Okay, good afternoon, everyone. Before we get started, for important disclosures, please see Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. The taking of photographs and use of recording devices is also not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. Thank you, everyone, for joining us here for day three of Morgan Stanley's Financial Conference. I'm Trevor Wankel, member of the Morgan Stanley Research Brokers, Asset Managers, and Exchanges Research Team. We're excited to have with us Robert Morse over there, who is the Executive Chairman of Bridge Investment Group, and Katie Elsnab, who is the Chief Financial Officer. Bridge is a leading vertically integrated private real estate investment manager with approximately $49 billion of assets under management based in Salt Lake City, Utah. Bob and Katie, thank you for joining us today, for making the trip up from Utah, I guess in your case, Katie, and across the road, Bob. Thank you. Let's dig right in. Bridge has been a public company now for about two years, and although you've been invested in real estate for a bit longer than that, for over a decade. For those of us that are a bit new with the Bridge story, do you mind just talking us through, giving us a brief overview of the firm, what you guys do differently, and how you approach real estate investing? Sure. Thank you for the question. Thanks, everybody, for attending. I'd be happy to start on that answer. We've been around as a organization since 1991. The antecedents of Bridge were started in 1991. We went through a recap in 2011 to create Bridge in its current format, and as you said, we've grown to about $49 billion of AUM. We have a number of specialized strategies across carefully curated sectors, mostly of U.S. real estate, with the notable addition of a secondary business as well. We invest primarily in the residential rental housing sectors, logistics sector, credit sectors in the U.S. Our focus for much of our assets is on the multifamily side of the business. I think the characteristics that differentiate us compared to many of our alternative asset investment management peers focused on real estate are a couple things. We're specialized. We have high-touch investment teams that are specialized and have deep capabilities and deep familiarity with the sectors on which they focus, so a separate multifamily team, a separate logistics team, et cetera. That specialization, we think, creates deal flow, creates capabilities. We're forward integrated. We operate almost everything that we either acquire or develop, and we think that that's a way to really access and capture the alpha at the asset levels in the value add situations in which we invest. That forward integration into property management and the ability to achieve efficiencies at the asset level, we think is more important today than ever before. The real estate markets clearly have been in a period of transition. As we've gone from a low interest rate environment to a higher interest rate environment, the value of leverage has diminished in many respects as interest rates have risen, even though cap rates have risen in concert with that. The ability to capture value at the asset level is more important than ever to drive performance of our assets. We went public, as was mentioned in July of 2021. We have a number of vectors for growth going forward. Think actually that the current environment offers extraordinary opportunity for us and potentially for others in the sector. We're excited about navigating through the remainder of 2023 and beyond. Excellent. Please go ahead, Katie. I think the only other thing that I would add is, you know, when we IPO'd, we went out with a very specific strategy, and, you know, I think we're very proud of our performance since the IPO. We've doubled our Fee-Earning AUM, we've doubled our Fee-Related Earnings, and that's primarily driven by the execution of that strategy. Excellent. Bob, you touched on this a little bit. Turning now to the real estate markets, I mean, arguably the pandemic has accelerated a number of trends. You have e-commerce, work from home, and then on top of that, layer on the higher interest rates you mentioned. That's led to some concerns about the future of CRE, if you can believe it, and what this can mean for real estate values. How do you see all this shaking out, and what risks or concerns do you see, and how much of that is legitimate versus, you know, hype, I guess? Well, clearly, the pandemic and some of the societal forces that were unleashed by the pandemic have impacted different sectors of real estate in a differentiated way. The most obvious losers have been the office sector, and the rise of remote working and the continuing questions around return to the office. That's impacted the office sector broadly. It's impacted different subsectors within office in a differentiated way. We think that there's still value to be seen and gained in selected parts of office, but we think a lot of the office sector is going to be under continued pressure for a very long period of time. The flip side of that is the importance of housing and the continued strong fundamentals around residential housing in general. We think, in particular, housing as it relates to serving the middle income and lower income cohorts of the U.S. resident population. Our housing focus has been on those parts of the market really since the beginnings of our company. We think that generally speaking, those resident bases have been underserved. They've been underserved in terms of housing itself. They've been underserved in terms of the social and community programming that always should be, but often is not part of a community to create strong neighborhoods and strong bonds. We've developed, we think, a great way to acquire, operate, and profitably