Q1 2024 Bridge Investment Group Holdings Inc Earnings Call
Operator: Greetings and welcome to the Bridge Investment Group first quarter 2024 earnings call-in webcast. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Bonni Rosen, Head of Shareholder Relations for Bridge Investment Group. Thank you. You may begin.
Greetings and welcome to the bridge investment group first quarter 2024 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. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this.
The conference is being recorded.
I would now like to turn the conference over to your host Bonnie Rosen head of a shareholder relations for bridge investment great. Thank you you may begin.
Bonni Rosen: Good morning, everyone. Welcome to the Bridge Investment Group conference call to review our first quarter 2024 financial results. The prepared remarks include comments from our Executive Chairman, Robert Morse, Chief Executive Officer, Jonathan Slager, and Chief Financial Officer, Katie Elsnab. 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 that are uncertain, outside the firm's control, and may differ materially from actual results. We do not undertake any duty to update these statements.
Bonni Rosen: Good morning, everyone welcome to the bridge investment Group Conference call to review, our first quarter 'twenty 'twenty four financial results.
Bonni Rosen: Prepared remarks include comments from our executive Chairman, Robert Morris, Chief Executive Officer, Jonathan Slater, and Chief Financial Officer, Katie else now, we will hold a Q&A session. Following the prepared remarks.
Bonni Rosen: I'd like to remind you that today's call may include forward looking statements, which are uncertain 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.
Bonni Rosen: 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 call, we will also discuss certain non-GAAP financial metrics. The reconciliation of the non-GAAP metrics is provided in the appendix of our supplemental slides. The supplemental materials are accessible on our IR website at ir.bridgeig.com. These slides can be found under the presentations portion of the site along with the first quarter earnings call event link. They will also be available live during the webcast.
Bonni Rosen: During the call we will also discuss certain non-GAAP financial metrics.
Bonni Rosen: 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 Dot com. These.
Bonni Rosen: These slides can be found under the presentation portion of the site along with the first quarter earnings call that link. They are also available live during the webcast.
Bonni Rosen: We reported a GAAP net loss to the company of approximately $36 $8 million for the first quarter of 'twenty 'twenty four on a basic and diluted basis net income attributable to branch per share of class a common stock was 24 cents and a net loss of five cents, respectively, mostly due to changes in noncash items.
Bonni Rosen: Distributable earnings of the operating company were $32 $2 million or 17 cents per share after tax and our board of directors declared a dividend of 12 cents per share, which will be paid on June 14th to shareholders of record as of May 31st. It is now my pleasure to turn the call over to Bob.
Bonni Rosen: We reported a gap net loss to the company of approximately $36.8 million for the first quarter of 2024. On a basic and diluted basis, net income attributable to Bridge per share of Class A common stock was $0.24 and a net loss of $0.05, respectively, mostly due to changes in non-cash items. Distributable earnings of the operating company were $32.2 million, or $0.17 per share after tax, and our Board of Directors declared a dividend of $0.12 per share, which will be paid on June 14 to shareholders of record as of May 31. It is now my pleasure to turn the call over to Bob.
Robert Randolph Morse: Thank you, Bonni, and good morning to all. Bridge reported improved financial results for the first quarter of 2024, with distributable earnings increasing 27% from the last quarter and fee-related earnings to the operating company increasing 19%. Excluding the impact of prior quarter write-offs, distributable earnings increased 10%, and fee-related earnings to the operating company increased 4%. Our FRE base continues to build as we've expanded the number of specialized funds we offer and is composed of mostly long-tenured, closed-end fund revenue.
Bob: Thank you Bonnie and good morning to all.
Bob: Greg's reported improved financial results for the first quarter of 2024 with distributable earnings increasing 27% from last quarter and fee related earnings to the operating company increasing 19% excluding.
Bob: Excluding the impact of prior quarter write offs distributable earnings increased 10% and fee related earnings to the operating company increased 4%.
Bob: F. R. E base continues to build as we've expanded the number of specialized funds. We offer and is composed of mostly long tenured closed end fund revenues since IPO, our quarterly FRE has grown at a 12% compound annual growth rate from $24 $9 million in <unk>.
Robert Randolph Morse: Since IPO, our quarterly FRE has grown at a 12% compound annual growth rate from $24.9 million in Q2 2021 to $33.9 million as of Q1 2024. Fee-earning AUM has grown at a 29% compound annual growth rate, driven by successful fundraising, including the successively larger funds in our flagship real estate strategies, the launch of new strategies, and the accretive acquisition of Newberry Partners, which now comprises the Bridge Second We've achieved this growth in an incredibly volatile real estate environment, which highlights the strengths of our diversified and highly specialized platform.
Bob: <unk> 2021 to $33 $9 million as of Q1 2024.
Bob: Fee, earning AUM has grown at a 29% compound annual growth rate driven by successful fundraisings, including the successively larger funds and our flagship real estate strategies, the launch of new strategies and the accretive acquisition of Newbury partners, which now comprises the bridge secondaries business.
Bob: We've achieved this growth through an incredibly volatile real estate environment, which highlights the strengths of our diversified and highly specialized platform as a capital light alternative asset manager with high margins and limited ongoing capital needs outside of GP commitments to our funds our business has produced strong cash flow.
Robert Randolph Morse: As a capital-light alternative asset manager with high margins and limited ongoing capital needs outside of GP commitments to our funds, our business has produced strong cash flow during an otherwise challenging period for the broader commercial real estate industry. This profitability in our platform is a testament to our resilient, profitable business model.
Bob: An otherwise challenging period for the broader commercial real estate industry. This profitability in our platform is a testament to our resilient and profitable business model.
Robert Randolph Morse: As I will explain further, with the new cycle forming, we believe these positive attributes of our platform are not adequately reflected in our share price today. Our recently published 2024 outlook, Navigating the Curve, outlines our perspective and provides details on why we feel so strongly about investing in the areas where Bridge has developed distinctive competencies. In late 2022 and throughout 2023, as rates increased and the lending environment for real estate worsened, real estate asset prices reset more or less across the board.
Bob: I will explain further with a new cycle, forming we believe these positive attributes of our platform are not adequately reflected in our share price today.
Bob: Our recently published 2024 outlook navigating the curve outlook.
Bob: Outlines our perspective and provides details on why we feel so strongly about investing in the areas where bridges developed distinctive competencies in la.
Bob: 2022, and throughout 2023 as rates increased in the lending environment for real estate worsened real estate asset prices reset more or less across the board. Although the fed has kept rates at current elevated levels for the last six meetings. We believe we are close to or at the end of rate increases the debate.
Robert Randolph Morse: Although the Fed has kept rates at current elevated levels for the last six meetings, we believe we are close to or at the end of rate increases. The delay in rate reduction has had a modest positive effect as it has actually forced selected real estate asset sellers into the market at realistic prices.
Bob: In rate reduction has had a modest positive effect as it is actually it's forced selected real estate asset sellers into the market.
Bob: Realistic prices.
Robert Randolph Morse: In response to our macro assessment, which is candidly mirrored by many of our industry counterparts and by much of our investor base, we believe 2024 represents an attractive entry point to deploy capital into our specialized strategy. We also believe that Bridge's patience over the last 18 months has been warranted, and with $3.1 billion of dry powder, we have started to lean in to capitalize on selected opportunities. We are optimistic about Bridges' positioning.
