Bridge Investment Group Holdings Inc (BRDG) 2021 Q2 法說會逐字稿

Greetings and welcome to the Bridge Investment Group's second-quarter 2021 earnings call and webcast. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, [Sloan Bolin], Investor Relations. Thank you, please go ahead.

Thank you and good morning, everyone. I am Sloan Bolin. We appreciate you joining us for the Bridge Investment Group second-quarter 2021 financial results conference call. Our prepared remarks will include comments from our Executive Chairman, Robert Morse; our Chief Executive Officer, Jonathan Slager; our Vice Chairman and Head of our Client Solutions Group, Dean Allara; and our Chief Accounting Officer, Katie Elsnab. We will hold a Q&A session following the prepared remarks from our leaders.

During the call today we will reference slides highlighting key points of discussion as well as certain non-GAAP financial metrics. The reconciliation of the non-GAAP metrics are provided in the appendix of our supplemental slides. The supplemental materials are accessible on our IR website at www.ir.bridgeig.com. These slides can be found under the Events & Presentations portion of the site along with the second-quarter earnings call event link. They are also available live during the webcast. It is now my pleasure to turn the call over to Bob.

Good morning. Thank you, Sloan, for the introductions. On behalf of my senior management colleagues and the entire Bridge team, we are delighted to host this second-quarter earnings call. Thank you to all the investors and analysts who are joining today.

Before we begin, I'd like to thank all of our 1,700 Bridge colleagues, the talented and dedicated employees who have made Bridge what it is today. Our successful IPO earlier this summer is a milestone in our Company evolution and establishes a platform that we believe will be the foundation of significant future success.

Our IPO will engender some changes at Bridge and many of our characteristics will remain the same. We will continue to perform as a specialized, differentiated and forward integrated real estate investment manager with a focus on selected large and growing real estate sectors dedicated to delivering top-tier results to our public shareholders and fund investors, and we'll continue to execute on the strategic vision which has created our scale and profitability.

We have meaningful dry powder for our primary IPO proceeds, our unused credit line and existing modest term debt to take advantage of opportunities to consolidate in our fragmented industry. We will continue to invest in our Company, in our team and in our capabilities. More on all that later and in subsequent quarters.

Our IPO has given us the opportunity to bring some fresh perspective and benefit from the enormous knowledge of our newly constituted Board of Directors. Our outside Board members, Debbie Hopkins, Deborah Martin Chase and Chad Lee, bring years of success and experience to our Board and we have already begun to benefit from that expertise.

If you turn to slide 5, as this is our first quarterly earnings presentation, and with the understanding that some of our constituency did not attend our roadshow, I wanted to start by providing a brief introduction to Bridge and our differentiated approach to real estate investment management. On this slide we depict visually the scale of our business.

We manage approximately $29 billion of AUM and touch the lives of almost 100,000 residents across our residential communities as well as thousands of office tenants. We operate in over 30 states across the US, carefully selected after intensive data analytics. We are specialized across our areas of focus. Our investment professionals are sharpshooters who know their sectors intimately, understand that real estate is both national and local, appreciate the nuances required to make informed investment decisions and we enjoy unparalleled deal flow. We have over 100 investment professionals and most bring decorates of successful experience to their jobs.

We are forward integrated, high touch property managers who operate virtually everything that we acquire or develop. Our property management teams allow Bridge to create alpha at the asset level by finding opportunities for revenue enhancement and cost savings every day. We have thousands of property management specialists that represent an invaluable asset. We built the team, the approach and the expertise over the past decade.

As you will hear, we deliver world-class service at a cost equal to or less than hiring an outside manager with better results. We have carefully curated where we invest in the US, which we believe is the preeminent global investment destination, and in selected verticals within real estate that offer above market growth such as multifamily, workforce and affordable housing, logistics and income generating fixed income.

We start our investment process with a top-down data-driven proprietary approach which helps to determine, by vertical, which cities in which to invest and where to avoid. As we have grown we've invested massively in our research and data capabilities and our research, financial planning and analysis, business intelligence, strategy and related teams aggregate to over 20 professionals. We've further amplified our capabilities through selected partnerships with leading prop tech firms which partnerships have already paid meaningful dividends.

This dual focus on specialized sectors and the Bridge target markets has driven our strong performance. Most of our multifamily funds are ranked first quartile by Preqin and six of our funds are in fact ranked number one for their vintage and investment focus. We counted to LP some of the largest and most prominent investors globally and we have over 6,600 total investors. Many of our investors have invested in multiple vehicles as evidence of their trust in Bridge.

