Bridge Investment Group Holdings Inc.

And welcome to the Bridge Investment Group's second quarter 2023 earnings call and webcast. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Bonnie Rosen, Head of Shareholder Relations. Thank you. You may begin.

Good morning, everyone. Welcome to the Bridge Investment Group conference call to review our second quarter 2023 financial results. Prepared remarks include comments from our Executive Chairman, Robert Morse, Chief Executive Officer, Jonathan Slager, and Chief Financial Officer, Katie Elsnab. we will hold a Q&A session following the prepared remarks. I'd like to remind you that today's call may include forward-looking statements which are uncertain, outside the firm's control, and may differ materially from actual results. We do not undertake any duty to update these statements. For a discussion of some of the risks that could affect results, please see the risk factor section of our Form 10-K. During the call, we will also 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 second quarter earnings call event link. They are also available live during the webcast. I will present our GAAP metrics and Katie will review and analyze our non-GAAP data. we reported a gap net loss to the company for the second quarter of 2023 of $2.8 million. On a basic and diluted basis, net loss attributable to bridge per share of Class A common stock was 24 cents, mostly due to changes in non-cash items. Distributable earnings of the operating company were $35 million, or 20 cents per share after tax, and our board of directors declared a dividend of 17 cents per share, which will be paid to shareholders of record as of September 1st. It is now my pleasure to turn the call over to Bob.

