Welcome back. Thank you, everyone, for joining us. The lights are on now. They can see us now. Today we're very pleased to have Robert Morse, Executive Chairman of Bridge Investment Group. Bob, thanks so much for joining us today. Appreciate it. Pleasure to be here. Thank you. Absolutely. So wanted to start. It's a. It's an interesting story at Bridge and a little bit distinct. So I wanted to talk a little bit about the business model, some of the distinct aspects of which are the vertical integration and also some of the specialized verticals that Bridge has. The firm's been around for about 15 years, and so interested in the history of how that came about and, more importantly, how those distinct aspects played to the advantage of Bridge. Thanks. Adam characterized this as the hot seat, and so that sounds like an easy question. Mm-hmm. And one that I love to talk about. I'm sure some more difficult questions will follow. Mm-hmm. We've actually, as a firm, been in existence since 1991, when the predecessor to what was recapped in 2011 was formed. And Bridge's antecedents all focused on owning and operating real estate in the U.S., started out as a regional producer. We now have a national footprint. And we've had a few characteristics that we think contribute meaningfully to positive performance that we try to follow as we prosecute our business. One is to be specialized, to understand that all different parts of real estate are not created equal. We have $48 billion or so of AUM that we have; about $20 billion, about half of it is in residential rental, comprised of market-rate multifamily workforce and affordable housing, seniors' housing, and single-family for rent. About 30% is in credit. That those credit vehicles are almost all multifamily-oriented in, as the collateral for which we lend. And then we have a meaningful logistics presence and a relatively new but meaningful secondaries, private equity secondaries business as well. I think the characteristics that unify all of those areas is that we deploy specialized teams of professionals against those opportunities. Having specialization is really important. It helps you see more deal flow. It helps you win more deal flow, often at not market-clearing prices. We've seen that most recently, in each of the multifamily workforce and affordable and logistics areas. And it helps you understand why an asset is attractive or not. The second distinguishing characteristic we think about Bridge is that we operate almost everything that we either acquire or develop. We're owner-operators. We're not allocators. And that allows us to create value at the asset level. It allows us to manage the expense profile of the assets. It allows us to manage the revenue profile related to occupancy and rents, etc. And we have what is really a cradle-to-grave approach to assets. The same team that analyzes and acquires the asset is responsible for operating and, ultimately, monetizing the assets. And we set high, we think, achievable but aspirational, operating metrics against our assets. And, you know, as one example, in our most recent multifamily fund, we're 12% above the pro forma NOI of those assets, even through a troubled, you know, not troubled, but turbulent time. So that we think that outperformance wouldn't have been the case if we weren't forward integrated into asset management. Our fund investors actually benefit from that, because we charge fees that are at or below the market level for that management. Our shareholder constituencies, we think, benefit as well. The property management fees that we develop are an important part of our overall FRE profile. And so it augments the management fees that we develop as well. So, you know, in net, we think that we have a differentiated approach to investing in real estate. We think that it's paid dividends for us in the past. We think it'll pay dividends for our constituencies in the future as well. Absolutely. No, makes sense. Just a question on the vertical integration because, one of your peers, actually a private company that was recently acquired, talks about how they use third-party, what they call, operating partners. You talk about having teams within Bridge doing some of the similar functions. Why do you feel that's an advantage? Well, that's a really good question. And the value of having internal property management is only value if we do a better job than third parties. And we measure ourselves against third parties all the time. Others manage us or measure us against third parties as well. Sometimes we have sold assets to allocators, and they've asked us to stay on board as a property manager, sometimes very big, very big firms. And to facilitate the sale, we don't do it as a practice, but to facilitate the sale, we've done it on occasion. And so we get evaluated relative to the whole stable of property managers, which those other firms use. And invariably, we've been ranked number 1, sometimes number 2, number 3 in those. So that's an appropriate external validation for what our view is. People at Bridge can make a career of property