We have built a scalable, state-of-the-art infrastructure platform to accommodate significant growth and have demonstrated repeatedly the ability to launch new products in new verticals and deliver attractive returns to our investors in a successful manner. We've created a strong income statement composed primarily of fee-related income, have long-duration, sticky revenue and a growing base. We are solidly profitable with strong margins and opportunities for growth.

Our growth has been strategic, deliberate and carefully curated. We seek to compete only when we have a differentiated advantage. In the last seven years, we've successfully incepted efforts in real estate fixed income, both debt strategies and AMBS, opportunity zones and more recently in logistics by hiring and attracting talented women and men who want to work at Bridge. We believe our best years are ahead of us since we've built further on the platform we've created.

On slide 6 we outline the key investment highlights for Bridge. We invest only in the most attractive sectors of US real estate carefully selected after much research. We've avoided most of the problem areas such as retail and hospitality. Our focus is differentiated and, in fact, we believe we are unique in the industry as an investor in property management specialists, a high touch, boots on the ground model drives asset level alpha. Our model has a deep moat around it and it would be hard or impossible to replicate.

Across our verticals we focus on prime growth markets where we invest with tailwinds, which takes a very local and data driven approach to our investment, but can do so while leveraging our national scale. Our average investment is in the range of $25 million. And to do that across $29 billion of AUM requires both local insight and national scale to source and manage a broad portfolio efficiently.

Our strategies have highly visible and recurring fee streamings both because of the long-duration of our funds, but also because many of our investors invest in multiple funds or across strategies. In fact, 59% of Bridge fund investors have invested in two or more funds and 40% of investors are in at least three funds. The embedded growth that sits within our existing funds as a result of that loyalty affords us the ability to pursue larger funds organically or consider growth through inorganic means within the US footprint or potentially beyond.

The tailwinds for alternative asset management, and differentiated real estate specifically, have been in place for many years. The alternatives market is projected to grow at nearly a 10% CAGR over the next five years to over $17 trillion by 2025. Nearly 30% of institutions are expecting to increase allocations to real estate this year. And in this market even a 10 basis point increase in total allocations implies new demand of approximately $100 billion for real estate. We believe that our culture is second to none and we celebrate mutual success and own our mistakes collectively.

On slide 7, our AUM has grown by a compound annual growth rate of 40% over the past five years, which has driven strong fee-related revenues, including our record highs recorded in this past quarter.

On slide 8, you can see our funds are invested entirely within the US, which we believe is the preeminent global investment destination. Bridge investments are made with highly developed local knowledge, but applied with the full advantage of our national scale. And scale matters in this business as we were able to deploy a record $998 million over just the past quarter. Our investment mix by strategy is in selected verticals that offer above market growth.

I mentioned before our attractive performance. Most of our multifamily funds are ranked first quartile by Preqin and six of our funds are in fact ranked number one for their vintage and investment focus, as shown on slide 9. We count as LPs some of the largest and most prominent investors globally and we have over 6,600 total investors.

Slide 10 depicts the strength, experience and diversity of the leaders of our specialized investment teams, most of whom bring decades of successful experience to their jobs. Unlike many managers, our investment professionals are sharp shooters who know their sectors intimately and understand that real estate is both national and local.

Before I turn the call to Jonathan, let me review to slide 11 and some of the things we are proud of at Bridge. We operate with a careful focus on our residents and tenants and have years of action in line with ESG best principles before ESG even had a name. As but one example, when COVID struck last year, we mobilized to provide meaningful relief to our residents in the form of the Bridge Cares COVID Relief Fund Versions 1.0 and 2.0.

As partners and employees we donated over $2 million to our residents, those most affected and most in need. We delivered over 60,000 meals and we provided access to public assistance and other [actions]. Each of our employees has a lot of pride in what Bridge means to our communities and as Chairman I'd like to state upfront that it is our clear mission to take the same approach to our shareholders, and we look forward to doing just that through what we believe will be the best years of this firm.

With that, let me turn the call over to CEO Jonathan Slager to take a closer look at our quarter and what we believe sets Bridge apart. Thank you.

Thank you, Bob, and thank you to all of our investors and analysts for joining us. Before I detail the results, I'd like to echo Bob's excitement and also thank everyone for the hard work during the IPO. This milestone could not have been achieved without the talent and determination of each of you and without the passion for our common vision.

The growth of this Company over the last decade has been phenomenal. We have proven that we can scale our business with consistent execution while continuing to be sector specialists. We have proven we can maintain a strong culture built on the belief that every employee, every resident, every investor and now every shareholder matters. Today we are poised for significant organic growth within our existing segment and, with the IPO capital and public profile, we anticipate even more growth from inorganic activities.

