Bridge Investment (BRDG) 7 Aug 242024 Q2 Earnings call transcript

Greetings, and welcome to the Bridge Investment Group Second Quarter 2024 Earnings Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Bonni Rosen, Head of Shareholder Relations for Bridge Investment Group. Thank you.

You may begin.

Good morning, everyone. Investment financial call results. Bridge second review the XXXX quarter to Group to conference our Welcome Chief Elsnab. Prepared Chairman, Executive and Robert include Morse; Officer, remarks comments Chief Officer, from Jonathan our Executive Financial Katie Slager;

these like duty We will session uncertain, forward-looking you results. Q&A statements. materially hold outside include do to the today's may undertake which and We to may from prepared call differ following that statements remind the a update remarks. I'd any are firm's not control actual

of our discussion risks could a the For some Risk that affect of the see Factors results, Form please section of XX-K.

directors XX. It to to dividend September turn $X.XX $X.XX, of call a in per is of Bob. of operating a of Bridge found call, due share the of the on loss pleasure under will non-GAAP of with certain stock declared non-GAAP available metrics shareholders our $XX.X XX $XX.X second ir.bridgeig.com. quarter quarter These earnings IR to site, the on are basis, supplemental over reported million, Class event be were company of noncash the share for changes financial our the be mostly was the A per the of of webcast. We in live to attributable diluted GAAP which second now will board paid per provided slides. The along of appendix to after items. Distributable also earnings website, the at reconciliation the common the to net link. During tax, income also company can record are our XXXX. They portion slides On of and we $X.XX call accessible during metrics. share, are as million discuss supplemental The my the August or Presentations approximately net materials

business. the a at results. XXXX, ability dynamics. Fee-earning from the to million navigate real peak market resilient XX% recurring of we in has past quarter increased million from also to last growth XXXX all. Bridge capitalize underscores operating in to XQ XQ Thank in markets, in estate AUM real and with quarter challenges $XX.X growth fund estate Since XXXX. XXXX, by have and period, through This have industry-leading part $XX To forward the costs the for capabilities X% asset compound fourth focused markets value, management navigated years, on integrated on by our XXXX. annual at acquisition financial in increasing the of interest trajectory in earnings of rate, this both we by robust Bridge fees of This our to do company delivered $XX.X the selecting fee-related second Bridge second the sectors negative, fundraising efforts, and the growth earnings growth the the which the our you, distributable X.X and quarter our acquisitions particularly morning and results a XX% large $XX.X improved shifting from XX%. Despite this good and of rise secondaries rates real positive management XXXX quarter increasing Bonni, of billion annual successfully been so, increasing borrowing estate strategies, posed reported compound in rapid to cases, the with to of successful growth, the billion quarter rate, strategic period. malaise shown use Newbury by has asset flagship over and we fueled also invest. Through property and carefully due to selective in in performance Partners, compelling in fourth

that the of end detail, this are benefit in the Rates before conducive factors the is real and occurs, in it have approximately borrowing Treasury. to levels more XX%, X-year past with and to in XX or expectations points, estate will of the and in basis the at stable in estate-specific real and of expected declined points, attractiveness XX the cuts enhance We the the yields days, rate a outlook that XX-year market Already Treasury assets XX%, earlier basis investments inflation XX sector Lower should that reduce shifting investment conjunction credit are and declined continued rental, XXXX, seeing the cases estate or Jonathan evidence and X residential especially growth. I and year. sectors, sectors. driving increasing for real were tailwinds private rates. the logistics actions interest higher broader implement provide meaningfully signs in of is further dynamics a inflation and ecosystem. mentioned to some those If already Bridge are least well for that in selected around conditions opportunities have use conducive moderating and provide from Macro Fed environment Fed earlier will positioned. macro costs

rates, ever. is than larger and focus renter attractive housing the at with slowing Our combination is in And workforce middle-income mortgage population especially on economic of target higher activity. times

on specialized environment. Additionally, spectrum of verticals current opportunities the amplifies our in focus further our the value-add