Bob: In response to our macro assessment, which candidly is mirrored by many of our industry counterparts and buy much of our Investor base. We believe 2024 represents an attractive entry point to deploy capital into our specialized strategies. We also believe that grid just patience over the last 18 months has been wanted and.
Bob: With $3 $1 billion of dry powder, we have started to lean in to capitalize on selected opportunities.
Robert Randolph Morse: We are raising capital globally, leveraging our forward integration into property operations, and investing in selective high-performance sectors of alternative assets with a middle market focus. Importantly, we continue to invest in our platform, building upon our best-in-class infrastructure and sales organization, with a number of mid- and senior-level hires over the past year. Additionally, we continue to find new avenues to enhance operating efficiencies, driving lower costs for our LPs in areas such as property insurance and investor reporting.
Bob: We are optimistic about bridges positioning we are raising capital globally, leveraging a forward integration into property operations and investing in selective high performing sectors of alternative assets with a middle market focus.
Bob: Importantly, we continue to invest in our platform building upon our best in class infrastructure and sales organization with a number of mid and senior level hires over the past year.
Bob: Additionally, we continue to find new avenues to enhance operating efficiencies driving lower costs for our L. P. As in areas, such as property insurance and Investor reporting.
Robert Randolph Morse: Turning to capital raising, the first quarter was busy, and we believe the dialogue with investors will bear fruit over the course of the year. We raised $153.2 million of capital during the first quarter, primarily through our secondaries and opportunities zones strategies. While the debt strategies vertical did not have a closing in Q1, we anticipate meaningful inflows in Q2. Our CSG team logged over 1,000 meetings and calls in the first quarter with both current and prospective investors.
Bob: Turning to capital raising the first quarter was busy and we believe the dialogue with investors will bear fruit over the course of the year, we raised $153 2 million of capital during the first quarter, primarily in our secondaries and opportunities on strategies, while the debt strategies vertical did not happen.
Bob: Closing in Q1, we anticipate meaningful inflows in Q2.
Bob: Our C. S. G team logged over 1000 meetings and calls in the first quarter with both current and prospective investors.
Robert Randolph Morse: Capital Raising has taken us across the Middle East, to the UAE, Saudi Arabia, Kuwait, and others, into Japan and Singapore in APAC, up to the Nordics and multiple visits to London, and then closer to home to Bermuda and Puerto Rico. Across the U.S., we have already touched over a third of the U.S. states and the District of Columbia and are on pace for our goal of having boots on the ground in almost every state this year.
Bob: Capital raising has taken us across the middle East in the UAE, Saudi Arabia, Kuwait, and others into Japan, and Singapore in APAC up to the Nordics and multiple visits to London, and then closer to home to Bermuda in Puerto Rico.
Bob: Across the U S. We've already touched over a third of the U S States and the district of Columbia and are on pace for our goal of having boots on the ground in almost every state this year.
Robert Randolph Morse: 2024 is meaningfully different than 2023 in terms of which bridge strategies are available to investors. For most of 2023, our capital raising was focused on net lease industrial, AMBS, and solar renewable energy, which are relatively newer strategies with lower targets as we build a following. In 2024, capital raising activities will feature vehicles from what we call our four horsemen, including our debt strategies, workforce and affordable housing, Newberry Partners Secondaries, and Logistics Value Add Strategies.
Bob: 2024 is meaningfully different than 2023 in terms of which bridged strategies are available to investors for most of 2023, our capital raising was focused on net lease industrial a M. B S and solar renewable energy, which are relatively newer strategies with lower <unk>.
Bob: As we build a following in 2020 for capital raising activities will feature vehicles from what we call our four horsemen, including our debt strategies workforce and affordable housing Newberry partner secondaries and logistics value add strategies. Although these strategies will represent the <unk>.
Robert Randolph Morse: Although these strategies will represent the bulk of capital raising focus, we have other attractive vehicles and initiatives to further drive our business and evolution, such as broadening our wealth channel efforts. We launched an accredited investor-focused product within our net lease industrial income vertical in Q1 to capitalize on the growing retail investor segment. We are now approved with several major custodians, including Fidelity, Schwab, and Pershing, as well as iCapital. iCapital is a leading platform providing alternative investment access to RIAs and broker-dealers that do not have their own alternative investment groups.
Bob: Welcome to capital raises and focus we have other attractive vehicles as an initiatives to further drive our business and evolution such as broadening wealth channel efforts, we launched an accredited investor focused products within our net lease industrial income vertical in Q1 to capitalize on the growing retail investor segment.
Bob: We are now with several major custodians, including fidelity, Schwab and Pershing as well as high capital I capital is a leading platform providing alternative investment access to our ideas and broker dealers that do not have their own alternative investment groups.
Robert Randolph Morse: This is an important first step for the vehicle. We believe the combination of the attractiveness of the industrial sector, along with the yield, capital appreciation, and downside protection attributes of our net lease industrial income strategy will be in demand with this new retail constituency. Building on our success with qualified purchasers on the wealth platforms, this new channel represents an exciting opportunity for Bridge Over Time. We have also enhanced the team of CSG professionals who service the retail investor distribution channel.
Bob: This is an important first step for the vehicle, we believe the combination of the attractiveness of the industrial sector.
Bob: Long with a yield capital appreciation and downside protection attributes of our net lease industrial income strategy will be in demand with this new retail constituency building on our success with qualified purchasers on the wealth platforms. This new channel represents an exciting opportunity for bridge overtime.
Bob: We have also enhanced the team of <unk> professionals, who service the retail industrial distribution channel with added retail distribution responsibilities to five members of our team inclusive of multiple senior leaders to complement our existing wealth team with more to come in this space in the future.
Robert Randolph Morse: We've added retail distribution responsibilities to five members of our team, including multiple senior leaders to complement our existing wealth team with more to come in this space in the future.
Bob: With that I will turn the call over to Jonathan.
Jonathan Peter Slager: Thank you, Bob, and good morning. In the first quarter, industry-wide commercial real estate transaction volumes remained muted as higher interest rates and volatility within the debt capital markets continued to weigh on activity. However, we are seeing signs of a strengthening transaction environment, with prices beginning to stabilize in capital markets opening up. As of the end of April, year-to-date CMBS issuance has nearly tripled the volume at this point last year, and spreads on BBB-minus loans have tightened 125 basis points. This gives us more confidence as debt capital becomes more available and cost trends lower. But we can't predict when the Fed will start to cut rates or how much and how quickly they will adjust.
Jonathan Peter Slager: Thank you Bob and good morning in the first quarter industry wide commercial real estate transaction volumes remained muted as higher interest rates and volatility within the debt capital markets continued to weigh on activity.
Jonathan Peter Slager: However, we are seeing signs of strengthening transaction environment.
Jonathan Peter Slager: Rice is beginning to stabilize and capital markets opening up.
Jonathan Peter Slager: As at the end of April year to date C. M. B S issuance is nearly triple the volume of at this point last year and spreads on Triple B minus loans have tightened to 125 basis points.
Jonathan Peter Slager: This gives us more confidence as that capital becomes more available and cost trends lower.
Jonathan Peter Slager: Well, we can't predict when the fed will start to cut rate or how much and how quickly they will adjust.
Jonathan Peter Slager: Our view is that the cost of capital and commercial real estate has peaked, and once the Fed gives the all clear from its first rate drop, we anticipate that the two-plus years of muted selling activity will bring sellers forward. With over $100 billion in dry powder and U.S. value-add and opportunistic equity funds and another $40 billion in debt funds, we expect markets to open up quickly and values to rebound. Trying to time the bottom precisely and waiting for this signal from the Fed has the potential to leave many investors behind.
