Q4 2021 Bridge Investment Group Holdings Inc Earnings Call
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Ladies and gentlemen, please continue to hold will be getting started momentarily. Once again. Please continue to hold we will be getting started momentarily. We do thank you for your patience.
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Hello, and welcome to the bridge investment group fourth quarter and full year 2021 earnings call and webcast. At this time all participants are in a listen only mode.
<unk> and answer session will follow the formal presentation. If anyone should require operator assistance. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded its now my pleasure to turn the call over to Bonnie Rosen Investor Relations. Please go ahead.
Good morning, everyone I'm Barney Rosen, we appreciate you joining us for bridge investment group's fourth quarter and full year 2021 financial results Conference call. Our prepared remarks will include comments from our executive Chairman, Robert Morris, British Chief Executive Officer, Jonathan Slaker, Vice Chairman, Dana Lira, and our chiefs.
Accounting officer, and soon to be CFO , Katie open that we will hold a Q&A session. Following the prepared remarks from our leaders.
During the call today, we will reference slides highlighting key points of discussion as well as certain non-GAAP financial metrics. A reconciliation of the non-GAAP metrics are provided in the appendix of our supplemental slides the supplemental materials are accessible on our IR website at IR Dot bridge I G Dot com.
These slides can be found under the events and presentations portion of the site along with the fourth quarter and full year earnings call, but definitely they are also available live during the webcast.
It is now my pleasure to turn the call over to Robert.
Thank you Bonnie and let me be the first to publicly welcome you to bridge your impressive IR and real estate experience will undoubtedly augment our shareholder communications as we continue to share the bridge story.
2021 was a watershed year for our company as you can see on slide five our financial results for the year achieved records across most key performance indicators.
Jonathan and Katie will review our financial results in more detail. So I will be brief here.
A second set of data metrics show over 50% growth across both our fee related earnings and distributable earnings this year over year growth reflects the upward trajectory of our company. The continued expansion of our mature strategies, the launch of new and exciting verticals and the inorganic expansion into.
The sectors of U S real estate as you will see our structure and purpose built organization has delivered outstanding returns, which performance has powered additional capital commitments from existing and new investors.
Please turn to slide six.
Our successful IPO in July 2021 was a catalyst for bridge in so many ways visibility and profile enhancement, which is translated to record capital raising across both retail and institutional platforms strong and continuing dialogue with our shareholders and an enhanced competitive profile.
As an attractive consolidator in the selected verticals in which we have an interest to expand it is also worth noting that of the 270 plus ipos in 2021. The average return through year end was negative 4%. In contrast bridge ended the year, 56% above our initial offer.
Price, making our company the 26th best performing IPO in the U S. Thank you to all who made this possible.
The IPO amplified our ability to leverage our expertise and differentiated investment approach in new and adjacent verticals. We've communicated some of the areas of interest in the past.
And we completed the acquisition of <unk> brothers and gold property management as of January 30, <unk> to create what we believe will be one of the most competitive participants in the large growing and still nascent single family rental sector.
In a short period of time, we feel validated in our decision to bring bridge public and are excited about the wide opportunity set and potential for continued growth in 2022 and beyond.
Before we talk about the future let me quickly summarize what we believe are impressive results for 2021.
First rich raised $5 billion of capital in 2021, Dean will provide more detail, but from my perspective. The most impressive aspect of the capital raise is how broad based it was both by Investor type and fund strategy. We have grown our client solutions group organization, we have dramatically expanded our stable of.
Institutional investors, we have expanded the wire house platforms, with whom we do business and we have deep penetration across the spectrum of sovereign wealth funds pension plans, the insurance sector endowments and foundations and family offices.
First of all we are only scratching the surface notwithstanding the record capital raising results for 2021, our pipeline is as strong as ever all <unk> members are traveling again, we currently have in person meetings confirmed with the literal who's who of institutional investors and we've substantially <unk>.
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Moving down the page investing capital at scale, both selectively and without sacrificing strategy or returns is critical in 2021 bridge deployed a record $4 6 billion, which is able to do this do to our purpose built structure our focus on the U S on selected prime growth.
Markets within the U S.
Our specialized investment teams oriented towards the most high growth sectors of U S real estate.
And our investment in and commitment to forward integration to generate alpha at the asset level.
Not only does deep knowledge of our assets and markets drive Alpha for fund investors, but it also allows us to be nimble in markets without marginalizing, our differentiated and proven diligence.
And the same concept also applies to fund realizations were in 2021, we realized $1 $3 billion, which netted over $83 million in realized performance fees first and foremost we're thrilled to add to our track record of performance for our fund investors, but similarly, we believe our platform.
To drive both AUM growth and scaled investment and realizations of those funds offer a compelling value engine for our shareholders. In addition, our unrealized accrued carry which Jonathan will discuss further has increased to $440 million demonstrating the pipeline for future performance driven.
Distributable earnings is significant.
Lastly.
We are proud to say that bridge got stronger as a company with key additions to our talented team of professionals and two the continued evolution of our funds management infrastructure. After several years of hard work, we expect to complete both suk won an sop two audits and have internalized Fund administration, which we believe will allow us to be.
More accurate and more responsive.
If we turn to slide seven I'll wrap up my comments on 2021 by framing them against our history as.
As we noted on the IPO Roadshow, we believe bridges unique approach to forward integration in property management and our focus on carefully selected commercial real estate sectors positions us very well to replicate strong and steady growth for years to come.
As you can see here the foundation of our most visible earnings streams has grown at an impressive rate over the past five years, including 2021 to five year compound average growth rates of our gross AUM and our fee paying revenues are 41% and 30% respectively.
