Bridge Investment Group Holdings Inc.

Greetings. Welcome to the Bridge Investment Group's first quarter 2022 earnings call and webcast. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Bonnie Rosen, head of shareholder relations. You may begin.

Good morning, everyone. We appreciate you joining us for the Bridge Investment Group First Quarter 2022 Financial Results Conference Call. Our prepared remarks will include comments from our Executive Chairman, Robert Morse, Chief Executive Officer, Jonathan Slager, and Chief Accounting Officer, Katie Elsnab. We will hold a Q&A session following the prepared remarks where we will have Dean Alera, Vice Chairman and Head of our Client Solutions Group, join. As a quick housekeeping item, please note the new format of our supplemental earnings presentation, which is designed to complement our prepared remarks and provide our shareholders and constituencies with comprehensive data and full transparency. As always, we welcome feedback on our materials and hope you find the new layout helpful. During the call today, we will discuss 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 ir.bridgeig.com. These slides can be found under the presentations portion of the site along with the first 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.

Thank you, Bonnie. We're excited to announce another solid quarter for Bridge. Momentum through year end 2021 continued. And in 1Q 2022, Bridge again produced strong growth across each of our key metrics. First quarter of 2022 was the best first quarter in our history. Distributable earnings per share more than doubled year over year to $0.28 a share, driven by a healthy combination of management and performance fee revenues across a broad and growing set of fund strategies. Fee-related earnings to the operating company more than tripled year to $45.4 million year-over-year, and fee earning AUM now stands at $14.7 billion, which is up 43% year-over-year. These results continue the track record of strong and consistent growth bridges delivered for many years. As of the end of first quarter, our fee-related earnings and AUM have grown at respective compound annual growth rates of 43% and 40% over the past five years. Jonathan and Katie will give more detail in a moment, but my key takeaway from our first quarter is that Bridge continues to execute and scale our differentiated fundraising and investment approach, focused on some of the most attractive sectors within real estate that aggregate to a large and growing total addressable market. Macroeconomic and geopolitical events are dominating headlines and impacting markets worldwide. in the context of increased public market volatility, higher interest rates, and the broad-based expectation that rates will continue to rise as the Fed raises the Fed funds rate and sells investment holdings instead of purchasing additional securities on a monthly basis, we continue to believe that the U.S. remains an attractive market in which to invest, and in fact, in our view, is the preeminent investment destination globally. Strong relative economic growth healthy consumer and corporate balance sheets, high household formation, low unemployment and high wage growth are just some of the positive characteristics that define the US economy. Fiscal and monetary stimulus supported strong growth during the COVID pandemic, but also exacerbated supply side challenges and contributed in part to the elevated levels of inflation across sectors today. Of course, we are acutely aware of the inflationary pressures buffeting the US economy currently and the impact of inflation on our investment verticals, especially as we develop new assets and repair and rehabilitate the value-add assets that we typically invest in. We have navigated well through supply chain issues and cost pressure in the past and hope we can continue to do so looking forward. Centralized procurement and careful planning have served our projects well. In addition, higher rates have affected projected returns for new investments, and we've adjusted our acquisition and development pro formas appropriately. We believe that the tailwinds across our verticals, high household formation, strong rent growth, strong consumer balance sheets in residential, the continuing and dire need for added