With that, let us turn to slide 13. It was a record second quarter for Bridge across a number of our key performance indicators. Total revenue was $72 million, up 31% from Q2 2020. Net income was $83.2 million compared to $7.8 million for the prior year. As a result, we grow very strong key-related earnings to the operating company of $24.9 million, which is up 33% compared to a year ago. And for the year, FRE was $38.6 million, up 22% from the same period in 2020.

The strength in the quarter was driven primarily by fund management fees from growth in our fee earning AUM. These fees were supplemented by transaction fees, which are also core to our business and part of our vertically integrated model. Performance fees were also very strong in the quarter driven by increased realizations versus a year ago when COVID slowed activity for CRE transactions.

Our second-quarter realized performance allocation was a record $35.6 million and was driven across a number of our fund strategies, but led by our multifamily and debt verticals. Even as we had record realizations, unrealized accrued carry grew by $43.2 million, up 300% from a year ago, due largely to our multifamily asset appreciation.

Our strong fee-related earnings, combined with performance fees that I just noted, yielded 136% in our year-over-year distributable earnings to the operating company, which ended the quarter at $55.7 million. Over the trailing year, distributable earnings now total $139.3 million, which is up 25% from the prior period.

Pro forma distributable earnings to the operating company where $36.6 million in the quarter, up 69% from the prior year, and pro forma distributable earnings to unitholders of record as of June 30 was $0.25 for the quarter.

We ended Q2 with gross AUM of $28.7 billion and we enjoyed record deployment of $998 million of equity. In the quarter we also launched Multifamily Fund V and Logistics Net Lease Fund, which is our second open ended fund. As you know, Bridge successfully completed our initial public offering last month which delivered $137 million of net proceeds to our balance sheet to help accelerate future growth.

Lastly, we are proud to announce our Board declared that all $55.7 million of our distributable earnings from Q2 will be paid out to our unitholders of record as of June 30, 2021. As a reminder, we expect to pay out substantially all of our distributable earnings in the form of dividends to shareholders.

If we can turn to slide 14, we detail some of the same key operating metrics highlighted. As you can see, fee earning AUM has grown an astounding 50% compounded annual growth rate over the last five calendar years and continues to have built-in organic growth for the foreseeable future. This growth comes from a combination of expanding our vertical investment fund offerings and the natural growth from these funds from the time we launch until the strategies mature.

Since 2017 we've added six new strategies, including our two open-ended funds. A typical Fund II has generally raised two times the amount of capital from the Fund I, and we generally have tripled our AUM from the end of raising of a Fund I to the deployment of a Fund II. So, we expect these new funds will generate outsized growth in addition to our three still growing more mature fund strategies.

Our fee-related earnings has grown at a 35% compounded annual growth rate since 2015. Q2 reflects our continued growth in fund management fee revenues, as well as our regular transaction fees, which are built into our structure. I would highlight that the steady and durable growth of our recurring fund management fees is also evident there and these have grown at a 43% compounded annual growth rate since 2015.

Our realized performance-related earnings reflect the harvesting of assets in our Multifamily III and Debt Fund III strategies. And we are optimistic that our performance-related fees will continue to be a meaningful income stream to our shareholders.

Finally, the growth in our pretax distributable earnings to the operating company reflects strong growth in distributable earnings driven by the underlying factors we just walked through. Since 2015, distributable earnings has grown at a 37% compounded annual growth rate.

Now, let's turn to slide 15, which highlights the value of our vertically integrated business model. As you've heard many times already, Bridge believes that its outperformance is driven in large part by its vertical integration. We drive value in our ability to make direct change at the operating level and to create alignment through a common vision with our entire team.

Bridge delivers better and more consistent results at a lower cost to our investors. We derive specific differentiated advantages in sourcing and underwriting to our actual boots on the ground and real-time data, execution, operations and management. Our property management leasing and acquisition teams build the business plan together and jointly are accountable to it throughout the life of the asset.

Unlike most publicly traded real estate managers who rely on third-parties -- who often have competing agendas, Bridge manages almost all of its assets directly. In each of the areas we provide integrated services, we seek to drive tens of millions of distributable cash flow each year to our LPs, higher net income and higher residual value and better and more consistent outcomes across-the-board.

On slide 16, let me give you a brief overview of how the top-down research and local level data drive our investment decision-making. First, we have top-down research capabilities which utilize demographics and proprietary metrics to prioritize the markets that have the highest population and job growth. On average, Bridge markets have 69% higher job growth and 26% higher household formation rates versus the US averages.

We then reinforce that data with our own asset level knowledge, because in these high-growth metros Bridge currently operates tens of thousands of multifamily, senior housing units and millions of square feet of commercial office. Best of all, our investment in proprietary technology provides us with real-time accurate data on rent, rent growth, operating costs, construction costs and very specific local insights that drive better decision-making across all our segments.

