Q3 2023 Bridge Investment Group Holdings Inc Earnings Call
Greetings and welcome to be break investment groups, three Q23 earnings call and webcast. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation, if anyone should require operator assistance.
The conference. Please press Star zero on your telephone keypad as a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Bonnie Rosen head of shareholder relations. Thank you Bonnie you May proceed.
Good morning, everyone welcome to the bridge investment Group Conference call to review, our third quarter 2023 financial results.
Prepared remarks include comments from our executive Chairman, Robert Morris, Chief Executive Officer, Jonathan Flanker, and Chief Financial Officer, Katie help them, we will hold a Q&A session. Following the prepared remarks.
I'd like to remind you that today's call may include forward looking statements, which are uncertain and outside the firm's control and may differ materially from actual results. We do not undertake any duty to update these statements for a discussion of some of the risks that could affect results. Please see the risk factors section of our Form 10-K during the.
Our call. We will also 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 I G dotcom.
These slides can be found on their nose under the presentation portion of the site along with the third quarter earnings call about link. They are also available live during the webcast.
I will put that are GAAP metrics, and Katie will review and analyze our non-GAAP data, we reported a GAAP net loss to the company for the third quarter of 2023 of $17 9 million on a basic and diluted basis net loss attributable to bridge per share of class a common stock was four cents mostly.
Due to changes in noncash items distributable earnings of the operating company were $48 million or 22 cents per share after tax and our board of directors declared a dividend of 17 cents per share, which will be paid to shareholders of record as of December 1st. It is now my pleasure to turn the call over to Bob.
Thank you Bonnie and good morning to all.
On a macro perspective, the third quarter of 2023 was volatile impacted by a number of cross currents.
On the positive side robust U S GDP growth highlighting the strength and resilience of the American economy.
<unk> growth accelerated to an annualized 4.9% in the quarter.
The U S labor market remains strong with high wage growth low unemployment and growing labor force participation.
These factors have bolstered consumer income and spending in particular wage growth has been high for the lower and middle income cohort of the working population. The part of the income band, which serves in much of a leading residential rental investments, while we know wage gains are decelerating relative to their prior peak day.
It remained strong at above 5% year over year, which are levels well above prior cyclical averages.
In addition, the U S manufacturing sector has been revitalized by globalization re shoring and new U S manufacturing tax incentives from the chips and other government stimulus broadly stated and informed by two weeks of international travel recently to meet existing bridge L. P. As in Asia.
In the Middle East the U S remains a preeminent investment destination.
In addition to strong growth of the overall economy and household income inflation metrics have decelerate, perhaps the most meaningful measure is core CPI minus shelter inflation, which is 1.95% year over year compared to the peak in February last year at 762%.
This has created the conditions for an extended pause in interest rate hikes.
A reduction in rates looking forward.
In our view the confluence of all these factors is supportive of the case for interest rate increases to at least pause.
And possibly remained higher for longer while the U S economy continues to show strength.
With the fastest tightening cycle in recent decades commercial real estate values in the U S have reset over the last 18 months and now are at levels, which we believe represents an attractive entry point.
This increase in cap rates has created unique opportunities across many of our strategies.
We firmly believe that 2024 represents an excellent vintage in which to invest at a reward for the patients. We have shown for much of 2023, particularly in our real estate equity strategies.
One buys as important as is where and at what valuation.
We believe residential rental a core area for bridge is poised to outperform housing prices are at an all time high measured by the case Shiller home price index and combined with a higher mortgage rate environment. Many households are finding it difficult to access the home ownership market.
The most recent census data emphasize at this point.
The 1 million, new renter households were formed last year compared to $4 4 million for them between 2011 and 2019.
This is a historic amount of new venture demand.
At the same time, we are appropriately focus on what we see as a short term surge in housing supply.
We also acknowledge we are in a far different environment than in previous cycles estimates from Fannie Mae as an example suggests that there is a shortfall of four to 5 million housing units today.
With high construction costs and tight credit conditions, we anticipate more shortages or default.
