Q3 2024 Bridge Investment Group Holdings Inc Earnings Call
Thank you for standing by my name is Mark and I will be conference operator today at this time I would like to welcome everyone to the friction free tier three four earnings call. All lines have been placed on mute to prevent any background noise at the Speakers' remarks, there will be a question and answer session.
Speaker Change: If you would like it if you would like.
To ask a question during this time she progressed star followed by the number one on your telephone keypad. If you would like to be part of your question first star one again.
Speaker Change: I'd now like to turn the call over to Paul Rosen and shareholder relations Bonnie.
Speaker Change: Thank you good morning, everyone welcome to the bridge investment Group Conference call to review, our third quarter 'twenty 'twenty four financial results prepare.
Speaker Change: Prepared remarks include comments from our executive Chairman, Robert Morse, Chief Executive Officer, Jonathan Flanker, and Chief Financial Officer, Katie Open up.
Speaker Change: 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.
Speaker Change: We do not undertake any duty to update these statements.
Speaker Change: For a discussion of some of the risks that could affect results. Please see the risk factors section of our Form 10-K.
Speaker Change: During the 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.
Speaker Change: Supplemental materials are accessible on our IR website at IR Dot bridge I G dotcom.
Speaker Change: These slides can be found under the presentation portion of the site along with the third quarter earnings call about link. They are also available live during the webcast. We reported GAAP net income to the company of approximately $10.6 million for the third quarter of 2024 on a diluted basis net income attributable to bridge per share of <unk>.
Speaker Change: As a common stock with four cents.
Speaker Change: Distributable earnings of the operating company, where $28.2 million or 15 cents per share after tax and our board of directors declared a dividend of 10 cents per share, which will be paid on December 20th to shareholders of record as of December 6th is now my pleasure to turn the call over to Bob.
Bob: Thank you Bonnie and good morning to all.
Bob: It's a pleasure to speak to you this morning and to share our results and outlook.
Speaker Change: As we assess our daily activities of interacting with our 13000, plus investor base to raise capital in a buying and selling assets across our specialized verticals. We believe that the long winter of real estate declines has bottomed and the sector has begun to re emerge.
Speaker Change: I Didnt full force, but we are seeing more substantive dialogue with investors more deals to evaluate and generally more activities.
Speaker Change: As we look across the alternative asset investment landscape. There are fundamental reasons why activity has picked up.
Speaker Change: So many asset classes are trading at or around all time highs public equities gold, even bitcoin real estate broadly defined has reset in value in large part due to the rate environment, although value declines since the 2021 peak vary across sectors within real estate on average.
Speaker Change: Values have decreased by 19%.
Speaker Change: We see in this environment echoes of the aftermath of the global financial crisis, when values declined and offered an attractive entry point for buyers with asset pricing at a meaningful discount to replacement cost ultimately, resulting in outsized investment performance over the ensuing 10 plus years.
Speaker Change: Such investment opportunities have reemerged today as we outlined in our 2024 outlook entitled navigating the curve. We think it is appropriate to lean into these opportunities remaining selective and precise and where we deploy capital not only taking advantage of a buyers market in several sectors, but also.
Speaker Change: So focusing on segments with secular tailwind behind them.
Speaker Change: To that end, which Jonathan will further detail in the third quarter of 2024, we were selectively active in deploying capital, we acquired $349 million of multifamily and workforce assets at attractive cap rates $40 million of logistics assets and deployed.
Speaker Change: $966 million of capital in our debt strategies vertical including meaningful recycling of investments.
Speaker Change: We expect deployment opportunities to increase over the next several quarters.
Speaker Change: In it and improving but still muted environment bridges business operations and financial results remained resilient and position us well to capitalize on the opportunities ahead, we have expanded our areas of competence since the last cyclical peak, we have three industrial logistics strategies one focused.
Speaker Change: Value add infill logistics equity one on developed a core logistics and one on net lease industrial manufacturing and logistics that had been well received in the institutional and retail markets, we have a top performing albeit small.
Speaker Change: Single family for rent business that performs best in class. We now have a P E secondaries business, which has developed a prespecified portfolio with attractive marks and we have a wealth solutions team with distribution in place and a specialized high performing investment strategy with more to come.
Speaker Change: All these initiatives have been financed off the bridge balance sheet.
Speaker Change: Thereby income statement capital, which previously decreased F. R. E D E, but are expected to be meaningful contributors over time.
