Bridge Investment Group Q4 2024 Earnings Report

Bridge Investment Group EPS Results

• Actual EPS: $0.18
• Consensus EPS: $0.16
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: N/A

Bridge Investment Group Revenue Results

• Actual Revenue: $81.96 million
• Expected Revenue: $82.02 million
• Beat/Miss: Missed by -$56.00 thousand
• YoY Revenue Growth: N/A

Bridge Investment Group Announcement Details

• Quarter: Q4 2024
• Date: 2/24/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, February 25, 2025
• Conference Call Time: 9:30AM ET

Bridge Investment Group (NYSE:BRDG) engages in the real estate investment management business in the United States. It manages capital on behalf of approximately hundred global institutions and 6,500 individual investors across approximately 25 investment vehicles. The company was founded in 2009 and is headquartered in Salt Lake City, Utah.

Bridge Investment Group Q4 2024 Earnings Call Transcript

Key Takeaways

• Bridge reported GAAP net income of $10.6 million ($0.04/share) and distributable earnings of $28.2 million ($0.15/share), with a $0.10 per share dividend declared.
• In Q3 the firm deployed $1.35 billion of capital—$349 million in multifamily/workforce, $40 million in logistics, and $966 million in debt strategies—with activity expected to rise.
• Bridge has broadened its platform with three specialized logistics strategies, a leading single-family rental business, a PE secondaries arm, and new wealth solutions, underpinned by internal investments.
• The company raised $672 million in Q3—led by debt strategies, workforce/affordable housing, and solar infrastructure—and anticipates stronger fundraising in Q4.
• Management sees signs of a real estate recovery, citing a ~19% value repricing since 2021, a 3% YTD gain in the Green Street index, improving debt markets, and robust multifamily and industrial fundamentals.

Presentation

[Operator]

Thank you for standing by. My name is Mark, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bridge Investments Group 3Q24 Earnings Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question and answer session.

[Operator]

Thank you. I would now like to turn the call over to Pao Hirosin, Head of Shareholder Relations.

[Bonni Rosen, Head of Shareholder Relations at Bridge Investment Group]

Thank you. Good morning, everyone. Welcome to the Bridge Investment Group conference call to review our third quarter twenty twenty four financial results. Prepared remarks include comments from our Executive Chairman, Robert Morse Chief Executive Officer, Jonathan Slager and Chief Financial Officer, Katie Elthnab. We will hold a Q and A session following the prepared remarks.

[Bonni Rosen, Head of Shareholder Relations at Bridge Investment Group]

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. 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.

[Bonni Rosen, Head of Shareholder Relations at Bridge Investment Group]

The supplemental materials are accessible on our IR website at ir.bridig.com. These slides can be found under the Presentations portion of the site along with the third quarter earnings call event link. They are also available live during the webcast. We reported GAAP net income to the company of approximately $10,600,000 for the third quarter of twenty twenty four. On a diluted basis, net income attributable to Bridge per share of Class A common stock was $0.04 Distributable earnings of the operating company were $28,200,000 or $0.15 per share after tax and our Board of Directors declared a dividend of $0.1 per share, which will be paid on December 20 to shareholders of record as of December 6.

[Bonni Rosen, Head of Shareholder Relations at Bridge Investment Group]

It is now my pleasure to turn the call over to Bob.

[Robert Morse, Executive Chairman at Bridge Investment Group]

Thank you, Bonnie, and good morning to all. It's a pleasure to speak to you this morning and to share our results and outlook. As we assess our daily activities of interacting with our 13,000 plus investor base to raise capital and of 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, not in full force, but we are seeing more substantive dialogue with investors, more deals to evaluate and generally more activities. As we look across the alternative asset investment landscape, there are fundamental reasons why activity has picked up. So many asset classes are trading at or around all time highs, public equities, gold, even Bitcoin.

[Robert Morse, Executive Chairman at Bridge Investment Group]

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 values have decreased by 19%. 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 assets pricing at a meaningful discount to replacement cost, ultimately resulting in outsized investment performance over the ensuing ten plus years. 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 in where we deploy capital, not only taking advantage of a buyer's market in several sectors, but also focusing on segments with secular tailwinds behind them.