Jonathan Peter Slager: Our view is that the cost of capital in commercial real estate has peaked and once the fed gives the all clear from its first rate drop we anticipate that the two plus years of muted selling activity will bring sellers forward.
Jonathan Peter Slager: With over 100 billion in dry powder and U S value add and opportunistic equity funds and another 40 billion in debt funds, we expect markets to open up quickly and values to rebound trying.
Jonathan Peter Slager: Trying to time, the bottom precisely and waiting for this signals from the fed has the potential to lead many investors behind.
Jonathan Peter Slager: As such, we have started to lean in on select investments, particularly in multifamily and logistics. In Q1, we deployed over $330 million of equity capital. Notably, on the multifamily side alone, we have closed or have under exclusive control nearly $800 million of assets by gross purchase price and another $250 million on the industrial side for Multi-Family. This 2024 activity has been awarded at unlevered, underwritten IRRs that are 30% better than pre-pandemic levels. And on a replacement cost basis, we're at 60% versus pre-pandemic levels of 80%, and at the peak, we were nearly at 100%.
Jonathan Peter Slager: As such we have started to lean in on select investments, particularly in multifamily in logistics in Q1, we deployed over $330 million of equity capital, notably.
Jonathan Peter Slager: Notably on the multifamily side alone, we have closed or have under exclusive control nearly $800 million of assets by gross purchase price and another $250 million on the industrial side.
Jonathan Peter Slager: For multifamily.
Jonathan Peter Slager: This 'twenty 'twenty four activity has been awarded at Unlevered underwritten IRR that are 30% better than pre pandemic levels and on a replacement cost basis, we're at 60% versus pre pandemic levels of 80% and at the peak we were nearly at 100%.
Jonathan Peter Slager: While we are encouraged by the increased level of deal sourcing activity, our overall deployment trajectory will depend in part on a broader rebound in industry transaction volume. The operating trends in most of our property portfolios remain healthy. Despite softening conditions in the market and our most recent multifamily and workforce vintage, we have exceeded our NOI projections by 9.6% life to date. In our first logistics value vintage, we have exceeded net effective rents by 21.8% on average since inception.
Jonathan Peter Slager: While we are encouraged by the increased level of deal sourcing activity. Our overall deployment trajectory will depend in part on the broader rebound in industry transaction volumes.
Jonathan Peter Slager: The operating trends in most of our property portfolios remained healthy despite softening conditions in the market and our most recent multifamily and workforce vintages, we have exceeded our NOI projections by nine 6% life to date.
Jonathan Peter Slager: And our first logistics value vintage we have exceeded net effective rents by 21, 8% on average since inception.
Jonathan Peter Slager: Operations are always important, but in the current environment, where near-term supply issues and tight labor markets exist, operations will drive alpha, and Bridge's vertical integration and operational focus continue to drive results. Since 2020, Bridge multifamily rents have outperformed by 24% compared to market rent. Our local operating knowledge and insights are so critical in a slower market for making sound investment decisions by knowing which assets to lean in on and, more importantly, which ones not to. Now, turning to investment performance. Excluding office, which is only 1.5% of our fee earned in AUM, our equity real estate portfolio valuations were roughly flat in Q1.
Jonathan Peter Slager: Operations are always important but in the current environment, where near term supply issues in tight labor markets exist operations will drive alpha and bridges vertical integration and operational focus continue to drive results.
Jonathan Peter Slager: Since 2020 bridge multifamily rents have outperformed by 24% compared to market rents.
Jonathan Peter Slager: Our local operating knowledge and insights are so critical in a slower market for making sound investment decisions by knowing which assets too lenient on.
Jonathan Peter Slager: And more importantly, which ones not to now.
Jonathan Peter Slager: Now turning to investment performance, excluding office, which is only one 5% of our fee, earning AUM our equity real estate portfolio valuations were roughly flat in Q1.
Katherine Elsnab: This is in line with broader market trends of stabilization. As holders of assets and closed-end funds with long fund durations, we have the wherewithal to withstand short-term capital markets volatility as we focus on improving operations at the property level to maximize future exit values. In our credit strategies, the increase in base rates has supported a strong distribution yield. In commercial real estate, the last time we saw a meaningful reset in asset values and transaction volumes was during the GFC.
Jonathan Peter Slager: This is in line with broader market trends but of stabilization.
Jonathan Peter Slager: As holders of assets and closed end funds with long son durations.
Jonathan Peter Slager: We have the wherewithal to withstand short term capital markets volatility as we focus on improving operations at the property level to maximize future exit values in our credit strategies. The increase in base rates has supported our strong distribution yield.
Jonathan Peter Slager: And commercial real estate or last time, we saw a meaningful reset in asset values and transaction volumes during the G. F C.
Katherine Elsnab: Cycles provide the chance to capitalize on lower entry points and have always created attractive investment opportunities. For example, during the GFC, property values declined by 30 to 40 percent, creating a meaningful opportunity to capture value at a discount to replacement costs. The current cycle has seen value declines of a similar magnitude, and we believe it will offer similarly attractive entry points. I'll now turn the call over to Katie.
Jonathan Peter Slager: Cycles provide the chance to capitalize on lower entry point, and I've always creating attractive investment opportunities. For example, during the G. S. C property values declined by 30 to 40 per cent trading a meaningful opportunity to capture value at a discount to replacement cost.
Jonathan Peter Slager: The current cycle has seen value declines the similar magnitude and we believe will offer similarly attractive entry points I'll now turn the call over to Katy.
Katherine Elsnab: Thank you, Jonathan. Bridges' recurring fund management fees continue to provide stability to our business in a more volatile capital markets environment. Recurring fund management fees increased 17% year-over-year and 11% from last quarter. Fee-earning AUM increased 1% compared to last quarter, driven by deployment within Workforce and Affordable Housing Fund 2. Over 97% of our fee-earning AUM is in long-term, closed-end funds with a weighted average duration of 6.6 years. Adding to the foundational stability of the business, our balance sheet remains resilient.
Katy: Thank you Jonathan.
Katy: It is occurring on management fees continued to provide stability to our business in a more volatile capital markets environment.
Katy: Fund management fees increased 17% year over year, and 11% from last quarter.
Katy: A increased 1% compared to last quarter, driven by deployment within the workforce and affordable housing for them too.
Katherine Elsnab: Over 97% of our fee, earning AUM is in long term close end fund with a weighted average duration of six six years I.
Katy: These are the foundation of stability of the vessel.
Katy: Our balance sheet remains resilient.
Katherine Elsnab: Fee-related earnings to the operating company were $33.9 million in the quarter, increasing 19% from last quarter, mostly attributable to the $5.7 million write-off taken in Q4, along with higher transaction revenue, which was partially offset by higher fee-related expenses. As we indicated on our call last quarter, the higher fee-related expenses reflect a more normalized expense environment and an increase for inflation adjustments to compensation and increased variable compensation. The year-over-year increase also includes the impact from our acquisition of Newberry Partners. On a modeling note, Q1 net earnings from Bridge Property Operators included a one-time leasing commission we earned of $1.5 million.
Katherine Elsnab: The related earnings to the operating company were $33 9 million in the quarter, increasing 19% from last quarter, mostly attributable to the $5 7 million write off taken in Q4, along with higher transaction revenue, which was partially offset by higher fee related expenses.