Speaker Change: Or via balance sheet capital. The net result is that going into the anticipated upturn, we have a broader offering of high demand investment capabilities more distribution and capital raising resources and more opportunity.
I want to further illustrate this point by highlighting our investment in logistics value add since 2021, we have assembled a strong team of professionals now numbering thirty-three and opened local offices in major logistics markets of Southern California, Dallas, Fort worth and South, Florida and the metal.
Speaker Change: <unk> area of New York, New Jersey, we have.
Invested 22 million to build these capabilities, which is substantially less than what it would cost to acquire an existing logistics business. We raised $336 million in our first value add closed end vehicles $428 million in developed to core Sma's and expect the first close of our next vintage fund.
And the value add logistics area to raise more capital in its first closing then the entire fund size of our first vintage.
In addition, we are in advanced dialogue with a leading state pension plan regarding a multiyear developed a core SMA. We believe that this initiative, although it so called cost us $22 million of FRE to the operating company to create.
Speaker Change: Will result in one of the best positioned specialized logistics businesses and a major profit contributor in the future money.
Speaker Change: Money, well spend often overlooked as an internal initiative, but very characteristic of bridges internal capabilities to recognize opportunity create and nurture teams and drive results and earlier example of the same practice is our development opportunity zone vertical which is deployed over $4 billion of equity.
And six vehicles since 2019.
Speaker Change: In addition to developing the product capabilities mentioned above we have continued to invest in our distribution capabilities, both domestically and abroad.
Speaker Change: Our institutional coverage efforts are stronger than ever and we've added or are in the process of closing 11, new institutions as meaningful investors. This year for some time. We are also focused on expanding our penetration with major pension funds and consultants, we've increased penetration to this important segment by 20% year.
Speaker Change: Over a year based on expected capital raised for 2024, we've opened an office in Dubai to further augment our already significant middle Eastern Investor base, and we continue to add L. P as in Europe, and Asia as well as domestically.
We introduced our retail accredited investor strategy last quarter, we've already made progress in this channel our net lease industrial strategy is approved with several major custodians, we have partnered with leading our eye as independent broker dealers and are in discussions with several major wealth platforms to expand our distribution.
<unk> of what we believe to be a differentiated offering to this part of the market. We've demonstrated some early success expecting to break escrow and have our first closing for the strategy in the fourth quarter. While we are still in the early stages. We're encouraged by the progress. We've made to date is a culmination of capital raising efforts we raised.
Approximately $607 million in the third quarter led by 429 million in debt strategies and $115 million.
Speaker Change: In workforce and affordable housing, we also had $48 million of inflows into our solar infrastructure strategy. We continue to have engagement from both repeat and new Lps in our secondaries business and we expect to see meaningful capital flows in the coming quarters.
Speaker Change: Third quarter fund raising improve from second quarter, and we expect fourth quarter to be even stronger. This we believe will be the manifestation of our determination and focus on high quality investment teams in the right sectors and explains why we have such confidence in the increasing L. P demand in our sectors with that.
Speaker Change: I'll turn the call over to Jonathan Thank.
Jonathan: Thank you Bob and good morning.
Jonathan: There is much to be optimistic about the outlook for commercial real estate over the next year.
Real estate prices continue to show signs of stabilization with major indices, turning positive in 2020 for Green.
Jonathan: Green Street's commercial property price index bottomed in late 2023 and is up 3% in 2024.
Jonathan: Our portfolios were also positive for the quarter, yet the impact of an improving debt market and increased transaction volumes has just begun to be reflected in the market.
Jonathan: We anticipate more meaningful improvements in valuation in volumes in the coming quarters.
Jonathan: The improvement in the debt capital markets as illustrated by a rise in sea MBS issuance and a significant narrowing of credit spreads.
Jonathan: As noted last quarter, we've capitalized on this and our S. F. Our business by completing a securitized debt financing for bridge FSFR fund for 200 basis points lower than our prior to securitization in November 22.
Jonathan: Other transactional green shoots this quarter was our debt strategies vertical had its biggest lending quarter in over two years with 15 loans totaling over $720 million being originated much.
Jonathan: Much of which was recycled capital so not fully captured in our deployment numbers for this quarter.
Jonathan: Additionally, Freddie Mac chose bridge to anchor its first ever multi contributor Q deal, which we issued with Harbor group in September.