Our accredited extensive solar are newer these retail reinforces renewable and investor in position. Simultaneously, our our competitive channel expertise remain pivotal energy differentiators. to bear integration starting in sector-specific our successful market investment and sectors cycles, and fruit. Throughout initiatives history forward penetrating the

knowledge our Brown reinforcing operational evident real our CIO Workforce building of joins approach the Bridge our proven from company, Alison to where She Blackstone a of already sustained particularly recent of Property portfolio best-in-class diminished. Further our of continued estate operating track welcomed rental strategies. experience teams. and integrated our during Management we LivCor, of estate focus as as in Deputy leverage Alison has impact President us and portfolios, yield for Affordable array vertically proudly Bridge the residential SVP she capabilities. years management & greatly quarter to served continues as platform, Operations. in-house Our from improvement to Alison's and times across brings leadership results XX contribute over real record of partners a a broad will the of successful supporting overseeing and property

quarter, real estate second an cycle. the Throughout sensing robust entry be dialogue raising. continued the foster in a attractive investors, to for cyclically with capital we promising point enthusiasm appears to what to Turning

more favorably While year, towards realizations that with cautious meetings and the and institutional complemented sentiment of of in Solutions Client influencing flow X,XXX lack investors, over this over retail to remain their continues start estate, we their approach has engagements allocations. Since investors acknowledge discussions investors. is XXX broader that real the our shift cash Group conducted with by

have markets. the close during Our Housing rolling have strategy, Middle which teams included Notably, parts have Affordable the will for XX. Inflows the recently South close X of our Japan, United Asia, global and the to million next North markets, first driven in raised of first & reentered capital for Workforce strategies, Thus traveled vintage by second a the to quarter States. We and from across significant encouraging, including opportunity our key reset. Europe, quarter X accommodate and been were primarily subsequent Workforce another both the of the based million with investors of Canada East, $XXX March recognizing response which quarter-end, on investor far, $XXX $XXX Affordable the million timing. strategies, the and the flagship new Housing attractiveness an & aggregate since the many existing to and Debt has pricing of

a Fund provisions sunsetting, this opportunity still our final compelling closing certain approximately had that for for bringing addition, we those strategy. remain continued the strategy, zone case make tax demand latest to VI $XXX In for Despite million.

We investor capitalize lease also within progress industrial launched investor continued strategy our income with to make growing the to our retail accredited vertical net on segment.

are which as and were partner many As custodians, Pershing several and Schwab the that Newbury has secondaries including our major the hope also same added for liquidity broker-dealer Fidelity, we discussed challenges as with over relationships with drive need well secondaries first dialogue been last for our face in approved iCapital. expand Partners, than time. Capital other slower anticipated, We've quarter, investors as we solutions. independent to raising platform,

the coupled investors, Group, predecessor Client we this vintage on to new Solutions from and with XXXX momentum, traction. Bridge into by re-ups as well expected build this the raise expect interest generating we capital is for originated However,

compelling coupled record at performance, strong relationships, for success cycle the real we in to will our ahead. With years Looking stronger fundraising. opportunities track that, a the Jonathan. outlook, positions call over with This pickup and well fund achieve and of improving the deployment ahead, I market investor in seem turn estate investment that a us beginning new proven favorable presents poised to

we quarter. bottoming real Thank the beginning you, of equilibrium. quarter, morning. Last and discussed through stabilization values and the the good of has built This and Bob, estate price stabilization momentum second

XX% Index For the view. Green real has that in a Commercial has dry quarter from to a reported below commercial situation XXXX, powder. Overall, large average example, over estate estate billion of of deficit been volume wall contrast real beginning been debt X the which and billion average Street's rising $XX either volume. per the remain XX% levels. on volumes months similar an our Property there volumes, year's X transaction which quarter, XXXX. $XX trades, opportunity to estate near-term ripe multifamily, for a values. mature Conditions Within straight stable time subdued years of real are rebound transaction commercial record for set or of the based first real average transaction in years, This sectors, prepandemic in through spell per $XX X just of billion half is average to means in XXXX in years since The has represents other estate-related

the we and are spectrum. a $XXX par. in loan using also of of see multifamily We're proxy the the maturing to as debt wall assets to refinanced volume, be longer to In billion for Again general, can XXXX, at market. addition most market current beginning which maturity these to across come no close pent-up a facing there is in transaction XXXX

