Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bridge Investment Group Holdings Inc (BRDG, Financial) reported improved financial results for Q2 2024, with fee-related earnings increasing by 6% and distributable earnings by 10% from the previous quarter.
- The company has shown robust growth in fee-earning AUM, increasing at a 21% compound annual growth rate from $13.4 billion in Q4 2021 to $21.5 billion in Q2 2024.
- Bridge Investment Group Holdings Inc (BRDG) successfully raised $305 million of capital during Q2 and an additional $400 million post-quarter end, totaling $700 million since March 31.
- The company is seeing increasing signs of moderating inflation and expects potential Fed rate cuts, which could benefit the real estate sector and broader private assets ecosystem.
- Bridge Investment Group Holdings Inc (BRDG) continues to focus on middle-income and workforce housing, which remains attractive during times of economic slowdown and higher mortgage rates.
Negative Points
- Despite improved financial results, Bridge Investment Group Holdings Inc (BRDG) reported a net loss attributable to Bridge per share of Class A common stock of $0.11, primarily due to changes in noncash items.
- Capital raising for the secondaries platform, Newbury Partners, has been slower than anticipated due to liquidity challenges faced by investors.
- The company acknowledges that investors remain cautious in their approach, and the lack of realizations is influencing broader cash flow allocation.
- Real estate transaction volumes remain 30% to 40% below average levels, indicating a slower recovery in the market.
- Construction costs have surged by more than 18% over the past three years, leading to a significant deficit in new construction starts for multifamily and logistics sectors.
Q & A Highlights
Q: What is the outlook for deployment in the second half of the year given the decline in interest rates and available dry powder?
A: Jonathan Slager, CEO: The pipeline is picking up across multiple sectors, including industrial and multifamily. While not at pre-pandemic levels, there are signs of improvement. We expect transaction volumes and pricing to improve as market participants adjust to the current interest rate environment. Selectivity remains key for Bridge.
Q: Can you discuss the state of multifamily housing in the Sunbelt, particularly regarding oversupply and investment momentum?
A: Jonathan Slager, CEO: In the Sunbelt, we continue to see resilience with ongoing rent growth and stable occupancy. While supply is peaking this year and into next, demand has been strong, allowing for modest rent growth and stability.
Q: What is the outlook for capital raising, particularly for Newbury Partners and other vehicles?
A: Jonathan Slager, CEO: We have seen a first close for our workforce and affordable housing strategy and significant interest in our flagship debt franchise. Newbury Partners is gaining momentum with re-ups from satisfied investors and new interest from Bridge's broader LP market. We expect continued capital raising success.
Q: Can you expand on the retail democratization and credit market strategy, particularly regarding distribution and product offerings?
A: Jonathan Slager, CEO: We have one product in the market targeting accredited investors, focusing on yield, safety, and capital appreciation. Our distribution strategy includes RIAs, independent broker dealers, and family offices. We have had about 1,200 independent dialogues with retail investor entities since the beginning of the year.
Q: What is the expected cadence of incentive fee crystallization for the triple-net product?
A: Katie Elsnab, CFO: The recent crystallization was related to our open-ended net lease product with a three-year period. Going forward, we expect a 12-month crystallization period for new REIT products.
Q: Are there concerns that increased transaction volumes might pressure valuations across the industry?
A: Jonathan Slager, CEO: We do not expect broad-based distress. Competitive dynamics and pent-up demand from equity funds should support attractive pricing. Lenders are not distressed sellers and will likely manage assets in an orderly way, preventing significant downward pressure on valuations.
Q: How is Bridge positioned to capitalize on the improving market conditions?
A: Robert Morse, Executive Chairman: Bridge's selectivity in acquisitions and recent transactions executed at outstanding value position us well. Improved transaction volumes should drive good performance, capital raising momentum, and ultimately benefit shareholders.
Q: What are the key factors driving the anticipated recovery in real estate transaction volumes?
A: Jonathan Slager, CEO: Factors include years of subdued transaction volumes, a large amount of maturing real estate debt, and significant dry powder in value-add and opportunistic equity funds. These elements set the stage for a meaningful recovery in transaction volumes and value resurgence.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