More bridge debt strategies issued 13, seer or U C. L O deal totaling over $638 million. It was our first CLO in two years and the deal was overwhelmingly well received with Oversubscription on every offered tranche, allowing the deals are priced well inside of other.
Jonathan: Issuers preceding deals.
Jonathan: This improving liquidity in the market provides the foundation for greater transaction activity on the real estate equity side of our business.
Although overall real estate transaction volumes are still far below normal levels momentum is building and our investment teams remain nimble to transact at attractive pricing.
Jonathan: For the quarter totaled $617 million led by dead strategies.
Jonathan: We also had a pickup in activity within multifamily as we continue to lean into select investments.
On the industrial side, we have a similar story only slightly behind multifamily starts are 76% off peak levels at just 43 million square feet.
Jonathan: The impact of high deliveries.
Apply has impacted rent growth at just 3% internationally on the multifamily side. However, our operational skills allow bridge to mitigate some of this in our most recent multifamily and workforce vintages, we've exceeded our NOI projections by six 8% life to date and our first.
Jonathan: Logistics value vintage we have exceeded underwritten net effective rents by 19, 6% on average since inception.
Jonathan: And in our single family rental portfolio Bridge maintains a 94% occupancy and year to date performance of just over five 9% blended rent growth and 11% NOI growth, which is solidly ahead of our public peers, who have reported NOI growth in the 5% range.
Jonathan: <unk>.
Jonathan: Now turning to performance as mentioned earlier, we had a positive performance for Q3, and our real estate valuations up 0.2%.
Jonathan: While the downward movement in the interest rates is positive for commercial real estate. Historically, there is a lag before this is reflected in fund valuations, especially as transaction volumes have yet to fully rebound.
Jonathan: We are encouraged by many leading indicators such as public Reits, increasing 41% since they trust in October of 2023 from a commercial real estate perspective, all signs are pointing up following declines in both volumes and values reminiscent of the GLC, resulting from the rate.
Jonathan: <unk> cycle.
Jonathan: Surveys of CRE participants by CBRE indicate that over 90% of them see significant improvement in volumes in 2025.
According to P. E. R E nearly half of all institutional investors are under allocated to private real estate and our own interactions indicate that they are recognizing that the reset in values makes us an attractive entry point bridge has invested significantly in building out best in class investment teams and the.
Jonathan: Most attractive sectors of commercial real estate and PE secondaries, and we are well positioned to emerge from this downturn to an even more compelling and scaled platform.
Jonathan: Now I'll turn the call over to Katie Thank you Jonathan.
Katie: British business continued to exhibit stability in the quarter with fee, earning AUM, increasing one 3% from last quarter, driven by increased inflows into workforce and affordable housing and that strategy.
Speaker Change: During the past two years of real estate volatility highlights the attractiveness of our long tenured AUO and profile.
Jonathan: 97% of our capital remains invested in closed end funds with a weighted average duration of six four years.
Jonathan: The related earnings to the operating company were $32 4 million decreasing from last quarter, mostly attributable to higher compensation related expenses.
Jonathan: Increased by approximately $3 1 million, excluding approximately $3 million in compensation associated with the fee related performance revenue.
Jonathan: We have weathered the downturn by growing fee, earning AUM during the last two and a half years with a careful eye towards cost management.
Jonathan: As the cyclical recovery has started materializing, we have begun investing in the growth of our platform, including on the investment in fundraising sides of the business.
Speaker Change: The company further sub cycle as outlined by Bob earlier.
Jonathan: The long term earnings power of the platform the substantial driven by our brand our track record and our people.
Jonathan: On the people side, we expect compensation expense to grow off of the adjusted $42 million in Q3.
Jonathan: Distributable earnings for the operating company for the quarter were $28 million with after tax dollars per share of 15.
Jonathan: A decrease of 4% from last quarter.
Jonathan: The decrease was mostly due to the items discussed within fee related earnings along with our net insurance loss of $1 6 million versus a gain of 2 million last quarter, representing approximately two cents.
Jonathan: The net insurance loss included a one time loss of approximately 2 million associated with a large claim in a captive.
Jonathan: Additionally, the large claim impacted our claims history, which also resulted in higher I've been a reserve for the quarter of $1 5 million. Our general expectation is that our interest income will stabilize similar normalized positive levels next quarter.
Jonathan: Similar to the last few quarters performance fee realizations, primarily consisted of tax distributions with him that strategies.