We believe the drivers of these key performance indicators have only become stronger in the past year for bridge. Many of our legacy fund strategies continue to rank in the top quartile or vertical integration continues to drive alpha and synergy across strategies and broadened the investment opportunity set available to bridge.
If we turn to slide eight let's talk a little bit about 2022 and beyond with our view of the environment and how we're structured to succeed.
The backdrop for institutional investment in commercial real estate remains robust according to <unk>, while the average institutional investor remains underweight commercial real estate as an asset class.
Another way the average investor has a target allocation of 10, 7% compared to current investment mix of just nine 3% for reference. These small percentages represent very big dollars each percentage point of allocation shift represents approximately $134 billion.
We believe this trend will likely accelerate given the global search for yield in commercial real estates natural inflation hedge, especially in property sectors that we focus on like residential and logistics.
Altogether. These factors provide a strong foundation for liquid commercial real estate markets in the coming years and our platform is well positioned.
Next I'd like to speak to how bridge succeeds in what is a competitive commercial real estate investment market. As you May know 2021 was an incredibly active year for asset transactions. According to real capital analytics total U S commercial real estate transaction volumes were $840 billion.
Nearly doubled 2000, twenty's total and exceeded the previous record of $600 billion in 2019 and impressive 42% of the volume transacted in the fourth quarter alone due to the typical seasonality of the business.
In markets that are liquid and competitive it's hard to overstate how important our approach is to our fund performance. We have purposely constructed fund strategies investment teams focused on real estate markets with the best and most durable secular demand drivers specifically bridges overweight the U S residential.
Market because of the chronic under supply of housing in the country since the great financial crisis, we are focused on logistics and infrastructure and on multiple strategies that offer high yielding returns in both open end and closed end structures and our opportunity zone vertical was recently ranked number one out.
613 opportunity fund vehicles that have been offered.
This is important context, especially when considered against our performance track record.
British does not drive alpha by participating in markets. The same way that the broader her does bridge instead is structured to drive better returns with superior local knowledge of markets faster speed to market and a full set of capabilities across the capital stack to finance our investments.
Our property management and development capabilities also survey distinct advantage.
Our ability to source and execute value add or redevelopment investments the value add market is inherently less competitive and as a result bridge wins often it.
It is for these reasons that our fund performance has been strong as you can see on slide nine we are equally excited about our prospects and our new strategies in logistics net lease income.
Single family for rent opportunity Zone development and agency MBS.
We published our inaugural firm wide ESG report last spring and we will release, our second annual ESG report later this quarter as a United Nations P. R. I signatory bridge completed its first P. R. I report submission in 2021 for our equity strategies are.
<unk> to sustainability reporting also included two first time grads be reporting submissions for the bridge workforce and affordable housing fund and the bridge office fun too rich became a supporter of the task force on climate related financial disclosures as well as completed a Tc FD maturity assessment in 2020.
One in early 'twenty, two we launched a dedicated climate change task force comprised of senior leadership.
Over the course of 2021, our diversity equity and inclusion committee and passionate advocates drove companywide programming that supported diverse hiring and retention.
Education and awareness building a firm wide diversity assessment and the launch of six additional employee resource groups or <unk>. Richard was also a leader in the real estate industry and recognizing juneteenth as a paid company holiday. We are also thrilled to share that 55 bridge owned commercial.
Office buildings earned the highly acclaimed well health safety rating in early 2022, and example of our commitment to implement evidenced based strategies that support the overall wellness of our properties.
Furthermore, the bridge workforce and affordable housing strategy received multiple awards in 2021, including Best ESG Fund in private equity by ESG investing social funded the year by environmental Finance and ESG private market strategy of the year by pension bridge.
Before I turn the call to Jonathan.
I just like to reiterate the importance we place in serving all of our stakeholders. As I noted we are proud of the returns we drive for our shareholders and fund investors, but we also view the value we create for our employees partners and those that occupy our properties as imperative to our strategy and success, whether it be our commitment to investment.
In alternative energy, such as solar or through our work with employee resource groups. We are proud of the difference that bridge makes every day and with that let me turn the call to Jonathan Thank you, Bob and good to speak to you all again.
<unk> had a great fourth quarter, which is a perfect way to cap off a momentous year for our company as.
As you can see on slide 12 richest total revenues for the fourth quarter grew 50% over the same quarter last year to $107 million. This is our highest quarter on record and notably three of our top five highest quarters had been reported in the last year.
Our investment income of $148 million was nearly double the same period a year ago for context, this exceeded last quarter by nearly 75%.
Similarly, net income of $166 million was up 79% year over year.
The related earnings for the quarter increased 57% over the same quarter last year to $36 million.
This growth has been driven by record deployment combined with record capital racing.
Our realized performance fees for Q4 totaled $10 million, but most impressively our unrealized of crude carrier grew to $440 million.
In line with Bob's comments on bridges strategic advantages. This performance is both from bridge being in the right sectors as well as our outperformance in these sectors driven by our unique approach to our in house management.
Distributable earnings of $39 million for the quarter increased 12% from the same period in 2020.
All of this helped drive impressive results for the full year of 2021.
Total revenue increased 42% from 2000 $20 million to $330 million realized performance fees of 83, 4 million were up 97% and unrealized carry a $440 million, which represents approximately $164 million of future distributable earnings to the company.
Turning to slide 13, you.
You can see in these graphs the tremendous growth I just for kids.
I'd like to give some color on the drivers of these metrics relative to the business strategy and capabilities. We spoke about at the top of the call.