Thank you, Bonnie, and good morning to all. In the three months since our last earnings update, we have seen an improvement in the macroeconomic environment and activity levels beginning to recover at adjusted and attractive prices in the U.S. real estate markets. Bridges focus on selected sectors of U.S. real estate, residential rental, logistics, and credit, and our recent expansion into secondaries have served the company well. Strong underlying fundamentals in these sectors have helped to preserve values of existing portfolios through operational improvements, while some of our dry powder in existing investment vehicles has been deployed at attractive values recently. In addition, Several of our newer initiatives, including AMBS, Net Lease Industrial Income, and Renewable Energy, are gaining traction and momentum. We are optimistic about Bridge's positioning looking forward, raising capital globally and investing in selective, high-performing sectors of alternative assets with an attractive mix of mature investments and relatively new sectors with high potential. Our areas of investment focus benefit not only from secular tailwinds, but also from the resilience and relative strength of the US economy. While the global outlook has softened in many major economies, the US continues to demonstrate that it is the preeminent destination for investment. Regional banking turbulence from last quarter did not put an end to the economic expansion, nor did it signal the beginning of a systemic crisis. Though financial conditions have tightened over the past year, restrictive monetary policy has not yet resulted in a severe or rapid deceleration of growth, nor has it compromised a strong labor market. Consumer confidence remains high, and consumer activity continues to bolster the economy's momentum. As a result, we have seen stronger than expected domestic growth amid a meaningful deceleration of inflation, Perhaps the most meaningful measure is core CPI minus shelter, which stands at 2.7% year over year compared to the peak in February of last year at 7.6%. As of August 1st, equity markets have responded, with the S&P 500 up approximately 20% and the Equal Weight Index up 10%. as the market rally has become more broadly based, which has diminished the so-called denominator effect, which has challenged the investment capability of many institutions. Strong labor and wage growth is also helping to support residential fundamentals, as we've witnessed across many of our investment portfolios. This has especially been the case for the lower half of the income band, which are the cohort bridge serves in much of our leading residential rental investments. including our flagship workforce housing and multifamily series. In the aggregate, our largest overall investment theme is in residential rental, and we provide shelter and comprehensive services to thousands of families and individuals in some of the most attractive markets in the country. Through market cycles, forward integration and sector specialization is our vital differentiator. We've seen our operational focus driving results within our real estate portfolios over the years, and especially over this past year. Operationally, most of our residential rental and industrial properties are outperforming their underwritten pro formas, and we're seeing positive fundamentals with healthy occupancy and rent growth. On the capital raising front, our client solutions group is larger and more capable than at any time in Bridge's history. and we are busier than ever before in the institutional, wealth management, and direct high net worth channels. Investors in the second quarter of 2023 remained cautious, resulting in $320 million of new capital raised across our investment vehicles. Yet the high volume of constructive dialogue and interest support our optimism entering the second half of the year. Additionally, With a large workforce housing portfolio acquisition expected to close today, we have essentially reached the required deployment threshold in our latest workforce and affordable housing fund. Along with our leading debt strategies fund, this enables us to launch successor vehicles in both strategies to drive future fee-earning AUM in the coming quarters on the back of strong track records in these sectors. The immediate predecessor vehicles in each of these strategies were the largest in Bridge history. 2Q inflows included the additional Townsend joint venture previously announced at the end of June. Bridge's continued partnership with Townsend represents another milestone in expanding the progression of our value-add logistics strategy. We also had inflows into many of our newer verticals, including AMBS, net lease, prop tech, and secondaries, as well as our debt strategies and opportunity zone vehicles. Year-to-date, we've raised approximately $1 billion. From a sales channel perspective, we continue to maintain a good balance between individual investors and institutional clients. 46% of our investor base is retail-oriented, with 54% institutional. Historically, we've always had a strong retail component with qualified purchasers, ultra high net worth and high net worth investors. This has resulted from our highly differentiated platform and high touch approach. We are also exploring ways to expand our retail efforts by making certain products accessible to accredited investors, thereby broadening our potential investor base. As we look forward, Bridge has a number of growth vectors in our high conviction areas of investing. residential rental, logistics, credit, and secondaries in both mature and exciting new sectors. Our more established strategies, including multifamily workforce and affordable housing and debt strategies, have achieved significant profitability, yet have substantial runway to scale further in future vintages, especially with the strong performance track records that Bridge has established. In addition, Newberry Partners, our recent PE Secondaries acquisition, is contributing meaningful fee-earning AUM, further bolstered by the positive reception of its most recent vintage in the market. I'd like to elaborate a bit on the impact of Newberry on our overall business. We acquired the firm at an attractive valuation. We implemented a SWOT team of our best and brightest professionals to ensure seamless integration and cross-sell. and we have exceeded our already high internal expectations. We indicated at the time of our IPO that inorganic growth and consolidation was an important component of future growth, and we've delivered on that objective via the Gorelick Brothers and Newberry Partners acquisitions, even in challenging times. Longer term, we have a number of newer organic strategies that have yet to achieve positive FRE, but are well positioned to scale over time. AMBS and net lease industrial income are reaching critical mass in AUM and moving closer to profitability. As banks and other balance sheet lenders reduce commercial real estate exposure, we believe these opportunities will continue to multiply. In a world of corporate costs rising and uncertainty about capital availability, triple net lease looks like an attractive option for many corporate users. In addition, the fact that our net lease industrial income strategy is relatively new and unburdened with assets acquired at higher prices pre-fed tightening, along with a singular focus on logistics manufacturing and mission-critical assets, is a significant advantage in the market. We've stood up an experienced logistics team now totaling 31 professionals, and they have deployed over $1.5 billion of gross capital from a standing start. Logistics and manufacturing demand remains robust, particularly in infill locations, as onshoring, e-commerce, and supply chain resiliency are durable demand drivers with staying power. Within residential rental, our single-family rental team has built a high-quality portfolio of over 3,300 homes. Housing is critically undersupplied and tight conditions are expected to persist for years due to elevated cost and availability of debt for new construction. Renewable energy, which just had its first close, will benefit from the global shift to transition energy sources broadly coupled with an unmet need for renewable energy solutions on commercial real estate. With that, I'll turn the call over to Jonathan.

