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.

Thank you, Bob, and good morning. Despite the market volatility experienced in the third quarter, Ridge was more active on the real estate deployment front compared to recent quarters as we closed on several acquisitions that attracted pricing. Industry-wide, commercial real estate transaction volumes remain at depressed levels as higher interest rates and volatility within the debt capital markets continue to weigh on activity. For the latest real capital analytics data, transaction volume for Q3 was down 51% year over year. In contrast, transaction activity in the secondaries market has been strong, as PE secondaries capital is highly sought by LPs seeking liquidity. Based on the high levels of activity in this segment, the secondary market is now and will continue to be one of the bright spots for deployment activity. Against this backdrop, bridge's deployment during the quarter was mostly centered on our credit strategies, as well as our previously announced workforce and affordable housing portfolio. BridgeNet strategies continue to be an active participant in both the investment and origination of floating-rate credit collateralized by multifamily properties and investments into investment-grade CRE, CLO, and CMBS bonds trading at outsized yields, which have represented an extraordinary risk-return opportunity. As mentioned, we closed on the Boston workforce portfolio discussed last quarter. which expands our multifamily footprint into an attractive major market. We believe that as the debt market stabilize, values and transaction volumes will improve. And in the meantime, we continue to see more opportunities to deploy capital from sellers who need to recover equity from some assets to support liquidity needs elsewhere. Additionally, we are already seeing potential opportunities for forced sellers that no longer have the ability to service the higher cost of debt, and the credit distress that is coming from higher rates. With $3.6 billion of dry powder and deep and longstanding relationships with lenders and owners, we are well positioned to find attractive opportunities in the near term while the broader market normalizes and regular volumes return. The operating trends in our portfolio properties have moderated but remain healthy. Multifamily and workforce same-store effective rent growth for Q3 increased 4.6% year-over-year. Our apartment communities are benefiting from the effects of a strong labor market on our resident base, though elevated supply pipelines will have near-term impacts in certain submarkets. Fundamentals in our latest single-family rental portfolio are similarly strong, with 9.3% year-over-year rent growth in Q3. Logistics which is a growing component of our AUM, continues to experience historically low vacancy rates. Leasing outperformance continues to drive portfolio returns by exceeding original acquisition underwriting by 24% on a net effective rent basis so far this year. Now, turning to investment performance. Our equity real estate portfolios were down approximately 1.6% as higher current income was offset by slightly more conservative terminal values and cap rates. Asset pricing continues to be volatile as the rise in interest rates is impacting near-term valuations. We have the ability to hold assets through the market volatility and have managed leverage in our funds to make sure that we have sufficient liquidity to operate through the impacts of this rate regime. In our credit strategies, the increase in base rates has supported a strong and growing distribution yield. We are well positioned to manage through a more challenging market environment with a stable core business of long-duration recurring fund management fees. Looking back to our IPO two years ago, we've grown fearing AUM by over 102%, which represents a 37% compounded annual growth rate. This strong growth in long-tenured AUM provides stable profitability to our business during periods such as now when market disruptions impact the overall commercial real estate transaction volumes and values. Furthermore, we've diversified our business model to having 43% of fee-earning AUM in credit and secondaries. This diversification adds to the stability of our company, creating opportunity for steadier deployment and fundraising over time. Looking ahead, the future earnings power of Bridge will benefit significantly as real estate transaction markets inevitably recover, enabling a more normalized level of deployment. With the business on solid footing, underpinned by stable and recurring management fee revenue, a more diversified platform, and potential upside drivers to transaction revenue. We look forward to a strong future at Bridge. I will now hand the call over to Katie to discuss our financial results.