Jonathan: As a reminder, the noncontrolling interest for this vertical is 60% leading to a ratio of 24% of gross realized performance fees that will flow through to the operating company.
Jonathan: Net accrued performance revenue on the balance sheet stands at $339 5 million, which slightly increased compared to last quarter and this recorded one quarter in arrears.
Speaker Change: It's important to note that 81% of the carriers related to multifamily fund for it and workforce one where we are currently monetizing assets with European waterfall. These funds are expected to drive substantial distributable earnings in the latter part of 2025 through 2026 with that I would now like to hand, the call back to Bob for some closing remarks.
Bob: Thank you Katie.
Speaker Change: Bridge has managed expenses carefully through the last two years of the real estate winter.
Bob: Now we are seeing a substantial uptick in investor interest early signs of rising values and indications that transaction volumes are beginning to recover for.
Bob: For bridge. This is the time to lean into our future growth by investing heavily in our manufacturing and distribution teams to take advantage of these opportunities you will see our trajectory and plan are proving out as we raise and deploy more capital, although the financial performance in our FRE.
Bob: <unk> distributable earnings May lag several quarters, after which you will see a much more scaled business emerge. We believe the many investments we have made in distribution logistics PE secondaries and renewable energy will become meaningful contributors going forward to supplement our historic presence in <unk>.
Jonathan: <unk> rental and commercial real estate backed fixed income with that I would now like to open the call for questions.
Speaker Change: We will now begin the question and answer session, if you'd like to ask a question at this time through the rest of our followed by the number one on your telephone keypad.
Speaker Change: And your first question comes from the line of Mike Brown with Wells Fargo Securities. Please go ahead.
Mike Brown: Great. Good morning, Thanks for taking my questions.
Mike Brown: I guess I just wanted to maybe start off by maybe trying to put a little finer point on the real estate market recovery here and outlook.
Mike Brown: Can you can you just maybe add a little bit more thought or color around when we can start to see a pick up in kind of three main places I guess one.
Mike Brown: Fundraising, particularly from like the retail side too.
Mike Brown: Transaction fees sounds like the outlook, there that that will start to pick up but just.
Mike Brown: That could play out over the next 12 to 18 months.
Mike Brown: Realizations, and then I guess.
Mike Brown: What's happening in real time here and we're seeing that.
Mike Brown: Backup in the yield so just curious if that.
Speaker Change: It gives you a little bit of pause do you think that that could kind of moderate the pace of the recovery. Thank you.
Speaker Change: Yes so.
Speaker Change: That was a very multi part question and Im not sure I did a great job. This is Jonathan slager.
Mike Brown: Great job of getting all of the notes, but if I Miss something please feel free to interject and make sure that I cover it.
Mike Brown: Before I respond to your question dimension that Unfortunately, Bob has had to leave for.
Mike Brown: An important client meeting they couldnt move.
Mike Brown: But we do have Dean Alair, our vice chairman, who is going to be on the line to be able to support with questions related to client solutions and capital raising and provide additional support for the team in addition to myself and Katie.
Mike Brown: With respect to the overall commercial real estate market.
Mike Brown: I think taking your last question first about about the impact of.
Mike Brown: Right.
Mike Brown: And the outcome of the election, and what we've seen so far I think our perspective is.
Mike Brown: Overall, it's early days to kind of be able to start assessing whether we have a change obviously the fed has a meeting later today and.
Mike Brown: I expect in all of US expect that they'll continue the trajectory down on the short end.
Mike Brown: The curve in terms of bringing bringing their rate of closer to the neutral rate overall.
Mike Brown: And.
Mike Brown: So despite the fact that.
Mike Brown: There is some optimism and a buoyant and theres been whatever.
Mike Brown: Called Trump trade that has impacted yields.
Mike Brown: We expect that to come back.
Mike Brown: Come back in and we expect that the impact of that.
Mike Brown: In the short run will be to slow down the pace of transaction flow and the pace of.
Mike Brown: Recovery in values, but we still expect that to take place, meaning there. There is a significant pent up demand for transaction volumes. Among the participants. There is also as we talk about and we've talked about many many times.
Mike Brown: Significantly the loan maturity wall, that's coming in the commercial real estate that's going to.
Mike Brown: That's going to kind of force transactions.
Mike Brown: <unk> placed into the market.
Mike Brown: As borrowers can bring capital to refinance the loans at the new lower lower loan amounts.