Because Bridge underwrites every deal in all of these markets, we have exact real-time information on cap rates, expense comparisons and rent. We know long before the data comes out to capital allocators what is actually happening on the ground in these markets. They study data that may be as much as six months old. We simply look at the real-time data in front of us and talk to our teams.

On slide 17, we show the alpha generation in Multifamily Fund II that was produced by our vertically integrated business model. Here we show what drives the results that matter most to our investors. We evaluated the results from our last fully realized fund, which was Multifamily Fund II. We recognized that we had rent growth that was 20% from acquisition [and divestiture]. This level of rent growth, for context, was 104% higher than the US national average.

Our net operating income, which includes expenses of running the assets, increased by an average of 36% from acquisition to exit. And we beat the US national average by 111% during that period. When we analyzed the rent growth in our chosen submarkets, we recognized that about half of our outperformance came from our market selection. The other half came from our execution on our performance locally and on the ground. So this gives a clear idea of exactly why we think that vertical integration is such a valuable tool.

On slide 18, we show the extent today of Bridge's local knowledge and national footprint across the entire United States. Today Bridge operates nine investment platforms across 32 states and 77 unique markets. The amount of information that we gather from this is significant to Bridge, but it's our holistic approach and vertical integration through every piece of the investment that allows our Firm to deploy capital and achieve outsized returns for our investors on a consistent basis, as we have for the past decade. With that over to Dean.

Thank you, Jonathan. As you and Bob noted, our LPs invest in us because of our impressive track record. In many cases this results in their reinvesting with us as we raise future funds. We have a long history of delivering for our fund investors and have compelling growth opportunities, both within our existing strategies as well as future strategies as we bring them to market.

In numbers, we have raised an average of $2.4 billion per year over the past five years, which has driven the 40% CAGR in our AUM mentioned before. The Bridge fundraising team is unique and is set up to cover globally both institutional and individual investors. We have dedicated teams solely focused on the largest wirehouse registered investment advisors in the world. Currently we have seven offerings on wirehouse platforms and anticipate that going to nine by year-end.

It's worth noting the past year we opened offices in Asia and India with senior managers focused solely on raising capital. Additionally, we hired two senior members here in the US to focus on North American institutional investors. The net result [ iswe have] great diversity across investor types from individual investors to large institutions in the world. In total our investor base spans 115 institutional and over 6,500 individual investors.

Best of all we have world-class reporting that offers a high touch investor experience. This gives us the opportunity to cross sell products, as evidenced by 40% of our investors participating in three or more of our fund offerings.

On slide 20, let me give you a quick overview of how our fundraising success drives Bridge's growth. As you can see on the left, we have raised nearly $3.78 billion in just the past 18 months, including nearly $1.3 billion year-to-date. Funds that we have raised notable capital for include Bridge opportunities on Fund IV, Bridge Workforce Affordable Housing Fund II (technical difficulty) and these funds, in addition to our flagship Bridge Multifamily Fund V and are two new logistics offerings.

Aside from growing our fee earning AUM, our fundraising success works hand-in-hand with our ability to deploy capital at scale, as Bob and Jonathan noted before. Bridge's local market knowledge and asset level vertical integration enables us to deploy capital at attractive returns. This is a key growth differentiator that drives returns for our LPs and they understand it. It further aids in our fundraising efforts. With that, let me turn it back to Bob to summarize our growth profile.

Thank you, Dean. On slide 21, we show how we will continue to pursue growth, as we have done successfully in the past. Capital is critical to express our investment decisions. We will continue to strengthen and expand our fund investor network domestically and abroad as we profile the returns Bridge has delivered to investors. We expect that several of our current funds will be oversubscribed, which portends well for the future.

We have successfully launched new platforms and new products, such as opportunity zones and logistics, and we are tireless in evaluating and expanding our product offerings where we can offer a compelling differentiated advantage. The investments in our state-of-the-art infrastructure are scalable and we are nimble and we can leverage that scale to enhance margins as we grow.

And finally, we've demonstrated an ability to grow inorganically and look forward to opportunities [in the] fragmented industry in which we operate. With that, I'll conclude our remarks and turn the call to our Chief Accounting Officer, Katie Elsnab. Katie has nearly 20 years of experience in asset management, real estate and financial services. We are lucky to have her at such an exciting point in our Company's progression. Katie, over to you.

Thank you, Bob. I'm very excited to speak to you as well and share the Bridge story as a public company. I'm going to spend a few minutes walking you through our GAAP income statement on slide 23, after which I will discuss our non-GAAP metrics.

Our total revenue for the three months ended June 30, 2021 was $72 million compared to $55.1 million in prior year. This is due to a 34% increase in fund management fees, including $6.6 million of catch-up fees. Additionally, our transaction fees are up 96% over prior year, which is driven by almost $1 billion of deployment during the quarter.