Thank you, Jonathan. Amidst a challenging external operating environment, third quarter earnings improved from the second quarter aided by stronger transaction revenue and realization. Recurring fund management fees increased to $61.5 million. up 1% from last quarter and 20% year over year. Our recurring fund management fees and the growth we've achieved have continued to provide stability to our business. The yearning AUM increased 31% year over year to 21.8 billion and was slightly down from the second quarter primarily due to a 570 million impact from Workforce Fund 2 converting its management fee base from committed capital to deployed capital, as we mentioned on our last earnings call. Future deployment in this fund and capital raises and deployment in other funds will continue to push the trajectory of this number upward. Over 97% of our fee earning AUMs is in long-term, closed-end funds that have no redemption features and a weighted average duration of seven years, adding to the foundational stability of our business. Fee-related earnings to the operating company were $36 million in the quarter, up 3% from Q2, mostly driven by higher transaction revenue, partially offset by higher compensation expenses, and the impacts from the FRE attributable to non-controlling interest. The year-over-year FRE comparison was impacted by lower catch-up fees and transaction revenue, along with higher comp expense. Given the recent slowdown in general real estate activity, as Jonathan discussed, we expect a more muted level of transaction and realization revenue in the near term until capital markets improve. On a modeling note, there are typically higher placement agent fees in the fourth quarter due to the timing when the capital was raised. We expect this amount to be approximately 1.5 million higher versus Q3. Fee-related expenses were 44.4 million, an increase of 2.5 million compared to last quarter, with fee-related revenues outpacing this amount. This resulted in margin expansion versus last quarter. We continue to maintain cost discipline with lower activity levels. While we remain confident in the resilience of our business, We also recognize the headwinds that exist in the current backdrop and have taken strategic measures across many business units to drive efficiency and effectiveness in our organization. This has included reallocating resources to support key priorities. We have also offshored certain tasks and centralized property accounting teams as we continue to carefully manage expenses and seek to be good stewards of capital. This is all being balanced with rewarding good performance and a focus on retaining key talent within the organization. Distributable earnings to the operating company for the fourth quarter were $40.8 million, with after-tax DE per share of 22 cents, an increase of 10% from Q2, mostly driven by the increase in realizations during the quarter. This included $14.7 million of performance fees from our successful closing of the approximate $550 million recapitalization of assets from Bridge Multifamily Fund 3 into a continuation vehicle, which was announced last quarter. We are proud of the success this fund has achieved and the attractive returns we have delivered to our investors, while also extending the duration for these assets by five years. Realizations for the quarter also included tax distributions within debt strategies. Unrealized carry for the quarter decreased by $50.9 million to $377.5 million. The decrease was primarily related to the recapitalization and tax distributions just discussed. Since our IPO in 2021, our accrued carry has increased 53%, and we are well positioned for additional increases as markets stabilize and potentially rebound. As we discussed on our prior earnings call, we collapsed the 2021 profits interest program on July 1st. This was the last of our planned legacy profit interest collapses for the foreseeable future. This resulted in an increase to the diluted share count of 2.9 million shares, which is offset by lower non-controlling interest going forward, such that the overall transaction should be accretive for public shareholders. Our long-term capital and asset light balance sheet model position as well to navigate the current environment and we remain confident in BRIDG's 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 zero, star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would 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. And as a reminder, it's star one, not star zero. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Michael Cypress with Morgan Stanley. Please proceed with your question.

Hi, good morning. Thanks for taking the question. I wanted to ask on real estate debt, just given about some of the challenges you alluded to in your prepared remarks, I was hoping we could come back to that just in terms of the challenges facing the banks, new capital rules that are coming down the pipe as well. How do you see this impacting banks' participation in in the CRE marketplace, how do you see the implications to the broader market and CRE playing out as you look out over the next couple of years? And maybe you could talk to some of the opportunity sets that you see for Bridge. What's most compelling for where Bridge might be able to step in? And maybe talk to some of the steps that you might take over the next 12 to 24 months to either expand your capability set or to best capitalize on the opportunity set here on the commercial real estate debt side.

Thanks, Michael. That's a very insightful and complicated question. And you're right in saying that there are implications, both positive implications for our existing debt business, we think very positive implications, as well as some challenges as it relates to providing leverage for real estate assets that we and others might acquire. the banking sector overall, and particularly the regional and local banks, have stepped back meaningfully from lending against real estate. That's been evident in terms of construction lending. It's been evident in terms of acquisition finance, et cetera, not fully out of the market, but the overall attitude waxes and wanes depending on the on the sector depending on the particular bank, et cetera. We think on the positive side, that represents great opportunity for us in our real estate-backed fixed income investment vehicles. We've had a long and successful track record lending mostly against multifamily assets with some increments from there. since our first investment vehicle in 2014, and that opportunity set continues to expand. We're in a great position, we think, at this point, both as an industry and as an individual manager. Base rates are high. Spreads have remained quite wide. Terms, which are always individually determined in terms of negotiations, generally are way more negotiable than they were in the past. And covenants are strong. So, you know, unlike some sectors of private credit, the opportunity in private real estate debt, we think, is very strong as we look forward into 2024 and beyond. We're starting to see more transaction volumes. which provides the fundamentals to make loans. And we think we're really well positioned to create compelling returns in that sector. The flip side of that, as your question suggests, is that it's harder to achieve the desired capital structure when one acquires assets. And that's true to a degree. There are a couple of mitigating factors. The fact that the banking sector broadly defined is less enthusiastic about commercial real estate lending is a fact. There are, in addition to our vehicle, other credit real estate credit vehicles that have stepped into some of that breach. Just by note, we never lend from our debt vehicle to our equity vehicles, but others do. And so there's been some stepping into that breach. The other factor is at current values, leverage is way less important than it was during the extended period of low rates. And leverage is, for the most part, neutral for transactions at this point. So the desire and need for leverage is down from what it was when rates were low. We think that, not to plug bridge too much, but we think that our forward integration into property management is more critical than ever in terms of creating alpha at the asset level. And we're seeing that in the operating metrics that we're able to post in the assets that we own and operate and, you know, focus on the minutia of every day. Sorry for the long answer, but it was an insightful and several-part question.