infrastructure investment in logistics, and the ever-present hunt for yield in the fixed income sector counterbalance many of the macro headwinds. To date, we have not observed a significant change in the underlying fundamentals for our core real estate investment sectors in the U.S. and observed tailwinds across most, if not all, of our specialized strategies. While the macro and geopolitical stresses will likely continue, our investment strategies have historically remained resilient in a wide range of market outcomes. Bridge recently published our comprehensive 2022 Real Estate Market Outlook co-authored by Jack Robinson, managing director of research, and our various sector heads. Our views of the current investment environment are summarized by the following observations. First, the U.S. remains the preeminent investment destination. In our areas of focus, capital inflows in the U.S. real estate climbed to a record in 2021 of nearly $250 billion, and early returns in 2022 suggest a continuation of these trends. Second, housing is critically undersupplied, particularly for the underserved middle class and workforce cohorts of the U.S., and will remain undersupplied for years to come. Third, the U.S. has a dire, ongoing, and substantial need for infrastructure to facilitate the continuing growth of e-commerce and onshoring. Fourth, notwithstanding recent and expected increases in interest rates, there's a global hunt for sustainable yields which is increasingly satisfied via alternative credit vehicles, like those in our debt strategies, AMBS, and net lease income strategies. With the 10-year treasury approximating 3%, the opportunity to achieve resilient, sustainable, double-digit yields without a huge amount of financial engineering and backed by solid real estate collateral is very attractive. This ability to provide yield in combination with commercial real estate as an inflation hedge position Bridge well in the current environment. Since our founding, Bridge is focused on fundraising and investment in markets and properties underpinned by long-tailed secular demand drivers like the ones I just described. We have purpose-built Bridge as a specialized investment manager forward integrated into property management to capture alpha at the asset level as we optimize the value-add assets we acquire or develop. Our nationwide teams, which now total 1,980 people, provide us with local nuance and knowledge, which allows us to identify and intimately understand our target markets and assets. More than many, we acquire assets one at a time, are selective in what we buy, develop bespoke individual renovation and rehabilitation plans for each asset, and aggregate at scale. We don't have to pay a portfolio premium to efficiently deploy over $4.6 billion per year, as we did in 2021, and therefore can deliver best-in-class performance. Our outperformance is a key driver to fundraising success, resulting in $1.1 billion of inflows during the quarter, which is typically the slowest quarter of the calendar year. In 1Q 2021, for example, we raised $175 million. 74% of our investors are repeat investors and 58% of our investors invest across multiple strategies. Additionally, each quarter we add new investors, both institutional and in retail, as our relationships with wire houses and local, regional, and national registered investment advisors expand. We added nine new institutional investors in 1Q 2022 and have continued to expand our relationships with global wire houses RIAs and other wealth managers. In 1Q 2022, 54% of new funds raised were institutional in nature. Lastly, we have just begun to scratch the surface of our opportunity to raise international capital with continued momentum from our recent fundraising team expansion in Europe and Asia. 45% of capital raised in the quarter came from international clients. In my experience, a full calendar for investor meetings is a good sign in our business. And thus far in 2022, we are busier than we ever have been across the investor universe and across our real estate verticals. Next week, for example, our expanded fundraising team will be actively engaged in meetings in the U.S., Europe, Asia, and elsewhere. With that, let me turn the call over to Jonathan to further detail our results and strategy. Jonathan?