management. Mm-hmm. CEO of our property management division has risen through the ranks. So, you know, instead of having this random, "I bought an asset, so I'm gonna find somebody at some property management firm that, you know, maybe was with the firm for one year, maybe 10 years," we know that we have a. Mm-hmm. A full cohort of managers who can help develop the pro formas and develop the management process for each of the assets that we do manage. And think it's an advantage. Think it actually adds meaningful alpha at the asset level. That I mean, it's an impressive signal, the idea that an allocator would buy an asset and then request that Bridge stay on as a property manager. Really, really signifies how effective your teams are. Thank you. Versus maybe, you know, some third parties. Wanted to ask also about the verticals because in some ways, you know, and I'm not necessarily a deep real estate expert, but it strikes me that Bridge has specialized funds. You already mentioned workforce housing, senior living. How do you decide to get into those areas? How did you decide? And why is it important to have funds that are so specialized? Whenever anybody says they're not an expert, I hold onto my wallet a little bit more tightly. We, you know, we look at the overall landscape of real estate, and we try to discern where there are enduring fundamental positive trends that will help to drive value going forward. We our commitment to residential rental is really premised on the view that the US is housing short. Mm-hmm. That by many estimates, there's 4-5 million units of housing shortage, even in a stable environment. The U.S. is blessed with a growing population. Mm-hmm. It's blessed with a relatively young population in a lot of respects. Mm-hmm. So the need for housing is there. And we feel that we can help to fulfill that need. We further focus on the middle and lower-income cohorts of the U.S. wage-earning population because we feel that those areas are underserved. The most of the new developments in multifamily as well as single-family have been on the luxury side. I think since. Mm-hmm. The year 2000, about 80% of all new developments have been Class A luxury, not what we do, but Class A luxury. And. Farming. We believe that focusing on the middle market, on the, you know, really backbone of the U.S. population, allows us to have a bigger potential resident pool. We try to imbue our communities with social and community programming that makes them attractive. It minimizes turnover. It maximizes occupancy. By managing it, we do, in addition to property management, a lot of our construction management and construction internally as well. We spend, you know, the better part of several hundred million dollars a year on investment and reinvestment in our properties, common areas, in the units themselves. We've centralized procurement. We saved, we estimated in 2022. 2023 numbers aren't in yet. We saved $22 million for our funds and our fund investors by centralizing procurement, buying power, and moving up in the supply chain, etc. So, it's a great closed loop of expertise that we develop. So the thesis behind residential rental is people need a place to live. Middle-income people particularly need a place to live, and we're housing short. Our commitments in the logistics area are different, but. Mm-hmm. We think equally as powerful. The U.S. is short infrastructure. The growth of e-commerce continues apace. The need for warehouses, for distribution, for industrial outdoor storage, is acute in many areas. There are particular markets around the U.S. that where a lot of that demand is centered. Mm-hmm. Mostly New York, New Jersey. Ports. Long Beach and Los Angeles. Ports. Dallas-Fort Worth. Down here in southern Florida, all the ports. And we built a terrific business buying infill properties, mostly off-market. 80%+ has been purchased off-market by people with longstanding relationships to the owners and brokers, to create that network of warehouses and industrial outdoor storage and other things that are very valuable and need to be present and managed to sort of grease the wheels of e-commerce. Mm-hmm. In a lot of respects. I've mentioned, you know, two of our major verticals. I think some of the same characteristics, perhaps manifested in a different way, apply to our credit business. Mm-hmm. The local and community banks that formed a lot of the foundation of real estate lending over the past 20 years or so are out of the market today. There's a great deal of pressure. Yep. On smaller banks. Their real estate books have grown to a point where they've become a liability, not necessarily an asset. Private funds like us can step in to replace that, to replace those banks. And it's, in many respects, a golden age for credit. We can charge the right spread. Base rates are high. We used to negotiate covenants, you know, to a very fine point. Borrowers don't negotiate covenants at this point. They say, "Thank you." And so we have the right protections. Yes. In terms I'm overstating a little bit, but the. Yeah. Point is valid. So we have