Thank you, Bob, and good morning. As Bob mentioned, bridge is beginning to see some renewed activity despite the fact that Q2 commercial real estate transaction volume remained at depressed levels as higher interest rates and volatility within the debt capital markets continued to weigh on activity. For the latest real capital analytics data, transaction volume for Q2 was down 62% year over year. However, up slightly from Q1, and seems to be starting to reemerge as owners are either becoming forced sellers to generate liquidity or have capitulated to the impact of higher rates for longer on valuations. On the PE secondaries front, our partners at Newberry have also seen strong transaction flow, despite headline volumes down 25% in the first half of 2023, according to Jeffries. Notably, That's off from a record high set in the first half of 2022. After a slower start to the year, market activity picked up in Q2, reflecting an improving macroeconomic backdrop. FIRE Demand is expected to be strong heading into the second half of 2023 for both GP-led and traditional LP transactions. Against that backdrop, Ridge deployed $490 million, with most coming from within our secondaries and credit strategies. As asset values have come down over the past year, fund managers have taken increasingly realistic marks on their portfolio valuations, creating willingness to transact. Additionally, the large amount of near-term debt coming due is pressuring asset owners to find solutions to fix broken capital structures. These owners, in many cases, own high-quality assets but with unattractive debt terms. These are exactly the kinds of situations where wealth-capitalized investors like Bridge are positioned to act with conviction. With $4.1 billion of dry powder to deploy into multifamily, logistics, workforce affordable, and debt strategies, We're actively underwriting investment opportunities, and our pipelines have been increasing from the historically low levels experienced in Q1. This momentum is building in a number of strategies across our platform. As Bob mentioned, we expect to close today on a large workforce housing portfolio in Boston, which opens up our multifamily geographic footprint further into an attractive major market. In logistics, we acquired four distribution and warehouse facilities within our prime infill locations. In bridge net lease, we acquired an off-market manufacturing asset with the distribution facility, both on long-term leases with credit tenants. In AMBS, we bought $240 million of securitized residential credit at attractive pricing. In debt strategies, we opportunistically bought $273 million of floating rate CRE, CLO, and CMBS bonds during Q2 with ratings that range from AAA to BBB at a weighted average discount margin of SOFR plus 456. These highly risk-mitigated investment-grade bonds have significant equity cushions and subordinate debt below them and have exhibited outsized yields due to market volatility. Subsequent to the quarter, we continued to take advantage of market dislocations. However, we have started to see spreads come in and more activity return as the inevitable flow of transaction returns to the market. On the operating side, the underlying fundamentals of our portfolio investments remain healthy. For example, our multifamily and workforce assets are 93% occupied. and our same-store effective rent growth for Q2 increased 6.4% year-over-year. While the sector is experiencing supply issues in some markets and slowing rent growth, NOI across our portfolio was up 6.6% year-over-year. Fundamentals in our latest single-family residential portfolio are similarly strong, with 9.9% year-over-year rent growth in Q2 and occupancy at 95%. Logistics, which is a growing component of our AUM, continues to experience historically low vacancy rates. Market fundamentals in the infill coastal gateway markets in which we primarily invest remain relatively strong despite modest upticks in vacancy. Even in light of market headwinds, leasing outperformance continues to drive portfolio returns by exceeding original acquisition underwriting by 28% on a net effective rent basis so far this year. While the slowing tempo of transaction volume has been evident across the sector, we expect fundamentals to regain footing in 2024 as challenges of constrained supply and limited availability of functional products persist in our target markets. Now, turning to investment performance. After several quarters of market-related markdowns, our equity real estate portfolios were roughly flat in the quarter, with the exception of our office funds, which represent only 4% of our fee-earning AUM. While we continue to see price volatility in assets, it seems the bulk of values are beginning to stabilize as the historic rise in short interest rates comes to an end and pent-up demand and dry powder on the debt and equity side of the market begins to take hold. Subsequent to the quarter, we announced the successful closing of a $550 million recapitalization of assets from Bridge Multifamily Fund 3 into a continuation vehicle. The fund was in its first extension period beyond its original term, and the transaction was driven by the need for additional time to complete certain business plans and the assets and the desire of many LPs for liquidity. We are proud of the success this fund has achieved and the attractive returns we've delivered for our investors. Looking back to our IPO two years ago, we've grown fee earning AUM and recurring fund management fees by over 100%. This strong growth and long tenured AUM provides stable profitability to our business during periods such as now when market disruptions impact overall commercial real estate transaction volumes. As mentioned, We are excited about the future as markets inevitably recover and bridge is well positioned with dry powder, capable investment and operational teams in the most attractive sectors of real estate and secondaries and deep global capital partners to support our growth. The future earning power of bridge will benefit significantly both on the real estate side as activity levels in real estate investment sales market inevitably recover. as well as the increased activity in the PE secondary space. In addition to our market leading positions in our more mature business segments, we have made major investments in our platform in sectors that have large addressable markets, which we expect to drive significant future FRE and DE to the company. We are fully staffed with best in class investment teams that are poised to drive value as markets reopen and they further scale. I will now hand the call over to Katie to discuss our financial results.