Great. And then if I could, just a follow-up question on fundraising, specifically for debt strategies. Maybe you could just update us on which debt strategies you have in the market that you're raising right now, which may enter into the market and raise as you look out over the next 12 months across your real estate debt strategies. And then what new strategies and adjacencies might make sense to be able to extend into over time?

We generally have reentered the market every two years or so with our debt strategies vehicles. We had a 2014 vintage, 2016, 2018, 2020. And we are in the very early stages of raising capital for the debt strategies fund five vehicle. we think that we have a time-tested approach to investing with a singular focus on the multifamily sector in the U.S. It's a sector that has strong tailwinds behind it. We have expanded our fixed income focus. We have an AMBS oriented investment strategy. We have a net lease income oriented investment strategy as well. And there is probably additional white space that we can potentially capture going forward from a broader basis. We have grown to where we are today by finding adjacencies and investing into those adjacencies. We have enunciated a number of times and are working hard to get to the point where we can, in fact, enter the markets with an accredited investor-oriented suite of vehicles as well. From our perspective, the true mass affluent retail space is a beneficiary of a couple of things. The fact that there's underpenetration of alts in the accredited investor space. And like some aspects of life, sometimes being the pioneer is not necessarily the best way to structure things. And we can stand on the shoulders of all the learning that's happened from others who have entered the mass affluent space with sophisticated structures and approach and hopefully a highly differentiated suite of products.

Great. Thank you.

Thanks for the two questions.

Thank you. Our next question comes from the line of Finian Osei with Wells Fargo Securities. Please proceed with your question.

Hi, everyone. Good morning and thank you. A question on the transaction revenue improvement this quarter. It sounded like a lot of the deployment was out of the debt and secondary strategies, which we would think entail less of those fees. Correct me if I'm wrong. Was it otherwise something like the Boston multifamily deal being outsized or the continuation vehicle driving that improvement?

Jonathan, do you want to handle that?

Yeah. There was a significant amount of fees that were driven by the Boston portfolio, the sizable portfolio, and we did have some other modest multifamily deployment, as you might have seen. So those were the primary drivers. We continue to have a significant amount of work that was done in refinancing and restructuring debt, and there's some modest fees that come from that sort of transaction work. But you are correct, there's no transaction fees oriented with the secondary business, and the debt business, generally speaking, doesn't have any significant deployment DD fees.

Okay, thank you. a higher level question on the impact of rates against your flagship real estate equity strategies. Are you needing to put more money into your deals to soften those pressures or retain refinancing? And how does the maturity profile look like at this point for the borrowings against your positions in real estate? Yeah.

I'm happy. Go ahead, Jonathan. I'd like to add something, but you should go first.

You want to jump in first, Bob?

No, no. Well, I was sure. What I was going to say is that the, you know, from a broad perspective, I think that Bridge's philosophy related to leverage has been has been quite straightforward. We have in the past used leverage, primarily just senior leverage to create a capital structure for our assets. And we intentionally, over the course of the last decade plus, have not sought to push the edge of the envelope as it relates to using leverage. It works when it does, and it comes back to really hurt you when it doesn't. And we're not in that position. Having said that, of course, the rapid rise in rates has created stresses. Those stresses are more mild in some sectors and more intense in other sectors. And we've done a great deal of work to make sure we recognize where those stresses are and that we address those stresses with preemptive actions to make sure that our assets are safe and secure. And, you know, maybe with that comment about philosophy, Jonathan, you could dive into some of the details.

