Q1 2022 Bridge Investment Group Holdings Inc Earnings Call
Greetings and welcome to the bridge investment groups first quarter 2022 earnings call and webcast. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Bonnie Rosen head of shareholder Relations you may begin.
Good morning, everyone. We appreciate you joining us for the bridge investment group first quarter 2022 financial results Conference call. Our prepared remarks will include comments from our executive Chairman, Robert Morris, Chief Executive Officer, Jonathan Flickr, and Chief Accounting Officer, Arkady elsewhere, we will hold a Q&A session following that.
Prepared remarks, where we will have Deanna leora, Vice chairman and head of our client solutions group join.
That's a quick housekeeping item. Please note the new format of our supplemental earnings presentation, which is designed to complement our prepared remarks and provide our shareholders and constituencies with comprehensive data and full transparency as always we welcome feedback on our materials and hope you find the new layout helpful.
During the call today, we will discuss certain non-GAAP financial metrics. The 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 Iga Dot com. These slides can be found under the presentation portion of the site along with the first quarter earnings call.
All of that link they are also available live during the webcast. It is now my pleasure to turn the call over to Bob.
Thank you Bonnie.
Excited to announce another solid quarter for bridge momentum through year end 2021 continued and in <unk> 2022 Bridge again produced strong growth across each of our key metrics.
First quarter of 2022 was the best first quarter in our history.
Distributable earnings per share more than doubled year over year to 28 cents a share driven by a healthy combination of management and performance fee revenues across a broad and growing set of fund strategies fee.
<unk> related earnings to the operating company more than tripled to $45 $4 million year over year and fee, earning AUM now stands at $14 7 billion.
Which is up 43% year over year. These results continue the track record of strong and consistent growth bridges delivered for many years as of the end of first quarter, our fee related earnings and AUM had grown at respective compound annual growth rates of 43% and 40% over the past five years.
Jonathan and Katie will give more detail in a moment, but my key takeaway from our first quarter is that bridge continues to execute and scale, our differentiated fundraising and investment approach focused on some of the most attractive sectors within real estate that aggregate to a large and growing total addressable market.
Macroeconomic and geopolitical events are dominating headlines and impacting markets worldwide.
In the context of increased public market volatility higher interest rates and the broad based expectation that rates will continue to rise as the fed raises the fed funds rate and sells investment holdings instead of purchasing additional securities on a monthly basis. We continue to believe that the U S remains an attractive market in which.
To invest and in fact in our view is the pre eminent investment destination globally.
Strong relative economic growth healthy consumer and corporate balance sheets high household formation, low unemployment and high wage growth or just some of the positive characteristics that define the U S economy.
Fiscal and monetary stimulus supported strong growth during the Covid pandemic, but also exacerbated supply side challenges and contributed in part to the elevated levels of inflation across sectors today.
Of course, we are acutely aware of the inflationary pressures buffet in the U S economy currently and the impact of inflation on our investment verticals, especially as we develop new assets and repair and rehabilitate the value add assets that we typically invested we have navigated well through supply chain issues and cost pressure in the past.
Asked and hope we can continue to do so looking forward.
Centralized procurement and careful planning have served our projects well.
In addition, higher rates have affected projected returns for new investments and we've adjusted our acquisition and development pro forma is appropriately we believe that the tailwind across our verticals high household formation strong rent growth strong consumer balance sheets and residential the continuing in dire need for added infrastructure.
<unk> and logistics and the ever present hunt for yield in the fixed income sector counterbalanced many of the macro headwinds.
We have not observed a significant change in the underlying fundamentals for our core real estate investment sectors in the U S and observed tailwind across most if not all of our specialized strategies, while the macro and geopolitical stresses will likely continue our investment strategies have historically remained resilient in a wide range of market outcomes.
Yes.
Bridge recently published our comprehensive 2022 real estate market outlook co authored by Jack Robinson, managing director of research and our various sector heads.
Our views of the current investment environment are summarized by the following observations first the U S remains the preeminent investment destination.
Our areas of focus capital inflows into U S real estate climbed to a record in 2021 of nearly $250 billion and early returns in 2020 to suggest a continuation of these trends.