Thank you, Jonathan. Despite heightened market volatility from the banking crisis, second quarter earnings improved from the first quarter, aided by the addition of Newberry Partners. The stability of our business continued to improve with recurring fund management fees totaling $60.3 million in Q2, up 18% from last quarter and 33% year over year. Our recurring fund management fees and the growth we've achieved have acted as a ballast while transaction markets have been muted. Fearing AUM increased 43% year over year to $22.2 billion, which includes approximately $4.3 billion from the Newberry acquisition. This represents tremendous growth of 106% in the short period of time since our IPO in 2021, when our Fearing AUM stood at $10.8 billion. Over 97% of our fee-earning AUM is in long-term closed-end funds that have no redemption features and a weighted average duration of 7.2 years, adding to the foundational stability of our business. Over 95% of our fee-earning AUM is invested in high-convection themes, which include residential rental in the U.S. across multifamily, workforce and affordable housing, single-family residential, and seniors housing. along with logistics, credit, and our newest secondaries vertical. Our central theme of the year is conviction, and we have thoughtfully positioned our investor capital to benefit from a variety of economic scenarios. We related earnings to the operating company worth $35.1 million and a quarter, up 14% from Q1, mostly driven by the Newberry acquisition and slightly higher transaction revenue. These were partially offset by a $2.7 million decrease in catch-up fee revenue, along with the timing of higher placement agent fees in the quarter. The year-over-year FRE comparison was impacted by the $13 million decrease in transaction fees. We expect transaction revenue to begin to improve in the second half of this year with acquisitions like those that Bob and Jonathan mentioned. On a modeling note, as Workforce 2 will hit the three-year mark of the investment period this month, Management fees will move from being based on committed capital to invested capital, which will result in a reduction in fee revenue in the third quarter until further deployment occurs. Fee-related expenses increased $4.1 million from Q1 with the addition of Newberry. We continue to maintain cost discipline on employee compensation and other expenses with lower transaction activity. This has helped protect margins, which have been impacted by lower catch-up fees and transaction-related revenue. As transaction markets rebound, our dry powder will be put to work and that revenue will push up margins. On a long-term basis, we expect our margins will average 50% plus or minus. For example, the margin in Q2 was 45%, but approximately 48% on the trailing 12 months. Distributable earnings to the operating company for the quarter were $35 million. with after-tax DE per share of 20 cents, an increase of 5% from Q1, as net realizations had a slight pickup, mostly due to Multifamily Fund 3. Q3 will include the impact from the recapitalization of assets in Multifamily Fund 3, which will result in a realization of performance fees. Overall, we're excited about the transaction, which creates a positive outcome for Fund 3 investors in a realization event, while also extending the duration for these assets to five years. Unrealized carry decreased slightly by $19.3 million to $428.4 million. As a reminder, accrued carry on the balance sheet is recorded one quarter in arrears. The decrease was primarily related to realizations in our bridge multifamily fund three and tax distributions in bridge debt strategy funds. Since our IPO in 2021, our accrued carry has increased 74% and we are well positioned for additional increases as markets stabilize and potentially rebound. Our board of directors declared a dividend of 17 cents per share, which will be paid to shareholders of record as of September 1st. The share count used in the dividend calculation includes the collapse of the 2021 profits interest program, which occurred on July 1st. As a reminder, this was the last of our planned legacy profits interest collapses for the foreseeable future, resulting in an increase to the diluted share count of 2.9 million. which is offset by lower non-controlling interest going forward, such that the overall transaction should be accrued for public shareholders. As discussed last quarter, we funded the Newberry acquisition using existing balance sheet resources, including $150 million of proceeds from our recent private placement of debt. The private placement included the issuance of $120 million of 7-year notes and $30 million of 10-year notes, with a weighted average interest rate of approximately 6%. The note's funded with the closing of Newberry on March 31st. In addition, our $225 million revolving credit facility was $80 million drawn at quarter end. We expect this to run at a similar amount going forward. In Q3, we expect to recognize a realized gap loss of $1.9 million on a balance sheet investment, which was monetized after quarter end. This loss will be reflected in our Q3 financials within net interest expense and realized gain and loss. The duration of our outstanding private placement is approximately seven years and is well staggered with no maturities until 2025. With our asset-light business model, along with our increased scale, we are well positioned to navigate the current environment, and we are confident in Bridges' long-term vision and strategy for success. With that, I would now like to open the call for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question key. You may press star and two if you would like to remove your question from the queue. For participants using speaker equipment, it is necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question is from Ken Worthington with JP Morgan. Please proceed, sir.