The residential rental we see the ability to capture value in today's market and capitalize on the growth driven by the demographic tailwind and long term fundamentals by taking advantage of the 2022 2023, he set in values and potential balance sheet distress.
In real estate credit investors are benefiting from the increase in base rates and spreads creating compelling all in current yields.
Amid tightening credit conditions, we note that an increasing number of banks have exceeded their commercial real estate concentration limits, which is sidelining, many conventional lenders with less competition from banks, particularly in regional and local banks, we see this not only as a broader opportunity set but also the <unk>.
<unk> to build lending relationships with new high quality borrowers with high quality assets.
You are active lenders, we believe this translates to the ability to structure loans with attractive terms at lower leverage points, a great opportunity from a risk adjusted perspective.
Logistics real estate strategies continued to see strong demand tail winds from the combination of growth in E Commerce, Kishore your manufacturing and retailers supply chain reconfiguration.
Supply chain resilience is further driving demand for novel logistics solutions, creating opportunities in both coastal gateway and intermodal markets initiatives like chips Act have incentivize advanced manufacturing, including battery technology in semiconductors, leading to a rise in real estate investments supporting such industrial.
Activity.
Each of these factors highlight the need for logistics infrastructure across the U S over the next decade.
Despite some near term supply issues in certain markets. We continue to see an under supply relative to demand in the infill gateway markets, where we invest which continues to drive rent growth and opportunity.
Our private equity secondaries business offer similar opportunity. The overall secondaries market is growing as private markets become increasingly dynamic and complex driving LP demand for sophisticated liquidity solutions.
Global private equity market has raised more than one six trillion dollars of new capital commitments over the past 36 months.
This surge in primary investment commitments, along with a significant decrease in exit activity and distributions.
Create significant opportunities for the secondary market in the coming years.
We're just team recently launched capital raising and deployment on it six vintage following a 15 year track record of success.
We have deployed meaningful capital across these four core strategies at attractive targeted returns and see increased opportunity ahead.
At actual rental logistics credit and secondaries represent approximately 95% of our fee, earning AUM and should continue to drive value as our platform continues to grow.
On the capital raising from the current macro backdrop is also impacting how investors allocate capital across the industry.
The reset of valuation parameters reluctance on the part of owners to sell assets during volatile times and general market uncertainty to get contributed to a slower capital raising environment, particularly for commercial.
Real estate equity strategies.
However.
Significant repricing and a recognition of the compelling demand side are starting to capture more attention and we see capital beginning to focus on 2024 allocations to take advantage of dislocated price it.
Against this cautionary backdrop, which raised $303 million of new capital during the third quarter across our investment vehicles, including new incremental capital as part of the recapitalization of multifamily funds three.
Year to date, we've raised approximately $1 $3 billion with our large flagship funds still in their investment periods and not actively fund raising.
Most all of the strategies, which had closes in 2023 to date.
Our newer verticals, including AMB S net lease industrial income logistics solar and single family so that.
We also had inflows into our latest opportunities on vehicle. These newer verticals continued to perform well are in attractive sectors and are starting to achieve scale, which is an encouraging indicator for the future growth of these strategies.
As we discussed last quarter some of our mature strategies reached the necessary thresholds to begin marketing the next vintages heading into 2024.
Next steps strategies vintage will have inflows to AUM in the fourth quarter of 2023.
Forrest and affordable to is now 79% allocated and pre marketing has begun for the successor vintage with expectations for a strong reception from our LP base and others.
Secondary strategies did not have a third quarter closing, but we will have inflows in the fourth quarter. Our secondary strategy is seeing strong acceptance in the marketplace as the industry broadly continues to grow into its place as a critical piece of the private market infrastructure.
We expect the trend of more limited allocations of capital to persist in the fourth quarter. However, at a high level of activity and constructive dialogue with L. P gives us confidence of allocations should start to improve as we enter the new year.
From a sales channel perspective, we continue to maintain a good balance between individual investors and institutional clients.
Proximately, 47% of our Investor base today is from individual investors, having raised $8 $7 billion since inception through the wealth channel.