the right structural protections around what we do. We bring an owner's mentality to our lending. We have a strong partnership between our credit team and our real estate equity teams. If we're lending against a multifamily asset, we ask the multifamily team, "Would you be comfortable owning this at par?" If the answer to that is yes, then we'll structure a loan at what today is 60% at par, maybe 55% at par. It used to be 75%. So leverage points have gone down. If the answer's no, then we move on to the next opportunity. So we've deployed $15 billion of capital into credit. It's a great way to structure loans that, you know, generate a solid. I think our most recent fund is at 11% or so internal rate of return. Our most recent investment vehicle I'm not allowed to use the F word. Okay. Can you please spell it? Our most recent investment vehicle. Yeah. No, that's interesting. Of course, given your operational capability in a credit situation where you took the keys, that would not be an issue either. We don't hope not to ever have to take back the keys. But on those rare occasions where we have had to do that, we've been able to, I think, navigate through those issues much more adroitly than if we didn't have the operational capability. Or a bank. Yes. For sure. Yes. Yeah. One more question about the business model, and then we'll get a little more tactical, just around 'cause as investors start to look at your income statement and what have you, there are a lot of different revenue lines. Obviously, management fees is the biggest and most important. But, you know, maybe talk just a little bit about what generates those other revenues. Our income statement is a product of a number of things, of course. It's a product of long-lived management fees. Most of our investment vehicles are closed-end vehicles with a. Mm-hmm. With a, you know, 8-10-year life, mostly 10 years. So we, among other things, report the average tenor of our management fees, looking forward. We have selected transaction fees when we execute on an acquisition. Mm-hmm. Of a transaction. We have an internal debt capital markets team that secures the financing for our asset acquisitions. We charge a below-market but fee for that activity as well. To the fund. To the fund. Yeah. We have property management fees as well. Yeah. Now, when we look back at 2023, 2023 was a transitional year for real estate in a lot of respects. Real estate is actually, in our view, one of the few asset classes that actually has reset over the course of the rise in interest rates. Mm-hmm. And reset in a way that we believe creates a significant opportunity today. If you look at public market indices, they're bouncing around all-time highs at this point. And I know different market observers have different perspectives on whether the U.S. economy will have a no-landing, soft-landing, hard-landing, whatever. Real estate prices and values have reset. We mentioned in our year-end results review that we were buying assets at a 6%+ cap rate today. Those same assets in 2021, 2022 would have probably traded at a cap rate that began with a 3, not a 6. So pretty significant. Yeah. Reset there. We think it provides an interesting entry point for real estate today, and that we're finding quite attractive opportunities. A lot of sellers have been relatively inactive in 2023. There wasn't a lot of transaction activity. I think some of those sellers, at least our experience has been, are now capitulating, if that's the right word. They saw the hope that rates would decline. You know, remember at one point in the fourth quarter, the 10-Year Treasury was below 4%. Mm-hmm. At one point in the quarter, it was above 5%. And it's crept back up to whatever it is today, 4.3% or so. And so we're seeing more transactional activity manifest itself. And we're well-poised to take advantage of that. We started 2023 with a lot of dry powder. We ended 2023 with a lot of dry powder. But we're wading back into the water at this point. And we're finding values that we think will be enduring values if things stay the same. If things get better and I know UBS, you know, as a very astute market observer, is one of the most bullish in terms of rate declines going forward. If rates decline, that's a lot of frosting on the cake, we think. Absolutely. No. And the other aspect of the opportunity there, besides the dry powder, besides bid-ask finally coming, you know, narrowing somewhat and sellers being willing, is that LPs perceive the opportunity as well, right? This is a vintage that they're interested in. They're the, I think, broadly speaking, that's absolutely correct. You know, there are many different classes of LPs. Some invest every year. Some are more opportunistic and wait until. Mm-hmm. What's perceived to be a good year. In the many, many conversations we have with LPs, the general consensus is that 2024 should provide a good entry point for putting new capital to work. Now, on the LP side, you know, last year and maybe a little before that, there were issues around sentiment, so willingness to invest in some segments, as