Hi, good morning. Thanks for taking the question. You talked a lot in your prepared remarks about the recovery in real estate. And if we think about the recovery in private real estate investing, where are we on this timeline? And I assume that deployment is what really comes back first, and that's sort of what you guys implied. Any view of the magnitude in recovery and deployment you see for the rest of the year? Is it something that deployment recovers a little bit, or do you think, given the opportunity set, it could recover more substantially? The second part of the question is, to what extent does the recovery and fundraising impact trail the recovery and deployment? Do those two sort of recover concurrently, or is there really a healthy lag between the fundraising recovery and the deployment recovery?

thanks for the question this is bob speaking i'm going to i'll start out and i'm going to ask jonathan to make some comments particularly about deployment as well i think as we tried to communicate in our prepared remarks we've been we've been patient over the last half of 2022 and the first half or so almost first half of 2023 as it related to deployment because we felt that asset values were resetting. In retrospect, it appears that that was an accurate assessment of how asset values have changed. We've worked hard operationally to maintain and enhance the value of existing assets while we've been patient in deploying incremental capital. As we tried to communicate, we've been I'll use the analogy of wading in the water, not diving into the water as it relates to asset deployment as of late, recently. And we found some pretty attractive opportunities. We found opportunities in in residential rental across many of our different aspects of residential rental. We found opportunities in logistics. We continue to see dislocation in the credit markets, which have provided opportunities across our fixed income vehicles as well. We think, and we're in the markets every day, we think that those opportunities are going to continue to manifest and probably accelerate over the course of the balance of the year, and we're excited about some of the opportunities that we're seeing now. Jonathan can elaborate a little bit on that, but I would say, as it relates to fundraising, what attracts capital is good deals and good performance. very good performance in our vehicles in the past. We think that some of the more recent investments that we've made will continue that good performance. The amount of dialogue that we have with investors around the world is very strong, and it's strong across all the various classes of investors, institutions, wealth channel, direct high net worth other other investors um and um and and and while there's been a while there's been i would call it patience on their part as well um what motivates capital raising is the opportunity to deploy capital at uh at attractive returns so to your point they're they're they're linked but beginning to uh beginning to show some real signs of life Jonathan, anything you'd like to add to that? Well, Bob, thank you.

I think as you noted, today we are closing on a very substantial portfolio that shows when you look at the unlevered returns on that portfolio, they're very strong. extremely attractive and we're seeing some larger sort of off-market things that are coming our way. Difficult to know whether any of those will actually end up making, but those larger portfolio opportunities, some of the off-market things could move the needle pretty substantially in terms of deployment. I think in the kind of regular way transaction side, there's still a lot of uncertainty about when is the Fed going to stop, stop, and when are we going to start to see more stability in the debt markets. We're seeing spreads tightening on the debt market, which is helping, and we're starting to see people kind of get to the point, as I said in the prepared remarks, we're starting to see people get to the point where they're kind of recognizing valuations at a more attractive level that can be executed on. I would say it's unclear what the second half is going to bring from deployment. But we're very hopeful about the activity. Certainly it's going to improve from the first half. I think I feel very confident in directing that. Whether or not it gets anywhere near kind of normal levels or beyond, we know inevitably it will. It's just a question of when.

Perfect. And then from a modeling perspective, you mentioned Workforce 3, the step down. Can you quantify that? a little impact or a big, and then the transition to the continuation fund, basically same question, what is sort of the net impact from a fee perspective on that transition, if any? Yeah, I guess to take the second half first.

Go ahead. On Workforce 2, you know, we will be about 72% invested in in August, and so it'll be about an $800,000 step down. From the perspective of multifamily fund three being converted to a continuation vehicle, it's about a 500K.

Perfect. Thank you.

No problem.

Thanks, Ken.

Thank you. Our next question is from Michael Supriest with Morgan Stanley. Please proceed.

Great. Good morning. Thanks for taking the question. I wanted to ask about secondaries with Newberry coming online here in the quarter. I was hoping you might be able to talk about some of the initiatives to expand the secondaries platform into real estate and credit. What steps might you take there? What the timeframe might be to launch those sort of strategies, how you might go about that. And then can you just give us an update on the Newberry Secondary's private equity side, just in terms of where they stand in terms of deployment on Fund 5, I believe it is, and when they might be activating and raising Fund 6, and any sort of fee step-downs to be aware of. Thank you.