Our fee, earning AUM grew 31% in 2020 one largely.
By Outstanding LP capital, raising and deployment over the year.
And as you can see in the lower right distributable earnings grew by 57%.
Dean will speak to our capital raising in a minute, but it is important to understand is that bridge continues to be able to scale, both in capital raising and deployment, while seeking top quartile returns.
We believe bridge has a significant strategic advantage because we have local knowledge from our boots on the ground and our in house management of our assets at a national scale.
Helps our investment teams.
These strategic advantages are really what drive returns and earnings for bridge shareholders that you see on the remaining three charts on this page.
Each of them New records for our company.
One thing I will highlight is that there is seasonality to our business, particularly as it relates to first quarter of each year, historically richest generated less than 15% of its annual fee related earnings from Q1, and nearly two thirds of the fee related earnings have come in the last two quarters in 2021.
66% of our fee related earnings came from our last two quarters.
Katie will elaborate on this but we would expect a similar pattern in 2022, where our earnings are stronger in the back half of the year.
On slide 14, we can see the visibility and during.
Duration of bridges fee streams.
Over the past five years richest fee related revenues have grown at a compounded annual growth rate of 30%.
More importantly, the growth of our recurring fund management fees has increased by a compounded annual growth rate of 44% over that same period.
As noted the macroeconomic demand drivers related to the shortage of residential housing logistics real estate combined with the deep and growing demand for commercial real estate exposure among institutional investors gives us confidence that growth will continue.
Specifically the trend towards more open and capital longer duration funds.
Combined with larger vehicles, and new strategies single strong visibility into more durable and stable fee related revenue streams.
In the fourth quarter capital commitments had an average duration of 10 eight years and as you can see on the chart on the right as of year end over 76% of our fee, earning AUM at a duration over five years and we increased our weighted average duration of our fee, earning AUM from seven two years.
In 2028 years at the end of 2021 in total a deep market with strong demand drivers and long dated capital is a powerful backdrop for our model and we are excited about what lies ahead.
Turning to slide 15, I'll take a minute on our performance fees for the quarter.
As mentioned, we generated $10 3 million over Q4 that was driven mainly by realizations in multifamily and that strategy.
As we've noted in the past realization of performance fees vary substantially from quarter to quarter, but the market conditions were strong in both Q4 and the full year of 2021.
Rising interest rates and inflation have not materially impacted commercial real estate pricing or cap rates.
Instead, we are seeing demand tailwind for assets like residential and rent residential rental and logistics that had been so strong that we continue to see values rise in cap rates compress.
As we introduced last quarter, we believe the best view of our performance pipeline can be seen in our accrued performance allocation.
We've updated the on the upper right of this page and you can see that the market remains very strong as evidenced by a 46% increase in that accrual to $440 million.
Timing of realization of these performance fees will vary but at the bottom right. We present unrealized performance allocation by fund vintage while the majority is in funds that are less than four years old nearly 22% are nearing their seventh year, which is a typical seasoning or the realizations.
The trend for larger longer duration funds combined with our ability to scale deployment presents a strong backdrop for performance fees to continue on a strong growth pattern.
As previously noted we have approximately $164 million of potential future distributable earnings to the operating company on the balance sheet.
Turning to slide 16.
It is my pleasure to present, an exciting new growth driver for bridge and the single family rental sector.
As you likely saw we announced the launch of single family residential strategy, along with the majority acquisition of the management platform of Gorilla Brothers capital.
In partnership with the Prince principals of Gorilla, which can execute against another investment class with significant secular demand drivers as we mentioned the chronic under supply of housing in the U S has driven our focus in the multifamily housing space for years of rich well.
While homebuilding has increased it continues to lag and in many ways has widened the affordability gap for many first time homebuyers. Additionally, demographic tailwind or young Americans, beginning families and creating households is still in its early years.
We also believe that the single family residential sector offers a broad addressable market with lower institutional competition.
Our local approach, which we believe can be highly effective will succeed in this area.
For context, the market for institutionally managed single family rental housing has grown substantially in the past decade, but remains highly fragmented and only 2% institutionally owned.
Better yet our new partners from Gorilla share, our passion and belief that value is driven through operations and they are experienced vertically integrated operators of single family residential so they bring breadth and capabilities that fit very well with bridges model and will be synergistic to our existing portfolio and.
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On page 17, you can see bridge now has a significant presence across all residential for rent asset classes that cover the full cycle and can leverage our market knowledge and tenant base across the country.
Including our single family residential investments and operations as well as our other existing sectors.
This portfolio currently includes over 47000 multifamily units with another almost 20000 under construction and the opportunities on the platform.
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The other program.
So what's the value to our residents.
To our shareholders with that let me turn the call to Dean to give you the highlights of a very successful year of capital raising at bridge.
Thank you Jonathan as Bob and Jonathan mentioned, it was a great year for bridges fundraising arm, we raised $5 billion in LP capital reached over $1 billion more than our previous peak in 2019.
Our success was partially aided by the strong market backdrop that bought detail that said, we believe bridge benefited most from the continued evolution of our next generation fund as.
As well as the launch brand new vertical strategy 2021.
And total bridge launch for funds in 2021 with two being next generation fund.
Typical fund two is generally raised two times the amount of capital from fun one.
It dovetails on Jonathan's last page bridge had a successful first investor closing of our single first single family for rent bonds at a size of $240 million to acquire an existing portfolio in connection with the launch of our single family for rent strategy in January 2022.
Before I speak to the pipeline demand it's worth repeating this fundraising success that we had in 2021 2021 is closely related to.