Housing is critically under supplied particularly for the underserved middle class and workforce cohorts of the U S and will remain under supplied for years to come.
Third the U S has a dire ongoing and substantial need for infrastructure to facilitate the continuing growth of E Commerce and onshoring.
Fourth notwithstanding recent and expected increases in interest rates, there's a global hunt for sustainable yield which is increasingly satisfied by our alternative credit vehicles like those in our debt strategies a M. B S and net lease income strategies with the 10 year Treasury approximating, 3% the opportunity.
To achieve resilient sustainable double digit yields without a huge amount of financial engineering.
And backed by solid real estate collateral is very attractive its ability to provide yield in combination with commercial real estate as an inflation hedge position bridge well in the current environment.
Since our founding bridge is focused on fund raising and investment in markets and properties underpinned by long tail secular demand drivers like the ones I just described.
We have purpose built bridge as a specialized investment manager forward integrated into property management to capture alpha at the asset level as we optimize the value add assets, we acquire or develop.
Our nationwide teams, which now total 1980 people provide us with local nuance and knowledge, which allows us to identify and intimately understand our target market to the asset more than many we acquire assets one at a time.
Our selective in what we buy developed bespoke individual renovation and rehabilitation plans for each asset and aggregate at scale, we don't have to pay a portfolio premium to efficiently deploy over $4 $6 billion per year as we did in 2021, and therefore can deliver best in class performance.
Our outperformance is a key driver to fundraising success, resulting in $1 1 billion of inflows during the quarter, which is typically the slowest quarter of the calendar year.
In <unk> 2021 for example, we raised $175 million, 74% of our investors are repeat investors and 58% of our investors invest across multiple strategies. Additionally, each quarter, we add new investors, both institutional and in retail as our relationships with wire houses.
And local regional and National registered investment advisers expands we added nine new institutional investors in <unk> 2022, and have continued to expand our relationships with global warehouses, Ria's and other wealth managers.
In <unk> 2022, 54% of new funds raised where institutional in nature.
Lastly, we have just begun to scratch the surface of our opportunity to raise international capital with continued momentum from our recent fund raising team expansion in Europe , and Asia, 45% of capital raised in the quarter came from international clients.
In my experience a full calendar for investor meetings is a good sign in our business and thus far in 2022, we are busier than we ever have been across the investor universe and across our real estate verticals next week. For example, our expanded fund raising team we will be actively engaged in meetings in the U S Europe Asia.
And elsewhere with that let me turn the call over to Jonathan to further detail our results and strategy Jonathan.
Thank you Bob and good morning, everyone.
British delivered another strong quarter and we are proud of how broad the success was from fundraising to investment performance integrating our entry into single family rental.
Bridge excelled on all counts.
Over the quarter.
The earning AUM grew 10% sequentially from the prior quarter.
Which is up 43%.
Compared to a year ago, our pipeline for continued growth with both existing and new investors is deep and growing.
Over the first quarter bridge had successful closings in eight funds, including multifamily workforce and affordable housing seniors housing single family rental opportunity zone net lease income yet in agency mortgage backed securities.
We will have our final close in the fourth vintage of our debt strategies fund during Q2.
We had a stronger core Q1 than anticipated.
Primarily to stronger transaction fee activity in connection with Q1 deployment.
And a large multifamily fund five closing ahead of schedule.
This effectively pulls forward some of the revenue and earnings we planned for later in 2022.
Our funds also continued to perform well with realized performance fees totaling $8 9 million.
Which was 37% compared to a year ago. Similarly, unrealized performance fees increased to 148% compared to a year ago.
We've now crossed the milestone achieving over half a billion dollars in unrealized performance fees, providing the potential for a $189 million in future distributable earnings for the operating company.
145% to a year ago.
While we are very pleased with our performance fees I'm. Most proud of the continued track record of growth in our recurring fund management fees, which grew from 36, which grew from $36 7 million to $44 3 million quarter over quarter and from $30 4 million a year ago.
Which represents a 41% compounded annual growth over the last five years.
We also had an active quarter on the transaction side of the business with more than $639 million deployed across all of our funds more.
<unk>, we've continued to deploy into high performing assets and operate them well, providing top quartile performance in fact.