Thank you, Bob. And good morning, everyone. Bridge delivered another strong quarter, and we are proud of how broad the success was. From fundraising to investment performance to integrating our entry into single-family rental, Bridge excelled on all counts. Over the quarter, fee-earning AUM grew 10% sequentially from the prior quarter, which is up 43% compared to a year ago. Our pipeline for continued growth with both existing and new investors is deep and growing. Over the first quarter, Bridge had successful closings in eight funds, including multifamily, workforce and affordable housing, seniors housing, single family rental, opportunity zone, net lease income, debt, and agency mortgage-backed securities. We will have our final close in the fourth vintage of our debt strategies fund during Q2. We had a stronger Q1 than anticipated due primarily to stronger transaction fee activity in connection with Q1 deployment and a large multifamily fund five closing ahead of schedule. This effectively pulls forward some of the revenue and earnings we plan for later in 2022. Our funds also continued to perform well with realized performance fees totaling $8.9 million which was 37% up compared to a year ago. Similarly, unrealized performance fees increased 148% compared to a year ago. We have now crossed a milestone, achieving over half a billion dollars in unrealized performance fees, providing the potential for 189 million in future distributable earnings to the operating company, up 145% to a year ago. While we are very pleased with our performance fees, I'm most proud of the continued track record of growth in our recurring fund management fees, which grew from $36.7 million to $44.3 million quarter over quarter, and from $30.4 million a year ago, which represents a 41% compounded annual growth over the last five years. We also had an active quarter on the transaction side of the business, with more than $639 million deployed across all of our funds. More importantly, we have continued to deploy into high-performing assets and operate them well, providing top quartile performance. In fact, our Multifamily IV and our Workforce Affordable Housing I were both ranked number one by Prequent as the top performing real estate funds by Net IRR for their respective fund sizes across all categories. Even in the face of geopolitical turmoil, by inflation and rising interest rates, Bridge continues to see strong performance in the fundamentals across all of our verticals, but particularly in our residential and logistics verticals. According to a study commissioned by the National Association of Realtors, the U.S. housing market has been underbuilt for the past two decades. They estimate the gap to be at least 5 million units across single-family and multifamily product. In the fourth quarter, multifamily absorption surged 673,000 units, more than double the previous decade's average, pushing vacancy to an all-time low of 2.6% and rents up by 13.8% year-over-year in all classes. Similarly, industrial demand drivers related to e-commerce in the United States continue to accelerate. According to a study by JLL, the U.S. is expected to grow its e-commerce revenue by $900 billion in 2025, which would equate to 1 billion square feet of industrial real estate demand. Before I turn the call over to Katie to review our financials, let me provide an update on our newest investment strategies. In January, Bridge acquired majority ownership of the management platform of Gorelick Brothers Capital, which operates in the attractive single-family rental housing market. We have successfully raised $240 million, including co-investment capital, in our first single-family residential fund. In conjunction with the launch of that strategy, in the first quarter, we have already begun acquiring individual homes, small portfolios, and expanding built-to-rent relationships. Since launching our logistics strategy in November 2021, we've been growing the business and are in a terrific position to invest at scale and through multiple deployment strategies focused on infill U.S. global gateway markets. Our regional organization structure is in place with boots on the ground in our key target locations, and we have deployed or are under agreement for approximately $1.5 billion in logistics assets. which equates to 8.3 million square feet of acquisition and development opportunities. We are already seeing the potential scale of this opportunity. RIG remains well positioned with over 85% of our current AUM in residential related strategies. And moving forward, the largest growth part of our business is in logistics, which is experiencing unprecedented demand, which is expected to continue for the foreseeable future. Our specialized vertically integrated teams due diligence process allows us to react dynamically to changes in the market. Bridge's core business is well suited to perform in inflationary times. And with our strong operating platform, we believe we can continue to drive alpha for our investors. As we begin to see the impact of higher interest rates on our market, we've started to see a transition from a seller's market to a buyer's market. Sellers have begun to eliminate weaker buyers from consideration, and buyers have become more selective about assets and markets. But Bridge remains confident and optimistic about its strong portfolios and the opportunity the markets are presenting us. Now, over to you, Katie.