[Robert Morse, Executive Chairman at Bridge Investment Group]

To that end, which Jonathan will further detail, in the third quarter of twenty twenty four, we were selectively active in deploying capital. We acquired $349,000,000 of multifamily and workforce assets at attractive cap rates, dollars 40,000,000 of logistics assets and deployed $966,000,000 of capital in our debt strategies vertical, including meaningful recycling of investments. We expect deployment opportunities to increase over the next several quarters. In an improving but still muted environment, Bridge's business, operations and financial results remain resilient and position us well to capitalize on the opportunities ahead. We have expanded our areas of competence since the last cyclical peak.

[Robert Morse, Executive Chairman at Bridge Investment Group]

We have three industrial logistics strategies, one focused on value add infill logistics equity, one on developed to core logistics and one on net lease industrial manufacturing and logistics that have been well received in the institutional and retail markets. We have a top performing, albeit small, single family for rent business that performs best in class. We now have a PE secondaries business, which has developed a pre specified 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. All these initiatives have been financed off the bridge balance sheet, either via income statement capital, which previously decreased FRE and DE, but are expected to be meaningful contributors over time or via balance sheet capital.

[Robert Morse, Executive Chairman at Bridge Investment Group]

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 33 and opened local offices in major logistics markets of Southern California, Dallas Fort Worth, South Florida and the Meadowlands area of New York, New Jersey. We have invested $22,000,000 to build these capabilities, which is substantially less than what it would cost to acquire an existing logistics business. We raised $336,000,000 in our first value add closed end vehicle, dollars $428,000,000 in developed to core SMAs and expect the first close of our next vintage fund in the value add logistics areas to raise more capital in its first closing than the entire fund size of our first vintage.

[Robert Morse, Executive Chairman at Bridge Investment Group]

In addition, we are in advanced dialogue with a leading state pension plan regarding a multi year developed to core SMA. We believe that this initiative, although it so called cost us $22,000,000 of FRE to the operating company to create, will result in one of the best positioned specialized logistics businesses and a major profit contributor in the future. Money well spent often overlooked as an internal initiative, but very characteristic of Bridge's internal capabilities to recognize opportunity, create and nurture teams and drive results. An earlier example of the same practice is our development opportunity zone vertical, which has deployed over $4,000,000,000 of equity in six vehicles since 2019. In addition to developing the product capabilities mentioned above, we have continued to invest in our distribution capabilities, both domestically and abroad.

[Robert Morse, Executive Chairman at Bridge Investment Group]

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 have also focused on expanding our penetration with major pension funds and consultants. We've increased penetration to this important segment by 20% year over year based on expected capital raise for 2024. We've opened an office in Dubai to further augment our already significant Middle Eastern investor base and we continue to add LPs in Europe and Asia as well as domestically. We introduced our retail accredited investor strategy last quarter.

[Robert Morse, Executive Chairman at Bridge Investment Group]

We've already made progress in this channel. Our net lease industrial strategy is approved with several major custodians. We have partnered with leading RIAs, independent broker dealers and are in discussions with several major wealth platforms to While we are still in the early stages, we're encouraged by the progress we've made to date. While we are still in the early stages, we're encouraged by the progress we've made to date. As a culmination of capital raising efforts, we raised approximately $6.00 $7,000,000 in the third quarter led by four twenty nine million dollars in debt strategies and $115,000,000 in workforce and affordable housing.

[Robert Morse, Executive Chairman at Bridge Investment Group]

We also had $48,000,000 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. Third quarter fundraising improved from second quarter, and we expect fourth quarter to be even stronger. This we believe will be the manifestation determination and focus on high quality investment teams in the right sectors and explains why we have such confidence in the increasing LP demand in our sectors. With that, I will turn the call over to Jonathan.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Thank you, Bob, and good morning. There's much to be optimistic about in 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 2024. Green Street's commercial property price index bottomed in late twenty twenty three and is up 3% in 2024. 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 Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