Our multifamily for and our workforce affordable housing one where both ranked number one by frequent at the top performing real estate funds by net IRR for their respective fund sizes across all categories.
Even in the face of geopolitical turmoil.
Inflation and rising interest rates bridge continues to see strong performance in the fundamentals across all of our verticals, but particularly in our residential and logistics vertical.
According to a study commissioned by the National Association of Realtors.
U S housing market has been under built for the past two decades today. They estimate the gas to be at least 5 million units across single family and multifamily product.
In the fourth quarter multifamily absorbed.
Sorption surged 673000 units.
And then double the previous decade's average pushing vacancy to an all time low of two 6% and rents up by 13, 8% year over year in all classes.
Similarly, industrial demand drivers related to e-commerce in the United States continued to accelerate.
According to a study by J O L. U S is expected to grow with E. Commerce revenue by $900 billion in 2025, which would equate to 1 billion square feet of industrial real estate demand.
Before I turn the call over to Katie to review our financials, let me provide an update in our newest on our newest investment strategies first.
In January bridge acquired majority ownership of the management platform of Gorilla Brothers capital, which operates in the attractive single family rental housing market.
We have successfully raised $240 million, including co investment capital and our first single family residential fund.
Conjunction with the launch of that strategy in the first quarter, we have already begun acquiring individual homes small portfolios and expanding built to rent relationships.
Since launching our logistics strategy in November 2021, we've been growing the business and are in a terrific position to invest at scale and through multiple deployment strategy is focused on infill U S Global gateway markets.
Our regional organization structure is in place with boots on the ground in our key target locations and we've deployed or under agreement for approximately $1 $5 billion in logistics assets, which equates to $8 3 million square feet of acquisition and development opportunities we are already seeing the potential.
Scale of this opportunity.
Richard remains well positioned with over 85% of our current AUM in residential related strategies and moving forward the largest growth part of our business is in logistics, which is experiencing unprecedented demand, which is expected to continue for the foreseeable future.
Our specialized vertically integrated teams due diligence process.
Allows us to react dynamically to changes in the market.
Reduced core business is well suited to perform an inflationary times and.
And with our strong operating platform. We believe we can continue to drive alpha for our investors.
As we begin to see the impact of higher interest rates on our market. We have started to see a transition from a sellers market to a buyers market.
Sellers have begun to eliminate weaker buyers from consideration and buyers have become more selective about asset and market.
But bridge remains confident and optimistic about its strong portfolios and the opportunity of the markets are presenting us now over to you Katie.
Thanks, Jonathan and good morning.
The more volatile macroeconomic environment, we achieved strong year over year growth in management and transaction fees fee related earnings investment income and distributable earnings.
And as Bob noted this was the best first quarter in our history as a fundraising platform continued to drive growth in the class.
Of our 2019 profits interest program proved to be accretive to our shareholders.
Our total revenue for the three months ended March 31, 2022 was $104 1 million compared to $58 5 million in the same period for the prior year.
This is primarily due to a 71% increase in fund management fees, which was driven by an increase of 43%.
AUM year over year, and $8 million year over year increase of catch up.
Which will increase our reoccurring fund management.
On an absolute basis catch up fees during the first quarter were $8 4 million, which was mainly due to a larger clothing and our multifamily fund five.
As we mentioned on our last call. We have successfully internalized Fund administration and you will not be a reoccurring revenue stream. As a result, this was $3 6 million in the first quarter and we expect a similar amount each quarter, which could increase over time as we scale. This is driving better reporting of our Altai Lp's, Wisconsin.
Operational efficiencies.
Additionally, our transaction fees are at 313% over the prior year, which is driven by $639 million of deployment during the quarter versus $212 million in Q1, 2021.
The activity must driven by multifamily workforce and affordable housing.
Family rental strategies.
While we had an impressive start to Q1. This amount was still off from the highest in the fourth quarter and as we noted on our last call that support the scene with real estate transactions seasonality.
Well, Jonathan and bought her focus on the opportunities and growth in that business and there's less certain times I want to spend a moment emphasizing the stability of our core business.
We have included additional information about our reoccurring fund management fees, which are up 21% compared to the prior quarter.
These are long duration fees with an average tenure of eight years.