over all billion attractive less months, market A increased real in have while broader powder pivot meaningful out activity to markets, this for are commercial but $XXX investor in our played next been continue that expressed and see historically of quarters activity North up remember poised in recoveries it's that to funds cyclical patient estate a anticipate dry estate a over dynamics, long over XX% alongside transaction time important value-add months. Despite resurgence. expecting recent in slower recovery find survey America, in setting equity by volume deploy another We're funds, value excited assets. years, real for XX XX% into debt repriced for opportunities. under not this and CBRE is there activity. We and to teams $XX and Lastly, over in the are have opportunistic investors in which billion

our secondaries, we levels million multifamily, XXXXs. Within on logistics Notably, to basis quarter, equity are that the of the sourced prepandemic seizing XX% early XX%, at XX% widest their underwritten prepandemic with at capital. deployed a of attractive on cost than and During our $XXX prices capitalizing a replacement for of the spreads and has and average properties investments year-to-date were better highly were and, versus XX% team on opportunities, over IRRs peak, number closed XXX%. Likewise, below is since risk nearly [indiscernible] transactions. peak, the unlevered

deal secondaries investors drought been as to the distributions multiyear in to solutions. has from flow equity primary liquidity seek alternative private robust, investments drive Our continues

Partners in Newbury is pipelines well limited over investment counterparty across of seeking Given our our LP-led their to positioned and billion powder are market, long-standing capitalize market. reviving a $X.X the on Bridge active trusted liquidity. With role secondary secondary for dry the partners verticals,

by the On and to ease, evidenced credit have a side, spreads. increasing of meaningful markets tightening continued CMBS capital issuance conditions as

X underlying on year-to-date the capitalized have this is of Fund spreads pricing business, than XX% on Specifically, Bridge for Homes, already of market new our including to year points the participation, in downturn the the Bridge being and leaving market inflation, first loans XX%, core combination financing in construction of which securitized outperformance. recent XXXX, XX.X%. This investors, as recognition in IV. last SFR SFR volume XXX to construction We basis tightened our strong improved were investors of a rates to the November outpace debt with issuance, is competitive to able increase Keep the SFR's for multifamily rates. Despite Bridge in a from securitization our just just BBB- securitization higher XX full issuance conditions costs in execution had continue that and starts new Bridge despite X better compared improving sectors. happened basis second from XXX loan significant Treasury a mind, acquiring operational before to and debt points. We've logistics, lower 'XX, dynamics completed Homes, value in a the market, basis and deficit XX CMBS since lower. points deal with securitization This the was with broad U.S.

in and double-digit XX%, Over X years, the by costs materials surged increases. labor past more construction have than with

not range. pivotal levels are maintains underpins XX% who by As occupancy just growth, dynamics multifamily new are approaching NOI our approximately peak a most levels we X% exceeded values XX%. This reported of buying life-to-date. our by asset average our of blended trough most NOI asset we juxtaposition have Multifamily logistics performance over focus In declining mid-X% the expectation starts trends projections falling Bridge for in XX% our peers up have Value Workforce continues have and our by shift lower first since ahead in in rent In seen first-half construction sets positive X.X% vintages, vintage, The starts opportunity. The starts exceeded net inception. drive a results. result, in supply/demand In XX.X% decade, with operational underwritten effective with public rental sectors. long-term values by growth to and rents healthy, operating a in remain rising property these portfolios portfolio, on these property costs which of as recent and a great our from an X% the single-family Logistics NOI and growth solidly of Bridge's

Now turning performance. to investment

equity market of trends were stabilization. valuations in flat estate Our roughly QX, in the portfolio with line broader real

X.XX dispositions demonstrated with product, results a the our have continued for multiple While a of XX.X% weighted-average sales. demand more multifamily limited, IRR on have year-to-date been and

market in in for potential recovery policy and growth supply ultimate anticipated capitalize this following to forward. transaction opportunity long-term the in These the momentum constructive our over improvements set now property excited liquidity about going turn value to our monetary market dramatic the sectors, improvement With core we're pivot building a and favorable dynamics on correction. I'll our won't Katie. happen poised and overnight, call the and is platform but is

continues to fees, last million, bolstered recurring business from Thank quarter. $XX.X for were operating expenses increased management the earnings other $XXX,XXX, X% quarter. from property approximately to fund be management our X% you, million. stability This Fee-related seasonality. is by of due mostly asset $X.X increasing of to decreased Jonathan. Bridge's million, company last benefit higher $X.X and included Fee-related onetime mostly which attributable income a by which

time. be note, On open-end the XXXX the interest on of performance the lease $X gross we carried for crystalization and basis QX net. million first modeling This for strategy $X.X net revenue expect a to recognize is to to fee-related approximately in our million related expected