We anticipate more meaningful improvements in valuation and volumes in the coming quarters. The improvement in the debt capital markets is illustrated by a rise in CMBS issuance and a significant narrowing of credit spreads. As noted last quarter, we've capitalized on this in our SFR business by completing a securitized debt financing for Bridge SFR Fund IV, two hundred basis points lower than our prior to securitization in November '2. Another transactional green shoot this quarter was our debt strategies vertical had its biggest lending quarter in over two years with 15 loans totaling over $720,000,000 being originated, much of which was recycled capital, so not fully captured in our deployment numbers for this quarter. Additionally, Freddie Mac chose Bridge to anchor its first ever multi contributor Q deal, which we issued with Harbor Group in September.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Furthermore, Bridge Debt Strategies issued the thirteenth CRE CLO deal totaling over $638,000,000 It was our first CLO in two years and the deal was overwhelmingly well received with over subscriptions on every offered tranche, allowing the deal to price well inside of other issuers preceding deals. 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. Deployment for the quarter totaled $617,000,000 led by debt strategies. We also had a pickup in activity within multifamily as we continue to lean into select investments.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Notably, on a year to date basis within our largest segment, multifamily, our $784,000,000 of investments were underwritten to unlevered IRRs that are 23% better than pre pandemic levels. On the credit side, in the first three quarters, we were able to deploy $1,900,000,000 in debt strategies, inclusive of recycled capital. In our multifamily pipeline, we are beginning to see medium to large sized portfolios sourced through off market relationships as well as lender driven transactions. There is a widespread expectation that a significant amount of product will come to market in Q1 and a view that if the debt markets remain active and the short end of the yield curve continues to improve, we will see significant volumes in 2025. While dispositions have been more limited, the results have demonstrated continued demand for our product with a weighted average IRR of 23.6% and a 2.39% gross multiple on year to date multifamily dispositions.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

In our logistics vertical, with the quick interest rate reversion, we've seen more and once untouchable properties come available in the super prime markets as users and private owners have limited liquidity alternatives. Our entry price point is approximately half of peak pricing and we are finding opportunities where we can stabilize assets to an approximately 7% yield. This stabilization point translate to some of the widest spreads we have seen since the early 2000s, making this an exciting time for our next fund series in this strategy. Despite laboring under near peak delivery levels in multifamily with 163,000 units coming in Q3, absorption exceeded this at 193,000 units, bringing our fourth quarter total to 490,000 units, which is 50% above pre pandemic average absorption levels of 330,000 units. We expect similar deliveries and absorption in Q4, but the picture gets much more compelling as multi family starts are down 42% off peak, juxtaposed against a continuing strong demand picture.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

On the industrial side, we have a similar story, only slightly behind multifamily, but starts are 76% off peak levels at just 43,000,000 square feet. The impact of high deliveries and supply has impacted rent growth at just 0.3% nationally on the multifamily side. However, our operational skills allow Bridge to mitigate some of this. In our most recent multifamily and workforce vintages, we have exceeded our NOI projections by 6.8% life to date. In our first logistics value vintage, we have exceeded underwritten net effective rents by 19.6% on average since inception.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

And in our single family rental portfolio, Bridge maintains a 94% occupancy and year to date performance of just over 5.9% blended rent growth and 11% NOI growth, which is solidly ahead of our public peers who have reported NOI growth in the 5% range. Now turning to performance, as mentioned earlier, we had a positive performance for Q3 in our real estate valuations, up 0.2%. 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. We are encouraged by many leading indicators such as public REITs increasing 41% since they frost in October of twenty twenty three. From a commercial real estate perspective, all signs are pointing up following declines in both volumes and values reminiscent of the GFC, resulting from the rate hiking cycle.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Surveys of CRE participants by CBRE indicate that over 90% of them see significant improvement in volumes in 2025. According to PERE, 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 in the 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. I'll now turn the call over to Katie.

[Katie Elsnab, CFO at Bridge Investment Group]

Thank you, Jonathan. Bridge's business related revenue was $82,500,000, increasing 1.3% from last quarter, driven by increased inflows into workforce and affordable housing and debt strategies. Fee related revenue was $82,500,000 increasing 3% from last quarter, mostly due to the inclusion of fee related performance revenues related to the crystallization of carried interest for our open end net lease strategy we discussed on our last earnings call. This was partially offset by lower other asset management and property income and net earnings from bridge property operators. The lower other income line item was impacted by a time benefit of $1,900,000 included in Q2, which we noted last quarter.