This is testament to our strong track record differentiated platform and high touch approach to client service as we mentioned on our last earnings call. We're also exploring ways to expand our retail efforts by making certain strategies accessible to accredited investors, thereby broadening our potential investor base, we continue.
To make good progress on this front.
With household wealth estimated at approximately 53 trillion dollars in North America alone and the allocations to alternatives less than 5% the opportunity for expansion it's huge.
With that I will turn the call over to Jonathan.
Thank you Bob and good morning despite.
Despite the market volatility experienced in the third quarter bridge was more active on the real estate deployment front compared to recent quarters as we closed on several acquisitions at attractive pricing industry wide commercial real estate transaction volumes remain at depressed levels as higher interest rates and volatility within the debt capital.
Markets continue to weigh on activity.
The latest real capital analytics data transaction volume for Q3 was down 51% year over year.
In contrast transaction activity in the secondary market has been strong as PE secondaries capital is highly sought by L. P seeking liquidity.
Based on the high levels of activity in this segment. The secondary market is now and will continue to be one of the bright spots for deployment activity.
Against this backdrop.
Just deployment during the quarter was mostly centered on our credit strategies as well as our previously announced workforce and affordable housing portfolio bridged. It strategies continued to be an active participant in both the investment and origination of floating rate credit collateralized by multifamily properties and investments into investment grade.
E C. L O N C M B S bonds trading at outsized yields.
Which have represented an extraordinary risk return opportunity as mentioned, we closed on the Boston workforce portfolio discussed last quarter, which expands our multifamily footprint into an attractive major market.
We believe that as the debt markets stabilize values and transaction volumes will improve and in the meantime, we continue to see more opportunities to deploy capital from sellers, who need to recover equity from some assets to support liquidity needs elsewhere.
Additionally, we are already seeing potential opportunities for fore sellers that no longer have the ability to service the higher cost of debt.
And the credit distress that is coming from higher rates.
With $3 $6 billion of dry powder, and deep and long standing relationships with lenders and owners, we are well positioned to find attractive opportunities in the near term, while the broader market normalizes and regular volumes return.
The operating trends in our portfolio properties have moderated but remain healthy multifamily and work for same store effective rent growth for Q3 increased four 6% year over year.
Our apartment communities are benefiting from the effects of a strong labor market on our resident base.
Though elevated supply pipelines will have near term impacts in certain sub markets fundamentals in our latest single family rental portfolio are similarly, strong with nine 3% year over year rent growth in Q3.
Logistics, which is a growing component of our AUM continued to experience historically low vacancy rates.
Leasing outperformance continues to drive portfolio returns by exceeding original acquisition underwriting by 24% on the net effective rent basis. So far this year.
Now turning to investment performance, our equity real estate portfolios were down approximately 1.6%. That's higher current income was offset by slightly more conservative terminal values and cap rates asset pricing continues to be volatile as the rise in interest rates are impacting near term valuation.
Yeah.
We have the ability to hold assets through the market volatility and have managed leverage in our funds to make sure that we have sufficient liquidity to operate through the impacts of this rate regime.
In our credit strategies the increase in base rates has supported a strong and growing distribution yield.
We are well positioned to manage through a more challenging market environment with a stable core business of long duration recurring fund management fees looking back to our IPO two years ago, we've grown fee, earning AUM by over 102%, which represents a 37% compounded and.
<unk> growth rate.
This strong growth and long tenured.
AUM provide stable profitability to our business during periods such as now when market disruptions impact your overall commercial real estate transaction volumes and values.
Furthermore, we've dive.
<unk> business model to having 43% of fee, earning AUM in credit and secondaries.
This diversification adds to the stability of our company, creating opportunity or steadier deployment and fundraising overtime.
Looking ahead, the future earnings power of bridge will benefit significantly as real estate transaction markets inevitably recover enabling a more normalized level of deployment with the business on solid footing underpinned by stable and recurring management fee revenue.
A more diversified platform and.
The potential upside drivers to transaction revenue.