deliver housing to a very resilient sector of the economy. The other thing that you mentioned, which is, of course a pretty meaningful beneficiary from onshoring, reshoring, continued growth in e-commerce, has been logistics. Logistics is a relatively newer strategy for us, but we're seeing really enormous momentum in terms of being able to find value add and profitably operate logistics assets in some of the prime gateway markets around the U.S., on the West Coast, in the New York, New Jersey area, South Florida, Dallas, places like that. Okay. Just on the point about office, I'm sorry, Katie, did you want to...? No, go ahead. The points on office, you said that some parts of office are still quite resilient. Where do you see that that bifurcation between the parts that maybe be a bit more challenged and the parts that perhaps can do better? I think there are a variety of perspectives that you can, that you can review to evaluate office. You know, one is geography, geographical. There are some cities that suffer from oversupply, suffer from, urban blight, suffer from the fact that the urban cores have emptied out a bit, and, offices in those cities are really struggling. San Francisco and Chicago are probably the two poster children, in that respect. On the other hand, some of the faster growing cities where jobs are being created, where there's net in-migration, where there's corporate in-migration, personal in-migration, are benefiting from an overall trend perspective. Within that, if you have an office asset with the right basis, the right amenities, the right focus on the on what the tenant needs are, we found that you can operate them well, you can keep them full, you can charge appropriate rents, and you can make money in that respect. It's, it's important not to paint the whole sector with the same brush. Probably going forward, there's always been some obsolescence of office assets as the world evolves. I think that obsolescence rate has increased, and the bifurcation between those cities and assets that are doing well and those cities and assets that are not doing well has widened a bit as well. I think that's been the general theme we've been hearing from all the alts about not painting the entire asset class with the same brush. What is interesting, though, is valuation in the office sector. Valuations can be really attractive. Assets that we're selling at four cap rates, you know, in our memory, are selling at 9-10% cap rates today. Really good entry points in which to in which to get in. Assets that come with debt in place. Mm-hmm. are more attractive on a relative basis than assets that need to a capital structure created around them. The amount of lender appetite for office assets is almost zero, you know, if not negative in a lot of respects. Yeah, that makes sense. I guess as we think about the market again, more broadly, we've seen this in your, in your financials in terms of transaction volumes being very low and, you know, declining. I forget what the numbers are, something like 40% quarter-over-quarter. You know, what do you think is required for that to reach a new equilibrium or for things to start to pick back up? What, you know... Is it rates? Is it confidence? You know, what do you think is required? I might make a couple comments, and then maybe Katie would ask you to talk about how that's reflected in our Q1 results. From a transaction perspective, at least our internal approach over the course of the last 3 quarters or so, has been to be disciplined and patient. We saw that asset values were adjusting as rates went up. Cap rates, I guess, by definition, lagged interest rate increases. We were cautious about pursuing assets at Cap rates that didn't reflect what we anticipated correctly to be the interest rate environment. So we haven't executed on a lot outside of our fixed income verticals, in the last three quarters or so. We're definitely seeing some green shoots around that at this point. The overall real estate markets have a lot of liquidity to them. Some of the sellers who were reluctant sellers as rates went up are now motivated sellers because for various reasons. And we're seeing that transactions are available at prices that we think are commensurate with what the current macroeconomic outlook is. You know, every asset's different, every asset's individual, every market has an impact. But if in the multifamily sector, for example, there was a low point of cap rates in the 3.5% range, and that'll vary a little bit depending on the asset, et cetera. That 3.5% of late 2021 is probably 5.25% or 5.5% today. We think at 5.5 as a cap rate, that's an attractive cap rate, and it certainly is a valuation that we can make the numbers work to deliver what we think are industry-leading returns for our investors. I would just add that, you know, you know, clearly in the last, you know, nine months, we've saw a disconnect between the bid-ask spread. You know, we have a weekly pipeline report, and, you know, in early January, there was very little activity. You know, we're seeing deals, you know, with, you know, 4% cap rates, and it just didn't make sense in that environment. You know, in the, you know, past, you know, two months, we've really seen an increase in the number of opportunities that we're looking at and evaluating. You know, I think some of the changes that are occurring is, you know, you're starting to see the distress in some of the capital stacks out there. Whether or not, you know, those deals are in default or else they're seeing the need for the rescue capital, we're having these opportunities for to potentially acquire some of those deals. We're seeing, you know, opportunities where we're, you know, some, you know, funds that are at that vintage where they, you know, just wanna liquidate. You know, they already have a