Katherine Elsnab: As we indicated on our call last quarter, the higher fee related expenses reflect a more normalized expense environment and an increase for inflation adjustments to compensation and increased variable compensation.
Katherine Elsnab: Year over year increase also includes the impact from a cause of sudden they're very partners.
Katherine Elsnab: On a modeling note.
Katy: Net earnings from British property operators included a one time leasing commission, we earned a $1 5 million.
Katherine Elsnab: As Bob and Jonathan noted, transaction activity appears to be improving. However, we are relying on broader commercial real estate markets, which could cause more muted transaction-related revenue to persist in the near term. Fee-related margins will continue to be impacted to the extent that we have lower transaction fees and catch-up fees from capital closing into closed-end funds. As transaction and capital raising volumes normalize, we expect to see a movement of our margins towards our longer-term average of approximately 50 percent.
Katherine Elsnab: As Bob and Jonathan noted.
Katherine Elsnab: The auction activity appears to be improving probably are relying on the broader commercial real estate market, which could cause Bermuda transaction related revenue to persist in the near term.
Katherine Elsnab: He related margins will continue to be impacted to the extent that we have lower transaction fees and.
Speaker Change: Couch I see some copper closing into close end fund.
Katherine Elsnab: I was transaction with copper or anything volumes normalize.
Katherine Elsnab: We expect to see our margins towards our longer term outage up approximately 50%.
Katherine Elsnab: Distributable earnings to the operating company for the quarter were $32.2 million, with an after-tax fee per share of $0.17, increasing 22% from last quarter, mostly due to the items discussed within fee-related earnings along with slightly higher net realized performance fees. Similar to last quarter, realizations were comprised of tax deductions within debt strategies. Realization revenue in the near term is expected to remain subdued. However, we are well positioned for an eventual acceleration in the context of improving liquidity in the real estate transaction market.
Katherine Elsnab: Distributable earnings for the operating company for the quarter were $32 2 million.
Katherine Elsnab: With after tax be Krishna, 17th that increasing 22% from last quarter.
Katherine Elsnab: Mostly due to the items discussed within fee related earnings along with slightly higher net realized performance fees.
Katherine Elsnab: Similar to last quarter realizations were comprised of parts of the patients within that strategy.
Katherine Elsnab: Realization of revenue in the near term is expected to remain subdued. However, we are well positioned for an eventual acceleration in the context of improving liquidity in the real estate transaction market.
Katherine Elsnab: Net accrued performance revenues on the balance sheet stands at 323 million.
Katherine Elsnab: Net accrued performance revenues on the balance sheet stand at $320.3 million. In closing, we believe that we are well positioned to navigate the near-term challenges in the institutional real estate sector due to our long tenure fee stream and our AUM concentrated in some of the most attractive sectors to achieve success as conditions inevitably improve. With that, I would now like to open the call to questions.
Katherine Elsnab: In closing, we believe that we are well positioned to navigate the near term challenges.
Speaker Change: So real estate sector.
Katherine Elsnab: There are long tenured featuring a M concentrated to some of the most attractive sectors to achieve success as conditions inevitably unquote.
Speaker Change: With that I would now like to open the call for questions.
Katherine Elsnab: Yeah.
Operator: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Ken Worthington with J.P. Morgan. Please proceed with your question.
Speaker Change: Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question Kim.
Operator: You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Operator: Our first question comes from the line of Ken Worthington with J P. Morgan. Please proceed with your question.
Kenneth Brooks Worthington: Hi, good morning, and thanks for taking the question. Robert, first for you, I was hoping you'd flesh out your comment on the new product in the Wealth channel. So, Wealth has been sort of a big distribution channel for you historically. Can you talk about what is new with this fund? Is it a different fund structure? Is it just sort of focusing on a different part of wealth distribution? So please flesh out your comments and fill in the pieces first, please. Unknown Attendee Yeah.
Kenneth Brooks Worthington: Hi, good morning, and thanks for taking the question maybe Robert first for you I was hoping you could flesh out your comment on the new product in the wealth channel. So wealth has been sort of a big distribution channel for you historically.
Speaker Change: Can you talk about what what is new with this fun is it a different fund structure is it just sort of focusing on a different part of wealth distribution. So you know pleased you know flush out your comments in an in fill in the pieces first please.
Robert Randolph Morse: Yeah, good morning, Ken, and thanks for participating today, and thanks for the question. We've had a long-standing presence in the wealth channel, broadly defined. Our vehicles in the past have typically been qualified purchaser compliant, meaning at a higher level of wealth than the current vehicle, which is an accredited investor compliant vehicle that's structured as a private REIT. So it's a different structure that seeks to build on the momentum and success that we've had for a decade plus in the wealth channel and offer another investment alternative for our wealth partners to share with their investor clients.
Speaker Change: Yes, good morning, Ken and thanks for thanks for participating today and thank you for the question.
Robert Randolph Morse: We thought we've had a longstanding presence in the in the wealth channel broadly defined.
Robert Randolph Morse: Our our our vehicles in the past it's typically been.
Robert Randolph Morse: Qualified purchaser of compliance meeting at a at a higher level of well then.
Robert Randolph Morse: And then in the current vehicle, which is which is a an accredited investor compliant vehicles are structured as a as a private REIT. So it's it's it's a different structure that seeks to build on the.
Robert Randolph Morse: Momentum and success that we've had for a decade plus.
Robert Randolph Morse: In the in the wealth channel and an offer.
Robert Randolph Morse: Another.
Robert Randolph Morse: Investment alternatives for our wealth partners to to share with their with their investor clients.
Robert Randolph Morse: And the ink is hardly dry. We're just in the early stages of launch at this point, very excited about the carefully designed structure, and very excited about the underlying investment thesis as well, which we think offers both strong income as well as exposure to a very strong asset class. So we hope and expect that it will gain some meaningful momentum as the months roll on.
Robert Randolph Morse: And it's it's it's the ink is hardly dry we're.
Robert Randolph Morse: We're just we're just in the early stages of our launch at this point very excited about the structure of carefully design structure very excited about the underlying investment thesis as well, which.
Robert Randolph Morse: Which we think offers folk Uh huh.
Robert Randolph Morse: Strong income as well as no exposure to.
Robert Randolph Morse: A very strong asset class.
Robert Randolph Morse: So until we so we hope and expect that it will.
Robert Randolph Morse: It will be in some meaningful momentum as the months roll off.
Speaker Change: Great. Thank you there.
Unknown Attendee: And then just maybe the modeling question with the collapse of the profit interest. Is there any NCI now associated with the performance fee revenue or, I guess, performance earnings? If we look at the performance revenue of $13 million this quarter, how much of the net performance fees of $5.5 million actually fall to the bottom line? I'm trying to get a sense of what is yours and what is not yours, given the profits interest is collapsing.
Robert Randolph Morse: And then just maybe modeling question with the collapse of the profit interests.
Unknown Attendee: Is there any NCI now associated with the the performance fee revenue.
Unknown Attendee: Or I guess performance earnings if we look at the performance revenue of $13 million this quarter how much of the.
Unknown Attendee: Net performance fees of $5 5 million actually now fall to the bottom line like I'm trying to get a sense of of what is yours and what is not yours given the the profits interest collapsing.
Unknown Attendee: Okay.