If we turn to investment performance you can see the value that they create a thorough due diligence focusing on value add assets in high growth markets.
Our total investment income for the first quarter increased 232% year over year, driven mostly by unrealized carried interest at $65 9 million and realized carried interest incentive fees of $9 million.
The performance fees were driven by realizations in multifamily and that strategy vertical we.
We now have the half million mark in unrealized carry.
The runway for future performance driven distributable earnings.
Although quarterly realization tasteful vary based upon timing of disposition.
We've also had a significant increase in employee compensation and benefits year over year, which was largely due to our increase in investment professionals and corporate employee head count related to aircraft in total AUM a niche strategy.
This includes the addition of our single family rental platform, which is partially reflected in Q1 with the acquisition at the end of January .
Additionally, during the first quarter, we incurred over 1 million costs related to being a public company, which we did not incur in 2021.
Overall, it was a strong quarter with GAAP net income to the operating company of $97 5 million versus $40 7 million in the prior year and our GAAP earnings per share was 35 cents.
Our total analyses for the quarter increased to 106% over last year to $74 7 million driven by strong growth in our contractually reoccurring fund management powered by the continued num golf or.
Our transaction fee growth was also strong as previously discussed.
I don't know if the related revenues grew by 110% over last year's quarter.
Quarter at $84 5 million.
Performance was driven by continued strong fundraising theme.
Growth and effective deployment.
As we've said many times, we believe our vertical integration drives.
The results for all piece as long term savings.
This integration also results in our transaction fees and that earnings from property operators, becoming an extension of our fund management fees.
Based upon the growth in our fee I mean are you in an elevated deployment during the quarter. We once again generated strong fee related margins of 54%.
This was also higher than expected due to the larger clubs on the multifamily side, which called for an additional fee, including catch up fees.
These margins include extensive there for our vertical integration and property management function.
Our margins will vary quarter by quarter, and as we indicated last quarter the building and scaling of our new strategy can have an impact on these ratios.
Total fee related earnings to the operating company was an impressive $45 4 million up 238% compared to the first quarter last year.
This includes the impact of the class of 2019 profits interest or not.
14 million shares.
Additionally, there was a positive impact from the remaining noncontrolling interest in the amount of 100, approximately 150000 digital off and the newer verticals as they built to scale.
Lastly, our pretax distributable earnings to the operating company for the quarter were $47 9 million.
83% compared to a year ago on a pro forma basis.
After tax distributable earnings per share increased to 133% to <unk> 28 per cent per share compared to trough since a year ago on a pro forma basis.
This was driven by all of the components of our business with details, including a strong fee, earning AUM growth fee related earnings and realized performance allocations.
Rich declared a dividend of <unk> 26 cents per share in line with our goal to distribute essentially all of our distributable earnings to our shareholders.
In closing despite rising interest rates and inflation, we believe that we are well positioned with our strong balance sheet carefully curated investment sectors and growing long duration fee, earning AUM.
Finally, I want to end by thanking our investors for their support of the company and all of our employees, who worked tirelessly to be best in class with that I will turn the call back to the operator, so we can take your questions.
At this time well be conducting a question and answer session.
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One moment, please while we poll for questions.
Our first question is from Michael Cyprus with Morgan Stanley . Please proceed with your question.
Hey, good morning, Thanks for taking the question here wanted to circle back on the retail platform that you guys have clearly a lot of.
Of your AUM already embedded in the retail channel, but I believe a lot of it sold to <unk>. So I was hoping you could talk a little bit about the.
The products on your road map that can help broaden access to the mass affluent space within retail maybe you could talk a little bit about what this requires from a distribution organization standpoint, as you think about pushing those sort of products out to a wider audience and how youre thinking about this opportunity and the timeframe there. Thank you.
Thanks, Michael for your question. This is Bob more speaking and I'll address that.
You are correct in saying that we have a really strong position with wire houses, we do business with with most of the major wire houses, perhaps and hopefully soon all of the major warehouses in the U S.
Operating offering our funds at.
At the $250000 and above level of commitment so qualified purchasers in that respect and our funds. We think have a broad appeal to that part of the market generally speaking high yield really good returns leading returns for as Jonathan said for.