Thanks, Jonathan, and good morning. Despite the more volatile macroeconomic environment, we achieved strong year-over-year growth in management and transaction fees, fee-related earnings, investment income, and distributable earnings. And as Bob noted, this was the best first quarter in our history as a fundraising platform continued to drive AUM growth, and the collapse of our 2019 profits interest program proved to be accretive to our public shareholders. Our total revenue for the three months ended March 31, 2022, was $104.1 million, compared to $58.5 million in the same period for the prior year. This is primarily due to a 71% increase in fund management fees, which was driven by an increase of 43% of fee-earning AUM year-over-year and an $8 million year-over-year increase of catch-up fees, which will increase our reoccurring fund management fees. On an absolute basis, catch-up fees during the first quarter were $8.4 million, which was mainly due to a larger closing in our multifamily fund size. As we mentioned on our last call, we have successfully internalized fund administration, and you will now see a reoccurring revenue stream as a result. This was $3.6 million in the first quarter, and we expect a similar amount each quarter, which could increase over time as we scale. This is driving better reporting overall to our LPs with cost and operational efficiencies. Additionally, our transaction fees are up 313%, over the prior year, which is driven by $639 million of deployment during the quarter versus $212 million in Q1 2021. The higher activity was driven by multifamily, workforce, and affordable housing, and single-family rental strategies. While we had an impressive start to Q1, this amount was still off from the highs from the fourth quarter, and as we noted on our last call, that is typical to see with real estate transaction seasonality. While Jonathan and Bob have focused on the opportunities and growth in the business in these less certain times, I want to spend a moment emphasizing the stability of our core business. We have included additional information about our reoccurring fund management fees, which are up 21% compared to the prior quarter. These are long-duration fees with an average tenure of eight years. If we turn to investment performance, you can see the value that has been created through our due diligence, focusing on value-add assets in high-growth markets. Our total investment income for the first quarter increased 253% year-over-year, driven mostly by unrealized carries interest of $65.9 million and realized carries interest incentive fees of $9 million. The performance fees were driven by realizations in multifamily and debt strategy verticals. We have now hit the half billion mark in unrealized carry. The runway for future performance-driven distributable earnings is significant, although quarterly realization pace will vary based upon timing of dispositions. We've also had a significant increase in employee compensation and benefits year over year, which is largely due to our increase in investment professionals and corporate employee headcount related to our growth in total AUM and new strategies. This includes the addition of our single-family rental platform, which is partially reflected in Key 1 with the acquisition at the end of January. Additionally, during the first quarter, we incurred over $1 million in costs related to being a public company, which we did not incur in 2021. Overall, it was a strong quarter with gap net income to the operating company of $97.5 million versus $40.7 million in the prior year, and our gap earnings per share was $0.35. Our total fund level fees for the quarter increased 106% over last year to $74.7 million, driven by strong growth in our contractually reoccurring fund management fees powered by the continued AUM growth. Our transaction fee growth was also strong as previously discussed. Total fee-related revenues grew by 110% over last year to end at the quarter at $84.5 million. The performance was driven by continued strong fundraising, BAU on growth, and effective deployment. As we've said many times, we believe our vertical integration drives differentiated results for our LPs as well as direct savings. This integration also results in our transaction fees and net earnings from property operators becoming an extension of our fund management fees. Based upon the growth in our fee-earning AUM and the elevated deployment during the quarter, we once again generated strong fee-related margins of 54%. This was also higher than expected due to the larger close on multifamily side, which pulled forward additional fees, including catch-up fees. These margins include the expense we bear for our vertical integration and property management functions. Our margins will vary quarter by quarter, and as we indicated last quarter, the building and scaling of our new strategies can have an impact on these ratios. Total fee-related earnings to the operating company was an impressive $45.4 million, up 203% compared to the first quarter last year. This includes the impact of the collapse of the 2019 profits interest in the amount of 14 million shares. Additionally, there was a positive impact from the remaining non-controlling interest in the amount of approximately $150,000 due to the loss in the newer verticals as they built to scale. Lastly, our pre-tax distributable earnings to the operating company for the quarter were $47.9 million, up 183% compared to a year ago on a pro forma basis. Our after-tax distributable earnings per share increased 133% to 28 cents per share compared to 12 cents a year ago on a pro forma basis. This was driven by all of the components of our business we've detailed, including our strong fee-earning AUM growth, fee-related earnings, and realized performance allocations. Bridge declared a dividend of $0.26 per share in line with our goal to distribute substantially all of our distributable earnings to our shareholders. In closing, despite rising interest rates and inflation, we believe that we are well-positioned with our strong balance sheet, carefully curated investment sectors, and growing long-duration fee earning AUM. Finally, I want to end by thanking our investors for their support of the company and all of our employees who work tirelessly to be best in class. With that, I will turn the call back to the operator so we can take your questions.