[Katie Elsnab, CFO at Bridge Investment Group]

The decrease in net earnings from bridge property operators was mostly driven by lower revenue from the office vertical as that strategy becomes a smaller part of our overall business. We anticipate that this trend will carry on in the future. Transaction fees were roughly flat versus Q2. As Jonathan noted, real estate deal volumes in the market appear to be improving. However, transaction related revenue will grow more modestly in the future due to the mix of the capital we're raising.

[Katie Elsnab, CFO at Bridge Investment Group]

I would also note we expect transaction fees to be smaller percentages of revenues as we continue to grow and scale our strategies. Historically, we have always focused on recurring management fees as a better indicator of the underlying performance of our business. This metric has grown at a 26% CAGR since IPO and has exhibited stability during the past two years of real estate volatility, highlighting the attractiveness of our long tenured AUN profile. 97 of our capital remains invested in clothes and funds with a weighted average duration of six point four years. Fee related earnings for the operating company were $32,400,000 decreasing from last quarter, mostly attributable to higher compensation related expenses, which increased by approximately 3,100,000 excluding approximately $3,000,000 in compensation associated with the fee related performance revenue.

[Katie Elsnab, CFO at Bridge Investment Group]

We have weathered the downturn by growing fee earning AUM during the last two point five years with a careful eye towards cost management. As the cyclical recovery has started materializing, we have begun reinvesting in the growth of our platform, including on the investment and fundraising sides of the business, positioning the company for this upcycle as outlined by Bob earlier. The long term earnings power of the platform is substantial, driven by our brand, our track record and our people. On the people side, we expect compensation expense to grow off of the adjusted $42,000,000 in Q3. Distributable earnings to the operating company for the quarter were $28,000,000 with after tax fee per share of $0.15 a decrease of 0.04 from last quarter.

[Katie Elsnab, CFO at Bridge Investment Group]

The decrease is mostly due to the items discussed within fee related earnings along with a net insurance loss of $1,600,000 versus a gain of $2,000,000 last quarter, representing approximately $0.02 The net insurance loss included a one time loss of approximately $2,000,000 associated with a large claim in our captive. Additionally, the large claim impacted our claims history, which also resulted in higher IBNR reserves for the quarter of $1,500,000 Our general expectation is that our reserve income will stabilize to more normalized positive levels next quarter. Similar to the last few quarters, performance fee realizations primarily consisted of tax distributions within debt strategies. As a reminder, the non controlling interest for this vertical is 60%, leading to a ratio of 24% of the gross realized performance fees that will flow through to the operating company. Net accrued performance revenue on the balance sheet stands at $339,500,000 which slightly increased compared to last quarter and is recorded one quarter in arrears.

[Katie Elsnab, CFO at Bridge Investment Group]

It's important to note that 81% of the carry is related to Multifamily Fund four and Workforce one, where we are currently monetizing assets. With European Waterfalls, 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.

[Robert Morse, Executive Chairman at Bridge Investment Group]

Thank you, Katie. Bridge has managed expenses carefully through the last two years of the real estate winter. 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 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 improving out as we raise and deploy more capital.

[Robert Morse, Executive Chairman at Bridge Investment Group]

Although the financial performance in our FRE and 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 residential rental and commercial real estate backed fixed income. With that, I would now like to open the call for questions.

[Operator]

And your first question comes from the line of Mike Brown with Wells Fargo Securities. Mike, please go ahead.

[Michael Brown, Equity Research Analyst - Asset Managers, Brokers and Exchanges at Wells Fargo]

Great. Good morning. Thanks for taking my questions. I guess I just wanted to maybe start off by maybe trying to put a little bit of a finer point on the real estate market recovery here and outlook. Can you just maybe add a little bit more thought or color around when we could start to see a pickup in kind of three main places?