Unknown Attendee: Happy to take this one. So, you know, when we collapsed, the profits interest that was really focused on our fee-related earnings. As it relates to our performance allocations, in general, nothing changed there. And so when you look at that, what drops to the OPCO unit holders, in general, is the sum of the realized performance allocations offset by compensation and offset by the realized NCIs. And so that, you know, the $13 million less the $7.4 less the $2.5 is what drops down to the opco. Okay, great. Thank you.
Speaker Change: I think I'll take this one so I you know when we collapsed the profits interest that was really focused on our fee related earnings.
Unknown Attendee: As it relates to our proportionate allocation in general nothing changed there and so when you look at that let drop to the.
Unknown Attendee: The Opco our unit holders in general is that some of the realized performance allocation offset by the compensation and offset by the realized MTI.
Unknown Attendee: And so that you know.
Unknown Attendee: The 13 million loss of $7 four less the 2.5 is what drops down to the Opco.
Speaker Change: Got it okay, great. Thank you.
Unknown Attendee: Okay.
Speaker Change: Thanks for the questions.
Operator: Thank you. Our next question comes from the line of Bill Katz with TD Calendars. Your question?
Unknown Attendee: Thank you. Our next question comes from the line of Bill Katz with TD Cowen.
Operator: Question.
William Raymond Katz: Okay, thank you very much. Good morning, everybody. So I just want to talk about maybe fundraising in general, and Bob, you mentioned the Four Horsemen. I was wondering if you could sort of help size the opportunities across each of the verticals, and how much of any headwind to growth is more a function of the macro malaise versus any of the sort of the branding stuff that may have come up associated with office last quarter.
William Raymond Katz: Okay. Thank you very much and good morning, everybody I'm. So I'm just trying to talk about maybe fund raising in general and Bob You mentioned the four horsemen I was wondering if you could sort of help size the opportunities across each of the verticals and how much of any headwind to growth is more a function of the macro malaise versus any.
William Raymond Katz: This was the branding stuff that may have come up associated with the office last quarter. Thank you.
Robert Randolph Morse: Thank you.
Bob: Yeah, Bill I think that our sense is the macro environment is improving.
Robert Randolph Morse: You know, Bill, I think that our sense is that the macro environment is improving. We try to communicate that in our prepared remarks.
Robert Randolph Morse: We tried to communicate that in our prepared remarks, we've had we've had literally hundreds of dialogue with with.
Robert Randolph Morse: We've had literally hundreds of conversations with various classes of investors over the first quarter, and there is a palpable sense of enthusiasm for what is a new entry point for real estate in the markets. You know, real estate as an asset class, in large part, and when you look at specialized verticals, has reset and reset in a positive way even as new construction costs and development costs have continued to go up. So, in particular, the value of existing assets on a relative basis, many people feel has improved pretty significantly, and that's inciting some meaningful interest across what we do, and, you know, hopefully, that will manifest into tangible capital commitments as time goes on.
Robert Randolph Morse: As I said, we're beginning to see that start, and hopefully, that momentum will change over time. In a more demanding operating environment, there's increasingly a view that, you know, one size does not fit all, and the fact that there's a specialized focus on particular verticals with fundamental strengths around them is appreciated. The fact that there's an ability to, you know, as appropriate, operate the assets, property manage the assets, and create value at the asset level in a more demanding operating environment is appreciated as well.
Robert Randolph Morse: Every time I think that there's a I think that there is you know.
Robert Randolph Morse: More.
Robert Randolph Morse: More demanding operating environment, there's there's there's increasingly a view that one size does not fit all and.
Robert Randolph Morse: Fact that there's a specialized focus on a particular verticals with with fundamental strikes around them is appreciated. The fact that that there's there's an ability to you know as appropriate operate the assets property manage the assets and create create valley.
Robert Randolph Morse: Are you at the asset level in a more demanding operating environment is appreciate it as well. So we we feel pretty good about that the and and and you know certainly when you look at.
Robert Randolph Morse: So we feel pretty good about that. And, you know, certainly when you look at the historical performance of what we really call the Four Horsemen, that's a colloquialism. It's just the vehicles where we've had a lot of success over the years in the past, plus our relatively new logistics vehicle, which has gotten out of the gates very strongly. The fundamentals there are quite strong, and interest appears to be. Your comment or your allusion to what happened with respect to our office fund one, you know, I think most of our investor base, and we've talked to every single one of our investors who invested in office, understand the, you know, significant amount of value decay that has taken place in the office world.
Robert Randolph Morse: The historical performance of.
Robert Randolph Morse: But what we really call the four horsemen, that's a colloquialism. It's just the the vehicles, where we've had a lot of success over the years in the in the past plus our plus are are are relatively new logistics vehicle, but which has gotten out of the gates very strongly.
Robert Randolph Morse:
Robert Randolph Morse: The the fundamentals there are quite strong and and interest appears to be quite strong your your comment or your allusion to to what what happened with respect to our office. Upon one you know I think most most of our investor base and we talk to her.
Robert Randolph Morse: <unk> one of our investors who invested in office understand.
Robert Randolph Morse: The you know.
Robert Randolph Morse: Significant amount of value decay that has taken place in the office in the in the office World are our experiences is not different to add and in many cases more muted than the the value to K. That's that's that's happened with a lot of other asset owners.
Robert Randolph Morse: our experience is not different than, and in many cases, more muted than the value decay that's happened with a lot of other asset owners, and it's a, a set of unfortunate circumstances that have culminated into value diminution, that, you know, either because we're lucky or good, was and is a de minimis part of our overall AUM, and we think that that damage, and certainly the financial impacts of that, was contained in our year-end earnings and that we've moved pretty significantly beyond that.
Robert Randolph Morse: And it's.
Robert Randolph Morse: Set of unfortunate circumstances that.
Robert Randolph Morse: Culminated into in in in the value diminution that that we either because we're lucky your good was.
Robert Randolph Morse: Wasn't as a de Minimis part of our overall, a U M and and we we think that that that that damage and certainly the financial impacts of that was was contained in our in our year and earnings and and and that we move pretty significantly beyond that.
Robert Randolph Morse: All right, thank you. This is a follow-up. Bob, you mentioned in your own mind that the stock's not adequately discounting the opportunity in front of you. And given the sharp drop in the stock, wondering what is changing from either the management team or the board's team to try and drive value other than just waiting for a more benign macro backdrop. Thank you.
Robert Randolph Morse: Alright. Thank you. This is a follow up Bob you mentioned in your in your own mind that the stocks not adequately discounting. So are the opportunity in front of you and just given the sharp drop in the stock wondering what is changing from either the the management team or the board's team to try and drive value.
Robert Randolph Morse: You all other than just waiting for more benign macro backdrop. Thank you.
Robert Randolph Morse: You know, Bill, we, we First and foremost, I think, have the objective of maximizing value in our investment vehicles. And, you know, as you know and others know, our income statement is comprised of a lot of different elements. One of those elements is making sure that we have the right transaction volume that takes place. 2023 was a pretty quiet year as it relates to transaction volumes, and intentionally so on our part.
Speaker Change: You know bill we we.
Robert Randolph Morse: First and foremost I think have the objective of maximizing value in our investment vehicles and you know as as as you go and others know our income statement is comprised of of a lot of different elements. One of those elements is is making sure that we have the right transaction volume that takes place too.