As you can see, we had a strong quarter related to our investment income, which was driven both by realized carried interest of $36 million and unrealized of $43 million. We have had a significant increase in employee compensation benefits which is due just two factors.

First, we awarded our 2021 profit interest awards during the quarter, the majority of which are vested when awarded as they are designed to be anti-dilutive to active partners. This resulted in a one-time share based compensation expense of $14 million. The majority of this expense relates to the big PI program that was collapsed upon IPO.

Additionally, in 2020, we paid reduced balances due to COVID, while full bonuses were paid in 2021. Overall it was a strong quarter with GAAP net income of $83.2 million versus $7.8 million in prior year.

On slide 24, let me provide a little more detail on the high-level drivers of our non-GAAP metrics. First, our total fund level fees grew at 49% over last year driven by a balanced mix of our contractually reoccurring fund management fees, which were up 34%, as well as strong transaction fees, which nearly doubled from last year given the strong pickup in activity from the impact of COVID last spring.

Turning to our total fee-related revenues, Bridge grew by nearly 40% over the last year to end the quarter at $55.5 million. The growth was driven by strong fee earning AUM growth, particularly in our Opportunity Fam Fund IV and our Debt Strategy Fund IV. Additionally, we maintained a very strong fee-related margin of 55%. For reference, this margin is in the neighborhood of top asset managers who do not have the same forward integration capabilities as Bridge.

Our property management business by definition has lower margins. However, it contributes meaningfully to the value of the assets and drives [value] at the asset level which we see in our performance-related income. The strong growth in fees drove total fee-related earnings to the operating company of $24.9 million or up 33% compared to the second quarter last year.

Moving down the P&L, Bridge had a very strong quarter for realized performance and incentive fees which totaled $35.6 million. This is up materially versus an easier compare last year with COVID. So, for context it's a record quarter and is 25% higher than our next highest quarter, which I will show you in a few slides.

Finally, driven by all of the above, our distributable earnings for the quarter was $55.7 million, or 136% higher compared to a year ago.

If we turn to slide 25, let's drill down on our fee earning AUM and fee-related earning trends. As Jonathan mentioned, we grew our fee earning AUM by 16% over a year ago, driven by the fund raises Dean mentioned a moment ago. Since 2015, we have now grown our AUM by an average of 40% per year. In addition, we currently have a number of new and next-generation funds in the market that we expect will continue to drive our AUM growth.

If we move down the page, the strong AUM trends drive commensurate growth in our contractually reoccurring fund management fees, which were up 34% over a year ago and have grown by a CAGR of 43% over the past five years.

Additionally, our vertically integrated and high touch approach to the assets we manage affords Bridge revenue opportunities that are activity-based. These revenues were up 96% compared to a year ago in the second quarter and were primarily driven by acquisition and origination fees on transactions. These revenues will tend to move around more compared to our fund management fees. That said, we view them as a regular component of our revenue growth, especially given our growing scale across this diverse set of fund strategies.

The last point I'd like to call your attention to on this page is the right-hand pie chart which shows the long-term duration of our AUM. As you can see, two-thirds of our funds have a duration longer than five years and 40% of our funds have a duration longer than seven years. The point here is a very significant portion of our revenue is based upon reoccurring management fees. (inaudible) those fees, the vast majority of them have this ability that is in excess of five years, which we believe is unique even amongst alternative asset managers.

Let's flip to slide 26 and detail our performance and incentive fees in the second quarter. As mentioned, it was a strong quarter driven primarily by great execution on realizations in our multifamily and debt strategies. For example, Bridge Multifamily III generated $22 million of gross performance fees, while Bridge Strategy Fund III generated $14 million in similar fees that were realized by Bridge during the period.

We are optimistic about the concentration in the multifamily sector. We will continue to harvest assets for Multifamily Fund III, Workforce & Affordable Housing Fund I and Multifamily Fund IV, which are now fully deployed, and we are raising capital on Multifamily Fund V and Workforce & Affordable Housing II.

As you can see here, we split out growth in net performance fees based upon noncontrolling interest. I will speak to that dynamic in a minute for your modeling, but here I will state, for those new to the Company, that on a pro forma basis Bridge on average will book approximately 35% of our performance fees to the operating company depending on the mix of realizations in the quarter.

As you can see on slide 27, we have split out our summary non-GAAP income statement to show the impact of noncontrolling interest, as I noted on the previous slide. We are going to spend more time on NCI this quarter than we normally do. We have had a lot of questions on NCI and so we want to make it very clear. The easiest way to look at our NCI is to separate our fee-related earnings from our performance fees.