healthy return, so we're having conversations related to some of those deals. You know, we're also seeing deals where potentially it's time to refi, you know, given, you know, they might have had a fixed rate before, so there's opportunities there. We're, we're definitely seeing that change, and, you know, I think there's starting to be a little bit more confidence. I think people are more comfortable with where the interest rates are gonna rate ultimately end up. That also really helps provide comfort in the underwrite. Well. I think- My next question is this: If rates go up again, does that derail the whole thing and send us back to January? You know, how do you see that playing out? Well, we're gonna know in an hour. Thank goodness, we don't have the 2:00 P.M. slot. Right. to compete We got hit by that. to compete with Jay Powell. If rates go up more, it probably means that the Fed assesses the economic strength and resiliency of the US as stronger than anticipated. That's, you know, at worst, a mixed blessing, I think, in that a strong economy, generally speaking, benefits real estate, and an inflationary economy generally benefits real estate. One of the reasons why inflation has proven to be as sticky as it is the strength of the labour market. When you unpack the labour market, you see, amongst other things, that the earnings power of the middle-income and lower-income workers has been rising disproportionately quickly relative to the labour markets as a whole. That's very good for many of our investment segments because our resident, our tenant, has more spending power and can pay more for the, you know, fulsome suite of services that we endeavor to deliver at all our communities. That's a good thing. The other point I wanted to make as it related to transaction volumes and flows is if, in fact, we're correct about cap rates resetting, we think that as a company, we're really well positioned to take advantage of that. We ended 2022 with about $4.4 billion of dry powder in a select number of our funds. We continue to have a lot of that dry powder today. We think our investors, our LP investors, and because our LP... Will benefit, our LP investors will benefit, the company and our shareholders will benefit as well from the disciplined patience that we exhibited over the course of the last half of 2022 and the 1st quarter of 2023. We think that 2023 will be a pretty good vintage, you know, broadly defined for making investments at this new level. Yeah. Yeah, no, I think that's really critical. You know, we were very fortunate that, you know, we had our three flagships that had their final closings- Mm-hmm. in, you know, 2021, we raised significant... We had $2.7 billion in our BDS IV fund, which we've been able to deploy all of it in, what, two years. You know, we had, you know, $2 billion for Multifamily Fund V. You know, we're 40% called there. There's a lot of opportunities there, as well as with our Workforce II fund, which was about $1.7 billion. We're really well positioned in this market to be able to capitalize on it. Yeah. We'll come to the deployment picture a bit later on. Sticking briefly with the sort of macro theme, you know, how might real estate assets perform in a situation of stagflation? The scenario I guess we're thinking about here is one in which we're just discussing, was one in which inflation is high, but the underlying economy is still performing. How does that look if you lose the second bit of that, but keep the inflation? How do you expect real estate assets to perform? You know, it's hard to. At least for me, it's hard to envision a scenario where that actually takes place. I understand an environment of high interest rates and why rates would be high. If you do find yourself in an environment where you have high rates but low growth, it's probably a manifestation of the Fed continuing to be focused on fighting inflation. Inflation has to come from somewhere. It comes from either wage growth, as we talked about, or housing prices and housing and rent growth. It's unlikely that you're going to see that from energy. It's unlikely you're going to see that from materials, et cetera. Those factors are not only not bad, but pretty good for where most of our AUM is focused between residential housing, which constitutes about $25 billion of our $49 billion of AUM, and credit, which is almost all multifamily focused, which constitutes another $12 billion or so of that $49 billion of AUM. We're really positively exposed to sectors that, at least in the past, have been resilient in all economic scenarios, have been particularly well-performing in difficult economic scenarios, just under the theory that everybody needs a place to live. A lot of the multifamily new construction that's taken place in this century has been luxury multifamily, Class A. I think something like 80%, maybe a little bit more than 80%, has been Class A. That's not where we participate, and that's not where the bulk of the U.S. renters can afford to live either. We have this situation where we have a great big but underserved population that we're focused on and serving and able to serve in a way that's very profitable for us as a company. In past downturns, GFC is a great example, we saw more trickle down from luxury to Class B, Class B to Class C, whatever, than we saw fallout from the bottom. We would anticipate that that would be the case if we found ourselves in an environment of stagflation. We'd be entering that with our communities, in many cases, sort of bursting at the seams. Our occupancies are high. Mm-hmm. Our rent growth, which has been meaningfully above trend for a number of years, has come down a bit, but still is, you know, at or around trend. The underlying fundamentals of the business would be quite strong going into a downturn. I would just emphasize