Bridge Investment Group Holdings Inc.

Greetings and welcome to the Bridge Investment Group's 3Q23 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 zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bonnie Rosen, Head of Shareholder Relations. Thank you, Bonnie. You may proceed.

Good morning, everyone. Welcome to the Bridge Investment Group conference call to review our third 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 factors 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 third 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 third quarter of 2023 of $17.9 million. On a basic and diluted basis, net loss attributable to bridge per share of Class A common stock was $0.04, mostly due to changes in non-cash items. Distributable earnings of the operating company were $40.8 million, or 22 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 December 1st. It is now my pleasure to turn the call over to Bob.

Thank you, Bonnie, and good morning to all. From a macro perspective, the third quarter of 2023 was volatile, impacted by a number of cross-currents. On the positive side, robust U.S. GDP growth highlighted the strength and resilience of the American economy. GDP growth accelerated to an annualized 4.9% in the quarter. The U.S. labor market remains strong with high wage growth, low unemployment, and growing labor force participation. These factors have bolstered consumer income and spending. In particular, wage growth has been high for the lower and middle income cohort of the working population, the part of the income band Bridge serves in much of our leading residential rental investments. While we note wage gains are decelerating relative to their prior peak, they remain strong and above 5% year over year, which are levels well above prior cyclical averages. In addition, The U.S. manufacturing sector has been revitalized by deglobalization, reshoring, and new U.S. manufacturing tax incentives from the CHIPS Act and other government stimulus. Broadly stated and informed by two weeks of international travel recently to meet existing bridge LPs in Asia and the Middle East, the U.S. remains a preeminent investment destination. In addition to strong growth of the overall economy and household income, inflation metrics have decelerated. Perhaps the most meaningful measure is core CPI minus shelter inflation, which is 1.95% year-over-year compared to the peak in February last year of 7.62%. This has created the conditions for an extended pause in interest rate hikes or potentially a reduction in rates looking forward. In our view, the confluence of all these factors is supportive of the case for interest rate increases to at least pause and possibly remain higher for longer while the U.S. economy continues to show strength. With the fastest tightening cycle in recent decades, commercial real estate values in the U.S. have reset over the last 18 months and now are at levels which we believe represent an attractive entry point. This increase in cap rates has created unique opportunities across many of our strategies. We firmly believe that 2024 represents an excellent vintage in which to invest and a reward for the patience we have shown for much of 2023, particularly in our real estate equity strategies. What one buys is important, as is where and at what valuation level. We believe residential rental, a core area for Bridge, is poised to outperform. Housing prices are at an all-time high, measured by the Case-Shiller Home Price Index, and combined with a high mortgage rate environment, many households are finding it difficult to access the home ownership market. The most recent census data emphasizes this point. Over 1 million new renter households were formed last year, compared to 4.4 million formed between 2011 and 2019. This is a historic amount of new renter demand. At the same time, we are appropriately focused on what we see as a short-term surge in housing supply. We also acknowledge we are in a far different environment than in previous cycles. Estimates from Fannie Mae, as an example, suggest that there is a shortfall of 4 to 5 million housing units today. With high construction costs and tight credit conditions, we anticipate more shortages are to follow. For residential rental, we see the ability to capture value in today's market and capitalize on the growth driven by the demographic tailwinds and long-term fundamentals by taking advantage of the 2022-2023 reset in values and potential balance sheet distress. In real estate credit, investors are benefiting from the increase in base rates and spreads, creating compelling all-in current yields. Amid tightening credit conditions, we note that an increasing number of banks have exceeded their commercial real estate concentration limits, which is sidelining many conventional lenders. With less competition from banks, particularly regional and local banks, we see this not only as a broader opportunity set, but also the potential to build lending relationships with new high-quality borrowers with high-quality assets. With fewer active lenders, we believe this translates to the ability to structure loans with attractive terms at lower leverage points, a great opportunity from a risk-adjusted perspective. Logistics real estate strategies continue to see strong demand tailwinds from a combination of growth in e-commerce, reshoring and manufacturing, and retailer supply chain reconfiguration. Supply chain resilience is further driving demand for novel logistics solutions, creating opportunities in both coastal gateway and intermodal markets. Initiatives like the CHIPS Act have incentivized advanced manufacturing, including battery technology and semiconductors, leading to a rise in real estate investments supporting such industrial activity. Each of these factors highlight the need for logistics infrastructure across the U.S. over the next decade. Despite some near-term supply issues in certain markets, we continue to see an undersupply relative demand in the infill gateway markets where we invest, which continues to drive rent growth and opportunity. Our private equity secondaries business offers similar opportunity. The overall secondaries market is growing as private markets become increasingly dynamic and complex, driving LP demand for sophisticated liquidity solutions. The global private equity market has raised more than $1.6 trillion of new capital commitments over the past 36 months. This surge in primary investment commitments, along with a significant decrease in exit activity and distributions, will create significant opportunities for the secondary market in the coming years. Bridge's team recently launched capital raising and deployment on its sixth vintage following a 15-year track record of success. We have deployed meaningful capital across these four core strategies at attractive targeted returns and see increased opportunity ahead. Residential rental, logistics, credit and secondaries represent approximately 95% of our fee earning AUM and should continue to drive value as our platform continues to grow. On the capital raising front, the current macro backdrop is also impacting how investors allocate capital across the industry. The reset of valuation parameters, reluctance on the part of owners to sell assets during volatile times, and general market uncertainty have contributed to a slower capital-raising environment, particularly for commercial real estate equity strategies. However, significant repricing and a recognition of the compelling demand side are starting to capture more attention in and we see capital beginning to focus on 2024 allocations to take advantage of dislocated pricing. Against this cautionary backdrop, Bridge raised $303 million of new capital during the third quarter across our investment vehicles, including new incremental capital as part of the recapitalization of Multifamily Fund 3. Year to date, we've raised approximately $1.3 billion. With our large flagship funds still in their investment periods and not actively fundraising, almost all of the strategies which had closes in 2023 to date were our newer verticals, including AMBS, net lease industrial income, logistics, solar, and single family for rent. We also had inflows into our latest Opportunity Zone vehicles. These newer verticals continue to perform well, are in attractive sectors, and are starting to achieve scale, which is an encouraging indicator for the future growth of these strategies. As we discussed last quarter, some of our mature strategies reached the necessary thresholds to begin marketing the next vintages heading into 2024. The next debt strategies vintage will have inflows to AUM in the fourth quarter of 2023. Workforce and Affordable II is now 79% allocated, and pre-marketing has begun for the successor vintage with expectations for a strong reception from our LP base and others. Bridge's secondary strategies did not have a third quarter closing, but will have inflows in the fourth quarter. Our secondary strategy is seeing strong acceptance in the marketplace as the industry broadly continues to grow into its place as a critical piece of the private market's infrastructure. We expect the trend of more limited allocations of capital to persist in the fourth quarter. However, the high level of activity and constructive dialogue with LPs gives us confidence that allocations should start to improve as we enter the new year. From a sales channel perspective, we continue to maintain a good balance between individual investors and institutional clients. Approximately 47% of our investor base today is from individual investors, having raised $8.7 billion since inception through the Wealth Channel. This is testament to our strong track record, differentiated platform, and high-touch approach to client service. As we mentioned on our last earnings call, we are also exploring ways to expand our retail efforts by making certain strategies accessible to accredited investors, thereby broadening our potential investor base. we continue to make good progress on this front. With household wealth estimated at approximately $53 trillion in North America alone and allocations to alternatives less than 5%, the opportunity for expansion is huge. With that, I will turn the call over to Jonathan.