Within our fee-related earnings we have essentially two buckets of NCI. First, NCI related to our fund managers. As we launch new strategies we provide our new teams a minority interest in their respective fund manager that can later be collapsed into the operating structure. We believe that this strategy differentiates us and provides us the ability to attract top talent.

We also have NCI related to our profits interest programs. These programs relate to profits interest [granted to] fund managers prior to the IPO and will be collapsed into the operating company over the next several years.

The one thing to clarify is that when these interests are converted into interest in Bridge it will be accretive to the public company. This will be done on a formulaic basis using DE as a respective fund manager and (inaudible) [to determine a] value of the fund manager interest being converted. We will then discount that amount by 20%. As such it will be accretive to the public shareholders. Our MD&A discloses the allocation of NCI between profits, interest and fund manager for your reference.

Now performance fees, due to our (inaudible) structure, the allocation between compensation and NCI is somewhat complex. The easiest way to think about it is to apply around 35% to the performance allocation income to determine the amount that will be applicable to the operating company.

And finally on slide 28, let's take a look at the trends in our pro forma distributable earnings as well as summarize our capital following the successful IPO in July. First, our pretax distributable earnings has experienced strong growth driven by the underlying factors we just walked through. Strong fee earning AUM growth results in reoccurring revenue growth and our attractive investment performance drives performance in incentive fees, which all drive our distributable earnings. As we noted during the IPO, our target is to [pay] substantially all of our distributable earnings as dividends to shareholders.

Finally, as you can see in the pro forma balance sheet, Bridge has ample capital, a substantial amount of unrealized performance fees and relatively low debt. To Jonathan's point, we believe there are significant opportunities to grow both within existing strategies as well as in new strategies, geographies or, if the opportunity presents itself, via M&A. With that, let me conclude my remarks and turn the call back to the operator so we can take your questions.

(Operator Instructions). Bill Katz, Citigroup.

Okay, thank you very much for the detailed update. Appreciate it very much. Maybe the first question, I think one of the teams talked about [a bunch of guys] is just inorganic opportunities. Just wondering, obviously you have a lot of de novo growth, but as you think about where to from here from an acquisition perspective, could you talk a little bit about what platforms or verticals would be of interest? Thank you.

Thanks very much for the questions. This is Bob Moore speaking. I would answer that question as follows. First, I do want to emphasize that we currently operate in an enormous total addressable market in terms of what we are doing. And we think we have a significant amount of organic growth going forward -- larger funds, follow-on funds, etc.

In terms of inorganic growth, over the years we've been presented with a number of opportunities. Currently we're aware of a number of opportunities to either enter additional related verticals in the US, to contemplate expansion outside the US, doing what we do so well in the US in other jurisdictions. We, as a company, spend most of our energy and focus on the value add part of the real estate market at this point.

We are certainly aware that other parts of real estate, particularly the core plus market, offers some significant opportunity. Core plus is of particular interest because, unlike the most developed core markets, there's still an element of value add in the core plus market.

Our specialized investment teams see a lot of opportunity that doesn't really fit the current fund metrics of our vehicles today. Some of our institutional relationships have allocations to core plus markets and they are increasingly starting to look to us as an investment manager to help them deploy that capital. So, we hope and expect that we will have an opportunity in the core plus markets over the coming quarters as well.

Okay, thank you. And just as a follow-up, just coming back to organic growth for a moment, maybe tie a couple things together. I think you mentioned that you have the opportunity to get added to or maybe got added to two more wire houses. Wondering if you can maybe flesh out what incremental products are there.

And then maybe the broader question, and I appreciate the length duration of your portfolio is quite long, but the perpetual capital is still a somewhat lower number within that. There seems to be just a tremendous growth opportunity in retail for permanent capital. And just given your strong relationships in retail, is there an opportunity here to craft similar type of permanent capital vehicles that have this tremendous demand opportunity?

Many of our most recent fund launches have been of longer duration. Our most recent launches have, for the most part, extended fund lives from 8 years to 10 years. We've launched two open-ended vehicles, one in AMBS and one in logistics net lease, which comprise a permanent capital component as well. And I think the overall tenor of our capital as we launch new vehicles has continued to increase.

On the retail side, we count as very strong relationships the relationships that we have with a number of wirehouses at this point. In addition to those national wirehouses in the US, we are expanding our presence overseas with selected distribution platforms. We've established and are continuing to strengthen a number of RIA and other relationships that access the retail investor as well.

Today our minimum ticket size is, generally speaking, about $250,000 as an investment with our distribution partners. And again, our focus is on the higher octane value add investments that don't really compete with the true retail vehicles that are out there in the marketplace today.

I think we would say that we've examined very carefully the more smaller ticket size retail opportunities. It's something we continue to examine as we proceed in 2021. And we may have an offering in that area at some point. No current plans, but we always look for opportunities to expand our presence in the broader retail market.