the focus in, you know, a downturn. That's really where our value add strategy, our property operating teams really do drive value, and it differentiates us. you know, even in a challenging environment, we're positioned as well. Excellent. You touched on a bunch of stuff there, which we'll come back to later on. For now, let's move away from the macro and focus specifically on Bridge. We see some pretty broad concerns about CRE, which we just talked about, and we see that reflected in the equity prices of companies such as yourselves, which I don't need to tell you, I'm sure. You know, REITs, the REIT index is down about 10% last time I looked. S&P, up a little bit more now than I have here, so probably closer to high singles now. My point is, it would suggest the market's pricing some fairly draconian outcomes here for real estate. I guess the question is: What are investors missing about Bridge, and what makes you, again, to the question we started off with, what makes you different? Why should you not be lumped in with the overall market the way, I guess, currently you're being priced? I'd be, I think there are a number of answers to that question. I was going to start off by saying I can't imagine any management team getting up and saying that their stock isn't undervalued. I do think that there are a number of differentiating factors of Bridge that are maybe not fully appreciated by the market. You know, we recognize that we're a smallish company, and we have limited float, but we think that we have a number of growth alternatives, which are going to serve us and serve our investors very well going forward. The first being, we have a great deal of organic growth in terms of what we're doing now. We've expanded our portfolio of strategies from multifamily to credit, and from that very strong base, we've launched a number of new-ish strategies recently. We've launched logistics, which is doing great and could be a sector that's as big as multifamily when it's fully built out. We've launched a net lease strategy that has gained great traction in a short period of time. We've launched a renewable energies fund. We've launched a PropTech fund. When you launch funds, you have to stand up a team, you have to create an organization. It's all CapEx that's disguised as reduction in EBITDA, because it's under accounting, it's current income that it costs to stand up those organizations. It's a great way to create the vectors for growth going forward. If we look at multifamily as an analogy, our first multifamily fund was $125 million. Second fund was $600 million. Third fund was $1 billion. Fourth fund was $1.6 billion, and most recent fund was $2.25 billion. Can we do the same in logistics? Hopefully, we can do that. We've not failed in the past, and we're gonna try very hard to create that same organic growth momentum. Since we've gone public, we've made two acquisitions. We've made an acquisition in the single-family for rent sector, which we think has many close parallels to what we're doing in multifamily successfully. Every multifamily resident, when they get their notices from Bridge, are made aware that when their families get too big for the typical two-bedroom multifamily apartment, often there's a single-family for rent opportunity right down the street, managed by their trusted landlord, Bridge Investment Group. There's some synergies there as well. We acquired a secondaries business. We think that the secondaries market, which has grown, I think, 10 times since our partner, Newbury Partners, was formed, has significant growth going forward. I believe it's Morgan Stanley that projects about a, what is it? 26% compound annual growth through 2026 for the secondaries business, so we feel pretty good about that as well. The very long-winded point being, we think we have a lot of vectors for growth going forward, that maybe are not fully appreciated by the market. Okay. Do you want to- I, another thing I just briefly touch, point out is the stability of our business. You know, the average duration of our fee-earning AUM, you know, is 7.4 years, and the majority of our fee-related earnings, you know, or fee-related revenue is driven by reoccurring fees. Certainly, you know, we don't have the variability that I think some folks feel like we have that exposure, and it just doesn't exist. Yeah, to that point, in terms of the structure, in terms of the fund structure, the duration of the capital, the leverage in the portfolio, can you talk a little bit about some of those things and how that might be different and underappreciated in terms of you don't have a double leverage and, you know, some of those details there? I think that one thing that's important to highlight is 98% of our Fee-Earning AUM is closed-end funds. We are conservative with our use of leverage. We don't do double leverage. In our equity funds, the majority of the leverage is at the asset level. You know, traditionally always been less than 75%, you know. In this environment, when raising rates, you know, we have reduced the leverage pretty significantly. I think that's critical. You know, we don't necessarily rely on leverage, you know, to drive returns. You know, we've been strategic as well, where, you know, 83% is fixed or hedged. You know, we, you know, our average duration of our mortgages is, you know, three and a half years. We've managed our debt portfolio, I think, very well. I think that is an advantage. In terms of the portfolio exposure, you're known as a multifamily shop, and that is obviously, at a time like this, presumably helpful in terms of when you look at the difference of your portfolio compared to the average REIT or any other, you know, real estate vehicle out there. You know, how do you guys think about that, and, do you think that's appreciated by the market in terms