We look forward to a strong future our bridge I will now hand, the call over to Katie to discuss our financial results.
Thank you Jonathan and that's a challenging external operating environment third quarter earnings per share from the second quarter aided by stronger transaction rather than your unrealized basis.
Recurring fund management fees increased to $61 5 million up 1% from last quarter and 20% year over year.
Our recurring fund management fees.
And the growth we've achieved have continued to provide stability to our business.
C O N E O M increased 31% year over year to $21 8 billion.
And were slightly down from the second quarter, primarily due to a 570 million impact from workforce fun to converting its management fee based on committed capital to deploy capital as we mentioned on our last earnings call.
You said appointment and that's fun and capital raises and the deployment and other funds well continue to push the trajectory of that number upward.
Over 97% of our fee, earning AUM is in long term closed end funds that have no readout. Some features.
On a weighted average duration of seven years.
Adding to the foundation of stability of our business.
The related earnings to the operating company were $36 million in the quarter.
30% from Q2.
Mostly driven by higher transaction revenue, partially offset by higher compensation expenses and the impact from the FRE attributable to noncontrolling interests.
The year over year, FRE comparison was impacted by lower catch up fees and transactional revenue along with higher comp expense.
Given the recent slowdown in general real estate activity as Jonathan discussed, we expect a more muted level of transaction and realization of revenue in the near term until the capital markets improve.
On a modeling note there are typically higher placement agent fees in the fourth quarter due to the timing of when the capital was raised.
We expect this amount to be approximately $1 5 million higher versus Q3.
C related expenses were $44 4 million, an increase of $2 5 million compared to last quarter.
With the related revenues outpaced more of them out there.
This resulted in margin expansion versus last quarter.
We continue to maintain cost discipline with lower activity levels.
While we remain confident in the resilience of our business.
So recognize the headwinds that exist in the current backdrop and have taken specific measures across many business yet to drive efficiency and effectiveness in our organization.
This has included reallocating resources to support key priority.
We have also offered certain task and centralized property accounting teams as we continue to carefully manage expenses and think could be good stewards of capital.
This is all being balanced with a rewarding good performance and a focus on retaining key talent within the organization.
Yeah.
Distributable earnings to the operating company for the fourth quarter were $40 8 million.
With after tax de per share up 22 cents.
An increase of 10% from Q2, mostly driven by the increase in realizations during the quarter.
This included $14 $7 million of performance fees from our successful clothing.
The approximate 530 million dollar recapitalization of out that's from branch multifamily fund three until a continuation vehicle, which was announced last quarter.
We are proud of the successful fund has achieved and the attractive returns we have delivered to our investors.
While also extending the duration of these assets by five years.
Realization for the quarter also included tax distributions within that strategy.
Unrealized carry for the quarter decreased by 59 million to 377 5 million.
The decrease was primarily related to the recapitalization and toxicity of some stuff with golf.
Okay.
Since our IPO in 2021, our accrued carry has increased 53% and we are well positioned for additional increases as markets stabilize and potentially rebound.
As we discussed on our prior earnings call, we collapsed the 2021 profit Suntrust program on July for Us.
This was the last of our planned legacy profit and trust collapses for the foreseeable future.
This resulted in an increase to the diluted share count of $2 9 million shares, which is offset by lower noncontrolling interests going for it.
The overall transaction should be accretive for our public shareholders.
Our long term capital and I felt like balance sheet model position us well to navigate the current environment and we remain confident in bridges long term vision and strategy for success.
With that I would now like to open the call for questions.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press Star Zero Star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
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And as a reminder, at Starwood not sorry, it's Rob.
One moment, please while we poll for questions.
Yeah.
Okay.
Thank you. Our first question comes from the line of Michael Cyprus with Morgan Stanley. Please proceed with your question.
Yes.
Hi, Good morning, Thanks for taking the question wanted to ask on our real estate debt.
Just given Bob some of the challenges you alluded to in your prepared remarks, I was hoping we could come back to that just in terms of the challenges facing the bank's new capital rules that are coming down the pipe as well how do you see this impacting banks participation in the CRE marketplace. How are you how do you see the implications to the broader market in theory playing.
