, such as apartment viewings and construction work, were slightly slowed down by the pandemic. This however had no large impact on the overall strategies.

In the BR-NAS Fund (9 locations throughout Germany, Office) which also follows a value-add approach, we have seen rent arrears of only 5-6% per month during Q2 2020 and these will have to be repaid.

to enable us to keep a steady performance and monitor each activity closely. This means regularly talking to the local property managers, letting agents and construction companies, making sure that conversations take place as soon as any irregularities occur. Wherever rent deferrals were necessary, we used the opportunity to renegotiate rental contracts, extending lease terms and in some cases even increasing the rent.

As an investment boutique, we have always believed in handpicking assets with a story and a location that we trust in and this has proven its merit during these times. We also make use of minor favourable deviations from our business plans that arise from new situations to enhance the value and revenue streams of our properties. Whilst we are not immune to the economy’s overall development, we can influence the success of our investments to a certain degree.

Furthermore, we are also in steady contact with our financing banks and since most of the purchase prices of our buildings were substantially below the current market prices, we are now still in a comfortable position. However, we noticed that banks currently have a very conservative approach and are offering quite expensive financing options for new real estate investments. Due to this issue and because real estate prices are still above pre-pandemic levels, we prefer to wait for the right opportunities and only evaluate deals which are above-average attractive.

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