Thanks, Michael. Secondaries and Newberry is, as you know, a new initiative to us. Second quarter was the first quarter where we included their results with our results. Just to refresh memories, the most recent fund that Newberry has raised and deployed is Fund 5, and that is fully deployed at this point. and we are in the market collectively with Fund 6. for Newberry and our experience in the quarter and beyond is that there's a great deal of interest in secondaries and particularly the continuation of the tried and true strategy that Newberry has pursued since I think 2006 when the firm was founded. The secondaries market is considered very attractive at this point. Discounts are attractive. There's a lot of product. And our early experience across both the traditional bridge investors as well as the traditional Newberry investors and the cross-sell associated with that has been very positive. We, of course, in any M&A transaction, buying right and integrating and moving forward collectively is critically important to success. We've established a strong team across both organizations to manage that integration, and we think it's been terrific. It's exceeded our expectations. Job number one is to go out and successfully raise and deploy Fund 6 to continue the success that Newberry has had in Funds 1 through 5 with the great returns that they've created. I think job number two, which will be pursued after job number one, is to explore other avenues for expansion, and we think that there are significant additional avenues for expansion within the broader secondary space. You mentioned a couple, real estate secondaries, credit secondaries, et cetera, and they're not really limited to that. You know, Bridge has a history of finding opportunities to organically expand in related diversification. Look at what we've done from a multifamily start. We've created now a multifamily workforce single family for rent and seniors housing verticals essentially emanating from a residential rental perspective and hope and expect that we can do the same across many of our existing sectors, including secondaries. But job number one is to successfully raise and deploy a successful fund six to follow into the pattern of the successful predecessor funds. We are aware, and I'm sure you're aware as well, the secondaries market from a macro perspective is big, is growing. There's a great deal of focus, and it's a very attractive time, we think, to be both raising and deploying capital in that sector.

Great. And just coming back to my earlier question point just around any step-downs to be aware of and timeframe for fee activation, might that be like a second half, a 23 event on Newberry Fund 6? On Fund 5? Step-down on 5, activation on 6.

As it relates to, I don't believe that there's a step down for Fund 5 that is happening anytime soon. We've had, and I believe Jonathan mentioned this, we had a modest closing very quickly for Fund 6, so we have some capital that we have to deploy and we're actively in the market with Fund 6 at this point. So it's been activated and is actively being raised and deployed. Fund six.

Great. Thank you. Just a follow-up question, if I could, just on private wealth. I was hoping you might be able to elaborate on the potential to expand distribution to access accredited investors, what the sort of path and steps could look like there. Thank you.

some of us in the organization when when when somebody says ai we don't think of we don't think of artificial intelligence we think about accredited investors and uh it's it's as important to us as ai is to as artificial intelligence is to uh to many people um we are uh you know we are we are actively focused on that sector of the market. We think particularly with our wealth channel penetration with most of the leading private wealth managers in the US and expanding overseas, we think that an accredited investor vehicle would be received very well. We have some ideas. about which of our sector focuses would be most appropriate for an accredited investor vehicle. We think we understand very well, intimately, what kind of structure would be best received by the market, and so we hope that we'll be able to execute on an accredited investor product in the relatively near future, certainly within a year or so.

Great. Thanks for taking my questions.

Thanks for your questions.

Thank you. Our next question is from Finian O'Shea with Wells Fargo Securities. Please proceed.

Hi, everyone. Good morning. Just a question on the management fees. I think last quarter it was $61.6 million mentioned pro forma for Newberry, and we're a little below that. I think, Katie, you may have mentioned something on placement fees, just looking to clarify that, or if there was any other source in the change this quarter. Thank you.

Thanks for the question. Yeah, essentially we do have a few placement agent fees that are paid on an annual basis, and there were larger payments made during Q2 which had the impact.

Okay, and those are netted out of top line fund management fees?

Yes, that is accurate.

Remember, when we talk about placement agent fees, that for us includes the participation of our wealth management partners. It's not what people traditionally think about in that respect.

Thanks, Finian, for your question.

Thank you. As there are no further questions at this time, I am turning the call back to Mr. Robert Morse for closing comments.

Thanks, Operator, and thanks all for your participation today in our earnings call. We appreciate the focus that you've given us. We, amongst other things, publish an annual review of our outlook for the year. Our 2023 outlook is one of entitled conviction. conviction in looking at the broader market of trying to discern where there is opportunity, of making sure that those opportunities are priced right and then successfully pursuing them. And we think that 2023 is shaping up to be the beginning of a very good vintage of opportunity within real estate. So we look forward to participating in the market as we go forward. Thanks so much for your time and attention today.

Thank you. This concludes today's teleconference. Thank you for your participation. You may now disconnect your lines.