Bridge Investment Group Holdings Inc

NYSE:BRDG

Earnings Call Analysis

Bridge Investment Group Reports Resilient Q2 Performance Despite Market Challenges

Bridge Investment Group saw a 6% rise in fee-related earnings and a 10% increase in distributable earnings in Q2 2024. The firm's fee-earning AUM grew to $21.5 billion from $13.4 billion since late 2021. They reported GAAP net income of $27.5 million and declared a dividend of $0.13 per share. Despite the real estate market downturn, strategic asset acquisitions and efficient property management helped maintain performance. The firm expects modest revenue growth from newly recognized fee-related performance revenue and is optimistic about future market conditions due to declining interest rates and favorable macroeconomic factors【4:0†source】【4:1†source】.

Strong Earnings Growth Amid Market Challenges

In the second quarter of 2024, Bridge Investment Group reported a GAAP net income of approximately $27.5 million, equating to a diluted loss of $0.11 per Class A share. However, they saw a positive trend in distributable earnings, which grew by 12% to $35.5 million or $0.19 per share. This growth is notable as it comes amid a challenging real estate market, primarily due to rising interest rates affecting borrowing costs. Despite these headwinds, fee-related earnings increased 6% compared to the previous quarter, highlighting Bridge's resilience and ability to adapt.

Recapitalizing on Prevailing Market Conditions

Bridge showcased a robust performance in this quarter by increasing recurring fund management fees at a significant compound annual growth rate (CAGR) of 26%. This reflected an increase from $34 million in Q4 2021 to $60.4 million in Q2 2024. Fee-earning assets under management (AUM) also grew, achieving a 21% CAGR from $13.4 billion to $21.5 billion during the same period. The firm's strategic focus on selecting sectors for investment, especially in resilient spaces like workforce housing and logistics, is promising as these sectors are poised for growth.

Positive Signs of Market Recovery

Lead executives from Bridge indicated that the real estate market is beginning to show signs of recovery, with six consecutive months of stabilization or rising values noted in the Green Street's Commercial Property Index. The company is optimistic about a rebound driven by improving transaction volumes and a substantial wall of near-term real estate-related debt coming due, which is expected to generate attractive buying opportunities in the market.

Capital Raising Initiatives Strengthened

Bridge's capital raising efforts were notably active, drawing $700 million in total since March 31. This includes $305 million raised during the second quarter and an additional $400 million after the quarter-end. The demand was particularly strong for their flagship strategies, including Workforce & Affordable Housing and Debt strategies. Investors have responded positively, recognizing the favorable market positions available due to the significant pricing resets in these sectors.

Strategic Positioning for Future Growth

The company anticipated further fee-related performance revenue beginning in Q3 2024, projecting approximately $5 million gross ($1.5 million net) due to first-time crystallization of carried interest from their open-end net lease strategy. This move aligns with Bridge's philosophy of focusing keenly on sectors that display resilience and potential for value growth, particularly logistics and middle-income housing.

Operational Excellence Drives Results

Bridge has reported that their operational metrics for key real estate sectors remain healthy. In multifamily and workforce housing portfolios, they exceeded the NOI (Net Operating Income) projections by an impressive 8.4% and 20.5%, respectively. Additionally, their single-family rental portfolio maintained a robust 96% occupancy rate coupled with significant rent growth far exceeding that of public peers.

Market Dynamics Creating Opportunities

With the backdrop of cooling construction and increasing labor costs (over 18% in recent years), new construction starts are declining significantly (e.g., multifamily starts falling by 47% from peak levels). These supply-demand dynamics are reinforcing positive long-term asset value expectations in the real estate sector, presenting Bridge with considerable opportunities for strategic acquisitions at favorable valuations.

Navigating Challenges with Caution

Bridge reiterated its strategy of being selective in its acquisitions, particularly as it anticipates an uptick in market activity. The executives indicated a cautious optimism about future investment cycles, acknowledging that while transaction volumes have not returned to pre-pandemic levels, conditions are gradually improving and are ripe for potential recovery.

Earnings Call Transcript 2024-Q2

[Operator]

Greetings, and welcome to the Bridge Investment Group Second Quarter 2024 Earnings Call and Webcast. [Operator Instructions]



As a reminder, this conference is being recorded.