The would and will the the with we item updated You outperform within our will its employee cash-based financial line see related definition new performance further a our expenses. Should compensation positive contribution non-GAAP into be the future. within compensation this FRE line to in have consistent FRE measures, hurdle, this integrated industry expect to we convention. fee-related strategy continue in

upon we QX. This upcoming based execute anniversary. deployment, upon invested investors, committed the their term be liquidity. from to this billion drive year is with material funds being our with Bridge's net foundation. Further, based in team's of institutional continue a a Despite decreased specialized mostly and post new AUM testament to been this closed-end of seek address is offerings to the anticipate ability us to there open-ended redemptions, lease quarter the capital fund with a with dynamic duration XXth preferences their stable anticipated during the the in raised X.X supporting III industrial revenue Conversely, ended, funds generally and and quarters. resilience in not XX% $XX notable Fund investment for up decrease, following and a no platform strategies combined our to years, Aligning enhanced in retail investors focus. setting and However, fees ensuring positive needs performance on opportunities to environment. Fee-earning and capital of closed-end QX NAV, to momentum and near funds attractive weighted-average market stability favor prefer by do and growth the from allows capital ongoing of a $XX.X moving its to our these business. investors remains flexibility both management the hitting billion, slight Newbury for for have driven being strategic retail Institutional product success

estate improving. appear real deal the be to market noted, Jonathan As in volumes

take into to from Fee-related closed-end will fees revenue transaction-related However, a time transaction materialize. in be catch-up have funds. and margins should continue to rebound fees lower we closing impacted could capital

capital-raising net last quarter, the expect towards our along our earnings the consisted company earnings, longer-term margins of interest and within lower for and distributions the increase performance normalize, discussed The average items XX%. Distributable mostly see transaction to volumes As of million, realizations was per fees. Similar operating of loss, to expense approximately realized movement with XX% primarily $X.XX, to a $XX.X were DE we tax net performance Debt for by after-tax fee-related due quarter last share strategies. partially quarter. of with lower fee offset from realized within increasing

a through the of $XX gross a ratio noncontrolling subdued. quarter. increased fees company. Net to As reminder, realized the is which stands to Realization $XXX.X this is million, sheet on compared vertical accrued leading operating last balance near revenue expected to XX% million XX%, of for performance to the revenue performance remain at the interest flow in that the term

an for are well would in improving like to acceleration markets. With the the transaction for open we now eventual questions. However, the in context real that, positioned of estate call liquidity I

Instructions] JPMorgan. Ken Worthington, comes line Our with the question [Operator from of first

of dig think this into deployment outlook to about the the for as more year. wanted second I we half

interest a As mentioned you the remarks, market pretty your meaningful prepared in has in decline rates. witnessed

favorable more what's we forward? current look persist ultimately, rates as interest willing So given do look Do cautiousness good Or the to have market quarters to attractive prior level in deployment forward? you expressed dry as are potentially here? we amount deploy outlook of that see you've you of of really for outlook being You as you powder, called out. think day? a also conditions the sell, sellers And does the to as

Jonathan, do to want question? handle you that

green anticipating Ken, think the reasons that Sure. had levels, industrials resurge we and prepandemic make lot we're that the for And think really rates lot and I that which is and rose, what just shoots it, it's our we that point would the at would the moderately But side keep and on not I they there'll anyone think is even think -- that influence talking quickly. remarks sectors, I pipeline certainly the our that reach all pipeline already during be I I about, that in we're multiple start both that And up trades, now. the pipeline we some in of think, kind we're ebullience side. really to longer," had that will think I seeing drop reach pace up. seeing my of to think of I certainly the they're there's of pricing anticipation friends and this soon. we broker a this a starting factors market. But at the relatively in -- but of say heard pipeline our not It relationships, to multifamily accept out people and across you that is all we're are not to "higher again, I picking rate lender be think that -- pick peers recognize out drops, we might the to to of the and the don't

more quick which stability, but actually an more in expect both to improvement, started drivers an an related hopefully, pricing, will attractive pricing transaction just I relatively that we've but the we'd see rates. there competitive a in improvement the to stability So not volumes improvement, be think and debt is and what increase in just

selective And last would that the terms being way in that Ken, just we in were to up of prides add question that acquisitions. on cycle. always and Bridge careful I itself

