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Operator: Greetings, and welcome to the Bridge Investment Group Fourth Quarter 2022 Earnings and Acquisition of Newbury Partners Conference Call. As a reminder, this conference is being recorded. I would now like to turn the call over to Bonni Rosen, Head of Shareholder Relations. Thank you. You may begin.

Bonni Rosen: Good morning, everyone. Welcome to the Bridge Investment Group Year-end and Fourth Quarter Conference Call. We will also discuss our planned acquisition of Newbury Partners. Our prepared remarks include comments from our Executive Chairman, Robert Morse; Chief Executive Officer, Jonathan Slager, Chief Financial Officer, Katie Elsnab; as well as Chris Jaroch partner of Newbury Partners. We will hold a Q&A session following the prepared remarks, where we will be joined by Chris Jaroch and Richard Lichter, Founder and Managing Partner of Newbury Partners. This morning, we posted a press release and investor presentation on our website with details on the Newbury transaction. I’d like to remind you that today’s call may include forward-looking statements, which are uncertain and 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 fourth quarter earnings call of event link. They are also available live during the webcast. I will present our GAAP metrics and Katie will present our non-GAAP data. We reported GAAP net income to the operating company for the fourth quarter of $18.2 million and $272.4 million for the full year 2022.

GAAP earnings per share was $0.92 for the full year 2022 with a GAAP loss per share for the fourth quarter of $0.04. It is now my pleasure to turn the call over to Katie.

Katherine Elsnab: Thanks, Bonni, and good morning, everyone. It’s an exciting day for Bridge. I will review our financial highlights from the 2022 earnings announcement this morning, followed by Bob and Jonathan with macro commentary on our markets and operations. Bob, Jonathan and Chris will then introduce the Newbury Partners and share details on how Bridge and Newbury will work together going forward. From a macro perspective, 2022 was a challenging year. We experienced the highest levels of inflation in decades. As a result, central banks around the world shifted policy from low interest rates and quantitative easing to aggressive rate increases and concurrent monetary tightening. In addition, the world experienced increased geopolitical risks from the expanding conflict between Russia and Ukraine and economic slowdown and now subsequent reopening in China and other developments weighing on global capital markets.

Despite a challenging backdrop, Bridge delivered meaningful positive growth across our key metrics for 2022. FRE to the operating company increased to $158.3 million powered by 37% growth in recurring fund management fees, which more than offset a decline in transaction fees. Operating expenses were up 37% year-over-year as our platform continues to scale. We added to our relatively new logistics, solar and PropTech teams, augmented our ESG and compliance efforts, and at the same time, we’re cautious on employee compensation and other expenses. Notwithstanding investing for growth, which has already started to occur in these new verticals, our fund management fee revenue outpaced this growth by 5%, showcasing our operating leverage and cost discipline.

Distributable earnings to the operating company increased to a record $187.9 million, with after-tax DE per share of $1.10, a 24% increase from 2021. This increase was driven by our continued growth in fee-earning AUM and fee-related earnings. Distributable earnings for the fourth quarter were $35.6 million, with after-tax DE per share of $0.21. We declared a dividend of $0.17 per share, which will be paid to shareholders of record as of March 10. The rapid rise in interest rates led to a repricing in the asset markets in which we participate and a significant decrease in lending activity during the second half of the year. A widening bid-ask spread in property transaction markets made it difficult to value assets and close investments. This has impacted deployment and to a lesser extent, our capital-raising activities.

With respect to deployment, we have been patient as markets corrected in the second half of 2022. As a result, our transaction volumes, along with the entire market were down, and we took a view that our $3.5 billion of dry powder would be deployed at better values in the future. Although transaction fees and realized performance fee revenue may remain muted in the near term due to the short-term market conditions, the underlying fundamentals of our business remain healthy. For example, our Multifamily and Workforce assets, which represent 34% of our fee-earning AUM are 94% occupied and the same-store effective rent growth for 2022 over 2021 averaged above 15%. Fundamentals in our latest single-family rental portfolio are similarly strong, with 7.4% growth in NOI for 2022 and 96% occupancy.

Logistics, which is a growing component of our AUM, continues to experience historically low vacancy rates, particularly in the coastal and gateway infill markets in which we primarily invest. This, in turn, has continued to support double-digit rent growth, which we think will persist into 2023. Now turning to investment performance. Our equity real estate funds, which are mostly value-add strategies, depreciated 4.8% in the quarter and 1.7% for the year as we’ve continued to increase cap rate assumptions in the rising rate environment on unrealized investments. These cap rate increases have been largely offset in many cases by rent growth and we continue to see strength in the underlying value-add sectors in which we invest. In addition, we generally have the ability to hold assets through the market volatility, and we believe our funds are conservatively and appropriately capitalized.

We are focused on the long-term value we provide to our limited partners and are confident that we continue to add value to the assets in our funds. We achieved solid fundraising results in Q4 of $518.1 million, bringing inflows to $4.5 billion for the year in what was a more difficult backdrop for raising capital. During 2022 through January of 2023. We also completed final closings for the latest vintages of our debt strategies, Multifamily and Workforce and Affordable Funds at record levels. We expect Debt Strategies IV will be fully invested in the coming months as we continue to find attractive investment opportunities amidst the turbulence of the credit markets. In the fourth quarter, we bought $633 million of investment-grade CRE, CLO and CMBS bonds with a weighted average spread of SOFR plus 436 basis points unlevered.