Advantages that Bob and Jonathan noted.
We're just still too fast with better information at scale in commercial real estate as a result, we can deploy Catholic efficiently and drive better returns. So as it turns in truck or to attract and retain our investors, which helps bridge marketing new investors and launched new strategies.
It really is symbiotic and as a result, we.
We've built a very efficient flywheel, largely because we control each function.
As for outpacing your distribution network and pipeline first on note that bridge is making great early strides to expand internationally.
Over the course of 2021, we've hired key personnel and our clients. This trip with a specific focus on generating incremental investors in Asia.
We added capabilities in Luxembourg, better sure European investors for context, the institutional Investor universe outside of U S has largely been untapped vibration storage.
And given our ability to scale, we are very excited about the potential in the years ahead and have already put a strong number up in 2021 with over 27% of our capital being raised internationally.
Lastly, turning to the man I believe Bob covered it well in his remarks, but from our seat is very clear, especially in light of recent inflation figures that investors from wire houses the largest institutional investors in the world are all seeking to commit capital to alternative and specifically commercial real estate is increasingly rapid rate asking.
Paired to historical allocation.
As Bob mentioned performance our funds led to successful next generation fund raising and scale in our growth.
Current post Covid environment has April the expanded team to get back on the road with key domestic international and best you mean, including with sovereign wealth funds pension plans insurance investors family offices and warehouses desire for meeting specific to our follow on funds in multifamily workforce portable as well as new offerings in single family.
From rent logistics and net lease has enabled us to forge new L. P relationships and expand our existing L. P firming, our ability to cross sell and all across all investor types.
This has also proved out in the fourth quarter as due diligence meetings were at all time high across all of our offerings with further acceleration during meetings. This year. This increase in industrial due diligence along with our continued strong returns per well with a broadening and more global Investor Universe. These conditions.
These conditions make for a compelling fundraising dynamic 2022 and the years ahead.
Before I turn the call to Katie.
I just like to highlight one figure on this page, which we think summarize the scalability of our model well. If you look at the charts here with $2 1 billion deployed in fourth quarter was not just a record for the company or is it a secret that eclipses every quarter fundraised in our history. This past one.
The internal process and this deployment of capital starts with our top down approach to prime growth markets with underlying supply demand imbalances are teams literally see thousands of assets that are reviewed and curated down to a select few that match our ability to drive value.
This process is embedded throughout the organization with Formula one their approvals and our weekly investment management Committee meetings.
As Bob and Jonathan said bridges uniquely well built to execute a significant scale with that I will turn the call over to Katy.
Thank you Dean I'll start on slides 22, and 'twenty three.
As everyone has noted it was a record breaking year and quarter for periods related to our capital raising and deployment.
As I walk you through our GAAP financial statements and non-GAAP metrics, you will see the impact of the execution on our financial performance.
I don't know if we focus on our fourth quarter results for purposes of this presentation.
Our total revenue for the three months ended December 31, 2021 was $107 3 million compared to $71 7 million in the same period for the prior year.
This is due to a 55% increase in fund management fees, which is primarily due to an increase of 31%.
AUM year over year, and $5 2 million of catch up piece, which will increase the high reoccurring fund management fees.
On an absolute basis catch up fees during the quarter were $13 3 million.
Additionally, our transaction fees are up 70% over the prior year, which is driven by $2 $1 billion of deployment during the quarter rich.
<unk> continues to trend very strong in the final quarter of the year with 33% of our revenue coming in the fourth quarter consistent with the seasonality that we historically observed within the commercial real estate space.
We want to highlight for analysts and investors that the first quarter of any year tends to be slower from a volume perspective and as a result, we would expect a step down in our transaction based fees.
In the first quarter of 2022 from the Q4 2021 level.
If we turn to investment performance you can see the value that's been created through our due diligence.
Cushing on value add assets in high growth markets. Our total investment income for the fourth quarter increased 87% year over year, driven mostly by unrealized carry carried interest at $137 6 million offset by lower realized carried interest and incentive fees of $10 3 million versus $28 5 million in the prior period.
Okay.
As Jonathan and Bob spoke to previously the runway for future performance driven distributable earnings as significant while the quarterly realization pace will vary based upon timing.
We also have a corresponding increase in play compensation and benefits, which is largely due to an increase in our investment professionals and corporate employee head count related to our increase in fee, earning AUM in the strategy.
Additionally, during the fourth quarter, we incurred approximately $1 million in costs related to being a public company and approximately $1 million of transaction costs related to that acquisition.
Overall, it was a strong quarter with GAAP net income to the operating company.
$5 8 million versus $92 5 million in the prior year and our earnings per share with 50%.
Next onto our non-GAAP measures turning to slide 23. Please.
First our total fund level fees for the quarter grew at 61% over last year to $81 6 million driven by strong growth in our contractually reoccurring management powered by the continued AUM growth.
Our transaction fee growth was also very strong as previously discussed.
Total fee related revenues grew by 63% over last year to end the quarter at $87 million.
Performance was driven by continued strong fundraising.
AUM growth and the effective deployment.
As you have heard many times already we believe that this performance is driven in large part by a vertical integration, we drive value in our ability to make direct change at the operating level that could create alignment through a common vision with the entire team and the stacks without deployment acquisition and through our operations or the funds assets.
This allows for transaction fees and that earnings from property operators to be an extension of our financing.
Based upon the graph.
AUM and elevated deployment during the quarter, we once again generated strong fee related margins of 57% for the fourth quarter and 55% for the year.