Robert Randolph Morse: Thousand twenty-three was it pretty quiet ear as it relates to transaction volumes and and intentionally so on our part I I mentioned, Jonathan mentioned that that we've started to lean in to the markets because because of what we feel is an attractive reset in terms of values.
Robert Randolph Morse: I mentioned, Jonathan mentioned, that we've started to lean in to the markets because of what we feel is an attractive reset in terms of valuation. And hopefully, we will be able to prove that thesis over the course of this year and next and into the future. We feel that the suite of investment objectives that we have and the areas of focus that we have offer some pretty significant opportunities. If you look back and see what the drivers of our business were prior to and leading up to and through the IPO, and you compare that to the drivers of our business today, we have a lot of new and, we think, pretty exciting initiatives that will take the strong foundation of what we have and add to that the potential growth of these new initiatives.
Robert Randolph Morse: Asian, and and hopefully we will be able to prove that thesis over the course of this year and next in and into the future we feel that.
Robert Randolph Morse: We feel that the sweet of of of investment objectives that we have in the areas of focus that we have offer some <unk> some pretty significant opportunity. If you. If you look back and you look back at what the drivers of our business where prior to and leading.
Robert Randolph Morse: Up to and through the IPO and you compare that to the drivers of our business today, we have a lot of new and we think pretty exciting initiatives that will take the strong foundation of what we had and and add to that the the the the the potential growth.
Robert Randolph Morse: Both of these new initiatives and that'll create a an even stronger revenue and earnings stream going forward.
Robert Randolph Morse: And that will create an even stronger revenue and earnings stream going forward, not the least of which is our initiatives in Logistics, Newbery, Secondaries, and our Retail Net Lease business. We've talked in the past about renewable energy infrastructure. So, you know, there's a set of multiple drivers of business initiatives and, as appropriate, for the businesses that are longer tenured within Bridge. Successor funds typically are as big as, or sometimes bigger than, predecessor funds, so that should provide some growth as well.
Robert Randolph Morse: Not the least of which is is is our initiatives and logistics Newberry secondaries, our retail net lease business, we've talked in the past about.
Robert Randolph Morse: Renewable energy infrastructure. So you know there's there's there's a.
Robert Randolph Morse: Set of multiple drivers of of of business initiatives and and you know.
Robert Randolph Morse: As appropriate for for the for the businesses that are that are longer tenured within within bridge.
Robert Randolph Morse: Successor funds typically are are as big as sometimes bigger than than than predecessor fun. So that should should provide some growth as well.
Speaker Change: Thank you.
Operator: Thank you. Our next question comes from the line of Michael Cyprys with Morgan Stanley. Please proceed with your question.
Robert Randolph Morse: Our next question comes from the line of Michael Stankfests with Morgan Stanley.
Michael J. Cyprys: With your question.
Michael J. Cyprys: Hey, good morning. Thanks for taking the time to answer the question. So I'm going to circle back to some of the commentary you were making earlier around the financing markets. I'm hoping maybe you could just elaborate a bit more on your access to the financing markets. How is that evolving at the fund level and at the asset level? What's changing for you over the last couple of months? And as you look out over the course of the year, how do you expect that to evolve at any particular color around where it is more challenged versus where you have more access, and how does that inform your actions and steps on the deployment and realization side?
Michael J. Cyprys: Hey, good morning, and thanks for taking my question, so I'm going to circle back to some of the commentary you were making earlier around the financing market. So I was hoping maybe you could just elaborate a bit more on your access to the financing markets, how does that evolving at the fun level at the asset level, what's changing for you over the last couple of months and as you look out over the course of the.
Michael J. Cyprys: <unk>, how do you expect that to evolve in any particular color around where is it more challenge versus where do you have more access and how does that inform your actions and steps on that the appointment of realisation side.
Robert Randolph Morse: Jonathan, do you want to address that?
Speaker Change: Jonathan you want or do you want to address that.
Jonathan Peter Slager: Sure, yeah. Look, we think that the markets are [inaudible] and there's been concern over, you know, whether the actions of the Fed are continuing to indicate further rate hikes. I think we're very, very much in agreement. Toward the back end of that, I think, as we've said, we believe that the next action that the Fed will likely take is a rate drop. But I do think that there's a lot of dry powder that we alluded to in my comments, right?
Jonathan: Sure Yeah I.
Jonathan: We think that the market or.
Jonathan Peter Slager: <unk> to be much more active and again there's been this this you.
Jonathan Peter Slager: Long period here that we've had a pretty big bid ask spread in in the major asset classes, particularly multifamily and industrial.
Jonathan Peter Slager: And there's been a concern over.
Jonathan Peter Slager: And what are the options for the fan or continuing to indicate further rate hikes I think we're very very much towards.
Jonathan Peter Slager: Towards the back into that I think as we said we're believers that the next action.
Jonathan Peter Slager: Fed will likely take is is it <unk>.
Jonathan Peter Slager: But I do think that that there's a lot of dry powder that we we alluded to it in my comments right. There's a lot of diet dry powder, that's also points and anxious to get into the market because.
Jonathan Peter Slager: There's a lot of dry powder that's also poised and anxious to get into the market because, as we see it, the secular demand drivers will exceed the supply potential in the next five to ten years in both industrial and residential.
Jonathan Peter Slager: As we see it the secular demand drivers exceed the supply.
Jonathan Peter Slager: Potential in the next in the next five to 10 years in both industrial and residential.
Jonathan Peter Slager: And we see a huge addressable market, a big opportunity, and we think Bridge is really well positioned for that. And one of our differentiators, as you probably well know, is that we have an internal debt capital markets team. And that debt capital market team spends a tremendous amount of time with, something in the order of, you know, 100 different lenders on a daily basis, both looking for opportunities that might be coming from them, from borrowers that got over their skis on attractive opportunities that we might be able to help them with, but also in terms of just them being able to provide us with attractive capital.
Jonathan Peter Slager: We see a huge addressable market big opportunity and we think bridges really well positioned for that and.
Jonathan Peter Slager: And one of our Differentiators as you probably well know is that we have an internal that capital market the team and that that capital market team spending.
Jonathan Peter Slager: Spend a tremendous amount of time with something in the order of 100 different lenders.
Jonathan Peter Slager: On a on a daily basis, both looking for opportunities that might be coming from them from from borrowers that got over their skis on.
Jonathan Peter Slager: Unattractive opportunities that we might be able to help them with but also in terms of them being able to provide us with attractive capital. So as I alluded to in the remarks are actually stated in the remarks, we are actually seeing spreads tightened and so if we get a little bit of help from the underlying indexes.
Jonathan Peter Slager: So, as I alluded to in the remarks, or actually stated in the remarks, we are actually seeing spreads tighten. And so, if we get a little bit of help from the underlying indexes, which I think are in some part connected to and driven by what the Fed does, I think we're going to start to see activity really strengthen. And our access to attractive debt capital will be there because we're positioned for that.
Jonathan Peter Slager: Which which I think are in some part connected to and driven by what the fed does.
Jonathan Peter Slager: I think we're going to start to see activity really strengthen and are are at our access to attractive capital.
Jonathan Peter Slager: Will will be there because we're position for that.
Jonathan Peter Slager: Great. And just a follow-up question on multifamily. I was hoping maybe you could elaborate on some of the key trends you're seeing across the multifamily marketplace with more supply coming online. Just curious when you expect that new supply to fall off, what you are seeing across your markets in terms of rent growth, and anything else you're able to elaborate on in terms of some of the steps you're taking across your portfolio to navigate through this period. Yeah, that's a great question.