For many of our funds and so a good track record and a good brand in the in the in the.
The retail market at that ultra high net worth level, if you will we've been.
As we've messaged before actively exploring opportunities to to market to the more mass affluent part of the market as well our early discussions have indicated that it should be.
A seamless transition there are structural.
And organizational elements that have to be put in place too.
To be able to offer an effective.
Structure and vehicle.
That would be both.
Both are appropriate for the mass affluent market and attractive.
We think that we invest in some if not all of the really attractive areas within U S real estate and believe that as and when we launch a retail vehicle, we could do so with a with a differentiated.
The structure and differentiated investment thesis that would that would help to really define the bridge advantage in that area.
The retail space is.
Although it is highly competitive at this point and there are a lot of entrance. It's underpenetrated in a lot of respects. So it's one of the areas that we have we have a great deal of focus on at this point, we don't have a particular timetable that that that we.
We can share at this point, but it's an area of focus for us.
Great and just a follow up question if I could just on fund raising we're hearing some <unk>.
Concerns around Crowdedness and congestion in the institutional fund raising market I'm, just curious to hear your perspectives around that to what extent are you seeing any sort of impact there in the marketplace what impact that might have as you kind of roll forward from here over the next couple of months and how the broader macro environment inflation geopolitical.
<unk> may impact the ability to raise capital and maybe you could just update us on sort of some of the strategies that you still have in the marketplace that you are raising here and what your perspective is on the timeframe for those races. Thank you.
Thanks, Thanks, again for that call and question and I'll take a first crack at that as well.
It's it's it's fantastic that the world is reopening and that people are taking meetings and we're able to get out and meet people.
<unk> is a not a not a new participant but a.
At eight a participant in the markets, where we're creating new relationships on an ongoing basis and it's harder to create new relationships by zoom not impossible as we showed last year and.
And it's easier to create new relationships. When you can show up we have an extraordinarily busy capital raising calendar as we look forward I mentioned in my prepared remarks, we have senior teams of people, who are who are literally all over the world as well as the U S. Over the course of the coming month, and that's that's sort of the norm.
At this point as we as as we reach out and we.
We continue to expand our investor base on the institutional side as well as on the retail side. So we think we have some wind at our backs at this point, we have some strategies that we that have been very well received in the market and are continuing to show a great deal of <unk>.
Actual notwithstanding the volatility in the public markets at this 0.1 of the one of the values, we think of investing in U S real estate and particularly one of the values of investing in often value add U S. Real estate is that the current environment is supportive of the fundamentals for for <unk>.
U S real estate.
Able to drive alpha at the asset level in terms of being able to offer yield debt, that's competitive and in many respects inflation protected at this point. So there is some tailwind around the strategies that we have we are continuing to market our fifth multifamily fund with.
With great effect, where we're completing the marketing of our second workforce and affordable housing fund critical given the dire need for for affordable housing in the U S and the great way in which we offer quality housing and community and social programming.
For our residents were.
We're marketing.
Our single family for rent fourth vehicle and that's been that's been well received as well we have a logistics value add offering we have a net lease offering.
We're just completing successfully are for debt strategies fund than we have.
And we have a very competitive fund in.
In <unk>.
Agency mortgage backed securities as well.
A long list, but each one of those is really attractive I think we're really excited as well.
On the slightly more opportunistic side.
We're seeing great traction in both our seniors housing fund three and soon to be launched office fund III as well. So a lot of specialized offerings that cover what we think are some of the most attractive parts of U S real estate that specialization.
Which perhaps makes for a complicated menu of offerings that specialization I think we've shown in the past really drives superior returns, particularly when coupled with the forward integration Thats a integral part of our strategy.
Great. Thanks, so much.
Thank you.
Our next question is from Finian O'shea with Wells Fargo. Please proceed with your question.
Okay.
Hi, everyone. Good morning.
I think you just touched on some of this.
The previous question, but was key.
Curious if you could expand on.
The market in real time, the turbulence we're seeing.
As it impacts market volume.
For for what Youre seeing in your pipeline are.
Are they.
Cap rates and pricing changing and as the volume changing.
As you look forward.
Jonathan do you want to handle that question.