I would now like to turn the conference over to your host, Bonni Rosen, Head of Shareholder Relations for Bridge Investment Group. Thank you. You may begin.

[Bonni Rosen, executive]

Good morning, everyone. Welcome to the Bridge Investment Group conference call to review our second quarter 2024 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 second quarter earnings call event link. They are also available live during the webcast.



We reported GAAP net income to the company of approximately $27.5 million for the second quarter of 2024. On a diluted basis, net loss attributable to Bridge per share of Class A common stock was $0.11, mostly due to changes in noncash items.



Distributable earnings of the operating company were $35.5 million, or $0.19 per share after tax, and our board of directors declared a dividend of $0.13 per share, which will be paid on September 13 to shareholders of record as of August 30.



It is now my pleasure to turn the call over to Bob.

[Robert Randolph Morse, executive]

Thank you, Bonni, and good morning to all.



Bridge reported improved financial results for the second quarter of 2024, with fee-related earnings to the operating company increasing 6% from last quarter and distributable earnings increasing 10%.



Despite the challenges posed by malaise in the real estate markets, in large part due to the rapid rise in interest rates and borrowing costs over the past 2.5 years, and also by shifting use cases, both positive and negative, we have successfully navigated through this period. To do so, we focused on selective asset acquisitions of compelling value, industry-leading asset performance with our forward integrated property management capabilities and carefully selecting the sectors in which to invest.



Through this period, Bridge delivered resilient results. Since the peak of the real estate markets in the fourth quarter of 2021, we have increased recurring fund management fees at a 26% compound annual growth rate, from $34 million in 4Q 2021 to $60.4 million in 2Q 2024. This growth trajectory underscores our ability to navigate and capitalize on market dynamics.



Fee-earning AUM has also shown robust growth, increasing at a 21% compound annual growth rate, from $13.4 billion in the fourth quarter of 2021 to $21.5 billion in the second quarter of 2024. This growth has been fueled by successful fundraising efforts, particularly in our flagship real estate strategies, and by the strategic acquisition of Newbury Partners, our Bridge secondaries business.



We are seeing increasing signs of moderating inflation and further evidence that macro conditions are conducive to Fed actions to reduce interest rates. Rates have already declined meaningfully from higher levels earlier in 2024, and market expectations are that the Fed will implement at least 2 rate cuts before the end of the year. If this occurs, and especially in conjunction with some of the real estate-specific factors that Jonathan will detail, it is expected to benefit the real estate sector and the broader private assets ecosystem. Already in the past 60 days, yields have declined approximately 93 basis points, or 19%, in the 2-year Treasury and 60 basis points, or 14%, in the 10-year Treasury. Lower borrowing costs and a more stable inflation outlook enhance the attractiveness of real estate investments and provide a conducive environment for continued growth.



I mentioned earlier that shifting use cases were driving opportunities in selected sectors, and Bridge is well positioned. Macro dynamics around residential rental, logistics and credit should provide tailwinds for investment in those sectors. Our focus on middle-income and workforce housing is especially attractive at times of slowing economic activity. And in combination with higher mortgage rates, the target renter population is larger than ever.



Additionally, our focus on the value-add spectrum of our specialized verticals further amplifies opportunities in the current environment. Our extensive and successful investment history in these sectors reinforces our competitive position.



Simultaneously, our newer initiatives in solar renewable energy and penetrating the accredited investor retail channel are starting to bear fruit.



Throughout market cycles, our forward integration and sector-specific expertise remain pivotal differentiators. Our sustained operational focus continues to yield results across our real estate portfolios, particularly evident in recent times as the impact of leverage has diminished.



Further reinforcing our vertically integrated approach to our residential rental platform, during the quarter we proudly welcomed Alison Brown as President of Bridge Property Management and Deputy CIO for our Bridge Workforce & Affordable strategies. Alison brings over 25 years of real estate experience and a proven track record of building and supporting successful teams. She joins us from LivCor, a Blackstone portfolio company, where she served as SVP of Operations. Alison's leadership and knowledge from overseeing a broad array of property management partners will contribute greatly to the continued improvement of our already best-in-class in-house operating capabilities.



Turning to capital raising. Throughout the second quarter, we continued to foster robust dialogue with investors, sensing an enthusiasm for what appears to be a promising cyclically attractive entry point in the real estate cycle. While sentiment continues to shift more favorably towards real estate, we acknowledge that investors remain cautious in their approach and that the lack of realizations is influencing their broader cash flow allocations.