Speaker Change: Alright, and just a follow up question on multifamily I was hoping maybe you could elaborate on some of the key trends, we're seeing across the multifamily market place that's more supply coming online just curious when you expect that new supply to fall off what are you seeing across your markets in terms of rent gross and yeah.
Jonathan Peter Slager: I also gave it to elaborate on in terms of some of the steps are taken care across your portfolio to navigate through this period.
Jonathan Peter Slager: Yeah, that's a great question. This year, we're continuing to see the overhang of supply hitting a lot of our markets. But we see that waning toward the end of this year, meaning the supply pipeline is really slowing down. And by 2025, we see demand exceeding supply again, which is not going to be the case this year and certainly was not the case last year. So, in some of the markets that got very heavily hit with supply, we think 25 is going to start to be a year when that slips back around.
Speaker Change: Yeah. That's a great question. This year. This year, we're continuing to see the overhang of supply hitting a lot of our market, but we we see that leaning towards the end of this year at meeting that supply pipeline really slowing down and by 2025.
Jonathan Peter Slager: We see demand exceeding supply again, which is not going to be the case. This year and certainly was not the case last year. You know there's this lag as you probably well know you you you.
Jonathan Peter Slager: You know can see Bud finance and undertake a project and begin construction. It takes a couple of years until that project becomes a natural project in the market. So we can very well see what the supply pipeline is for the next few years and we can very wealthy where the demand drivers are so.
Jonathan Peter Slager: And by 26 and 27, we see really attractive markets in terms of supply and demand imbalance in favor of a lack of supply. And across the portfolio, rent growth is needed right now in the entire market. But as you heard me discuss, when we go back and we do measurements and metrics, Bridges outperformed the market pretty meaningfully.
Jonathan Peter Slager: So in some of the market that got very heavily hit with supply. We think twenty-five is gonna start to be a year when when that flip back around and by 26th and 27 weeks. He really attractive markets in terms of supply demand imbalance in favor of a lack of.
Jonathan Peter Slager: Hi.
Jonathan Peter Slager: Thank you. As a reminder, if you'd like to join the question queue, please press star one on your telephone keypad. Our next question comes from the line of Adam Beatty with UBS. Please proceed with your question.
Jonathan Peter Slager: And and so we in terms of what we're doing operationally.
Adam Quincy Beatty: That is one of us as you heard from US and you always hear from US one of our core shrank, we spend a tremendous amount of time getting out ahead of the key performance drivers, making sure that we're attracting the right amount of lead that were closing on the leads properly that everything at the outset level is very competitive or not.
Adam Quincy Beatty: The kinds of people, who want to follow we sort of went to lead out in terms of being a market trend.
Adam Quincy Beatty: <unk> Center and so we just we're myopically focused on all those key performance drivers and making sure that we maintain the right balance between rent and rent growth and occupancy and across the portfolio that <unk> is needed right now in in.
Adam Quincy Beatty: The entire market, but if you heard me discuss where we go back and we do measurement and metrics Bridget.
Adam Quincy Beatty: Bridget outperformed the market pretty meaningfully.
Adam Quincy Beatty: Alright, thank you.
Adam Quincy Beatty: As a reminder, if you'd like to join the question. Please press star one on your telephone keypad.
Adam Quincy Beatty: Our next question comes from the line of Adam.
Adam Quincy Beatty: D U B S. Please proceed with your question.
Adam Quincy Beatty: Thank you and good morning. A follow-up on fundraising, and just parenthetically, when they arrive, I hope the four horsemen can leave the apocalypse at home in the closet. We probably don't need one of those. But anyway, just on fundraising, and I think Bob mentioned that successor funds are generally larger than prior vintages. So just wondering, for fundraising this year, either separately or collectively, how you expect that to trend? Do you expect fund sizes to be bigger across the board, or some puts and takes there?
Adam Quincy Beatty: Alright, Thank you and good morning follow up on fund raising and just parenthetically when they arrive I hope the four horsemen can we'd be apocalypse at home in the closet, we probably don't need one of those but anyway, just on fund raising and I think Bob mentioned that successor funds, you know generally being larger than than prior vintages. So just wondering for fund raising.
Adam Quincy Beatty: This year, either separately or collectively you know how you would expect that the trend that you expect funds sizes to be bigger across the board or some puts and takes their thank you.
Robert Randolph Morse: Thank you.
Speaker Change: Hi, there thanks for the question.
Robert Randolph Morse: And you know we share your view of the four horsemen were hoping that they can be.
Robert Randolph Morse: Nice big sturdy clydesdales that'll that'll be bringing the that came to town.
Robert Randolph Morse: Hi there. Thanks for the question. And, and, and, you know, we share your view of the four horsemen. We're, we're hoping that they can be, you know, nice, big, sturdy Clydesdales that'll be bringing the kings to town. As we go through the year, I think that I think that. In the past, and going forward, we've always tried to marry capital raising with the size of the opportunity is in front of us so that we can effectively raise and deploy capital in our strategies. And in the past, we've been disciplined in limiting fund size in order to marry that deployment opportunity and selectivity with capital raising. We're going to continue to do that going forward.
Robert Randolph Morse: As as as as we go through the year I think that I think that that.
Robert Randolph Morse: In the past and going forward, we've always tried to marry.
Robert Randolph Morse: Capital raising with what the size of the opportunity is in front of us. So that we can effectively raised and deploy capital and our strategies and.
Robert Randolph Morse: In the past, we've we've been disciplined.
Robert Randolph Morse: In limiting fun size in order to marry that deployment opportunity and selectivity with with capital raised we're going to continue to do that going forward. It haven't having said that it's been it's been our experience that uhm as hard as we invested our teams as they grow as the.
Robert Randolph Morse: Having said that, it's been our experience that as we invest in our teams, as they grow, as markets evolve, that we've found more opportunities. I'll use multi-family as an analogy for what are a number of different market segments at this point. We used to have only a generalized multi-family investment vehicle.
Robert Randolph Morse: As as markets evolve that we've found we found more opportunity I'll I'll use I'll use multifamily as a.
Robert Randolph Morse: As an analogy for water a number of different market segments. At this point, we used to have only.
Robert Randolph Morse: Now we have market-rate multi-family, which is, which is, for the most part, class B value add, as well as workforce. And in both of those areas, there's, we think, some pretty significant opportunity. Asset values go up and down, and transaction activity goes up and down.
Robert Randolph Morse: A generalized multifamily investment vehicle now we have market rate multifamily, which is which is for the most part clasby value add as well as workforce and in both of those areas. There's some there's we think some pretty significant opportunity asset values.
Robert Randolph Morse: Go up and down and and and transaction activity goes up and down but the overall size of the of the multifamily market. As that example, writ large is pretty significant and there's there's ways to expand that market. So we think we do have the potential to effectively raised into.
Robert Randolph Morse: But the overall size of the multi-family market, as that example writ large, is pretty significant, and there are ways to expand that market. So we think we do have the potential to effectively raise and deploy more capital looking forward than we did looking backward. It's a similar story with different parameters around it.
Robert Randolph Morse: Applause more capital looking forward that week than we did looking backward. It's a it's a similar story with different parameters around it and.