Ken Worthington, JPMorgan.

Good morning. Thanks for taking my question. First, congratulations on the first conference call here. It's a nice milestone. You went public just a month ago. Can you talk about the early feedback you're getting from your sales force in terms of the tone of conversations from either institution to retail intermediaries as a result of the IPO?

Maybe along the same lines, any change in reception that you are hearing from property targets? I think the assumption that we've had is that things would change. I know it's very early days, it's been just a month, but any feedback you're getting in terms of being a higher profile as a public company?

Dean, you're on the front lines as it relates to our dialogue with institutions and our retail partners. Do you want to handle that?

Yes, I will handle that piece, absolutely. Yes, thanks for a good question. If anything positive to quite positive. I think you may have -- as I noted in my prepared remarks, with the expansion of team in both EMEA and Asia and here in North America we've got more boots on the ground, if you will, from a marketing perspective.

The IPO has been well received. The amount of meetings we are getting has never been stronger, institutionally as well as RIA as well as wirehouses. So, if anything I'd put a pretty positive comment on that piece of your question.

Okay. And then any change from the target perspective? Are targets viewing you differently? Is this going to make it easier to get transactions done there?

I think Bridge has enjoyed an incredible strong reputation in all of the markets it chooses to participate in. Frankly that's been one of the hallmarks of our success to date is that -- I call it tie goes to the runner. Bridge has generally had a very high percentage of winning tie goes to the runner.

I also have this expression, greatest rebounder in the league, because often times when someone kind of reached out above the pack they would always come back to us when they couldn't perform. At the end of the day I think this has done nothing but improve the confidence that people have in our ability to perform, especially in complex transactions. So, absolutely yes.

Okay. great. And then maybe a numbers question. Performance fees carry elevated this quarter. You mentioned I think twice during the call, and I didn't get it down either time, some funds that contributed to the majority of performance fees.

The question really is, what is the accrued carry in those funds that contributed to the performance fees this quarter? And maybe if you can give us aggregate accrued carry firm wide. I know you have some balance sheet disclosure, but it looks like things were aggregated and I wasn't quite sure if I could rely on it for accrued carry. So, thanks.

Sure. This is Katie. So, overall at quarter end we did have $246 million of carry. In Fund I it's $91.3 -- or BMF3 it's $91.3 million, and in BDF3 it is $37.3 million. Some of the factors that contributed to the outperform -- the first off really is related to our BDF3 fund. We completed the liquidation of the opportunistic K Series investments that we purchased during the market dislocation in late March 2020 in the second quarter.

Background information, in Q1 2020 we were well-positioned, we had substantial dry powder, and we weren't really impacted by the margin calls that some of our peers were being impacted by. So, as a result, during that time we were very opportunistic and were able to raise and deploy about $700 million capital during the first month of COVID.

These opportunistic builds generated 160% IRR to our LPs and we built in a substantial carry for [big]. And we generally have not modeled for our opportunistic builds -- or we haven't modeled carry for our opportunistic builds. And then additionally related to BDF3, we did have some GP tax distributions that weren't modeled.

On the other side, on the multifamily side we broadly outperformed with those assets that were disposed of. And then additionally, our model didn't contemplate the realization of carry on some assets that had previously been disposed of, but the carry was realized during the current quarter.

Okay, great. Excellent, thank you so much.

(Operator Instructions). Mike Cyprys, Morgan Stanley.

Good morning. Congratulations on the first quarter out of the gate and thanks for taking the question. Just wanted to come back to some of your M&A commentary. I guess as you look out over the next three to five years, can you talk a little bit about your vision for Bridge? How it might look differently in five years versus how it looks today as more of a real estate focused manager?

And I guess as you're thinking about that, what's the appetite opportunity for extending it to other asset classes? Infrastructure seems like it could be a relatively easier adjacency than maybe private equity. What are your thoughts there and also broader geographies around the world?

Thanks, Mike. I think that we've established a history where we've been able to successfully launch new verticals and get to a leading position pretty quickly. I would note our launch on the fixed income side in 2014, our launch on the workforce side, in 2017 opportunity zones, in 2018 and more recently in logistics.

And so, finding additional verticals where we have a compelling differentiated advantage is something that we spend a great deal of time thinking about and we have a couple of things on the planning horizon. At this point -- nothing's set at this point. But we would expect that we can continue to expand into areas of related diversification. Amongst those, with nothing guaranteed at this point, could be an opportunity offered by the secondaries market. It could be an opportunity offered in some other related areas to what we're doing now.