Since the start of this year, our Client Solutions Group has conducted over 670 discussions and meetings with institutional investors, complemented by over 1,200 engagements with retail investors. Our teams have traveled to key global markets, including Europe, the Middle East, Japan, North and South Asia, Canada and across the United States.



We raised $305 million of capital during the second quarter and another $400 million subsequent to quarter-end, for an aggregate of $700 million since March 31.



Inflows were primarily driven by 2 of our flagship strategies, Workforce & Affordable Housing and Debt strategies, which have recently reentered the markets. Notably, the quarter included the first close for the next vintage of our Workforce & Affordable Housing strategy, which will have a rolling first close in 2 parts to accommodate investor timing. Thus far, the response from both existing and new investors has been encouraging, with many recognizing the attractiveness of the opportunity based on the significant pricing reset.



In addition, we had the final closing for our latest opportunity zone strategy, bringing Fund VI to approximately $240 million. Despite certain tax provisions sunsetting, those that remain still make a compelling case for continued demand for this strategy.



We also continued to make progress with our accredited investor strategy launched within our net lease industrial income vertical to capitalize on the growing retail investor segment. As discussed last quarter, we were approved with several major custodians, including Fidelity, Schwab and Pershing as well as iCapital. We've also added our first independent broker-dealer partner and are in dialogue with many other relationships which we hope to expand over time.



Capital raising for our secondaries platform, Newbury Partners, has been slower than anticipated, as investors face the same liquidity challenges that drive the need for secondaries solutions. However, the expected re-ups from predecessor investors, coupled with new interest originated by the Bridge Client Solutions Group, is generating momentum, and we expect to raise capital well into 2025 for this vintage as we build on this traction.



Looking ahead, we seem poised at the beginning of a new real estate investment cycle that presents compelling opportunities for improving fund performance, stronger deployment and a pickup in fundraising. This favorable market outlook, coupled with our proven track record and strong investor relationships, positions us well to achieve success in the years ahead.



With that, I will turn the call over to Jonathan.

[Jonathan Slager, executive]

Thank you, Bob, and good morning.



Last quarter, we discussed the bottoming of real estate values and the beginning of price stabilization and equilibrium. This stabilization has built momentum through the second quarter. For the first time in over 2 years, Green Street's Commercial Property Index has reported 6 straight months of either stable or rising values. Conditions are ripe for a rebound based on years of subdued real estate transaction volumes, a large wall of near-term real estate-related debt set to mature and record dry powder.



Overall, commercial real estate transaction volumes remain 30% to 40% below average levels. Within multifamily, for example, since the beginning of 2023, the average commercial real estate transaction volume has been just $30 billion per quarter, in contrast to $44 billion per quarter average from the 3 prepandemic years of 2017 through 2019. This means that there has been an $84 billion deficit in trades, which represents half a year's average volume. The situation is similar in other sectors, which spell opportunity in our view.



In addition to the pent-up transaction volume, we are also facing a loan maturity wall across the spectrum. Again using multifamily as a proxy for the market in general, there is $470 billion of debt maturing in 2024 and 2025, most of which can no longer be refinanced at close to current par. We're beginning to see these assets come to market.



Lastly, there is over $150 billion in dry powder in value-add and opportunistic equity funds in North America, alongside another $40 billion in debt funds, which have been patient for a long time and are poised to deploy into repriced assets. A recent investor survey by CBRE expressed that over 60% of commercial real estate investors anticipate increased activity over the next 12 months, while under 10% are expecting less activity.



We see all this setting up for a meaningful recovery in transaction volume and value resurgence. We're excited for this pivot in market dynamics, but it's important to remember that cyclical recoveries historically have played out over quarters and years, not months.



Despite slower activity in broader real estate markets, our teams continue to find attractive opportunities. During the quarter, we deployed over $364 million of equity capital. Notably, for multifamily, our investments year-to-date were underwritten to unlevered IRRs that are 30% better than prepandemic levels and on a replacement cost basis were at 60%, versus the prepandemic average of 80% and, at peak, nearly 100%.