Robert Randolph Morse: In logistics, as an example, we're we think we're just getting started in logistics. And our, our, the team that we stood up now numbers somewhere between 35 and 40 people. We, we are actively deploying capital in our logistics value-add fund, too. We are actively deploying capital in some build-to-core activities around that vertical as well. And we think that logistics, when you look at it from a size perspective, the overall market is as big as the multifamily market, to be sure, but our participation is much, much smaller at this point.
Robert Randolph Morse: In logistics.
Robert Randolph Morse: As as an example, we're where we think we hope we're just getting started in logistics and are are.
Robert Randolph Morse: The team that we stood up now numbers somewhere between 35 and 40 people. We we are we are actively deploying capital.
Robert Randolph Morse: In our.
Robert Randolph Morse: Our logistics value add fund to we we are actively we are actively deploying capital in some build decor activities around that that vertical as well and we think that logistics you know when you look at logistics as from a size per.
Robert Randolph Morse: Specter of the overall market is as big as the multifamily market to be sure, but our our our participation is much much smaller at this point. So there should be a great deal of growth. There. When you look at when you look at secondaries. The secondary market has been growing really strongly and and we think that from.
Robert Randolph Morse: So there should be a great deal of growth there. When you look at secondaries, the secondaries market has been growing really strongly. And we think that, from an industry structure perspective, secondaries are not only here to stay, but are going to become an increasingly important strategic part of the overall ALTS universe, allowing both GPs and LPs to manage liquidity, etc., so there's a lot of room to grow there.
Robert Randolph Morse: From a an industry structure perspective secondaries, you know not only are here to stay but are going to have to become an increasingly important strategic part of the overall.
Robert Randolph Morse: <unk> universe, allowing both G PS and lp's to manage liquidity et cetera. So so we think that there's a lot a lot of room to grow their you know I could go I could go on and on about are.
Robert Randolph Morse: And I could go on and on about our different verticals. One of the factors that's pretty fundamental to us when we try to curate where we participate and where we don't is what the future growth prospects are, what the potential for growth is, what the potential for related diversification is, building on what we strongly believe are differentiated capabilities in what we're doing and how those capabilities might be applied in related ways to expand the markets that we do.
Robert Randolph Morse: About our different verticals one of the one of the factors is pretty fundamental to us when we got Qurate, where we where we participate where we Don is what the what the future growth prospects are what the what the potential for for growth is what the potential for related diversification.
Robert Randolph Morse: It is building on what we what we strongly believer differentiated capabilities in what we're doing and how those capabilities might be applied in.
Robert Randolph Morse: In related ways to expand the markets that we do so so we we think that we think that we have some pretty attractive gross drivers in place.
Robert Randolph Morse: So we think that we have some pretty attractive growth drivers in place that, hopefully, as we, at least from our perspective, see this as at or near the cyclical bottom, will be amplified going forward, both through the cyclical upturn but also because of the secular growth of the underlying vertical.
Robert Randolph Morse: That that hopefully as we at least from our perspective see this as a at or near the cyclical bottom will be will be amplified going forward. It goes through the cyclical upturn, but also because of the secular growth of the of the underlying vertical.
Robert Randolph Morse: <unk>.
Adam Quincy Beatty: Excellent. Thank you for piecing those out. And then just a question on the Wealth Management Channel. One of the aspects of that channel that's gotten some attention from your peers recently has been some liquidity features for individual investors. So maybe you could talk a little bit about, you know, overall in your wealth effort, what those liquidity features look like, and in particular for the new product that you're bringing to market. Thank you.
Speaker Change: Excellent. Thank you for repeating those out and then just a question on the walkman ruined channel one of the aspects of that channel that's gotten some attention at your peers recently has been sort of liquidity features for individual investors. So maybe you could talk a little bit about you know overall in your wealth.
Adam Quincy Beatty: That for you know what those recording features work like in in particular for the new product that you're bringing to market. Thank you.
Robert Randolph Morse: I'm sure that's a really good and appropriate question because there's always the concern that you have a vehicle that offers liquidity and then underlying assets that are less liquid than potentially the capital. I think we've structured well around that.
Speaker Change: I'm sure that's a that's a really good and and an appropriate question because there's there's always the concern.
Robert Randolph Morse: That that you have a vehicle that offers liquidity and then underlying assets that are better less liquid and then then potentially the capital I think we've we've structured well around that we have defined.
Robert Randolph Morse: We have defined characteristics of liquidity that will help to guide investors in understanding what their options are. It's really early in the capital raise for this vehicle. We did, over the course of the last couple of years, create a very strong seed portfolio. That seed portfolio The investors who helped to fund that seed portfolio also have liquidity around their investment. The seed portfolio has been performing so well that we, I don't think we've had a, if we've had any requests for liquidity, they've been de minimis. I don't want to say zero, but nothing that has risen to any level of importance in that respect.
Robert Randolph Morse: Case of liquidity that.
Robert Randolph Morse: That that that will will will help to help to guide investors in understanding what their options are.
Robert Randolph Morse: It's really early in the in the capital raise for for.
Robert Randolph Morse: For this vehicle we did over the course of the last couple of years created a very strong C portfolio that seat portfolio <unk>.
Robert Randolph Morse: The investors, who helped to fund that seat portfolio also do have liquidity since around their investment.
Robert Randolph Morse: <unk> portfolio has been performing so well that we I don't think we've had.
Robert Randolph Morse: If we've had any requests for liquidity, David <unk>, I don't Wanna say zero, but nothing that that that has risen to any level of importance in that respect we we invest in we invest in in in discrete.
Robert Randolph Morse: We, you know, invest in discreet investments that are relatively small individually but aggregate to a meaningful scale. So that enhances liquidity as well. If there are requests for liquidity, what we've invested in is highly marketable to meet those liquidity requests. And we do have defined parameters around how much liquidity investors can expect that are relatively consistent with what other, you know, so-called retail democratized vehicles have in the marketplace as well.
Adam Quincy Beatty: Excellent. Thank you.
Adam Quincy Beatty: Discreet investments that are.
Adam Quincy Beatty: Relatively.
Adam Quincy Beatty: Small individually, but aggregate too meaningful scale, so that enhances liquidity as well were there to be requests for liquidity that what what what we've invested in we think is highly marketable in it.
Adam Quincy Beatty: To to to meet those liquidity requests and we do have defined parameters.
Adam Quincy Beatty: Parameters around how much liquidity investors can expect that are relatively consistent with what what other so-called retail democratize vehicles have in the marketplace as well.
Adam Quincy Beatty: Just very specifically, is there an initial lock-up period for investors?
Speaker Change: Excellent. Thank you I just first specifically is there an initial walk up period for investors.
Robert Randolph Morse: I believe there is, it might be. I believe there is, I'm not. It might be a year, it might be a little bit more than a year, I'm not sure.
Speaker Change: I believe there is it might be.
Robert Randolph Morse: We can come back to you on that. Okay, no sweat. Thank you very much. I appreciate it. Thank you.
Speaker Change: I believe there is I'm not on it might be a year it might be a little bit more than a year I'm not sure. We can come back to you on that okay. No sweat. Thank you very much appreciate it.
Adam Quincy Beatty: No sweat. Thank you very much.
Speaker Change: Thank you thanks for the questions.
Speaker Change: Thank you.
Operator: Thank you. Ladies and gentlemen, this concludes our Q&A session and thus concludes our call today. We thank you for your interest and participation. You may now disconnect your lines.
Speaker Change: Ladies and gentlemen, this concludes our Q&A session and that concludes our call today. We thank you for your interest and participation you may now disconnect your lines.