This will vary quarter to quarter. However, on an annual basis, our margins have risen over time and we are optimistic that they will continue to increase as we scale.
This strong growth in Pes show total fee related earnings to the operating company of $35 5 million up 57% compared to the fourth quarter last year.
As previously mentioned realized performance incentive fees for the fourth quarter totaled $10 3 million.
Performance fees were driven by realizations in the multifamily industry vertical.
Lastly, our distributable earnings for the quarter were $38 7 million or 12% higher compared to a year ago on a pro forma basis, and an impressive $134 6 million for the full year 2021, an increase of 57% year over year.
Turning to slide 24, our pretax distributable earnings for the fourth quarter to the operating company totaled $38 7 million or <unk> 35 per share up 12% compared to a year ago on a pro forma basis, driven by all of the components of our business with details, including our shop.
Growth fee related earnings and realized performance allocation.
As you saw from our earnings release spreads also declared a dividend of 21 cents per share the share count includes the collapse of the 2019 profits interest program on January one at 14 million units as well the 2022 restricted awards of $2 2 million shares and 694000 operating company.
And it's related to the acquisition of the SSR platform.
We have laid this out for you on slide 33, the collapse of the 2019 profit interests was accretive to public shareholders. The D E to the operating company for the fourth quarter and year end would have been eight and 19 times higher per share respectively on a pro forma basis.
Class a diesel grants that had occurred on January 1st 2021.
As the 2019 conference the largest portion of the profits interest income allocated to noncontrolling interests decreased significantly. Although we will continue to break this out in the MD&A just plus we're going for it.
Finally, I would like to now the Brits continues to have significant available capital relatively low debt among other opportunities to deploy our capital and grow our business. We're excited to announce that since I'm. The last time, we have made $21 million of commitments directly into our funds, which are public shareholders can hear directly in the value creation of these fun.
With that I will turn the call back to the operator, so we can take your questions.
Thank you, we'll now be conducting a question and answer session and people like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. We ask you. Please ask one question and one follow up then return to the queue. Once again Thats star one to be placed in the question queue and please ask one question.
And one follow up then return to the queue. Our first question today is coming from Bill Katz from Citigroup. Your line is now live.
Okay. Thank you very much good morning, everyone and appreciate you taking the questions maybe if we could sort of.
Zero in on the retail opportunity to me. If you can just give us a snapshot of what kind of volume you got from the from the retail channel in the fourth quarter with one more in.
On one hand, it seems like a tremendous amount of momentum with new products on the other hand, it seems to be rising competition can you talk a little bit about how you sort of see your positioning as you look into 'twenty two thank you.
Thanks, Bill for the question I'll make a couple of comments. This is Bob speaking and then turn things over to Dean to detail some of the press.
Precise volumes Youre right in your assessment the retail.
Interest in real estate is very high continues to be very high I think premised on the fact that real estate provides a good yield as an investment the returns have been very strong.
The tax profile of an investment in real estate is very favorable relative to many different investment alternatives. So we see strong continuing demand.
As a as you know bridge has a number of relationships with a variety of warehouse distribution platforms across the U S as well as internationally.
We've expanded those networks over the course of 2021 and in particular in the in the fourth quarter and we continue to see really great promise there.
Our our overall retail focus is further supplemented and augmented by the fact that we have a strong direct family office and high net worth and ultra high net worth.
Coverage effort that's directed.
Individually by our client solutions group within bridge as well so a lot of a lot of momentum.
A lot of demand going forward Dean do you want to.
Detail.
It's a little more specifics what what we've raised from the retail channel.
Oh, Yeah, it's pretty substantial last year I think if you include bill retail as well as family office High net worth found.
Foundation, which some of that plays together.
On the warehouse side too because theres, because somebody's got base cuddle.
That sector as well.
A doubt.
<unk> a good call it.
3 billion or so three of our 5 billion came from that channel overall.
So it's been good to us I'd I'd also comment.
As we've gone to 2022 here.
We are now.
Sure.
We're doing multiple products across multiple.
Across the board with the warehouse in particular, so we've been able to not only do you know.
Deepen our.
Are going to have probably cross the wire houses, but now we're having multiple products across multiple warehouses to sell.
So it really has been kind of.
<unk> got to oversell, here's all of it but it's been great we've been able to.
Whether it be opportunity zones workforce housing and multifamily five.
Discussions about other products, where we're sort of queuing up up and the way that the warehouses, particularly the way. It works is you sort of you got to you got to kind of fight for your slots for lack of a better way to put it and.
It feels like we're probably getting more than our share at this point in time, I hope I can keep saying that until future quarters and years, but it feels pretty good overall.
Okay terrific and just as a follow up.
I apologize you usually give us some some signaling on this can you sort of go through the seasonality of the platform just from an FRE perspective, maybe level set.
Exit pace or entry pace for both base management fees as well as maybe expenses as you look to the first quarter. How are we supposed to think about the sort of the pacing of that as we look out for the full year I'm certainly appreciate higher margins here and you guys want to make sure I have it right on sort of a quarter quarter basis. Thank you.
Jonathan do you want to you want to address that.
Sure.
Yeah, I mean, I think that we've always guided you guys about margin.
They are variable and I think we had a we had a strong margin core we had a strong margin quarter and year this year.
Our margins historically have been kind of in that call it 50% range.
And long term, that's kind of the range that we expect them to be and so.
Think that we have with them.
Again various products.
That drive different margins, but most importantly, its really about the timing of catch up fees and when we actually.