Sure.
And thanks for the question.
It's interesting I think you heard in my prepared remarks that we're definitely seeing some things shift and the wins and one of the things that we are seeing is.
The the let's call it less well heeled investment investors and market participants.
Or are starting to lose ground.
So.
Sellers are no longer.
As focused on getting call. It the last dollar out of the investment and more focused on.
Surety of close and execution when Theyre looking at transactions.
I think that we're starting to see a little bit of a shift toward more a little bit more of a buyer's market I'm, sorry, a little bit more a little bit more of a buyer's market a sellers market is still attractive.
Attractive assets are still getting great play and there is still lots of energy around them.
We are seeing.
A little let's call it.
Being able to acquire things on more traditional term freight where we were seeing times win.
You wanted to buy an attractive asset you had to put up a lot of non refundable money and close very quickly we're starting to see this.
Go back to more normal due diligence periods of more normal terms, but again there is there is such a deep.
If you think about the secular demand for most of the sectors, especially multifamily and industrial.
We haven't seen.
The transaction volume get significantly lower we have had seen some sellers say, maybe I'm going to wait a little bit longer but the deal flow right now that we're seeing is pretty robust.
The differences, we're seeing a lot less competitors.
On the acquisition side.
And we're in the midst of doing several dispositions.
And we're still seeing really attractive pricing on those.
I wouldn't I would say that kind of overall.
There is a bit of a wind shift, though so that's kind of how I would describe that.
Period, when and again one of the things that's happened is.
There is more I would say when you look at the underwriting for these investments there's more emphasis on the growth that we're seeing in rents and in revenues.
Have tremendous rent lag because of this supply demand imbalance.
And less a little bit less cash flow because interest rates have moved up and so some of some as cap rates continue to stay relatively low and interest short term interest rates move up a little bit more we're seeing a little less cash flow, but we're still seeing a lot of growth. So.
Still attractive I would say risk adjusted returns in this sector and still I think a solid amount of.
Investment capital from well heeled institutional and private investors.
Great. That's helpful. Thank you and just general.
Small follow up you mentioned.
A couple of times, you're very constructive on.
Logistics can you can you talk about the the.
Amazon comments that seem to throw.
I was hoping you would ask about those.
Yes.
Everybody is focused on Amazon.
Dominate our universe.
What's interesting is.
I think you've seen this response.
Multiple players that are extremely focused in the sector.
There is so much demand I think the overall view is that.
There is there is still <unk>.
Mass of shifts taking place.
Two.
Online and digital and as we see that shift take place and we are and we're behind the curve relative to places like the U K and China and a lot of places in the world. We haven't nearly have the penetration that those places have.
And I don't know anyone who doesn't see that trend continuing in terms of that penetration and that consumed a lot of industrial real estate.
Think the estimate over the next few years like 1 billion square feet of industrial real estate. So it's a lot of it's actually might be a $1 billion a house, even if the big it's a big amount of demand and not all of that demand is from Amazon. So the other thing that's happening is as you saw the supply chain scare from most re.
Retailers, they've all decided that.
They're going to need to hold a little bit more inventory to make sure that they are prepared in the event of a supply chain interruptions, which.
I think even today, given what's going on in China, and everything people are very concerned with right. So when they can get inventory theyre getting inventory that they know they're going to need which means there is an increase in the demand for warehousing space. So again across all of what we call logistics.
The demand just continues to be good.
Greater than the supply and Amazon, although very important player, they're not they're not saying, they're not going to participate anymore. They're just saying we're going to slowdown the insane right of growth that we had before and we're going to take a little bit of a b before we kind of start doing a lot more.
And I don't think most of the participants in the market are super concerned.
Great. Thanks, so much.
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Our next question is from Ken Worthington with Jpmorgan. Please proceed with your question.
Hi, good morning.
Wed love to dig into the outlook for transaction revenue and transaction volumes, so with inflation equity and credit market volatility how do you see levels of.
Activity that drive these transaction revenues over the next few quarters.
You mentioned a couple of times this migration from a sellers market to a buyers market.
Will that have an impact and then maybe lastly, the transaction fee revenue seemed robust to me given the sort of the level of of deployed equity. So I assume there was something maybe on mix here either on due diligence fees or mortgage brokerage fees.