[Michael Brown, Equity Research Analyst - Asset Managers, Brokers and Exchanges at Wells Fargo]

I guess one, fundraising, particularly from like the retail side. Two, transaction fees, sounds like the outlook there is that that will start to pick up, but just how do we think that could play out over the next twelve to eighteen months and then realizations? And then I guess a lot happening in real time here and we're seeing kind of a backup in the yield. So just curious if that gives you a little bit of pause, do you think that that could kind of moderate the pace of the recovery? Thank you.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Yes. So a lot that was a very multi part question and I'm not sure I did a great job. This is Jonathan Slager. 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. I do want before I respond to your question to mention that unfortunately Bob has had to leave for an important client meeting they couldn't move.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

But we do have Dean Allara, our Vice Chairman, who's 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. With respect to the overall commercial real estate market, I think taking your last question first about the impact of rates and the outcome of the election and what we've seen so far.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

I think our perspective is

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

that overall it's early days to kind of be able to start assessing whether we have

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

a change. Obviously, the Fed has a meeting later

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

today and I expect and all of us expect that they'll continue the trajectory down on the short end of the curve in terms of bringing their rates closer to the neutral rate overall. And so despite the fact that there's some optimism and ebullience and there's been whatever the so called Trump trade that has impacted yields, We expect that to come back in and we expect that the impact of that in the short run will be to slow down the pace of transaction flow and the pace of recovery in values, but we still expect that to take place, meaning there is a significant pent up demand for transaction volumes among the participants. There's also as we talk about and we've talked about many, many times a significant loan maturity wall that's coming into commercial real estate that's going to kind of force transactions to take place into the market as borrowers can't bring capital to refinance the loans at the new lower loan amounts. So we see that contributing. And again, the overall sentiment is there's a tremendous amount of dry powder and demand.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

And we're really optimistic. I think we mentioned the absorption in my opening remarks in my script. We talked about the 193,000 units that were absorbed versus the deliveries of 163. So we're getting towards the back end of the deliveries on the multifamily side, But the demand at 590,000 units in the last four quarters continues really strong and we expect that to continue strong. And obviously, one of the positive parts of the expectations under a Trump administration is going to be continued growth.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

And all of that is for commercial real estate. So we're expecting value to recover. And again, what's challenging and has been challenging for a long time 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 will start to show a more normal shape with lower front end debt. 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.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

And I think that there's 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 and the place they want to allocate is in industrial and multifamily, which are two really strong suits for bridge.

[Dean Allara, Vice Chairman of the Board at Bridge Investment Group]

Hey, Jonathan, I just added good morning, Mike. Your question about retail fundraising. So we have a vehicle that we expect that we will break escrow on this quarter. We are pretty excited about that. Currently, it's not and we're breaking escrow likely because of our number of custodian platforms.

[Dean Allara, Vice Chairman of the Board at Bridge Investment Group]

We're on a couple of larger RIAs to put it that way. We're in dialogue as we look to the future with multiple, warehouse type folks as well. So that all feels pretty good as the momentum sort of swings here, I think is what's happening and we expect over the coming quarters to be pretty positive as Jonathan mentioned. Also worth mentioning that we expect in time that we'll have multiple products as we continue to build out not only the distribution is being built out right now, but obviously the marketing as well, the product set as well. So further questions on that, but just clarification.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Thanks, Dean. Did we miss anything there because that was a lot of multi part questions? I feel like I want to make sure that you got covered there, Mike.

[Michael Brown, Equity Research Analyst - Asset Managers, Brokers and Exchanges at Wells Fargo]

Yes. No, I think you hit all my four or five sub questions in there. Thank you for all that.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Fantastic. And thanks, Dean, for helping me out in that retail one.

[Dean Allara, Vice Chairman of the Board at Bridge Investment Group]

No, no problem. We said retail fundraiser, I think we got it.

[Michael Brown, Equity Research Analyst - Asset Managers, Brokers and Exchanges at Wells Fargo]

And if I could just ask a follow-up here on maybe on kind of like a theme of operating leverage. So as we think about that recovery that's playing out and the investments you've been making in the business, You've talked a lot about the investments in the logistics side and also flagged some of the investments you're making on the distribution. 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 and how that will kind of come through in terms of operating leverage?