You mentioned infrastructure, infrastructure broadly defined is something that obviously is of great interest. The fact that we have a bipartisan bill to invest in infrastructure in the US shows how much need there is. We think our two new logistics offerings play directly into that theme of providing infrastructure, particularly the infrastructure that powers e-commerce and some of the other trends directly in that regard as well.

Right now, as we look back, we are very comfortable with our decision to focus on the US over the course of the past 10 years or so. The US has been the best performing market, head and shoulders, we think over other markets. But we certainly are aware that there are opportunities in other markets outside the US.

If we were to expand outside the US we probably would place a priority -- not a necessity, but I priority on inorganic expansion. Were we to find a complementary organization that had the same approach to the markets, the same approach to investing and culture that Bridge does such that we could have a synergistic combination with somebody like that.

And we are scoping out that opportunity on an ongoing basis. We do have a pretty significant investment in our strategy team that intersects with other firms with various advisors as we parse through the markets at this point.

Five years from now, maybe to answer that part of your question, we think we are at a pretty steep part of our growth curve. At this point, when you combine the organic growth that we have embedded in our verticals, I believe we said on our road show that we think our logistics vertical could be as big as all Bridge at this point. It's just brand-new at this point, so there's a lot of embedded growth in what we have.

But if we can supplement that embedded growth with some inorganic opportunities that allow us to extend our capability in a way that we have a differentiated competitive position, we are going to pursue that with a great deal of enthusiasm.

Great. And just as a follow-up, if you could just talk a little bit about the buildout of your international distribution capabilities, how that's progressing, what sort of traction are you seeing? And if you can maybe give us a sense of your team overseas and some of the initiatives that you have in place over the next 12 to 24 months to further expand and grow your international distribution footprint.

Most of the investment that we've made to date has been on the client solutions group side. Dean, do you want to talk a little bit about the momentum and progress and accomplishments we've made internationally?

Yes, we opened an office last year in Seoul, Korea. We have had quite a bit of success in some closings into this quarter as well from capital in that space. We are just -- I think we are just at the beginning of quite a bit of additional opportunity from a fundraising perspective. In both the Korean market as well as the rest of Asia, we have had a number of -- currently have a number of diligence meetings going on across that region of the country.

The same is true over in India. A little bit different because you have licensing issues to deal with that we are in the midst of finalizing right now. We've been working with a third party on using their licensing, but it's a little bit hamstrung. That should be all in our court as of January of next year and the meetings we are having, continue to have, the institutions we are seeing that we're having these meetings with continues to just be very strong.

I mentioned both logistics, Multifamily Fund V is our flagship, we're just in those spaces, debt in particular, all those funds just continuing to be strong. So, I would expect that we will continue to further resource both those areas with human capital over the coming 3 to 18 months as we continue to grow there and be successful on the capital raising side.

What's really interesting -- just to add on to that, what's really interesting is how effective a local presence is. And Korea is a great example. We had very modest fundraising success in Korea prior to hiring and placing in an office in Korea an outstanding professional who is intimately familiar with the Korean market.

We now count as investors many of the most prominent Korean institutional investors, and that's had a great knock-on effect in the overall Asia-Pacific region. So, we expect that our current activities will continue to pay dividends and we'll continue to invest in additional resources going forward as well.

Thank you. At this time I'd like to turn the floor back over to management for any additional or closing comments.

Thank you. Thank you, operator. We tried today to provide a detailed overview of Bridge, our approach to real estate investment management, and our second-quarter results. If I may, I'd like to suggest a number of attributes to perhaps remember as takeaways, and why Bridge is differentiated from many other real estate investment managers.

We are specialized, we are high touch, we are forward integrated, not just a capital allocator. We are data-driven both from a top-down markets perspective and an operating perspective. We are focused on high-growth prime markets and local within those markets. We are high-performing, we are accessible to our LPs. That has been a hallmark for us and now to our public shareholders.

We work in an enormous total addressable market with a great deal of room to grow. As an organization we are culturally aligned. We share mutual successes, we embrace diversity and inclusion. We strive to hire the best and brightest and provide them with an unparalleled opportunity to build lasting careers. We believe that excellence is only achieved via diversity and that's reflected in the team on the field.

Real estate is a special financial asset. We seek to create vibrant communities where people are excited to live and work. And as part of that we are environmentally sensitive to make sure that our carbon footprint and our impact is minimized and optimized in so many ways. We're with our investors, whether they be shareholders or our LPs, from cradle-to-grave, fully aligned financially and operationally. And we only succeed when you succeed.

And with that, we thank you for your time and focus on Bridge today. We look forward to subsequent quarters of dialogue with you and would wish you good day. Thank you.

Ladies and gentlemen, thank you for your interest and participation in today's Bridge Investment Group holdings teleconference. You may disconnect your lines or log off the webcast at this time and have a wonderful day.