you say, and also capacity or ability to invest just because of things like the Denominator Effect and shortage of liquidity. Are those things improving? I think they are. The Denominator Effect was a product of a lower stock market. Right. For the most part, alternatives allocations went up because the overall denominator, the overall funds under management went down. That's reversed itself pretty significantly. We've worked hard to augment our what we call Client Solutions Group. We have a physical presence in Europe. We will shortly have a physical presence in the Middle East. We opened a couple of years ago an office in Seoul, South Korea. And we've been augmenting our team in the U.S. So we think we're well-positioned. You know, at least when we think of capital raising, there's really three classes of investors. There's institutions, broadly defined. And there are subclasses of institutions. There's high-net-worth individuals, the so-called Qualified Purchaser, who has a minimum of $250,000 of to make an investment in a particular vehicle. And then there's the broader democratized retail investor. And each of those areas has been an area of initiative and focus for us. Yeah. And high-net-worth and retail is somewhere where Bridge has had success in the past. It's a, you know, all through this conference, it's been discussed. And it's an area where Bridge has probably more of a solid foundation than some aspirants to that same space. How are you finding, you know, if I could call it retail, but sentiment in that segment right now? I think the retail sector seems receptive to us at this point. Obviously, yield is important. I think the general bullish nature of retail that existed for many years has given way to a more discerning retail investor at this point. And the space is more crowded than it was. You know, it used to be that there was one big real estate-oriented retail vehicle. Now there are many. And that creates both a need as well as an opportunity to distinguish yourself. Mm-hmm. So we hark back to what our basic principles are. We wanna make sure, as we participate in this space, that we have a specialized approach. Mm-hmm. that approach generates above-market returns, that the retail investor can evaluate those returns relative to all the other stuff out there. Everything else then sort of takes care of itself after that. It's interesting because when folks talk about the retail channel, they talk about investor education. And one aspect of that is obviously communicating information. Another aspect of it is to live through something of a challenging period. And when you say in you know, retail investors are more discerning, it seems that some of the lessons of recent past have come home. I know you're a student of history. Students of history will know that retail vehicles have gone through a number of different manifestations. There were the REITs 1.0 and REITs 2.0. We think we're at REITs 3.0 at this point. With each generation, I think the playing field has leveled more in favor of the retail investor. Fees have come down. Mm-hmm. Expense drag has come down. Specialization has increased. Choices increased. So we look at it as a market in which, hopefully, we will distinguish ourselves through performance, communication, etc. We just, to your point about education, we just launched on our website what we call BIG Insights. BIG is Bridge Investment Group. BIG Insights, which has what we think is a state-of-the-art primer for the retail investor that seeks to explain how real estate works, how real estate works in the context of alternative investments, and why particular areas of real estate. And that's been received pretty well by folks. I'm sure. Yeah. Okay. Hot seat time. Okay. So in your most recent earnings review, you wrote off some fees receivable and fee AUM from one of your two office funds. It's not a lot in terms of your overall AUM, but it was significant and, you know, concerning to folks. So big picture and small or maybe a little more process and then a little more numbers. On the process side, just interested in how that came about. You mentioned that bank response was maybe not what it might have been, which is probably not surprising to anyone here. So that would be of interest, some details there. And then also kind of the exposure remaining in the firm, whether it's the other office fund or other funds where there may be either seed capital or unsecured loans at risk. We have a relatively modest exposure to the office market, from an AUM perspective across an Office Fund 1, a smaller Office Fund 2, and an SMA with an institutional investor. It comprises a low single-digit number of our. The latter is shown as JV, right, on your disclosure? Yes. Yes, it is. Yeah. Our office exposure is further divided between pre-COVID investments and post-COVID investments. Broadly speaking, if you take the pre-COVID investments, they're struggling. The post-COVID investments are doing much, much better. The debt has longer tenor. The debt is generally lower in terms of leverage. The entry prices were better. So