At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Michael Cypress with Morgan Stanley. Please proceed with your question.

Hey, good morning. Thanks for taking the question here. I wanted to circle back on the retail platform that you guys have. Clearly, a lot of your AUM are already embedded in the retail channel, but I believe a lot of it's sold to QPs. I was hoping you could talk a little bit about the products on your roadmap that could help broaden access to the mass affluent space within retail. Maybe you could talk a little bit about what this requires from a distribution organization standpoint as you think about pushing those sort of products out to a wider audience and how you're thinking about this opportunity in the timeframe there. Thank you.

Thanks, Michael, for your question. This is Bob Moore speaking, and I'll address that. You're correct in saying that we have a really strong position with wire houses. We do business with most of the major wire houses, and hopefully soon all of the major wire houses in the U.S., offering our funds at the $250,000 and above level of commitment, so qualified purchasers in that respect. And our funds, we think, have a broad appeal to that part of the market, generally speaking, high yield, really good returns, leading returns for, as Jonathan said, for many of our funds, and so a good track record and a good brand in the retail market at that ultra-high net worth level, if you will. We've been, as we've messaged before, actively exploring opportunities to market to the more mass affluent part of the market as well. Our early discussions have indicated that it should be a seamless transition. There are structural and organizational elements that have to be put in place to be able to offer an effective structure and vehicle that would be both appropriate for the mass affluent market and attractive. We think that we invest in some if not all of the really attractive areas within U.S. real estate and believe that as and when we launch a retail vehicle, we could do so with a differentiated structure and differentiated investment thesis that would help to really define the bridge advantage in that area. The retail space is, although it's highly competitive at this point, and there are a lot of entrants, it's under-penetrated in a lot of respects. So it's one of the areas that we have a great deal of focus on at this point. We don't have a particular timetable that we can share at this point, but it's an area of focus for us.

Great. And just a follow-up question, if I could. Just on fundraising, we're hearing some – concerns around crowdedness and congestion in the institutional fundraising market. I'm just curious to hear your perspectives around that. To what extent are you seeing any sort of impact there in the marketplace? What impact that might have as you kind of roll forward from here over the next couple of months and how the broader macro environment, inflation, geopolitical concerns may impact the ability to raise capital. Maybe you could just update us on sort of some of the strategies that you still have in the marketplace that you're raising here and what your perspective is on the timeframe for those races. Thank you.

Thanks again for that call and question, and I'll take a first crack at that as well. It's fantastic that the world is reopening. and that people are taking meetings and we're able to get out and meet people. Bridge is not a new participant, but a participant in the markets where we're creating new relationships on an ongoing basis. And it's harder to create new relationships by Zoom, not impossible, as we showed last year. And it's easier to create new relationships when you can show up. We have an extraordinarily busy capital raising calendar as we look forward. I mentioned in my prepared remarks, we have senior teams of people who are literally all over the world as well as the US over the course of the coming month. And that's sort of the norm at this point as we reach out and we continue to expand our investor base on the institutional side as well as on the retail side. So we think we have some wind in our backs at this point. We have some strategies that have been very well received in the market and are continuing to show a great deal of traction, notwithstanding the volatility in the public markets at this point. One of the values we think of investing in U.S. real estate, and particularly one of the values of investing in often value add U.S. real estate, is that the current environment is supportive of the fundamentals for U.S. real estate in being able to drive alpha at the asset level in terms of being able to offer yield that's competitive and, in many respects, inflation protected at this point. So there's some tailwinds around the strategies that we have. We are continuing to market our fifth multifamily fund with great effect. We're completing the marketing of our second workforce and affordable housing fund, critical given the dire need for affordable housing in the US and the great way in which we offer quality housing and community and social programming for our residents. We're marketing. Our single family for rent, fourth vehicle, and that's been well received as well. We have a logistics value add offering. We have a net lease offering. We're just completing successfully our fourth debt strategies fund, and we have a very competitive fund in agency mortgage-backed securities as well. It's a long list, but each one of those is really attractive. I think we're really excited as well that on the slightly more opportunistic side, we're seeing great traction in both our seniors housing fund three and soon to be launched office fund three as well. So a lot of specialized offerings that cover what we think are some of the most attractive parts of U.S. real estate, that specialization is which perhaps makes for a complicated venue of offerings, that specialization I think we've shown in the past really drives superior returns, particularly when coupled with the forward integration that's an integral part of our strategy.

Great.

Thanks so much. Thank you.

Our next question is from Finian O'Shea with Wells Fargo. Please proceed with your question.