[noise] out as you look out over the next couple of years, maybe you could talk to some of the opportunity sets that you see for bridge, what's most compelling for a bridge might be they might be able to step in and maybe talk to some of the steps that you might take over the next 12 to 24 months to either expand your capabilities that are the best capitalize on the opportunity set here on the commercial real estate debt side.
Thanks, Michael that's a that's a.
Very insightful and complicated question and Youre.
Youre right in saying that there are implications both positive implications for our existing debt business, we think very positive implications as well as some challenges as it relates to providing leverage for for real estate assets that we and others might might acquire.
The.
Banking sector, overall, and particularly the regional and local banks.
Have stepped back meaningfully from from lending against real estate that's been.
Evident in terms of construction lending that's been evident in terms of acquisition finance et cetera, not fully out of the market but.
There the overall attitude waxes and wanes, depending on the on the sector, depending on the particular bank et cetera.
We think on the positive side that represents a great opportunity for us in our fixed at our real estate backed fixed income investment vehicles.
We've had a long and successful track record lending mostly against multifamily assets with with with some.
Increments from there since our first investment vehicle in 2014 and that that opportunity set continues to expand.
We're in a we're in a great position.
<unk>, we think at this point, both as an industry and as an individual manager.
Base rates are high spreads have have remained quite wide.
Terms.
Which are always individually determined with in terms of negotiations.
Generally our way more negotiable than they than they were in the past.
And and covenants are strong so unlike some sectors of private credit.
The opportunity in.
Private real estate that we think is a is very strong as we look forward.
Into 2024 and beyond we're starting to see more transaction volume, which provides the fundamentals to make loans and we think we're really well positioned to create compelling returns.
In that sector.
The flip side of that as your question suggests is that it is is that it's harder to achieve.
Achieve the.
Desired capital structure, when when when you when one acquires assets and.
And that's true to a degree there are a couple of mitigating factors. The fact that the banking sector broadly defined as less enthusiastic about the commercial real estate lending.
Is the fact that there are.
In addition to our vehicle other.
Credit real estate credit vehicles that have stepped into some of that breach just by no. We never learn from our debt vehicles to our equity vehicles, but others do.
And so theres been some stepping into that breach. The you know the other factor is at at current values leverage is way less important than than than than it was during the <unk>.
Extended period of low rates and leverage is for the most part neutral.
For for transactions at this point, so so so the desire and need for leverage is down from from what it was when when when rates were low we think that we think that.
Not to pile on bridge too much, but we think that our forward integration into property management is more critical than ever in terms of creating alpha at the asset level and we're seeing that in the operating metrics that we're able to that were able to post in the in the assets that we do.
We own and operate.
Right and focus on the minutiae of every day.
Sorry for the long long answer, but it was a it was an insightful and several part question.
And then if I could just a follow up question on fundraising specifically for that strategy, maybe you could just update us on.
You know, which debt strategies you have in the market that you're raising right now which may enter into the market and raise as you look out over the next 12 months across your real estate debt strategies, and then what new strategies and adjacencies might make sense to be able to extend into overtime.
We we generally have reentered the market every two years or so with R. R.
Our debt strategies vehicles, we had a.
2014, vintage 2016 2018 2020.
And and and we are we are we are in the very early stages of raising capital for the debt strategies.
Five vehicle.
The we think that we think that we have a time tested approach to investing.
With with with a singular focus on the multifamily sector in the U S. It's a sector that has strong tailwind wins behind it.
We have we have.
Expanded our fixed income focus we have a an a M. B S oriented investment strategy, we have a a a net lease income oriented investment strategy.
As well and and and there is probably additional white space that that we can that we can scan.
Potentially capture going forward from a from a from a broader basis, we have grown to where we are today by finding adjacencies.
And in and investing.
Into those adjacencies.
We are we have.
Enunciated a number of times and are working hard to get to the point, where we can in fact enter the markets with a accredited investor oriented suite of vehicles as well I think from our perspective see the true.