See those see those fees for various closed end funds because as you know I think one of the other important thing. This year is that we have we have a huge amount of growth in our company. So we were really excited because we've launched.
The logistics value team that that's.
Going to generate a huge amount of.
Highly profitable business for us going forward, but right now we've invested in a really large team. It is scaled we're deploying significant amounts of capital raising significant amounts of capital, but where in that ramp up so it's kind of a startup right now.
For 2022, we expect it to be sort of a drag on our overall earnings.
Single family for rent.
And even though we're launching with really good momentum same thing we were building that platform and that's going to scale really substantially so and even even some of our <unk>.
Less new but still newer strategy logistics that weighs a MBS all of which in 2022 are really gaining significant momentum as is.
As Bob and team can address on both the capital raising side and on the deployment side.
But that that that's going to indicate some lower margins I think the other the other thing that everyone everyone for 2022.
The other thing that we talk about is is.
Just the way the bridge has always been that including 2021, where where our margins are our total.
FRE is heavily back end weighted and so we expect to see that again.
Part of that is again the momentum we're actually building in those because new new strategies that I've. Just described so we're really excited I think we're heading in the direction that we had had originally.
Focus to everybody.
But 2022.
It's going to be a building year I think it's still very profitable, but a building year.
Thank you.
Thank you. Our next question is coming from Ken Worthington from Jpmorgan. Your line is now live.
Hi, Thank you good morning.
Wanted to further flush out the acquisition of garlic and get a number of details around that transaction.
Maybe part of that is how do the economics of FFS S that far for work you know whats the target size fee rate pharmacy structure, just give us. Some some details about that that I think probably flagship fund for them and then in terms of the economics of Korlym.
Can you tell us what fee paying AUM ended the year and what sort of fee rate rate, we should expect on their business.
Their fee paying AUM going forward and I guess you hinted at the margins are lower.
Score with making money should we expect that to be you know a little drag or a big drag so anyway all of that wrapped into a question on korlym.
Sure. Thank you. Thank you for the inquiry there remember we closed that transaction on January 31 of this year. So.
No 2021 impact it'll be a 2022.
And as we indicated in our.
Press release at the time of the closing we acquired 60% of the operating platform Gorilla brothers, and we recapitalized and approximately $660 million portfolio of about 2750 homes plus minus.
As a as part of that transaction.
Doing that we that recapitalization we.
Launched the fourth fund on the Gorilla platform.
We brought in about 200 in <unk>.
30 million plus minus of equity capital to.
Both capitalized at recapitalization as well as provide some dry powder to continue to grow the.
The single family for rent portfolio, we have a great pipeline.
Of activities, there's been there's been a flurry of early activity, which we think will continue as we integrate the gorilla like brothers team and approach and platform with our extent multifamily and other resident.
Joe.
Both investment and operating platform, we had a we had a really productive series of meetings in.
In our offices to identify areas of overlap identify areas of coordination and efficiency.
And in fact, the CIO Gorilla is is with the team in New York today.
Meeting with some investors as well so lots of activity, there and and and the activity is.
Is is quite robust in a lot of respects, where we're really excited about the the outlook for the single family for rent business.
As Jonathan stated, it's up it's just a nascent business from an institutional perspective.
We think that bridge in combination with Gorilla now named bridge homes.
Has a.
As a highly differentiated competitive profile, particularly because of the 1000 plus.
<unk> that we have on the on the operating side in multifamily, which translates so directly to just single family for rent. So we think we will offer a really competitive profile in terms of both growing the portfolio.
And cost effectively and efficiently managing the portfolios, we're raising up where.
Our objective is to raise a 10 year closed end fund our.
Our capital objective for equity is is about $1 billion.
We had a strong first closing to two effect that net and a lot of dialogue going forward.
Fees and other.
Revenues related to <unk>.
Growing and managing a single family for rent portfolio are somewhat commensurate with what they are for multifamily depending on the size of the investment we charge a management fee and a performance incentive fee along.
Along with various ancillary property management fees et cetera that are there.
That debt.
For services that bridge provides.
Okay and is this the only garlic vertical are there other growth verticals.
So what it go or like sort of end the year at so like I see what you've raised did they have any other fee paying AUN outside of the money that was just raised in <unk> and <unk>.
They have a they they they they have a modest legacy business.
With with with a couple of earlier.
<unk> portfolios that are still being being managed and operated.
The economics of the vertical if you will or are pretty directly dependent on what our activities are going forward.
Sense and follow up on Bill's question, maybe said differently compensation was $31 million in <unk>.
You did talk about the seasonality of activity seasonality.
You know as a business.
Of the $31 million and for Q, what part of that should we think as being a recurring as we start <unk> thier shall we think about you know <unk> starting at $31 million as part of that you know it was a great year and cash bonuses were big and therefore, we reset lower for <unk>.
<unk>.
Anyway just.
I need some help.
What our starting point is as we start the new year for comp.
So I think I think Jonathan can provide or Katie can provide some more detail.
I would maybe start off by saying that you know of course.
Our business is highly dependent on attracting retaining and attracting and retaining great people to to execute on the on the business model.
We are we pay semi annual bonuses and one of those semiannual period ends at the at the end of the year. So so there is some lumpiness in compensation going forward. We think we think that bridge is is a great employer, we've been we've been able to.
And retain some sand.
Retain a great number of.
Fantastic people and weeds.
We detailed the hiring that we did.
Over the course of 2021 as well. So we think we're entering 2022 with a very fulsome team very capable there are of course wage pressures throughout the industry and we're not immune to that but but we think we're growing well.
Growing revenues well in excess of how we're growing expenses Jonathan.