-- that are this there recent outstanding in up as at a market We expect be fundamentals we've that of well. The estate many, what our executed different them, the real couple cycle many value in recent hopefully across referenced are. have to been The way we done the transactions, Jonathan vehicles. relative to think developing investment are transactions but

performance in capital volume raising So to expected in well. creates be what LPs transaction that the shareholders uptick happy should and as selectivity result happy momentum good on side, coupled an performance. with hopefully Good is creates

Great. the number about articles And housing discussing then decelerating Belt in and there's Sun of oversupply investment multifamily momentum. been a

talk of So about can multifamily your sort what in and there? you're portfolio you seeing

Jonathan?

actually impact we out rent I really to I levels, Belt, and have to the balanced. we're the But growth. seeing growth on to operationally. the demand In even in stability year markets, and coming. And occupancy. continuing still and Sun major supply The continuing supply peak think, to certainly regular we absorption year, resilience but rent into across that's on seeing peaking to allowed say. weathered compared to see next is have, the see we would supply. It's been And this us being strong, way, continue more actually the The see has modest, are rent demand we're compared relative growth We're levels.

for questions Thanks interest. Ken. Thanks, the and

line Our Bill Katz, comes the Cowen. TD question with of next from

of Maybe of sort increasing called the press your in you release, vehicles you just, you're momentum going market spoke the And Bob of that for. a the out number be sort of and in different Jon, to franchise. about of both sort

I was the of terms we're the wondering in for dollars of if in seems Newbury. secondaries. what little us maybe of quantum a counter in on hearing was to in the a the here. And also ahead, It bit wondering help zero could you terms little opportunity I you of if demand just set Looking industry sort could frame

to trying more get platform. just you a when with might start that to traction So understand little

maybe A So second part the more overall little comment for year. specific gross of half next outlook. Newbury's on sales year, of early outlook

Thanks, Bill.

Reinvestment an Act being impact launched Workforce oriented to first towards of independent vintage really we had Housing. seen is evolution Community & a it So of most sector, multifamily in a asset We've think fund, and I Affordable the of in was deploy. general, as capital first class. our meaningful spoke the workforce, about our close particular. and Workforce When that recent we investors viewed bit investors

others undersupply that workforce, out universe workforce, that are point. that of broadened and of market we itself. of cetera, in attractive offer, housing quality residents extraordinarily think fashion, positive think, potential I we we some has which of recession the but since enormous And who offer, for looking and and and the in tenants the community dramatically an et resilience investor services, is

a of there's and it had there. Same We've really a think to in performance fund we've we franchise. closing, prosecute collateral, vehicle raising lot relates as started logistics opportunity the think interest. is and infrastructure, the the flagship great if deal nodes vintages interest that and you capital infrastructure series. of And to lack first So Debt thing successful as And of our value the been of certainly earlier the we're we've in U.S. amount think is I one that continues as some of there. fifth interest. We on where is driving performance multifamily significant of a has focus The -- Jonathan of investments. and value-add finding as mentioned has predecessor terrific office short of our of all exposure vehicles logistics and mentioned will, the an that relative peers drive we to to area a

on we're that. so capitalizing And

to as tried in we be as to As prepared it our relates possible comments. Newbury, precise

an to of investments really a in build is practiced We've portfolio begun established and participant. Newbury. Newbury compelling

Newbury happen well. potential seen legacy and And is strategic the in That's investors what contributed to from in of typically earlier -- the satisfied and the as of overall efforts. to have between Bridge meaningful Asia, in objectives we're LP legacy typically amount a re-ups Newbury stand-alone the Canada point. And between significant we're the to one beginning the We Bridge Bridge of a interest advantages doing has U.S., see breadth of elsewhere, this of East, Newbury that starting Middle by is seen investors. Newbury from transaction at and that market amount in

that had continuing Fund that expect we've that investment see a and Newbury. commensurate and we vehicle first build that's to VI, will are for we momentum respect our are results closing hope what objectives in So with achieve Newbury of and

follow-up. a just then And Okay.