Mass affluent retail space is is a beneficiary of a couple of things. The fact that there's under penetration of all in a credit in the accredited investor space and like like some aspects of life, sometimes being a pioneer is not necessarily the.
The best way to to structure things in and we can stand on the shoulders of all the learning that's happened from from others, who have entered the the mass affluent space with with sophisticated structures and approach and hopefully a highly differentiated suite of products.
Great. Thank you.
Thanks for the two questions.
Thank you. Our next question comes from the line of Finian O'shea with Wells Fargo Securities. Please proceed with your question.
Hi, everyone. Good morning, and thank you a question on the transaction revenue improvement this quarter. It sounded like a lot of the deployment was out of the debt and secondary strategies, which we would think.
Until less of those fees correct me if I'm wrong.
Was it otherwise something like the Boston multifamily deal being outsized or for the continuation vehicle driving that improvement.
Jonathan do you want to handle that.
Yeah. It was there was a significant amount of.
Fees that were driven by the Boston portfolio that sizable portfolio and and we did have some other modest multifamily deployment as you might have seen.
So those were the primary drivers we continue to have.
A significant amount of work that was done in refinancing and restructuring debt and there's some modest fees that come from that sort of transaction work.
You are correct. There is no transaction piece oriented with the secondaries.
Business and the debt business generally speaking doesn't have any significant.
The dips.
Deployment.
D G fees.
Okay. Thank you and just a higher level question on on the impact of rates.
And against your <unk>.
Flagship real estate equity strategies are you are you needing to put more money into your deals to soften those pressures or retain refinancing.
And how does the mature.
Maturity profile look like at this point for the borrowings against your your positions in real estate.
Yes, I'm happy to make.
Go ahead Jonathan.
I'd like to add something but you should go first.
You wanted to jump in first Bob.
Well I was sure what what I was going to say is is that the you know from a from a broad perspective.
That bridge.
Bridges philosophy related to leverage has been has been quite straightforward we have in the past used leverage.
Primarily just senior leverage to create a capital structure for our assets and we intentionally over the course of the last decade, plus have not sought to push the edge of the envelope as it relates to to using leverage it works when it does and it and it comes back.
Two really hurts you when it when it doesn't and we're not in that position.
Having said that of course, the rapid rise in rates is create stresses those stresses are.
Our four mild in some sectors and more intense in other sectors and we've taken a we've done a great deal of work to make sure we recognize where those stresses are and that we address those.
Those are those stresses with with preemptive actions to to to make sure that our that our assets are safe and secure.
And maybe with that comment about philosophy, Jonathan you could dive into some of the details.
Well I mean, I think I honestly think you've covered things pretty well I mean, we we very very.
Assiduously track our maturities. We you know it's a constant review of our overall portfolio situation to try to keep it.
Any any loan maturities are any near term.
Yet financing issues.
At Bay, we get we get ahead of it make sure everything's structured right and make sure that we had the extension is taken care of so so we feel very confident about the current liquidity in in our funds. We continue again as I said to actively used that one of the benefits of our vertical integration is that.
We have an internal debt team that spends 100% of its time with all of the lending relationships, both private and and bank and agency relationships, making sure that we have are.
Credit side covered so where we are in a very strong position.
With respect to liquidity.
High degree of confidence in terms of your question about whether or not we're we're rebalancing or using incremental equity I think I think right now is the time as Bob alluded to where where the.
Credit is actually non accretive in many cases, so we we've always been focused on trying to drive you know the.
The.
Appropriate balance of how much leverage to have and now is the time when less leverage is better. So we are delevering some of our portfolios at the right.
With the right balance in mind.
Thanks, so much.
Yeah.
Thanks for the question.
Okay.
Thank you. Our next question comes from Ken Worthington with J P. Morgan. Please proceed with your question.
Hi, good morning, and thanks for taking the question I've got a couple around the conversion to the continuation fund. So maybe first what was the impact of the conversion on <unk> deployment.
And second can you talk about the economics of the conversion to bridge and how fee and carry rates compare between what was it fun fun three and then the conversion front as we look forward.