Jonathan do you want to you don't have any other details on.
I'm going to let Clayton jump on that one okay, Bob Sarah and just to give you a little bit more specific guidance you know a lot of our key hires to take place in Q4. So we would anticipate that there for Q1, it would be relatively consistent with what you saw for Q4.
Okay. Thank you.
Thank you. Our next question is coming from Michael I think the one thing sorry, Terry but with the one thing to note probably is that we brought on the gorilla platform right. So the <unk> platform.
We'll be later.
Layered in to what you what youre going to see rate for Q1.
Even with a sapphire it should be relatively okay.
We're still good okay.
Thank you. Your next question is coming from Michael Cyprus from Morgan Stanley . Your line is now bye.
Oh, Hey, good morning, and thanks for taking my question I wanted to circle back to some of the newer adjacent strategies with logistics. Natalie said industrial was hoping you could update us on the progress there the build out of head count where are you guys still hiring there talk about some of the initiatives and where you stand today in terms of AUR and how the fundraising is progressing with those newer strategies. Thank you.
Sure.
We're really excited about what we're doing in logistics as well as in net lease income.
Over the course of 2021, we went through a substantial team building.
In both of those areas and we think we field fully capable and very competitive teams.
Across our costs across both of those sectors.
<unk> made an announcement about a.
Joint venture with <unk> with the Townsend organization to invest in.
A number of logistics value add properties, we anticipate launching formerly our logistics value add fund later this year, we have a couple of other.
Corollary initiatives to deploy capital into what is a really attractive space across the logistics value add side of the business.
And and as as we detailed in the past logistics today represents a pretty small percentage of our overall business, but we think it has enormous growth prospects going forward the.
The amount of both institutional and retail interest in logistics is running very very high.
The team that we've assembled brings literally decades of successful investing experience to that to that sector on the on the net lease side.
We view the.
Our net lease business, which has a legit logistics and distribution primary orientation to it as a great opportunity to offer tax advantaged yield oriented products to to investors and so it fits so well with what we're doing on the real estate back.
First income side on the agency mortgage backed security side.
With an open ended fund format for.
For a net lease income that.
That gives investors a exposure to yield with the with the confidence of collateral that hopefully will be rising in value over the lifetime of the hold there.
We've had a couple of closings in that in that vertical we continue to have a lot of dialogue around the net lease opportunity and and we have some ambitious targets for for the rest of the year as we as we continue to invest in and grow that.
Vertical.
Great and just a quick follow up on the new senior living co investment ventures that you guys announced with steps down maybe you could just talk a little bit about your aspirations, there and what the economics could look like.
Rich.
Yeah.
Seniors housing is a is really one of the components of our overall suite of residential strategies. We are we feel coming at coming out of the pandemic that seniors housing is poised to perform very well.
The Covid Lockdowns, we're not we're not particularly kind to seniors housing there was a significant diminution in occupancy just given that the front door was closed end up in the back door was open in some respects, where we see what I think we'd characterize as record levels of.
<unk> of inquiry, and tours, and and and and expected growth in the occupancy as well as rents going forward.
The the.
SMA that we announced with step stone is a complement to our fund strategy, where in the market with seniors housing fund III.
Following the successful deployment of capital in funds, one and two.
We think that we think that the.
Macroeconomics around seniors housing are strong like they are in multifamily a growing cohort of 75 year old plus potential residents. The amount of activity is quite high and there is at least as we know as far as we know no other firm that.
Is as well positioned as we are in terms of having an integrated.
Both investment team as well as property management team to deliver great service and value and comfort to the to the seniors housing residents and and their loved ones.
So so we believe that the step stone SMA will help to accelerate the growth of exposure for bridge in that sector a lot sitting alongside the fund.
Great. Thanks, so much.
Thanks for the question.
Thank you. Our next question is coming from Adam Beatty from UBS. Your line is now live.
Alright. Good morning, Thank you for taking my questions.
Want to ask about the mix of fund raising the momentum is obviously quite strong results were great last year and you mentioned that you know maybe three out of the 5 billion raised was sort of retail and adjacent I. Appreciate the point about endowments and others going through like wire house that phase do you expect that sort of mid.
Or proportion to remain similar to this year I know you're expanding internationally you know maybe there's a different mix overseas or what have you, but just wanted to get your thoughts on sort of institutional versus retail and the mix of future fundraising. Thank you.
Dean.
Yeah.
I'd say, it's going to.
International institutional is going to increase we've got some deep dialogues going.
Further then the dialogue at this point in time with notable institutions I would anticipate you know on our target. This year that we maybe get to 40 plus percent I would think.
Because of these dialogues very chunky.
Both.
Mexicali and internationally right now so I would think that would swing.
Yeah. These two still rank overall still a very strong presence overall, we have different goals for this year versus last year as we grow but I would think we're going to definitely go up from 30% to just because of the chunk of nature in EMEA Korea.
In particular as well as well dialogues in North America, we're having today with what you.
You saw your next Townsend steps down you can sort of piecing together kind of whats coming together across the offerings here.
Great.
You know what's interesting is 2021 was a was a transitional year there were a lot of particularly institutional investors, who who still weren't taking meetings with with people. We think that that's changing at this point.
The expanded client solutions group team that we have as far as I can tell.
Today is just one data point, there's almost nobody in the office and there's nobody in the office because everybody's out seeing clients.
Potential investors at this point so the level of activity is really really ratchet it up in a lot of respects.
The amount of dialogue in person meetings has ratcheted up as well as a relatively newer entrants in the market that's really important for us.