Likewise, [indiscernible] logistics properties is seizing on opportunities, with prices 40% below their peak, and capitalizing on the widest risk spreads since the early 2000s.



Within secondaries, our team has sourced and closed a number of highly attractive transactions. Our secondaries deal flow has been robust, as the multiyear drought in distributions from primary investments continues to drive private equity investors to seek alternative liquidity solutions. Given their long-standing role in the LP-led secondary market, our Newbury Partners are a trusted counterparty for limited partners seeking secondary liquidity.



With over $3.1 billion of dry powder and active investment pipelines across our verticals, Bridge is well positioned to capitalize on the reviving market.



On the capital markets side, conditions have continued to ease, as evidenced by increasing CMBS issuance and a meaningful tightening of credit spreads. Specifically, CMBS issuance volume is already 11% higher year-to-date as compared to the full year of 2023, and spreads on BBB- loans have tightened 285 basis points.



We've capitalized on this in our SFR business, Bridge Homes, which just completed a securitized debt financing for Bridge SFR Fund IV. This is our second securitization since acquiring Bridge Homes, with the deal pricing 200 basis points lower than the first securitization in November '22, despite underlying Treasury rates being just 2 basis points lower. We had broad participation, with 17 investors, including 11 new investors from the last issuance, and were able to increase the loan to value to 68%, from 62.5%.



This improved execution was a combination of better market conditions and a recognition of Bridge SFR's strong operational outperformance. Keep in mind, that securitization happened before the recent downturn in rates.



Despite improving competitive dynamics in the debt market, construction costs continue to outpace inflation, leaving the U.S. market with a significant deficit in new construction starts for multifamily and logistics, 2 of our core sectors. Over the past 3 years, construction costs have surged by more than 18%, with materials and labor in double-digit increases. As a result, new construction starts are approaching trough levels not seen in a decade, with multifamily starts declining by 47% from peak levels and logistics starts falling by 70%.



This pivotal shift in supply/demand dynamics underpins our positive expectation for long-term asset values in these property sectors. The juxtaposition of these rising costs with lower asset values sets up a great buying opportunity.



The operating trends in most of our property portfolios remain healthy, as Bridge's operational focus continues to drive results. In our most recent Multifamily and Workforce vintages, we have exceeded our NOI projections by 8.4% life-to-date. In our first Logistics Value vintage, we have exceeded underwritten net effective rents by 20.5% on average since inception. In our single-family rental portfolio, Bridge maintains a 96% occupancy and first-half performance of just over 6% blended rent growth and approximately 9% NOI growth, which are solidly ahead of the public peers who have reported an NOI growth in the mid-4% range.



Now turning to investment performance. Our equity real estate portfolio valuations were roughly flat in Q2, in line with the broader market trends of stabilization. While dispositions have been more limited, the results have demonstrated continued demand for our product, with a weighted-average IRR of 23.1% and a 2.13 multiple on year-to-date multifamily sales.



With the potential for a constructive pivot in monetary policy and anticipated improvement in transaction market liquidity and long-term favorable supply dynamics in our core property sectors, we're excited about our opportunity set going forward. These improvements won't happen overnight, but the momentum is building and our platform is poised to capitalize on the value recovery and ultimate growth following this dramatic market correction.



I'll now turn the call over to Katie.

[Katherine Elsnab, executive]

Thank you, Jonathan.



Bridge's business stability continues to be bolstered by our recurring fund management fees, which increased 1% from last quarter. Fee-related earnings for the operating company were $35.9 million, increasing 6% from last quarter. This is mostly attributable to higher other asset management and property income of $2.8 million, which included a onetime benefit of $1.9 million. Fee-related expenses decreased by approximately $700,000, mostly due to seasonality.



On the modeling note, we expect to recognize fee-related performance revenue in Q3 2024 related to the crystalization of carried interest for our open-end net lease strategy for the first time. This is expected to be approximately $5 million on a gross basis and $1.5 million net. You will see this in a new line item within our non-GAAP financial measures, and we have updated our FRE definition consistent with the industry convention. The related compensation will be integrated into the cash-based employee compensation line within fee-related expenses.



Should this strategy continue to outperform its performance hurdle, we would expect further positive contribution to FRE in the future. However, we do not anticipate revenue to be material in the near term following Q3.



This performance is a testament to Bridge's success setting up a new platform and the net lease industrial team's ability to execute on attractive investment opportunities in a dynamic market environment.