let's take that and put it aside for a minute. I'm happy to talk about all of that. In our Office Fund 1, which is mostly pre-COVID, we had decided over the course of 2023 to accrue as opposed to collect management fees because we were trying to preserve cash at the fund level. And we wrote those fees off in our fourth quarter as uncollectible. The assets in Fund 1 have leverage associated with them. The actual operation of the assets is not terrible. It's not fantastic, but it's not terrible. But the capital structure is untenable. And the banks with whom we've been working, with a couple of exceptions, have been pretty intransigent in terms of offering either concessions or extensions, which is what resulted in the write-off for Office Fund 1. The same issues in Office Fund 2 and the joint venture don't really manifest themselves. In terms of remaining, we wrote off what we could. We do have a $15 million loan. Mm-hmm. Senior loan to Office Fund 1 that our accountants say is not uncollectible at this point. So even if we wanted to write that off, we could not write that off. We have a GP commitment and a loan for Fund 2, which are performing. Mm-hmm. At this point. And we don't really have any capital exposure to the SMA other than a modest GP commitment to accompany the meaningful institutional commitment for that fund. So the you know, the office sector remains the poster child of distress in real estate today. There's you know, you can hardly pick up a paper without seeing somebody writing off something or selling something today. Somebody sold an asset in New York for half of what they paid in 2015. Very unsatisfying. That, practically speaking, means they wrote off all the equity because everything is, you know, levered a bit. And our exposure is pretty de minimis at this point. I think that the specialization that we pursue, in this case, in many cases, makes us a winner. In this case, it's made us a little bit of a victim because the fund was all office. Right. Fund 1 was all office. The performance isn't what we wanted expected it to be. We, given the vintage of the fund, we didn't have the time to last through the current malaise in office. We hope that that's not the case for the subsequent vehicles. And we're doing everything we can to preserve and enhance value. Thank you. Just risk-wise, outside of office across the firm, are there other loans to funds? Or are these the only instances? I think those are the only instances. We have meaningful GP commitments. Sure. To our funds. I think we have, you know, the better part of $700 million of GP commitments. Much of that is individual commitments from management from the wide group of management members. Some of it is Bridge Investment Group. Firm balance sheet. Right. And we have a particular formula that we use to make sure that we create really strong alignment between ourselves and our LP investors. And I think it's a strength of Bridge. But I don't believe that there are any other financial exposures like what we just talked about. Okay. That makes sense. And just in terms of operating metrics in some of the other verticals, you know, you read things in the press. And you know, it's difficult to kind of understand, you know, whether it's rent growth and OI growth, you know, how are those faring in your most important verticals and which might be different from the headlines that we see? It's really interesting, because the US economy continues to grow pretty well. And so because the US economy's growing, the income cohorts that we service, their incomes are growing as well. Area Median Income has been growing faster than income in general. So our ability to charge what are still affordable rents continues to grow as well. Every asset and every market are individual. We seek to, as much as we can, invest in areas where people are moving to, where companies are moving to, where there's more rather than less e-commerce, etc. And so that gives you the ability to try to manage rents. I think there's been a lot of industry talk. And I believe there's been a lot of talk in this conference about the state of multifamily. And multifamily has been tagged a little bit with a lot of capacity coming on stream. Right. That future pipeline of capacity seems to be melting away pretty, pretty significantly. Where that new capacity is coming on stream, it's been harder to grow rents, existing rents and new rents. We've seen some of that slow down. We continue to invest in our assets. When I say invest in our assets, that means when somebody leaves, you go in, you know, you renovate. You could spend $10,000 a unit. You could spend $30,000 a unit, depending on whether it's a light or heavy lift. Generally speaking, if you understand your market, if you do your job well, you can then create a rent bump related to reletting that renovated unit. We estimate that the IRR from that $20,000 renovation is about 16% or 17%, sometimes higher. But we don't do anything for free. We always attribute a target return to what we're doing. And we generally speaking achieve that type of program. Has that