Hi, everyone. Good morning. I think you just touched on some of this in the previous question, but was curious if you could expand on the market in real time, the turbulence we're seeing as it impacts market volume for what you're seeing in your pipeline. Are the cap rates and pricing changing, and is the volume changing? as you look forward.

Jonathan, you want to handle that question?

Sure. Happy to. And thanks for the question. You know, it's interesting. I think you heard in my prepared remarks that we're definitely seeing some things shift in the winds. And one of the things that we are seeing is, you know, the, let's call it, less well-heeled investors and market participants are starting to lose ground. Sellers are no longer as focused on getting, let's call it, the last dollar out of the investment and more focused on surety of close and execution when they're looking at transactions I think that we're starting to see a little bit of a shift toward a little bit more of a buyer's market. I'm sorry, a little bit more of a buyer's market, a seller's market. The attractive assets are still getting great play and there's still lots of energy around them. being able to acquire things on more traditional terms, right, where we were seeing times when if you wanted to buy an attractive asset, you had to put up a lot of non-refundable money and close, you know, very quickly. We're starting to see this go back to more normal, you know, due diligence periods and more normal terms. But again, there's such a deep If you think about the secular demand for most of the sectors, especially multifamily and industrial, we haven't seen the transaction volume get significantly lower. We have had seen some sellers say, maybe I'm going to wait a little bit longer, but the deal flow right now that we're seeing is pretty robust. The difference is we're seeing a lot less competitors on the acquisition side. And, you know, we're in the midst of doing several dispositions, you know, and we're still seeing really attractive pricing on those. I would say that, you know, kind of overall, you know, there's a bit of a wind shift, though. So that's kind of how I would describe, you know, the period we're in. And, again, one of the things that's happened is, you know, there's more, I would say, when you look at the underwriting for these investments, There's more emphasis on the growth that we're seeing in rents and in revenues. We have tremendous rent lag because of this supply-demand imbalance and a little bit less cash flow because interest rates have moved up. As cap rates continue to stay relatively low and short-term interest rates move up a little bit more, we're seeing a little less cash flow, but we're still seeing a lot of growth. So still attractive, I would say, risk-adjusted returns in the sector and still, I think, a solid amount of investment capital from well-heeled institutional and private investors.

Great. That's helpful. Thank you. And just, John, a small follow-up. You mentioned a couple times you're very constructive on logistics. Can you talk about the Amazon comments that seem to throw some of those names? I was hoping you would ask about those.

Yeah, I guess everybody's focused on Amazon. They sort of dominate our universe, don't they? What's interesting is I think, and you've seen this response from multiple players that are extremely focused in this sector, There is so much demand. I think the overall view is that there's still a massive shift taking place to online and digital. As we see that shift take place, and we're behind the curve relative to places like the UK and China and a lot of places in the world. We haven't nearly had the penetration that those places have. And I don't know anyone who doesn't see that trend continuing in terms of that penetration. And that consumes a lot of industrial real estate. I think the estimate over the next few years is like a billion square feet of industrial real estate. So it's a lot. It's actually might be a billion and a half even. It's a big amount of demand and not all of that demand is from Amazon. The other thing that's happening is, as you saw, the supply chain scare from most retailers, they've all decided that they're going to need to hold a little bit more inventory to make sure that they're prepared in the event of supply chain interruptions, which I think even today, given what's going on in China and everything, people are very concerned with, right? So when they can get inventory, they're getting inventory that they know they're going to need, which means that there's an increase in the demand for warehousing space. So again, across all of what we call logistics, The demand just continues to be greater than the supply and Amazon, although a very important player, they're not saying they're not going to participate anymore. They're just saying, we're going to slow down the insane rate of growth that we had before and we're going to take a little bit of a beat before we start doing a lot more. I don't think most of the participants in the market are super concerned.

Great, thanks so much.

As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Our next question is from Ken Worthington with JP Morgan. Please proceed with your question.