Mike Brown: So we see that contributing and again the overall sentiment is there is a tremendous amount of dry powder and demand and we're really optimistic I think we mentioned the absorption in my opening remarks in my script.
Mike Brown: We talked about the 193000 units that were absorbed versus the deliveries of 163. So we're at that we're getting towards the backend of the deliveries on the multifamily side.
Mike Brown: But demand at 590000 units in the last four quarters.
Mike Brown: <unk> is really strong and we expect that to continue strong.
Mike Brown: Obviously, one of the positive parts.
Mike Brown: Of.
Mike Brown: The expectations under a Trump administration is going to be continued growth.
Mike Brown: And.
Mike Brown: All of that is good for commercial real estate. So we're we're expecting values to recover.
Mike Brown: And again.
Mike Brown: What's challenging it has been challenging for a long time.
Mike Brown: Is the pace at which values recover the pace at which rates ultimately do come down, especially on that kind of shorter end of the yield curve and the curve hopefully well, we will start to show a more normal shape.
Mike Brown: With lower <unk>.
Speaker Change: A lower front end.
Speaker Change: So I think broadly speaking that's my response to the overall market is that we see a lot of enthusiasm dean's on the phone, but he's out there every day talking to our LP base and.
Speaker Change: And I think that there is a huge amount of them that have been paused in terms of allocation into commercial real estate and now they're meaningfully and actively looking to allocate in the place they want to allocate as in industrial and multifamily which are two really strong suits for bridge.
Speaker Change: Hey, Jonathan I would just add.
Mike Brown: Mike Your question about retail.
Mike Brown: Fundraising so we have a vehicle that we expect that we will bring.
Mike Brown: <unk> was strong this quarter.
Speaker Change: We're pretty excited about that.
Speaker Change: <unk> is currently in China, and we're breaking escrow likely because overall number custodian platforms or on a couple of large or larger ROI as you put it that way we're in dialogue and we look to the future with multiple.
Speaker Change: Wire house type folks as well so that all feels pretty good as the.
Speaker Change: The momentum sort of swings here I think is what's happening and we expect over the coming quarters should be.
Speaker Change: Pretty positive as Jonathan mentioned.
Speaker Change: Also worth mentioning that we expect in time that will have multiple products as we continue to build out not only the distribution is being built out right now, but I think obviously the.
Speaker Change: The marketing is where all the product set as well so no further questions on that but just.
Speaker Change: Yes.
Speaker Change: Thanks, Dean did we Miss anything there because that was a lot of multi part question. So I feel like I want to make sure that you've got covered there Mike.
Mike Brown: Yeah, No I think I think you hit all my fault.
Mike Brown: <unk> hundred five questions in there. Thank you for all that.
Speaker Change: Fantastic and thanks team for helping me out on that retailer.
Mike Brown: No.
Mike Brown: You said retail ratio I think we are.
Mike Brown: Yes.
Mike Brown: If I if I could just ask.
Mike Brown: Follow up here on.
Mike Brown: Maybe kind of like a net.
Mike Brown: Operating leverage so as we speak.
Mike Brown: Think about that recovery, that's that's playing out and the investments you've been making in our front end business.
Mike Brown: You talked a lot about the investments in the logistics side and I also flagged some of the investments you're making in the distribution.
Speaker Change: Just curious how you think about that investment spend level at 25% relative to 24, and then balance that against again that recovery, that's going to come through and the scale that's building in the platform.
Mike Brown: And how that kind of come through in terms of operating leverage.
Mike Brown: Yeah.
Speaker Change: Well I want to clarify when you when you refer to operating leverage.
Speaker Change: Are you referring to.
Speaker Change: To the overall balance sheet that bridge in there or are you referring to the investments.
Speaker Change: No just to clarify Im just.
Speaker Change: Thank you drew that kind of revenue growth potential relative got it.
Speaker Change: Any kind of expense growth.
Speaker Change: Right, Okay well.
Speaker Change: Got it.
Speaker Change: I think is very very positive note we have.
Speaker Change: For the last few years, we keep talking about investing but we built out a pretty scaled national team and Bob referred to that in his opening remarks.
Speaker Change: On the logistics side, so we don't need to do a huge amount of team growth.
Speaker Change: Obviously.
Speaker Change: The team is there and in place. The other thing is a lot of what we've been doing on the on the logistics side its development and that development. We now have like seven maybe it's $8 seven to eight green lit.
Speaker Change: Construction projects development construction projects.