Fee-earning AUM decreased from $22 billion to $21.5 billion, mostly driven by management fees for Newbury Fund III moving from being based upon committed capital to being based upon NAV, with the fund hitting its 11th year anniversary. Despite this slight decrease, there have been no notable redemptions, and 97% of our capital remains invested in closed-end funds with a weighted-average duration of 6.6 years, ensuring a stable foundation.



Further, the capital raised during Q2 and post quarter ended, combined with this deployment, is anticipated to drive positive momentum in the upcoming quarters. Institutional investors continue to seek specialized strategies and favor closed-end funds for their stability and strategic focus. Conversely, retail investors generally prefer open-ended funds for their enhanced flexibility and liquidity. Aligning our product offerings with these preferences allows us to address the needs of both institutional and retail investors, supporting the ongoing resilience and growth of our business.



As Jonathan noted, real estate deal volumes in the market appear to be improving. However, a rebound in transaction-related revenue could take time to materialize. Fee-related margins will continue to be impacted should we have lower transaction fees and catch-up fees from capital closing into closed-end funds. As transaction and capital-raising volumes normalize, we expect to see a movement of our margins towards our longer-term average of approximately 50%.



Distributable earnings for the operating company for the quarter were $35.5 million, with after-tax DE per share of $0.19, increasing 12% from last quarter. The increase was mostly due to the items discussed within fee-related earnings, along with lower net interest expense and realized loss, partially offset by lower net realized performance fees.



Similar to last quarter, performance fee realizations primarily consisted of tax distributions within Debt strategies. As a reminder, the noncontrolling interest for this vertical is 60%, leading to a ratio of 24% of the gross realized performance fees that flow through to the operating company.



Net accrued performance revenue on the balance sheet stands at $338.9 million, which increased $19 million compared to last quarter. Realization revenue in the near term is expected to remain subdued. However, we are well positioned for an eventual acceleration in the context of improving liquidity in the real estate transaction markets.



With that, I would now like to open the call for questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Ken Worthington, with JPMorgan.

[Kenneth Worthington, analyst]

I wanted to dig more into the outlook for deployment as we think about the second half of this year. As you mentioned in your prepared remarks, the market has witnessed a pretty meaningful decline in interest rates. You have a good amount of dry powder, as you also called out. Do you see market conditions as being attractive to deploy here? Or does the level of cautiousness that you've expressed in prior quarters really persist to the current day? And do you think sellers are willing to sell, given outlook of potentially more favorable interest rates as we look forward? So ultimately, what's the outlook for deployment as we look forward?

[Robert Randolph Morse, executive]

Jonathan, do you want to handle that question?

[Jonathan Slager, executive]

Sure. Ken, I would just say that at this point the pipeline is picking up. And I think we're seeing that across multiple sectors, both in the industrials side and on the multifamily side. It is certainly not the pipeline that we had prepandemic levels, and it's certainly not the pipeline that we had during the ebullience of the market.



But I think you heard in my remarks that there's a lot of factors and a lot of reasons to think that that pipeline will start to resurge relatively soon. And I think that we're already -- and again, the green shoots we keep talking about, we're seeing it, I think, moderately pick up now. But I think the anticipation -- we reach out to all of our peers and we reach out to all of our broker friends and even our lender relationships, and I think people are starting to make trades, accept that kind of we're in this "higher for longer," recognize that there'll be some rate drops, but they're not -- I don't think anyone is anticipating the rates to drop at the pace that they rose, which would be what might really influence pricing really quickly.



So I think what we'd just expect is that there will be an improvement, hopefully, a relatively quick improvement, but an improvement in both transaction volumes and not just the stability, which we've started to see the stability in pricing, but actually an increase in pricing related to more competitive drivers and more attractive debt rates.

[Robert Randolph Morse, executive]

Ken, I would just add to that question that Bridge prides itself always on being selective and careful in terms of acquisitions. And we were that way in the last up cycle. We expect to be that way in this hopefully developing up cycle as well.



The recent transactions, Jonathan referenced a couple of them, but there are many, many across our different investment vehicles. The recent transactions that we've done we think are -- have been executed at outstanding value relative to what the fundamentals in the real estate market are.