dynamic still been happening at the property? That dynamic is still happening. Yes. Excellent. Over the years, we've learned that, for example, you don't want to renovate every unit to the highest standard because that means you limit the potential renter base. So some will renovate to a high standard. Some will renovate to an intermediate standard. Some will renovate to what we call a classic standard. That means don't do much. Paint. And that allows us to broaden out the renter base. And you always have the opportunity, when market conditions are appropriate, to renovate the classic unit to a higher standard. I, I think when I bought my apartment, I renovated to the classic standard personally. Want to shift gears a little bit, talk about PE secondaries, which you mentioned before, also an important part of the business. The Newbury funds acquired are, are performing well. What I feel as though I've observed kind of across the space is a lot of interest, fairly strong fundraising, actually, even in a difficult period. But deployment and returns are industry-wide maybe not being the kind of gold rush that some folks anticipated. So just wanted to get your thoughts on that. I believe the volume of secondary transactions in 2023, if I recall correctly, totaled about $118 billion. The record was in 2021 at about $130 billion. But $118 is not. Not bad. Insignificant volume. Sure. In a lot of respects. And there are two aspects. There are multiple aspects, but two primary aspects to secondaries. One are GP-led secondaries, continuation funds, and other things. Bridge did a continuation fund for our multifamily Fund 3 in the third quarter of 2023. And we brought in a few secondaries players. And that worked well for us. It worked well for our investors. It I believe will work well for the investors in the continuation vehicle. And they're LP-led secondaries. Newbury focuses on LP-led secondaries. And it's a diversified, individualized business. They have a ton of relationships, longstanding relationships with family offices and others. And the typical transaction would be that a family office has their portfolio of investments. One of the beneficiaries of the family office, you know, calls the manager and says, "I need $30 million. I need $30 million to buy a boat or to do whatever they need $30 million for." So the manager then calls a firm like Newbury, often Newbury, and says, "Here's my portfolio. Why don't you go through it, curate it, tell me what, in your view, is the best way to raise $30 million?" Price is important. Price is always important. But it's maybe not the most important thing. Right. You know, timing, confidentiality, confidence in closing is important. And our team has. That's how they've made their mark in the market. They've developed a suite of analytics that allows them to evaluate quickly and thoroughly underlying positions, to select those positions which will generate the needed proceeds but will provide some meaningful upside for us as the secondary buyer. And over the course of their five investment vehicles, they've generated meaningful returns. They've also generated returns where some of it comes from the initial discount. Discounts range from 20%-25% today. You mark that up the next quarter. You have to mark that up the next quarter because that's the NAV. Mm-hmm. Value comes from the further growth of the portfolio as well. Right. The typical transaction would be buying a private equity position. It's PE class. It's PE. Class. Right. Class. Right. It's PE as an asset class. Yeah. Buying an equity position in a fund that maybe is 7 years into its 10-year life. 80% or so of the capital has been committed. There's a future capital commitment that's required. But you know what you're buying. You're through the J Curve. You have. Right. Cash curve is favorable. 100% visibility in terms of what you're buying. In their history since 2006, 75% of the value has been generated from future growth of those investments, 25% from the discount that you get upfront but 75% from the future growth. So that's a great business. We were, you know, interested because when we looked outside of real estate, we saw in private equity, broadly speaking, there's probably 1,000 private equity firms, big firms, middle-market firms, little firms, maybe more than 1,000. That sounds like an army of competitors that we didn't really want to compete with. There are many fewer secondaries firms. And secondaries gives you that broad diversification into private equity in one fell swoop. And we loved the Newbury team. They loved us. They had a process that they aborted. And they came back to us and said, "The culture, the partnership, the, you know, just the way that you all live life seems to be consistent with how we want to approach life." And so we're really excited about that as a new vertical at Bridge. Interesting. Thank you. Bob, the clock has ticked down. I think we're off the webcast. What I'll do is thank the folks in the room for joining us today and hope you'll join me in thanking Bob Morse from Bridge. Thank you. Thank you very much.