And then.
The continuation fund raised new capital what is the appetite that you're seeing from investors to contribute new capital to continuation funds, maybe broadly and do you see more opportunity for more conversion funds in your portfolio if you.
You know the environment remains kind of challenging as it is today. So thanks for all.
Jonathan do you want to talk to the metrics of the fund three continuation vehicle and then perhaps we can both share some.
Some comments on the overall environment for continuation funds.
Okay.
Okay.
Actually I'm going to let Katie I'll give some of the specific numbers that are actually in financials. So I don't get any of those wrong. She I think she has them.
So I'll, let her give the answer so I don't give you round numbers, but before I do I will say that I think you understand the logic that that fund was.
Not only at the end, but beyond the end of it was in its first extension period.
And we had a development asset and a handful I think it was three to be exact.
Assets that were in funds III that we felt were not in their optimal position to realize we all know that the market conditions are not super attractive to exit assets, but the assets that havent had the best success in achieving a realization of the assets that have been.
It's an extremely strong positions, which these were not so rather than asking the fund III investors to continue with longer extensions and putting more capital into these assets.
We created the option for them of staying in and continuing or or taking the capital that they had and I would point out that that people receive basically at two times multiple and approximately a 20 IRR. So it was a very successful vehicle and about 90% of the people opted.
To take the capital and redeploy it into hopefully other bridge funds, but.
The other thing so Katie you can give the exact metrics perhaps.
So for our capital raising and included in our Q3 totaled 200 million was related to that continuation vehicle and $173 million related to the recap of our deployment right.
Okay. So both of those numbers in deployment.
Sure.
Capital raised and $173 million in deployment.
Okay. Thank you.
And you know to the to the point about appetite for continuation funds and the.
The use of the continuation fund structure as a as a path to monetization.
We approach all of our funds with a philosophy that our it's our fiduciary duty to achieve the best results for for investors. We felt at the time that we completed the continuation fund for multifamily fund three that it was a tougher market.
To sell assets, we didn't want to be misinterpreted as a as a.
That's a motivated or seller, who had to sell assets we felt.
In assessing all the alternatives that the continuation vehicle as Jonathan said provided both optionality for the investors.
A a very positive result, if they chose to monetize it in a really attractive outlook. If they if they chose to roll in and continue to do so it seem to it seemed to tick all the boxes are a continuation of fun stuff.
Best tool in all environments.
Probably not but are they are a useful tool to have in the toolbox as we as we look to create.
Optimal value for investors and they're a good tool to have.
Okay, and then lastly, the economics is are the economics.
Meaningfully different between the continuation fun and multi fam three.
I think in part it depends it depends on how you look at it.
You know there's a there's a five year extended term. So so the fact that we're continuing to manage the assets for five years as a positive.
The economics are or are not exactly equivalent to fund economics, there there for the most parts lower than than fund economics, but but but not inconsistent with the economics that one would get from a from a large institutional investors.
Bester.
Which is really the characterization of the of the of the capital that came in to fund the continuation vehicle.
Okay.
Thank you for it.
Bearing with me on all those questions I appreciate it.
It's important it's important from a modeling perspective, we know that.
Thank you there are no further questions at this time I'd like to turn the floor back over to Robert for closing comments.
Great. Thank you operator, and thank you all for for for your time.
And attention. This morning, we are we lead the third quarter and enter the for the fourth quarter.
With with a great deal of anticipation, we think that unlike some markets around the world the real estate markets, particularly in the U S have have adjusted to a higher interest rate environment.
You know as we said in our prepared remarks, we're beginning to see meaningful green shoots that.
That are.
Sprouting up both on the transaction side as well as on the capital raising side.
We think that bridge is well positioned to navigate through.
A continuing.
Market volatility and hopefully be able to capture some of those opportunities as they manifest and we appreciate all your support and your AR and your focus thank you.
This concludes today's teleconference.
May disconnect your lines at this time, thank you for your participation.
Okay.
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Yeah.
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Yeah.