So that selectivity coupled with what is expected to be an uptick in transaction volume should result in good performance. Good performance creates momentum on the capital raising side, creates happy LPs and hopefully happy shareholders as well.

[Kenneth Worthington, analyst]

Great. And then there's been a number of articles about multifamily housing in the Sun Belt discussing oversupply and decelerating investment momentum. So can you talk about your portfolio in multifamily and sort of what you're seeing there?

[Robert Randolph Morse, executive]

Jonathan?

[Jonathan Slager, executive]

In the Sun Belt, we're actually continuing to see resilience operationally. We're continuing to have rent growth. And across the markets, we have, I think, weathered the major impact on the supply. The supply is still coming. It's peaking out this year, I would say. And into next year we see supply and demand being balanced. The absorption in the demand has actually been really strong, and that's allowed us to continue to see modest, certainly compared to peak but compared to even more regular way, rent growth levels. But we are seeing rent growth levels, and we're seeing relative stability on occupancy.

[Robert Randolph Morse, executive]

Thanks, Ken. Thanks for the questions and interest.

[Operator]

Our next question comes from the line of Bill Katz, with TD Cowen.

[William Katz, analyst]

Maybe just, Bob and Jon, you both sort of spoke about sort of the increasing momentum of the franchise. And in your press release, you sort of called out a number of different vehicles that you're going to be in the market for. Looking ahead, I was just sort of wondering if you could help us frame maybe the opportunity set in terms of the quantum of dollars here.



And I was wondering if you could also zero in a little bit on Newbury. It seems a little counter to what we're hearing in the industry in terms of demand for the secondaries. So just trying to understand when you might start to get a little more traction with that platform.



So overall gross sales outlook for maybe second half of the year, early part of next year. A little more specific comment on Newbury's outlook.

[Robert Randolph Morse, executive]

Thanks, Bill. So I think we spoke a bit about the first close of our most recent vintage of Workforce & Affordable Housing. We've seen a meaningful evolution of the multifamily sector, in general, and workforce, in particular. Workforce is being viewed as an independent asset class. When we launched our first fund, it was oriented really towards impact investors and investors that had Community Reinvestment Act capital to deploy. I think that that investor universe has broadened out dramatically since that point. And the recession resilience of workforce, the undersupply of workforce, the enormous market of potential tenants and residents who are looking for quality housing and community services, et cetera, which we and some others offer, but we offer, we think, in an extraordinarily positive fashion, is attractive in and of itself. So we've had a first closing, and we think that there's a lot of opportunity there.



Same thing really as it relates to our flagship Debt franchise. We've been successful in raising capital as we've started to prosecute the fifth vehicle in that fund series. And the performance of earlier vintages I think is driving a significant amount of interest there. The focus on multifamily as collateral, the lack of office exposure certainly relative to all of our peers and the performance of predecessor vehicles has and continues to drive interest.



We mentioned -- Jonathan mentioned logistics as an area where we're finding some terrific investments. And the U.S. is short infrastructure, if you will, and value-add logistics is one of the nodes of infrastructure that we think has a great deal of value and interest. And so we're capitalizing on that.



As it relates to Newbury, we tried to be as precise as possible in our prepared comments. Newbury is an established and practiced participant. We've begun to build a really compelling portfolio of investments in Newbury. We have typically seen -- Newbury has typically seen a significant amount of re-ups from satisfied earlier investors. That's beginning to happen at this point.



And one of the strategic objectives and advantages of that transaction between stand-alone Newbury and legacy Bridge is the breadth of the potential LP market that is contributed by Bridge to the overall Newbury efforts. And between what we're doing in the U.S., in Asia, in the Middle East, Canada and elsewhere, we're starting to see a meaningful amount of interest in Newbury from legacy Bridge investors as well.



So we've had a first closing of Newbury investment vehicle Fund VI, and we see momentum that's continuing to build in that respect and hope and expect that we will achieve results that are commensurate with what our objectives are for Newbury.

[William Katz, analyst]

Okay. And then just a follow-up. You mentioned scale of traction on the retail accreditation, retail democratization in credit market. I was wondering if you could maybe expand on your comments just in terms of just having a little bit of a choppy experience with the office platform just where you are in terms of footings, AUM, what kind of products you're in the market for and then just maybe expand a little bit on the distribution opportunity you articulated in your prepared comments.