Speaker Change: And those will start generating significant development fees, which are which again don't require us to hire incremental folks those folks are already in place and they've done all the work of getting everything entitled and ready to go. So we're going to start to see that coming through on the revenue side.
Speaker Change: That will that will drop through towards the bottom line. So you start looking at a very significant investment we've made in the logistics team in particular over the last few years and you look into 2025 and you say that's going to start turning positive in the back half of 2025. So we're really excited really excited about that with respect to retail.
Speaker Change: Distribution.
Speaker Change: And Dean might have something to add here, it's going to continue to be significant investment not just in retail, but also we've been expanding our institutional.
Speaker Change: Coverage and really made some amazing inroads.
Speaker Change: Dean do you want to cover some of the statistics about how.
Speaker Change: The progress we've made there, but we need to continue to invest in our distribution raising capital through institutions is different than the wire houses and our and our business is transitioning towards that and regular way retail. So maybe you can jump in.
Speaker Change: Yeah, absolutely. So a couple of comments here I'd make is as it relates to investing in distribution to give you a sense Mike over the past two years, our distribution team is up by head count by 50%.
Speaker Change: So I.
Speaker Change: I don't know I don't know if will grow to that extent, but as we built and we've made some pretty notable significant executive hires at the retail level over the over this year that we expect will start flowing below that as well to execute there so that and thats always been ongoing part I think we've always believed and invested in distribution as we look to grow over.
Speaker Change: So I don't see that I see that continuing.
Speaker Change: To a degree I can't give you exact numbers, but we're not we're not stopping that investment I would put it that way.
Speaker Change: The success I think we have retail sort of at our doorstep to some degree. They are still just takes quarters don't want expectations high here and we're just starting to sort of like a launch for that so that's how it feels right institutionally. We've just we've had you know we have 11, new accounts, we're going to bring in this year institutional accounts.
Speaker Change: That are new which is breaking new ground. There. We think there's a lot of white space, we're seeing the white space I would say are the the execution of those new institutions is global it's between that Bob mentioned, we just open the option Dubai <unk>.
Speaker Change: So we're seeing some middle eastern capital were seeing some additional European capital.
Speaker Change: Seeing motion new casual be honest here in the in the U S.
Speaker Change: And Canadian more U S pension institutional World I think there was a comment about the 20% increase in consultant coverage, we've got year over year as you penetrate the much of that capital is furnished with the consultants on the <unk> side here in the U S. And then we're seeing new institutional traction in.
Speaker Change: In Asia, mainly Korea, but we are seeing an erosion in other parts of Asia as well so I hope that answers. The second part of your question, Mike, but additional color there.
Speaker Change: Yes, great. Thank you for that.
Speaker Change: That color.
Speaker Change: Okay. Thank you.
Speaker Change: Thanks, Thanks, Mike.
Speaker Change: Your next question comes from the line of Ken Worthington with Jpmorgan. Please go ahead hi.
Speaker Change: Great maybe first to follow up on that question.
Speaker Change: You mentioned that the outlook for fund raising is better than for Q, what magnitude of improvement are you expecting relative to three Q.
Speaker Change: And is it more funds and market should we should we end up seeing a closing newberry or is it just bigger contributions into the existing funds that we saw in <unk>.
Speaker Change: Yeah, obviously, we can't be specific because I know you want us to be and but Dean maybe you can give them a flavor for what.
Speaker Change: We think the energy as I think we did say in the remarks that we thought logistics.
Speaker Change: Winter.
Speaker Change: Let me give you some directional comments here I'll hit this as well.
Speaker Change: We're going to see in logistics, we're going to see some notable increase so you can make those Q4 numbers.
Speaker Change: Q3, plus maybe plus plus I can't say more than that I don't think.
Speaker Change: But that feels very good.
Speaker Change: We also have we call them the four horsemen in our world. We have that right now we have that we have a workforce we have logistics.
Speaker Change: And the market and we have Newberry.
Speaker Change: Newberry and so I think all of those will contribute Newberry just just comment further on that.
Speaker Change: The re ups.
Speaker Change: I'd say it this way the re ups feel good the team has executed on the initial.
Speaker Change: Investments in this current vehicle.
Speaker Change: And have executed as you might expect.
Speaker Change: The market's been pretty good chair, so they've done what they've done over their history back to the <unk> days and so I think it's really a matter of coming quarters liquidity to their current Lps as sort of the gating thing right now, but that's what that feels like it's going to be cutting loose over the coming quarters on clear about that.