Well, I mean, I honestly think you covered things pretty well. I mean, we very, very assiduously track our maturities. It's a constant review of our overall portfolio situation to try to keep any loan maturities or any near-term financing issues at bay. We get ahead of it, make sure everything's structured right, and make sure that we have the extensions taken care of. So we feel very confident about the current liquidity in our funds. We continue, again, as I said, to actively... One of the benefits of our vertical integration is that we have an internal debt team that spends 100% of its time with all of the lending relationships, both private and bank and agency relationships, making sure that we have our... credit side covered. So we're in a very strong position with respect to liquidity and have a high degree of confidence. In terms of your question about whether or not we're rebalancing or using incremental equity, I think right now is a time, as Bob alluded to, where the credit is actually non-accretive in many cases. So we've always been focused on trying to drive appropriate balance of how much leverage to have, and now is the time when less leverage is better. So we are de-levering some of our portfolios with the right balance in mind. Thanks so much.

Thanks for the question.

Thank you. Our next question comes from Ken Worthington with JP Morgan. Please proceed with your question.

Hi, good morning and thanks for taking the question. I've got a couple around the conversion to the continuation fund. So maybe first, what was the impact of the conversion on 3Q deployment? Second, can you talk about the economics of the conversion to bridge and how fee and carry rates compare between Fund 3 and then the conversion fund as we look forward? And then the continuation fund raised new capital. What is the appetite that you're seeing from investors to contribute new capital to continuation funds maybe broadly? And do you see more opportunity for more conversion funds in your portfolio if, you know, the environment remains kind of challenging as it is today? So thanks for all.

Jonathan, do you want to talk through the metrics of the Fund 3 continuation vehicle, and then perhaps we can both share some comments on the overall environment for continuation funds?

Actually, I'm going to let Katie give some of the specific numbers that are actually in the financials, so I don't get any of those wrong. I think she has them up. so I'll let her give the answer so I don't give you round numbers. But before I do, I will say that I think you understand the logic. That fund was not only at the end but beyond the end. It was in its first extension period. And we had a development asset and a handful, I think it was three to be exact, assets that were in Fund 3 that we felt were not in their optimal position to realize We all know that the market conditions are not super attractive to exit assets, but the assets that have had the best success in achieving a realization have been the assets that have been, you know, in extremely, you know, strong positions, which these were not. So rather than asking the Fund 3 investors to continue with longer extensions and putting more capital into these assets, we created the option for them of staying in and continuing or taking the capital that they had. And I would point out that people received basically a two times multiple and approximately a 20 IRR, so it was a very successful vehicle. And about 90% of the people opted to take the capital and redeploy it into hopefully other bridge funds. into other things. So, Katie, you can give the exact metrics, perhaps.

So, for capital raising included in our Q3 total, $200 million was related to the continuation vehicle, and $173 million was related to the recap or deployment.

Right. Okay, so both those numbers were in deployment. So, $200 million in capital raise and $173 million in deployment.

Okay, thank you.

And to the point about appetite for continuation funds and the use of the continuation fund structure as a path to monetization, we approach all of our funds with a kind of philosophy that it's our fiduciary duty to achieve the best results for investors. We felt at the time that we completed the continuation fund for multifamily fund three, that it was a tougher market in which to sell assets. We didn't want to be misinterpreted as a motivated seller who had to sell assets. We felt in assessing all the alternatives that the continuation vehicle, as Jonathan said, provided both optionality for the investors, a very positive result if they chose to monetize and a really attractive outlook if they chose to roll and continue. So it seemed to tick all the boxes. Are continuation funds the best tool in all environments? Probably not, but are they a useful tool to have in the toolbox as we look to create optimal value for investors? They're a good tool to have.

Okay. And then lastly, the economics is, are the economics meaningfully different between the continuation fund and multifam three?

I think in part it depends on how you look at it. There's a five-year extended term. So the fact that we're continuing to manage the assets for five years is a positive. The economics are not exactly equivalent to fund economics. They're, for the most part, lower than fund economics, but not inconsistent with the economics that one would get from a large institutional investor, which is really the characterization of the capital that came in to fund the continuation vehicle.

Thank you for bearing with me on all those questions. I appreciate it.

It's important from a modeling perspective. We know that.

Thank you. There are no further questions at this time. I'd like to turn the floor back over to Robert for closing comments.

Great. Thank you, operator, and thank you all for your time. and attention this morning. We leave the third quarter and enter the fourth quarter with a great deal of anticipation. We think that unlike some markets around the world, the real estate markets, particularly in the U.S., have adjusted to a higher interest rate environment. As we said in our prepared remarks, we're beginning to see meaningful green shoots that are happening sprouting up both on the transaction side as well as on the capital raising side. We think that Bridge is well positioned to navigate through a continuing market volatility and hopefully be able to capture some of those opportunities as they manifest. And we appreciate all your support and your focus. Thank you.

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