[Robert Randolph Morse, executive]

Thanks again for the question. As it relates to accredited investor investment vehicles, we have one product in the market at this point.



In order to be competitive in retail, we think you need 2 things. You need a compelling product that performs well, provides the financial metrics that the accredited investor is looking for, which is yield, safety, capital appreciation. We think that our triple net lease product provides all those and then some in terms of both absolute and relative financial metrics.



And you need distribution. And historically, Bridge's distribution has had a significant wirehouse component to it. That wirehouse component remains. We've broadened our distribution team pretty significantly to include distribution to RIAs, to independent broker-dealers, et cetera. And that breadth, I think, is best encompassed by the statistic that I shared. Since the beginning of the year, we've had about 1,200 independent dialogues with different retail, so-called retail investor entities. Those are typically aggregated to be wirehouses, registered investment advisors, independent broker-dealers, family offices, et cetera.



And in many respects, to know us is to love us, hopefully, that when an informed investor compares the various alternatives for retail real estate exposure in the market, that what we call our [ BIG I ] product stands tall.



Thanks for the question.

[Operator]

[Operator Instructions] Our next question comes from the line of Adam Beatty, with UBS.

[Adam Beatty, analyst]

First, maybe a detailed follow-up on the triple net product and the incentive fees that Katie mentioned. She was pretty clear that in the near term it's going to be somewhat episodic. But just wondering over the longer term as things normalize what might be the cadence of incentive fee crystallization and what the lookback period is there, whether it's kind of current performance or a certain period of time.

[Robert Randolph Morse, executive]

Katie, do you want to [indiscernible] that?

[Katherine Elsnab, executive]

Happy to take this one. Adam, the crystallization that occurred today was related to our open-ended net lease product. When the fund was originally launched 3 years ago, effectively, the first 18 months were treated like a closed-end fund. So all capital that came in, in the first 18 months effectively went back to the date the fund was launched.



It's a 3-year crystallization period. And so that carries a crystallized in Q3 effectively goes back to that period. Going forward, we'll have basically 12 months with limited carry, and then it will crystallize on a regular basis.



The other REIT product that we will be launching will have a 12-month crystallization period.

[Adam Beatty, analyst]

Excellent. Very helpful. And then kind of a bigger picture, just around valuation. It looks as though we're kind of heading into perhaps a more benign period. Certainly, rate cuts would help. On the other hand, you and peers have both mentioned or alluded to kind of motivated sellers. Do you have any concerns based on historical experience that as those transactions start to pick up, the realized valuation might somehow put pressure on marks either across the industry or other firms? I'm sure Bridge has its own independent process, but just more broadly around the industry.

[Jonathan Slager, executive]

Do you want me to get that, Bob?

[Robert Randolph Morse, executive]

Yes, please.

[Jonathan Slager, executive]

Sure. I would say it this way, we do not expect to see broad-based distress. So said another way, while we do expect to start to see a lot of those transactions clear, where the borrower either has to -- desires to sell because they can't -- they still have equity, but they can't refinance at par. So they have to go out and either bring in capital to keep the asset and refinance the asset or they have to sell it. In that case, those players are going to be market players. They're going to want to try to get the best value they can. So it will be a competitive process.



And I think the dynamic there that we've been seeing is both more attractive rates and more aggressive competitive lending market as well as pent-up demand from equity that's been sitting on the sideline doing nothing for a long time in funds that are ticking away, right? So that competitive dynamic is going to emerge as those come to market.



The assets that go back to lenders, where really ultimately the lenders are in control because their value is below 1.0 of the loan value, those lenders are not -- they're well-heeled; meaning, they're not in a position that they have to kind of push things to market and realize whatever they can realize. They're not distressed sellers. They are, though, however, not people who want to own assets long term, and they're not in a position to own and operate assets long term. So the expectation is those will flow through the market in a relatively orderly way. There will be attractive pricing opportunities there and structuring opportunities there. But it doesn't feel like a case where that's going to drag down values in a material way.



So hopefully, that helps you understand how we see the dynamic.

[Operator]

Thank you. Ladies and gentlemen, that concludes our question-and-answer session and, thus, concludes our call today. We thank you for your interest and participation. You may now disconnect your lines.

[Robert Randolph Morse, executive]

Thank you, all.