Speaker Change: And we're also seeing traction across.
Speaker Change: Traditional bridge clients as well as a cross sell there so I don't know if that get it all.
Speaker Change: Yep Okay.
Speaker Change: Helps.
Speaker Change: And then.
Speaker Change: You mentioned compensation.
Speaker Change: You said that $42 million was the right jumping off point. This is sort of a higher comp accruals and we have seen either earlier this year or last year. So.
Speaker Change: We've seen bridge as a pay for performance company.
Speaker Change: Now sort of having to pay in advance of performance you mentioned all the green shoots is that you know what what's driving the step up in compensation and sort of what we think of as a as a payout ratio.
Speaker Change: Yes.
Speaker Change: I'll start with that.
Speaker Change: And maybe <unk> deemed might want to chime in but I think I think to be fair.
Ken: Ken we've been we've been very.
Ken: The remarks.
Ken: In the script say at all we've been very careful about really tightly managing expenses.
Ken: We also have an important mandate to obviously maintain morale maintain our teams to make sure that everybody's.
Ken: Excited because because we are coming into this phase where.
Ken: Everyone has high expectations for significant increase in volumes the improvement in values and and.
Ken: Incredibly well positioned so what we think is youre going to start seeing that flywheel of capital raised and capital deployed but we need the team we need the team both on the capital raising side, we need the team on the investment side to be motivated and excited and I think our overall perspective is it's time to get everybody excited.
Ken: And so we need to make sure that we're not being super stingy about about bonuses and comp.
Ken: And so a lot of it is just making sure that we're sending the right message to the team about our confidence there and then and then making sure that going forward everything is appropriately staff too.
Ken: To be able to accomplish what we think is going to be a much higher volume of total work.
Ken: Okay business is growing I think that's the encouraging news is the business is growing we love our teams we have great teams and we want to keep morale solid.
Speaker Change: Okay, Great Yeah, I would just add there.
Speaker Change: Go ahead.
Ken: Sorry.
Speaker Change: Our employees are our greatest asset and now is the time to invest in them.
Speaker Change: Okay. Thank you.
Speaker Change: Did you have a follow on Ken.
Speaker Change: Ken.
Speaker Change: I think Ken has already on.
Speaker Change: Back on the okay.
Speaker Change: Well go next to the next question Michael <unk> with Morgan Stanley Michael. Please go ahead.
Michael: Great. Thanks, so much good morning, just a question on the deployment backdrop in multifamily I was hoping maybe you could unpack that a bit more in terms of what youre seeing there. What you expect to see you mentioned short end of the curve moving lower the improvement there is a catalyst for volumes as you look ahead, but maybe you can unpack some of the moving pieces were also seeing the backend.
Michael: Move a bit higher curious how you think about the sort of moving pieces around that the implications there and if that yields were to continue to go even higher from where they are today. How do you see this sort of implications of that thank you.
Speaker Change: Yeah, Great question, I know Theres, a lot of debate around that.
Speaker Change: The treasury yields in the shape of the curve and all of that but I think for for commercial real estate value add commercial real estate investing let's put it that way because that's primarily what bridge is involved in that.
Michael: The bulk of our current.
Michael: Investing activities.
Michael: The shorter end of the yield curve is a much more impactful thing so getting getting those.
Michael: Call It one month to call it three to five year.
Michael: Underlying indices tighter is important it's also important that.
Michael: The debt markets be.
Speaker Change: Active and available.
Speaker Change: That's part of the messaging that we gave you either securitization market, the CLO market, where having significant resurgence in those and youre seeing that in the issuances that we've done and all of that provides real liquidity, we're getting inbounds on a regular basis from banks, who were literally out of the market for the last two years.
Speaker Change: And now they are calling us up.
Speaker Change: Saying, Hey, we want we want to do deals with you guys. So so I think that what that means to me between that and all the all the dry powder, that's sitting in the credit funds.
Speaker Change: Is that spreads are going to tighten. So we can expect an available credit market. We can expect tighter spreads and we do need a little bit of help from the short end of the yield curve to really accelerate the volumes and the values, but volumes and values will increase regardless.
Speaker Change: In my view.
Speaker Change: And it's just a question of how much time, it takes and how long it takes for that to manifest and I think I already mentioned some of the reasons for it but at the end of the day, we have a really good supply demand dynamic.