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Yes. Well, I want to clarify when you refer to operating leverage, are you referring to the overall balance sheet at Bridge and are you referring to the investments?

[Michael Brown, Equity Research Analyst - Asset Managers, Brokers and Exchanges at Wells Fargo]

No, just to clarify, I'm just thinking through the kind of revenue growth potential relative to expected kind of expense growth.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Right. Okay. Well, I think on a what I think is very, very positive note, we have for the last few years, we keep talking about investing, but we've built out a pretty scaled national team, and Bob referred to that in his opening remarks on the logistics side. So we don't need to do a huge amount of team growth. Obviously, the team is there and in place.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

The other thing is a lot of what we've been doing on the logistics side is development. And that development, we now have like seven, maybe it's eight, seven to eight green lit construction projects, development construction projects. 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 and that will drop through towards the bottom line.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

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 about that. With respect to retail distribution, and Dean might have something to add here, it's going to continue to be a significant investment, not just in retail, but also we've been expanding our institutional coverage and really made some amazing inroads when maybe Dean you want to cover some of the statistics about how progress we've made there. But we need to continue to invest in our distribution. Wirehouses and our business is transitioning toward that and regular way retail.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

So maybe you can jump in, Dean.

[Dean Allara, Vice Chairman of the Board at Bridge Investment Group]

Yes, absolutely. So a couple of comments here I'd make as it relates to investment in distribution. To give you a sense, Mike, over the past two years, our distribution team is up by headcount by 50%. So that and that I don't know if we'll grow to that extent, but as we build and we've made some pretty notable significant executive hires at the retail level over the in this year that we expect will start filling in below that as well to execute there. So that and that's always been an ongoing part, I think, we've always believed and invested in distribution as we look to grow overall.

[Dean Allara, Vice Chairman of the Board at Bridge Investment Group]

So I don't see that I see that continuing to a degree. I can't give exact numbers, but we're not stopping that investment. I'd put it that way. The success, I think we have retail sort of at our doorstep to some degree. There's still this takes quarters.

[Dean Allara, Vice Chairman of the Board at Bridge Investment Group]

I don't want expectations higher. And then we're just starting to sort of launch through that. So that feels right. Institutionally, we've just we've had we have 11 new accounts we're going to bring in this year, institutional accounts that are new, which is breaking new ground there. We can fish a lot of white space.

[Dean Allara, Vice Chairman of the Board at Bridge Investment Group]

We're seeing the white space, I'd say, or the execution of those new institutions is global. It's between and I know Bob mentioned we just opened the option in Dubai. So we're seeing some Middle Eastern capital. We're seeing some additional European capital. We're seeing most of the new capital, to be honest, here in The U.

[Dean Allara, Vice Chairman of the Board at Bridge Investment Group]

S. And Canadian, but more U. S. Pension institutional world. I think there's a comment about the 20% increase in consultant coverage we've got year over year as we penetrate the much of that capital is harnessed with the consultants and on institutional side here in The U.

[Dean Allara, Vice Chairman of the Board at Bridge Investment Group]

S. And then we're seeing new institutional traction in Asia and mainly Korea, but we are seeing in most other parts of Asia as well. So hope that answers that second part of your question, Mike, but additional color there.

[Michael Brown, Equity Research Analyst - Asset Managers, Brokers and Exchanges at Wells Fargo]

Yes, great. Thank you for all that color. I'll leave it there. Thank you.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Thanks, Mike. Thanks, Mike.

[Operator]

Your next question comes from the line of Ken Worrington with JPMorgan.

[Ken Worthington, Financial Analyst at JP Morgan]

Maybe first to follow-up on that question. You mentioned that the outlook for fundraising is better in 4Q. What magnitude of improvement are you expecting relative to 3Q? 3Q? And is it more funds in market?

[Ken Worthington, Financial Analyst at JP Morgan]

Should we end up seeing a close in Newberry? Or is it just bigger contributions into the existing funds that we saw in 3Q?