Because so often we are not the incumbent we're we're we're winning based on how we performed based on what our.
Our R R.
The value proposition is going forward and so being able to have a robust often in person dialogue around that is important so we have some.
Some meaningful enthusiasm for 2022 in a in a revitalized environment.
That's perfect no a great sense of the kind of a trajectory in the pipeline that I really appreciate that.
And then just to kind of zoom out you know in a similar area I guess, where I was captivated by the statistic around.
You know allocation actual versus target of $10 seven versus 9.3, I just wanted to get your sense, maybe Bob over time, you know, how you've seen that changed as the target actually going up.
The gap closing or just or just persisting a little bit and then where you know in terms of segments. Maybe you see the greatest opportunity you know gap versus versus you know target versus actual thank you.
We had a we.
We had a a couple of data points in our prepared remarks.
That in the interest of time, we deleted and we probably should note, but I think that that target allocation has has risen every year since 2013.
If memory serves me well and real estate.
State as an investment asset for a long time has been hit has been.
Your allocated debt is projected by people, who who know about these things to continue to go up.
As a percentage of overall allocations I think real estate as an asset class has performed very well also particularly for taxable investors and there are some taxable and some tax exempt investors.
The tax efficiency of real estate is really strong as well. So so we have a.
Bullish outlook for.
For what allocations will be going forward.
That's great really appreciate that maybe I can convince our bonnie to send over that draft. Thanks very much.
Good luck with that.
Thank you. Our next question is coming from Finian O'shea from Wells Fargo. Your line is now live.
Okay.
Hi, everyone. Good morning.
Back to the topic of inflation understanding that's a positive on demand.
For demand for your products and strategies.
Meaningful are the portfolio headwinds with cost inputs. For example, when we think about value add strategies senior housing and <unk>.
Even generally on traditional multifamily any color you can provide.
Jonathan.
Uh huh.
Okay.
Okay, just making sure I'm off mute can you hear me.
Got it.
Yes.
So just can.
Can you clarify the question you're concerned about or your question is related to headwinds related to the costs that have moved up the expense and.
Call it construction or replacement cost is that the question.
Well, yes, a lot of your strategies seem to have have more more opex.
Stuff that's value add stuff like senior housing with a lot of labor input if you see that yeah sure.
Yes, Okay now I think I understand the question, yes, I mean theres no question that.
<unk>.
We'll take senior since you grab that one I mean seniors I think.
In a brief moment.
Sure.
To be the most challenging right because labor costs have gone up for everything everywhere.
Think bridges House view is that's a good thing for the world. So we're pretty constructive about people getting paid what they're worth it essential workers, so but that being said, it's going to take because Bob alluded to are not alluded to but outright stated that.
During the pandemic the back door was open in the front door was closed so we lost a lot of occupancy we've gained back a good portion of that.
But but until we start to get back to a point, where our occupancies are are pushing the nineties.
It's going to be difficult to do a lot with rate in terms of cost.
And pass through some of those extra expenses so.
I think our teams have done an amazing job. That's one of the great things about being operationally vertically integrated is we've been able to drive some amazing cost savings and really make up for a lot of that ground in operational efficiencies and use of technology, but that being said, it's going to take a little while till we kind of get get to the point where.
Sure.
At three balanced, but because of the strength as we like to call. It the silver tsunami and what we know the demand is going to be for the needs based housing. We provide we're very optimistic that will happen on the multifamily side, it's a whole other story because the.
The revenue growth has been so strong because of the supply demand imbalance.
That debt.
That debt.
The topline is is just if you take 100% of the expenses and a typical multifamily. The revenue is two times the expense. So if they are both growing at the exact same rate that's great for your NOI right and the components of the expenses that are growing.
And there is a heavy component about of of payroll that payroll really in the world of expenses of multifamily is a relatively smaller one proper.
Property taxes are for example, significantly higher but there are a lot of expenses that are moving up on the expense side. It's just the revenue is just by far outpacing the revenue growth is outpacing the expense growth and it's already as we said two times larger so it actually margins are really good forecast.
Or operationally for multifamily and frankly same story with single family residential all of this bodes I think extremely well as far as construction costs.
And in development of multifamily <unk> cost relative to rehab a renovation of our units those are going up but again.
The value that you can drive is also going up so so the return on investment continues to be stronger I mean, we've looked at since we have like 20000 units under construction or opportunity zone funds and we've had some as you can well imagine when you underwrote those deals prepaying debt.
We've had some cost overruns, but when we look at the revised pro forma with very conservative revenue projections are return on investment and our stabilized cap rate on costs keep going up.
So overall, it's been it's been constructive.
Obviously, I think we'd all like to see the rate of everything kind of.
Slow down to a more manageable pace, but but so far so good in terms of how it's working in our world.
That's very helpful. Thanks, so much.
Thank you we reached end of our question and answer session I would like to turn the floor back over to Mr. Morris for any further closing comments.
Great. Thank you. Thank you all for joining us today.
On this call. We are we hope that we adequately communicated the momentum that we experienced in the fourth quarter, our positive outlook for 2022, I think as somebody said.
We do work in a competitive environment, we think that bridge is built to succeed in that competitive real estate investment environment. We continued.
To invest in our organization, we continue to invest in our people and.
And we continue to deliver really strong returns for our fund investors.
With those principles in mind, we hope that we can outperform in the public markets as well. Thank you all for your interest and we look forward to a continued dialogue.
Have a great day.
Thank you that does conclude today's teleconference and webcast you may disconnect your lines at this time.
Right.
Thank you for your participation today.
So budd.