Speaker Change: Dynamic for for residential and industrial and those are the two sectors, where we focus.
Speaker Change: <unk>.
Speaker Change: Thank you think thats the response.
Speaker Change: Great. Thanks, and just a follow up question I think you mentioned, some rent and NOI growth and occupancy stats for the <unk> business, but just curious if you could elaborate on what that looks like across multifamily workforce and some of the other sectors and how has that been trending and then as you look into 'twenty five how do you.
Speaker Change: You expect.
Speaker Change: NOI growth rent growth occupancy to trend into next year. Thanks.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Go ahead go ahead sorry.
Speaker Change: So and then we had rent growth in our multifamily and workforce housing about three 3% quarter over quarter.
Speaker Change: The same store revenue growth was 2%. So overall the assets are performing very well.
Speaker Change: And it's just.
Speaker Change: Really a matter of valuations et cetera are a matter of the capital market, Yes, and I think I think to.
Speaker Change: To give you an idea of our forward view on that.
Speaker Change: We I mentioned it but to repeat that we are seeing already seeing on the multifamily side in particular.
Speaker Change: Absorption exceed deliveries and deliveries are at the back end of their peak rate. So it's one of the things that's nice about real estate is that it takes a long time to build it right. So it doesn't just magically appear and nobody knew it was coming so we have a very clear view on deliveries and they are down and they're down.
Speaker Change: Hard coming forward and we have a pretty good view on absorption and you can see that that's maintaining very solid kind of record levels of absorption and so those two dynamics.
Speaker Change: Give you a pretty solid picture I think the other thing is in.
Speaker Change: In order to in order to initiate new supply.
Speaker Change: Real estate, you have to be able to get a decent return on that investment and today, we don't see a lot of dynamics that are going to create lower cost to construct new real estate, either industrial or multifamily.
Speaker Change: And we don't see that.
Speaker Change: The cap rate either have to massively compress or the rents have to grow in order to justify new supply well you pick either one of those or both of those both of them are good for bridge and good for real estate and they inevitably have to happen if the supply demand.
Speaker Change: Story continues as we expect it to.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Great. Thanks, so much.
Speaker Change: Great.
Speaker Change: Again, if you'd like to ask a question in the press star followed by the number one on your telephone keypad.
Speaker Change: And your next question comes from the line of manual Roberts with TD Securities.
Speaker Change: Go ahead.
Speaker Change: Hey, guys I'm on for Bill Katz. Good morning, Thanks for taking my question.
Speaker Change: Wanted to come back to some of your prior comments.
Speaker Change: Given that 90% of inflows in the third quarter came from institutional I Wonder if you could give us some color on how that might impact your outlook for transaction revenues.
Speaker Change: What management fee rates will look like against the 110 basis points, we saw in the quarter.
Speaker Change: Thank you.
Speaker Change: Yeah, I'm going to give this syndicate.
Speaker Change: To give you some more guidance I think she gave some in your remarks, but.
Speaker Change: Correct.
Speaker Change: So if we think about <unk> during the quarter, primarily related to our debt strategies, which historically has been primarily institutional investors.
Speaker Change: In general what we are seeing across the board is that we are seeing a greater shift to institutional investors.
Speaker Change: Traditionally with institutional investors, we're going to see a slightly lower management fee rate as well as.
Speaker Change: No change in our overall revenue mix, where we will see transaction fees being a lower percentage of our total revenue over time and so when you think about our business as we continue to grow in scale and diversify youre going to see overall revenue growth that transaction fee is going to be a lower percentage of background and that revenue.
Speaker Change: Right.
Speaker Change: We're viewing transaction fees as being Theres some.
Speaker Change: There is some growth off of the place we are today, but.
Speaker Change: But again when you look at the character of what was in our business back in like 2021, where we had really large opportunities.
Speaker Change: Funds that were being deployed that did have transaction fees connected to them that those those become smaller in overall scale and size and then as you point out the mix of investors, where you have institutional investors, where the transaction fees don't flow through.
Speaker Change: Will will impact it but again, we continue to have.
Speaker Change: Yes.
Speaker Change: Generation of transaction fees as part of our long term.
Speaker Change: <unk>.
Speaker Change: Okay.
Speaker Change: Okay great.
Speaker Change: Full color guys. Thank you very much.
Speaker Change: There is no further question at this time that concludes today's call. Thank you all for joining you may now disconnect.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yes.