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Yes. Obviously, we can't be as specific as I know you want us to be. And but Dean, maybe you can give them a flavor for what where we think the energy is. I think we did say in the remarks that we thought logistics is going to be a big winner.

[Dean Allara, Vice Chairman of the Board at Bridge Investment Group]

Yes. Let me give you directional comments here. I'll hit this as well. I think we're going to see in logistics, we're going to see some notable increase that will we can make those Q4 numbers be Q3 plus maybe plus plus I can't say more than that, I don't think. But that feels very good.

[Dean Allara, Vice Chairman of the Board at Bridge Investment Group]

We also have we call them the four horse in our world. We have debt right now we have debt, we have workforce, we have logistics in the market and we have Newberry. And so I think all those will contribute. Newberry, to just comment further on that, the re ups I'd say it this way, the re ups feel good. The team has executed on the initial investments in this current vehicle and have executed, as you might expect, the marks have been pretty good there.

[Dean Allara, Vice Chairman of the Board at Bridge Investment Group]

So they've done what they've done over their history back to the three GFC days. And so I think it's really a matter of coming quarters liquidity to their current LPs is sort of the gating thing right now, but that feels like it's going to be cutting loose over the coming quarters. I'm clear about that. And we're all seeing traction across traditional bridge clients as well as the cross sell there. So I don't know if that get at all?

[Ken Worthington, Financial Analyst at JP Morgan]

Yes. Okay. That helps. And then you mentioned compensation. I think you said that $42,000,000 was a rate jumping off point.

[Ken Worthington, Financial Analyst at JP Morgan]

This is sort of a higher comp accrual than we've seen either earlier this year or last year. So we've seen Bridge as a pay for performance company. Are you now sort of having to pay in advance of performance? You mentioned all the green shoots. Is that what's driving the step up in compensation and sort of what we think of as a payout ratio?

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Yes. I'll start with that, and maybe Katie and or Dean might want to chime in. But I think to be fair, Ken, we've been very I think the remarks in the script say it all. We've been very careful about really tightly managing expenses. But we also have an important mandate to obviously maintain morale, maintain our teams, make sure that everybody is excited because we are coming into this phase where everyone has high expectations for significant increase in volumes, improvement in values and we're incredibly well positioned.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

So what we think is you're 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. And so we need to make sure that we're not being super stingy about bonuses and comp. And so a lot of it is just making sure that kind of we're sending the right message to the team about our confidence there and then making sure that going forward everything is appropriately staffed to be able to accomplish what we think is going to be a much higher volume of total work.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Business is growing. I think that's the encouraging news as the business is growing. We love our teams. We have great teams and we want to keep morale solid.

[Ken Worthington, Financial Analyst at JP Morgan]

Okay, great. Yes,

[Katie Elsnab, CFO at Bridge Investment Group]

I would just add

[Dean Allara, Vice Chairman of the Board at Bridge Investment Group]

Sorry.

[Katie Elsnab, CFO at Bridge Investment Group]

I would just add that our employees are our greatest asset and now is the time to invest in them.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Yes.

[Ken Worthington, Financial Analyst at JP Morgan]

Thank you.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Did you have a follow on, Ken?

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Ken? I

[Operator]

think Ken is already on the back on the queue. So we're going next to the next question, Michael Cyprys, Morgan Stanley. Michael, please go ahead.

[Michael Cyprys, Managing Director at Morgan Stanley]

Great. Thanks so much. Good morning. Just a question on the deployment backdrop and multifamily. I was hoping maybe you could unpack that a bit more in terms of what you're seeing there, what you expect to see.

