BlueRock’s Ronny Pifko: A Solid Strategy Built on Strong Foundations

CFI.co’s Jason Agnew finds out from BlueRock Group’s Managing Partner, Ronny Pifko, how they’ve kept constructive during testing times.

When Ronny Pifko co-founded BlueRock in Zurich back in 2010, the focus was entirely on Swiss commercial real estate. The company grew rapidly and within three years was investing in the German office sector. The strategy was conservative, and Pifko and his team took full advantage of the relatively risk-free core and core-plus segments to build up a large and diversified portfolio.

BlueRock Group’s Managing Partner Ronny Pifko

In 2017 a reduction in yields in these segments led BlueRock to switch to riskier value-add opportunities, and the team’s deep knowledge of the German market enabled them to make the transition so effectively that by 2021 the company’s total portfolio size had increased to €1.5 billion.

Catching up with Ronny Pifko post-pandemic, I asked him if the team had maintained the same balance as before or if they had adopted a slightly riskier approach. He told me:

“As an investment boutique with a wide range of investor vehicles, we have always and will always offer various options of investment products in terms of diversified risks and asset classes. In this way, every risk appetite can be met according to each individual investors’ appetite.

Increasing residential investments in central Berlin does not pose an investment risk in our opinion, as it is a very solid and risk averse investment.”

Ronny Pifko explained that Germany has become by far BlueRock’s biggest market because it boasts a strong economy and is very open to international investors. That openness meant that the company was able to develop its expertise in the local real estate market, creating a strong know-how of that market plus building an extensive network of partners in various complementary fields. He emphasised that, “This has become our home market and will keep us there for many years to come.”

Being an investment boutique undoubtedly offers the team, currently 15 strong in the various locations and growing, a certain amount of flexibility that large, more rigid set-ups don´t enjoy. I wondered whether office and residential would continue to be the main focus of the firm and he confirmed that indeed it would as it is “our field of expertise.”

In response to my question about the effect of Covid-19 on the value of office space, with many people continuing to work from home, he expressed the view that the office will always be an integral part of the working environment but that companies will have to adjust and adapt for the times in order to attract employees into the office.

“Tenant and employee satisfaction are something that has become integral in acquiring and renting office space so companies will require modern space and need to be creative to refurbish and provide modern workspace.”

Continuing on the theme of the pandemic’s effects on the real estate market, with prices soaring in certain locations, I asked his opinion on the possibility of another bubble. He replied that they have been expecting a correction for some time and this has made them more cautious; they have only bought one off-market office property in the last two years, and they obtained that at a special discount.

“Inflation, interest rates and the banks’ reluctance to lend has brought the office market to a standstill but we don’t expect a bubble, rather a healthy correction. Being that our portfolio has steadily increased in value this doesn’t pose any problem to our investors.”

He firmly believes that BlueRock will keep focusing on perfecting its asset management and, by preserving asset values through technical improvements and ESG measures, will be able to, as a landlord, “pull through the upcoming price correction.”

Communication and transparency are both important and BlueRock provides all its investors with a detailed asset management report every quarter. This includes an update on the current Net Asset Value of their investment, the current property valuation, the upcoming distribution and a full property management report which includes all details on the P&L of the property and its development.

The company’s offer is restricted to direct placement deals and has singular structures for each product ensuring the investor has a clear choice of which product to invest in: “Thus the investor is aware of the stringent asset selection and can simply decide if they want to participate in the venture.”

Ronny Pifko, despite BlueRock having achieved an ROI of 16 percent a year, has his feet on the ground and, when I ask him if he expects to reach that in 2022, he is philosophical:

“At the moment we are happy to stay in the black during these turbulent times.”

This winning combination of ambition, know-how and realism has ensured that BlueRock has delivered high returns right from the start and its ability to innovate while offering its investors clear solutions, free from any liquidity constraints, should guarantee sustainable success built on ever solid foundations.