Hi, good morning. We'd love to dig into the outlook for transaction revenue and transaction volumes. So with inflation, equity, and credit market volatility, How do you see levels of activity that drive these transaction revenues over the next few quarters? You mentioned a couple of times this migration from a seller's market to a buyer's market. Will that have an impact? And then maybe lastly, the transaction fee revenue seemed robust to me given the level of deployed equity. So I assume there's something maybe on mix here, either on due diligence fees or mortgage brokerage fees. that drove what at least we thought was high transaction revenue given deployment. So what's happening in the mix there? Jonathan?

Yeah, I'm happy to. I'm going to have Katie do the second part of the question, and I'll do the first part of the question about kind of volumes. And candidly, I think I said it in my remarks, Our investment teams were getting candidly a little bit concerned about, I don't know what the right term is, but the overall energy in the market. And we were passing on a lot of transactions that we loved because we felt like the numbers just weren't making sense. And we were holding to what we thought was the right value for the assets. and we used to be, you know, back in the days of Fund Free, we call ourselves the greatest rebounder in the league, which meant that a lot of deals passed us by, went to a high bidder, and then came back to us. Well, it looks like our rebounding skills are getting put to work again now. We're starting to see transactions where, you know, more aggressive players are just not able to execute, and they're even walking away from relatively sizable non-refundable deposits because their financing is just coming in below where they wanted it to and they're having to tap out. We're able to hold values in the levels where we think they make more sense and starting to see things. I think right now we look at this and say we're not expecting you know, an acceleration of our transaction volume, but we are expecting to be able to continue to deploy, and we're actually very excited about, you know, at least the opportunity set that we're seeing and the pricing that we're seeing in that opportunity set across most of our portfolios. So our teams, I think, remain confident. I'm going to let Katie address the mix piece.

Sure. And a lot of the development fees that we recorded during Q1 were related to our development funds. And so there is, you know, as part of the revenue recognition... The transaction fees, ma'am. Yes.

Yeah.

Thank you. As part of the transaction fees, there is a revenue recognition criteria where a portion of it is deferred. And so about 75% is related to those development bills. Right.

So what you're seeing is a spillover, effectively. Exactly. Related to our Opportunity Zone funds. Does that make sense?

Yep, yep, that's great. Okay, thank you. And then I think you guys touched on this, but not directly. In terms of funds that are going to commence fundraising and make their way into fee-paying AUM in the next two quarters, like what are the new funds or new vintages that are going to start to ramp up here? again, in calendar 2Q or calendar 3Q that we should make sure we're aware of.

Thanks, Ken. Remember, we have two open-ended funds, net lease income and agency mortgage-backed securities. So they are in the market and available on an ongoing basis to investors. And so those will will remain as open-ended offerings for us, both focused on delivering high and resilient current income to investors. We are at the stage where we will launch our Logistics Value Add Fund 2 to follow on the very significant SMA that we announced with Townsend earlier in this year. And so that fund is launching imminently. Number one, we are at the point where we're about to pull the trigger on our Office Fund 3 with some early momentum in that fund. We are in the early stages of Of marketing our single family for rent fund Denominated fund for that builds on the prior track record of Gurelek brothers. We've had a first Founders class closing for that for that fund at about 250 million dollars and we're actively marketing that fund as well so those are the and and you know Jonathan or Katie correct me if I've missed anything those are the those are the funds that we are have on the docket as new entrants. We're finalizing the final closes in the either second quarter or third quarter for debt strategies fund four and workforce and affordable housing fund two. Those successful fundraisings will have their final close in the second quarter for debt and the third quarter for Workforce and Affordable Housing II, respectively. And so that's really the docket as it is.

I don't know, did you mention follow on for OZ, of course?

No, thank you, Jonathan, for adding that. We have a successful series of Opportunity Zone tax motivated investment funds. two in 2019, one in 2020, one in 2021. And we've launched Opportunity Zone Fund 5 earlier this year that will be raising capital through, I think, November of this year. The last fund was sized at about $1.5 billion of equity. This fund has a $1 billion target. The Opportunity Zone funds, broadly speaking, invest predominantly in built-to-core funds very needed multifamily with a significant component of workforce and affordable housing in selected opportunity zones around the country. And I think to date we have circa 70 developments that we're pursuing in those opportunity zones around the country. The earliest projects in Fund 1 after a after a construction period, are entering, some of them and more to follow, are entering the lease-up period. And, you know, those developments have basically been characterized by a tough environment in which to develop but through which we've successfully navigated and stronger than certainly pro formaed lease up and rental rates and leasing velocity. So we feel pretty good about those funds as well.