That drove but at least we thought was high transaction revenue.
Given deployment, so what what's happening in the mix there.
Jonathan.
Yeah.
Im happy to see I'm going to have Katy do the second part of the question.
And I'm going to do that I'll do the first part of the question about kind of volumes and candidly I think I said it in my remarks.
Our investment team we're.
We're getting candidly a little bit concerned about.
I don't know what the right term is that the overall energy in the market and we were we were passing on a lot of transactions that we love because we felt like.
The numbers just weren't making sense.
And we were holding to what we thought was the right value for the asset.
We used to be back in the days of fund III, we call it call ourselves the greatest rebounder in the league, which meant that a lot of deal passes by went to a high better and then came back to us.
It looks like a rebounding skills are getting put to work again now we're starting to see transactions were.
More aggressive players are just not able to execute and they're even walking away from.
Relatively sizable amount of fundable deposits because they are financing is just coming in below where they wanted it to and they are just.
They're having to tap out.
And we're able to hold values in the levels, where we think they make more sense and starting to see things. So I think right now we look at this and say we're not expecting.
And acceleration of our transaction volume, but we are expecting to be able to continue to deploy and we're actually very excited about at least the opportunity set that we're seeing.
The pricing that we're seeing in that opportunity set.
Most of our portfolio. So our teams I think remain confident I'm going to let Katy address the mix piece here and a lot of the development fees that we recorded during Q1 were related to write about that fund and so there is.
As part of the revenue mix in the transaction.
Yes. Thank you.
As part of the transaction fees. There is a revenue recognition criteria, where a portion of its differed and so about 75% is related to those.
Kind of what Youre seeing is a spillover effectively exactly related to our opportunities funds.
That makes sense.
Yep Yep, that's great. Okay. Thank you and then I think you guys touched on this but not not directly in terms of funds.
That are going to commence fund raising.
And and make their way into fee paying AUM in the next two quarters like what are the the new funds for new vintages that are going to start to ramp up here.
And.
Calendar <unk> calendar <unk>.
That we should make sure we're aware of.
Thanks, Ken.
Remember we have two open ended funds net lease income and agency mortgage backed securities. So they are in the market and available on an ongoing basis to investors and so those will will will remain as as open ended offerings for us both focused on <unk>.
Hi, and resilient current income to investors.
We we are are at.
The.
Stage, where we will launch our logistics value add fund two to.
To follow on the very significant.
SMA.
That we that we announced with with Townsend earlier in this year and so that fund is is launching imminently.
Number one we are at the.
At the point, where we're about to pull the trigger on our office fund three with some with some early momentum in that fund.
We are in the early stages of.
Of marketing our single family for rent fund denominated funds for that builds on the prior track record of Gorilla Brothers, we've had.
First founders class closing for that for that fund debt at about $250 million and we're actively marketing that fund as well so those are the.
And Jonathan or acuity correct me if I've missed anything those are the those are the funds that we have.
Have have on the on the docket as new entrants.
We're finalizing the final closes in the in the either second quarter or third quarter four.
For debt strategies fund, four and workforce and affordable housing fund to those those successful fund.
<unk> will have their final close in the second quarter for that in the third quarter for workforce and affordable housing two respectively.
So that's.
That's really the that's really the docket as as it is.
I don't know did you mentioned follow on for <unk> of course.
No. Thank you Jonathan for.
For adding that we have a successful series of opportunities zone tax motivated.
Investment funds.
Two in 2019, one and 2021 and 2021 and we've we've launched opportunity Zone fund five earlier this year that we'll be raising capital through I think November of this year. The last fund was was sized at about $1 $5 billion of equity.
This fund has a $1 billion target the opportunity zone funds broadly speaking invest predominantly in built to core very needed multifamily with a significant.
Component of workforce and affordable housing.
In selected opportunity zones around the country.
And I think to date, we have circa.
The developments that we're pursuing.
In those opportunities zones around the country. The the earliest projects in fund one after up after a construction period our R. R.
Entering.
Some of them and more to follow our entering the lease up period and.
And those those developments have basically been characterized by a tough environment in which to develop but through which we have successfully navigated and stronger than certainly pro forma Ed.