AUM, just accreditation, of the democratization on a maybe your mentioned wondering retail You experience market. with of just retail if credit scale choppy of bit in terms having expand comments you was the of traction platform of little market a on I could in little the in office in then in your the a distribution on comments. and expand terms are just kind for what prepared opportunity just footings, maybe you you products articulated bit where you're

question. again for Thanks the

we this we As investment at competitive the it retail, need order to point. In market one product think in relates vehicles, have to in X you accredited be investor things.

aggregated ] X,XXX Those cetera. And in hopefully, question. advisors, in market, what wirehouse investor You had year, need that that independent the I broker-dealers, different RIAs, financial that pretty of for encompassed all metrics be independent various retail think, our need wirehouses, the exposure appreciation. call that the retail, a lease metrics. And many you net independent component et to think investor performs us, Since wirehouse breadth, We've the cetera. yield, And has distribution. both product when I the We remains. that is And to provides our respects, historically, family investor the relative product is best to et love an to us typically investment to shared. registered retail and compares so-called that accredited That is Bridge's tall. Thanks significant alternatives [ are financial the BIG that it. distribution distribution stands looking real know we in informed we've beginning to component which of about broker-dealers, then for product compelling offices, estate those a absolute by capital include broadened distribution I statistic entities. triple team our significantly for, to dialogues provides had safety, is well, and some with terms the

the with from comes question next Our Instructions] UBS. [Operator of Beatty, line Adam

longer certain to triple cadence going that First, that and maybe the as Katie or the incentive might what of there, whether period performance of lookback period a the of term somewhat crystallization things a current net it's in near kind just was wondering be the time. over product term fee mentioned. normalize it's follow-up incentive She be detailed what But is pretty clear the and episodic. the on fees

you do [indiscernible] that? to Katie, want

related to originally today open-ended months the Adam, take a this that lease fund. crystallization to net fund one. closed-end like first ago, occurred was effectively, Happy X XX were the years launched the was our When product. treated

back all XX the the the period. months was in effectively that crystallization launched. It's in, So a fund went date came capital to X-year first

And in crystallized effectively so to QX period. a goes back carries that that

have months and basis. we'll crystallize will with carry, a limited regular then forward, Going basically it on XX

have that will The period. other REIT be product a XX-month crystallization we launching will

looks we're perhaps kind though valuation. then And a rate benign of would bigger helpful. period. kind Very more Excellent. of It Certainly, as a help. just heading picture, around cuts into

valuation other or peers the on you mentioned to that alluded any experience its and the On kind sellers. either up, sure or more on realized transactions firms? concerns industry. to Bridge have Do based industry put pick have motivated of start somehow has those around broadly as the just other you the both I'm process, own across hand, marks pressure might historical independent but

Do you want Bob? me to get that,

Yes, please.

to say I way, Sure. not expect this distress. broad-based do would we it see

-- to can't par. equity, way, clear, to do lot see of -- borrower the where they either we to transactions start a because they but they to said sell refinance expect have at can't while another still desires So those has

to market and to sell to want case, to refinance go have they capital going get those to are the or they asset In going try bring they and to in asset They're be can. value players. players the that keep either out have best to So the it.

not not they lenders pent-up they're more those right? are they're long be value the to that's things position there will the I as term. distressed doing a -- long seeing assets equity They're X.X realize. been can been competitive attractive emerge demand and on they a competitive sellers. market. The well-heeled; going market back their process. And push that are well think we've go own dynamic rates ticking that competitive and however, who it to aggressive to a because lending in and they're whatever away, assets and more not want are, below lenders come in really are in is that loan not sitting as market both realize have though, time lenders, from as that long that assets those to the not control people ultimately value, in So operate to of own a dynamic of is sideline the meaning, for funds is nothing So kind position to They term, where to

So feel through a the and relatively will a that's going opportunities there case be it in is pricing to way. doesn't There way. flow down where expectation like there. a But drag in values structuring will those the opportunities attractive market material orderly

the dynamic. helps that hopefully, understand So see we how you

you that Thank thus, our gentlemen, call our question-and-answer your interest you. and participation. today. session We for and, Ladies thank concludes concludes and

You may disconnect now your lines.

Thank you, all.