Awesome. Thank you so much.

Our next question is a follow-up from Michael Cypress with Morgan Stanley. Please proceed with your question.

Hey, thanks for taking the follow-up question here. I'd just be curious to hear your latest thoughts on M&A and Just how is the current market backdrop impacting the number of deals that are crossing your desk? And maybe you could talk a little bit about how private valuations have evolved given the pullback in public valuations and have seller expectations adjusted enough? And just maybe more broadly, what sort of acquisition opportunities would you guys be looking at and make the most sense? I think in the past you've mentioned a European platform possibly or even infrastructure. Thank you.

Thanks, Michael. That's a big and complex question that encompasses a lot of things. I'd like to think that we are aware of many of, if not most of the opportunities that are available in the market. There appears to be a continuing desire of private alternative asset investment managers to consider M&A, whether it be for growth, whether it be for transition and succession or just access to infrastructure or capital raising capabilities, et cetera. So I think that there's a continuation of enthusiasm to consider M&A. across the markets. And I think that everybody recognizes that values have come down, at least temporarily, in line with public markets. Look at our results and look at our stock price versus what our stock price was at the end of the year. I think somebody sent some information to us a couple days ago that of the class of 2021 IPOs, the average IPO in 2021 is down like 60% or so. Don't take that as gospel, but it's been a tough public market and we think that those valuations have translated to the private market as well. What's most important to us is finding opportunities that fit well with our strategy looking forward. And remember, we've grown by acquisition, aka Gorelick Brothers, and we've grown by seeding teams as we've done in net lease income, as we've done in logistics, value add most recently, but as we've done throughout our history. As we look at opportunities going forward, we think continuing to focus on real estate is a good focus. We think that being cognizant of opportunities to expand as I believe you asked earlier into the mass affluent retail. is potentially attractive if there was the right opportunity. We have a long stated initiative to find an opportunity to participate in the Core Plus side of the business, maybe Core and Core Plus side of the business. I think given what's happening in Europe today, there's an interest, but it's a It's perhaps a bit more of an academic interest today than a tangible interest and we'll see how things develop there as well. And I think the other thing I would characterize about us as a company and our operating philosophy, as we've grown either through acquisition or as we've grown by bringing on teams of people, you know, they've learned a lot from us and how we do business. We've learned a lot from them and how they have done business and do business either at their former firms or in their vision going forward. And I think that Bridge today is a really strong and powerful aggregation of best practices from a number of other parts of the business as we've all come together and put on the same jerseys and get on the field together. So we think that M&A should be and hopefully will be an important part of our growth going forward. We want to be very deliberate and very strategic in what we do. We think that Bridge represents a great platform for others to sort of manifest what they can do, and I think that that's reflected in a lot of the inquiry, both outbound and inbound, that we see today. Great. Thanks for taking my follow-up. Thank you.

We have reached the end of the question and answer session, and I'll now turn the call over to Robert Morse for closing remarks.

Thank you, operator. To everybody who participated with us today, thanks for your time. and attention. We're delighted to be able to announce strong results for the first quarter. We as a management team and as a company, we continue to work very hard in this environment to progress our businesses going forward. We're encouraged. We're encouraged by a lot of the opportunities that we see both on the capital raising side as well as on the deployment side. We continue to invest in our company. One of the things that we didn't really mention today was the successful conversion to in-house fund administration, which took place as of January 1st of this year. And that's a big deal for us as well. We think we will be able to provide comprehensive and transparent communications to our investors at a better price and lower cost. And we... and we think that that's representative of some of the continued evolution of bridge as well. So we look forward to our continued dialogue, and again, thank you for your participation. Bye-bye.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.