Lease up and rental rates and.
And leasing velocity, so we feel pretty good about those those funds as well.
Awesome. Thank you so much.
Our next question is a follow up from Michael Cyprus with Morgan Stanley . Please proceed with your question.
Alright, thanks for taking the follow up question here I'd just be curious to hear your latest thoughts on M&A and just how is the current market backdrop impacting the number of deals that are crossing your desk could maybe you could talk a little bit about how private valuations have evolved given the pullback in public valuations have seller expectations adjusted enough.
And just maybe more broadly what sort of acquisition opportunities would you guys be looking at and make the most sense I think in the past you've mentioned, our European platform, possibly or even infrastructure. Thank you.
Thanks, Mike well, that's a that's a big and complex question that that encompasses a lot of things I I I'd like to think that we are aware of many if not most of the opportunities that that are available in the market there appears to be.
A continuing desire of private.
Alternative asset investment managers to consider M&A, whether it be for growth, whether it be for transition and succession or just access to infrastructure or capital raising capabilities et cetera. So I think that theres, a theres a continuation.
<unk>.
Of of enthusiasm to to consider M&A.
Across the markets.
I think that that everybody recognizes.
That values have come down at least temporarily.
In line with with public markets look at our results and look at our stock price versus the versus what our stock price was that at the at the end of the year I think somebody sent some some information.
<unk> to US a couple of days ago that of the.
Our class of 2021 Ipos. The average IPO in 2021 is down like 60% or so don't take that as golf ball, but it's been a it's been a tough public market and we think that those valuations have translated to the private market as well, what's most important to us.
Is finding opportunities that fit well with our strategy looking forward and remember we've grown we've grown by acquisition 8-K, a gorilla brothers and we've grown by seeding teams as we've done in <unk>.
Lease income as we've done in logistics value add most recently, but as we've done throughout our history.
As.
As we look at opportunities going forward.
We think continuing to focus on real estate is a is a good focus.
We we we think that that being cognizant of opportunities to expand.
I believe you asked earlier into the mass affluent retail.
Is potentially attractive if there was the right opportunity.
We have a long stated.
Initiatives to find an opportunity to participate in the core plus side of the business, maybe core core and core plus side of the business.
I think given what's happening in Europe today, there's there's an interest, but it's perhaps a bit more of an academic interest.
Day, then that then a tangible interest and we'll see how things develop there as well.
And I think it's I think the other thing I would I would characterize about us as a company and our operating philosophy.
As we as we.
<unk> grown either through acquisition or as we've grown by bringing on teams of people they've learned a lot from us and how we do business. We've learned a lot from them and how they have done business and do business either at their former firms are in there in their <unk>.
<unk> going forward and I think that bridge today is a really strong and powerful aggregation.
Best practices from a number of other.
Sure.
Of the of the business as we bought come together and put on the same jerseys and get on the field together. So we think that we think that that M&A should be and hopefully will be an important part of our growth going forward, we want to be very deliberate and very strategic in what we do.
We think that bridge represents a great.
Platform for others to sort.
Manifest what what they can do and I think that that is reflected in a lot of the inquiry, both outbound and inbound that we that we see today.
Great. Thanks for taking my follow up thank.
Thank you.
We have reached the end of the question and answer session and I will now turn the call over to Robert Morris for closing remarks.
Thank you operator.
Two to everybody who participated with US today. Thanks for thanks for your time and attention.
We're delighted to be able to announce strong results for the for the first quarter.
We as a management team that is going to come and as a company. We continue to work very hard.
In this environment to progress our businesses going forward. We're encouraged we're encouraged by a lot of the opportunities that we see both on the capital raising side as well as on the deployment side.
We continue to invest in our company one of the things that we didn't really mentioned today was the successful conversion to in House Fund administration, which which took place as of January 1st of this year and that's a that's a big deal for us as well, we think we will be able to.
To provide.
Comprehensive and transparent communications to our investors at a at a better price and lower cost and we and we think that Thats representative of.
Some of the continued evolution of bridge as well. So we look forward to our continued dialogue and again. Thank you for your participation.
Bye Bye. This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Yes.
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Goodbye.
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