of the exposure you have to good neighborhoods? Pardon the pun. Yeah, you know, I think from that perspective, you know, when we look at our Fee-Earning AUM, you know, we feel very comfortable. I think we've been very selective with, you know, our strategies. You know, 90% of our Fee-Earning AUM is either in residential or logistics related to our real estate funds. We really feel like that we are in the right sectors, and we've been very selective on how we've, you know, selected them. You know, I think that that may not be fully, you know, acknowledged in the market. You know, only 4% of our Fee-Earning AUM is in office. If we look at our office, Fund II, in particular, it's performing very well. You know, we don't have as much exposure in the CBD as some of the other funds, and so I don't know that that's fully acknowledged as well. Excellent. When we get together as a senior management team and talk thematically and strategically about our business, we try to get the big things right, what sectors on which to focus, what sectors to avoid, how we can create a differentiated profile in what we choose to do, on the one hand, and on the second hand, then we really work to sweat the details at the individual asset level in everything that we do. Our approach, which has been crafted over many, many years, is designed to have sort of a sorry, seamless integration between the investment team, the property management team, and the disposition team. The same...... group of professionals is with each asset, really, from cradle to grave, from the time that we sign the check to acquire the asset to the time we receive the check from selling the asset. That attention to detail, along with hopefully making the right decisions strategically, are very important. Now, I'll give you a tangible example, which Katie alluded to. In our debt strategies fund, we made a decision when rates were still close to 0, that there was only upside exposure to rates. That decision manifested itself in insisting that all of our fixed income exposure would be floating rate, so that as rates rose, the returns to our investors would rise. In our most recent debt strategies, fully deployed fund, 99% of the exposure is floating rate. Thank goodness for that, because fixed rate has struggled and floating rate has prospered as rates have risen. It required some discipline because there were a bunch of what, at the time, were attractive fixed rate deals that were available, but over time, as SOFR went from zero to. Mm-hmm. -five and a quarter, that attractive appeal diminished and then reversed. I think getting the big things right is important. Sweating the details is really important as well. Excellent. I'm just conscious of time. Just wanna make sure we get to any questions in the room. I have a bunch here, so don't... I think there's a mic coming your way. Just over here, please. ...%, permanent capital vehicles. Any thoughts on shifting to permanent capital vehicles that remain open-ended, but you still realize carry annually, like Blackstone? Talk about the LP base, and do you compound or do you invest your own balance sheet into the funds? Sure. In terms of fund structures and tenor of capital, Katie mentioned the average tenor of our capital is 7.4 years. We have mostly closed-end funds. We have a couple of open-ended funds. You know, permanent capital vehicle and open-ended fund are not synonymous, as we've seen recently in some of the redemptions and gates coming down and things. The beauty, we think, of a closed-end fund is it's capital for the life of that fund. So we actually take some comfort from that. We do believe that there are times when an open-ended vehicle is more appropriate than a closed-end vehicle and vice versa. We'll continue to offer both, but right now we're predominantly closed-end fund oriented. In terms of investor base, our investor base is about half/half high net worth and institutional. We have, I think, at last count, 29 people in our Client Solutions Group to help raise capital. Probably the most effective team that we've ever been able to field. We have a dedicated team focused on the retail part of the market, the wealth management channels, RIAs and mostly ultra high net worth individuals. We have a separate team that focuses on the institutional market. We count as investors, you know, many prominent sovereign wealth funds, national pension plans, state pension plans, et cetera. We're continuing to grow that presence across both of those sectors. We have ambitious targets as it relates to, as it relates to raising capital. We have ambitious targets as it relates to, deploying capital. We think, for the most part, with our existing investor base, we've won their confidence. You know, we performed for them in the past. We think that the combination of performance and consistent, comprehensive, transparent communications is a winning formula. It looks like we're actually out of time. You have very high FRE margins already with the lower asset base relative to peers. What do you think that can get up to as these new strategies scale, where it sounds like you've already incurred costs, have a fully built-out team, but maybe aren't drawing on the fee income yet? Our high margins are a product of our CFO, and the discipline that she imposes. Yeah, when we think about our margins, you know, what historically we've always just targeted is about a 50% margin. You know, we do have a lot of variability, quarter-over-quarter, driven by our catch-up fees and our transaction fees. You know, the target is always about 50%, and as we continue to scale, it may move higher than that, but I don't... That's, you know, a long-term goal. Excellent. Thank you for the questions and for the participation. Bob, Katie, it's been a pleasure. Thank you so much for joining us. Thanks, all.