[Michael Cyprys, Managing Director at Morgan Stanley]

You mentioned short end of the curve moving lower the improvement there as a catalyst for volumes as you look ahead, but maybe you can unpack some of the moving pieces. We're also seeing the back end yields move a bit higher. Curious how you think about the sort of moving pieces around that, the implications there? And if the Bakken yields were to continue to go even higher from where they are today, how do you see the sort of implications of that? Thank you.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Yes. Great question. I know there's a lot of debate around the treasure yields and the shape of the curve and all of that. But I think 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's the bulk of our current investing activities.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

The shorter end of the yield curve is a much more impactful thing. So getting those, call it one month to call it three to five year underlying indices tighter is important. It's also important that the debt markets be active and available. And that's part of the messaging that we gave you. The securitization markets, the CLO markets, we're having significant resurgence in those.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

And you're 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. And now they're calling us up saying, hey, we want to do deals with you guys. So I think that what that means to me between that and all the dry powder that's sitting in the credit funds is that spreads are going to tighten.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

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 in my view. 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 supplydemand dynamic for residential and industrial. And those are the two sectors where we focus.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

So I think that's the response.

[Michael Cyprys, Managing Director at Morgan Stanley]

Great. Thanks. And just a follow-up question. I think you mentioned some rent and NOI growth and occupancy stats for the SFR business. But just curious if you could elaborate on what that looks like across the multifamily workforce and some of the other sectors and how has that been trending?

[Michael Cyprys, Managing Director at Morgan Stanley]

And then as you look into 2025, how do you expect NOI growth, rent growth, occupancy to trend into next year? Thanks. Yes. Go ahead.

[Katie Elsnab, CFO at Bridge Investment Group]

So in general, we had rent growth in our multifamily workforce housing about 3.3 quarter over quarter. The same store revenue growth was 2%. So overall, the assets are performing very well. And it's just really a matter of valuations, etcetera, a matter of the capital market.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Yes. And I think on to give you an idea of our forward view on that, we I mentioned it, but to repeat that we are seeing already seeing on the multifamily side in particular absorption exceed deliveries and deliveries are at the back end of their peak, right? 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're down and they're down hard coming forward.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

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 give you a pretty solid picture. I think the other thing is, in order to initiate new supply of 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 costs to construct new real estate, either industrial or multifamily. And we don't see the cap rates either have to massively compress or the rents have to grow in order to justify new supply.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

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 story continues as we expect it to.

[Michael Cyprys, Managing Director at Morgan Stanley]

Great. Thanks so much.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Great.

[Operator]

And your next question comes from the line of Manu Roberts with TD Securities.

[Manu Roberts, Equity Analyst at TD Securities]

I wanted to come back to some of your prior comments. 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 and what management fee rates will look like against the 110 basis points we saw in the quarter? Thank you.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Yes. I'm going to give this one to Katie to give you some more guidance. I think she gave some in her remarks, but

[Katie Elsnab, CFO at Bridge Investment Group]

Correct. So if we think about the inflows during the quarter, they are primarily related to our debt strategies, which historically has been primarily institutional investors. So in general, what we are seeing across the board is that we are seeing a greater shift to institutional investors. Traditionally with institutional investors, we're going to see a slightly lower management fee rate as well as change in our overall revenue mix where we'll see transaction fees being a lower percentage over time. And so when you think about our business, as we continue to grow and scale and diversify, you're going to see overall revenue growth that transaction fee is going to be a lower percentage of that growth of that revenue.

[Jonathan Slager, CEO & Co-Chief Investment Officer at Bridge Investment Group]

Right. I think we're viewing transaction fees as being there's some growth in it off of the place we are today. But again, when you look at the character of what was in our business back in like 2021, where we had really large opportunity zone funds that were being deployed that did have transaction fees connected to them, 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 will impact it. But again, we continue to have generation of transaction fees as part of our long term business.

[Manu Roberts, Equity Analyst at TD Securities]

Okay, great. Helpful color guys. Thank you very much.

[Operator]

There's no further question at this time. That concludes today's call. Thank you all for joining. You may now disconnect.

Participants

Executives

• Bonni Rosen, Head of Shareholder Relations
• Robert Morse, Executive Chairman
• Jonathan Slager, CEO & Co-Chief Investment Officer
• Katie Elsnab, CFO
• Dean Allara, Vice Chairman of the Board

Analysts

• Michael Brown, Equity Research Analyst - Asset Managers, Brokers and Exchanges at Wells Fargo
• Ken Worthington, Financial Analyst at JP Morgan
• Michael Cyprys, Managing Director at Morgan Stanley
• Manu Roberts, Equity Analyst at TD Securities