These highly risk-mitigated investment-grade bonds were all floating great and are seen here in the capital structure, that exhibited outside deals due to the general illiquidity in the securitization markets during the quarter. We continue to have productive dialogue with our investors related to this strategy. We had momentum in Q4 from several of our strategies with $167 million committed to opportunity on Fund V, $44 million to net lease income and $42 million to AMBS. We ended the year with gross AUM of $43.3 billion and fee-paying AUM of $17.3 billion, an increase of 19% and 30%, respectively, from 2021. With $3.5 billion of dry powder, we are well positioned to fully deploy capital for our funds at we believe is an attractive point in the cycle.

Our value-add platform is built for such market environments. We also feel good about our fund capital base with 98% of our fee-earning AUM in long-term closed-end funds, which have no redemption features and a weighted average duration of 7.7 years. This significantly inflates Bridge from the redemptions currently seen by those who have more exposure to retail open-end vehicles. Approximately 90% of our fee-earning AUM is invested in high-conviction themes, which include residential rental in the U.S. across Multifamily, Workforce and Affordable Housing, Single-Family Rental, Senior Housing and in our private credit strategy where the majority of the collateral is Multifamily related. While the market environment has been volatile in the past few months, we continue to believe that the U.S. real estate alternative offers investors resilient, recession resistant downside protection, durable inflation-protected yields and the potential for meaningful capital appreciation.

With that, let me turn the call over to Bob.

Robert Morse: Thank you, Katie. We are pleased to discuss our strong year-end 2022 and fourth quarter results and the definitive agreement to acquire Newbury Partners, one of the largest and, in our view, highest quality and best performing independent secondaries firms. The transaction is an exciting next step in our strategic plan to grow both organically and inorganically to thoughtfully expand our investment platform in an attractive and growing asset class. Before reviewing the strategic rationale for the Newbury transaction and the macro environment in which we expect to operate in 2023, I wanted to highlight selected achievements in 2022. We achieved record closes in 3 established Bridge verticals with Debt Strategies IV at $2.9 billion, Multifamily V at $2.3 billion with a final closing that occurred in January; and Workforce and Affordable Housing II at $1.7 billion, highlighting the confidence investors place in our best-in-class investment teams.

Both Multifamily V and Workforce and Affordable II are the largest specialized funds of their kind, and positioned to participate in the continued opportunities around housing in the U.S. The predecessor funds for each of these are ranked in the top quartile in performance by Preqin for their sizes and vintages, illustrating the value of specialized focus and forward integration, both of which, in part, define our approach to the real estate markets. We will launch in first quarter 2023, successor vehicles in our established logistics, office and health care verticals as well as our debt strategies vertical since Debt Fund IV is expected to be over 85% deployed. We have assembled outstanding investment teams and launched new strategies in Renewable Energy and PropTech to further expand our scope and have enjoyed early success in those efforts.

And finally, we completed 1 strategic acquisition in the complementary Single-Family for rent sector. We’re starting strong in 2023 with the planned Newbury acquisition, to expand into the attractive and growing secondaries sector with an outstanding management team and an enviable track record of success. 2022 was an unusual year from the perspective of commercial real estate. Counter to the typical pattern where volumes are greater in the second half than the first half of the year, 2022 started with a bang and ended with a whimper. At the beginning of 2022, transaction volumes were high, price expectations from sellers were high and buyers were plentiful. In the first half of 2022, we sold $745 million of assets, contributing to $31.6 million of realized performance fees.

In the second half of 2022, we were very selective on monetizations as well as deployment, yet we remained actively engaged with brokers, sponsors and lenders seeking attractively priced opportunities. We expect to see more of these as 2023 progresses, hopefully culminating with a much more steady and active market by the second half of the year as the capital markets stabilize. As we look ahead, we see green shoots, particularly in the U.S. with a resilient labor market and healthy consumer metrics. We’ve also started to see some evidence of inflation easing with the personal expenditures price index rising just 5% in December, the slowest annual gain since September 2021. We’ve already seen the Fed slow the pace of rate increases from 75 basis points to 25 basis points, and treasury yields come down by almost 100 basis points from their highs.

If these trends continue, this will bring much needed price discovery back to the market, which would increase the velocity of commercial real estate transactions as we progress further in 2023. In commercial real estate, our outlook focuses on sectors with long-term demand drivers and opportunistic plays that may come in the form of broken capital structures or repositioning of assets. We expect to see some attractive near-term opportunities albeit in a slower deployment market, followed by a significant increase in activity later in the year as the capital markets stabilize. Our long-term strategic intentions are to continue to grow organically as we’ve done in our established verticals and combine organic growth with carefully curated acquisitions.

The alternative asset management space is fragmented and consolidating and we believe offers significant opportunities. Over the course of 2022, we evaluated numerous opportunities before focusing on Newbury Partners. We have seen that the weakness in the capital markets in the third and fourth quarters of 2022 accelerated the desire of smaller managers to consolidate, and we believe this trend is just beginning. We selected the secondaries sector as one of the most attractive and believe that the Newbury team, investment philosophy and process fit hand in glove with how Bridge has navigated successfully since founded. We and others see significant opportunity within the high-growth secondaries market. The alternative asset sector has grown rapidly over the past decade with more than $13.3 trillion in assets under management by alternative managers and is expected to grow at double-digit rates for the next 5 years.

As liquidity needs evolve for investors, demand for secondaries solutions has accelerated. The secondaries market has grown dramatically in recent years with $132 billion in volume in 2021, up 120% over 2020 with a healthy $108 billion of volume estimated for 2022, and the market is projected to grow at a 22% compound annual growth rate through 2026 per a Morgan Stanley research report. The current macroeconomic environment along with the gap between public and private market pricing has only increased the need for LPs and sponsors to seek secondaries solutions to rebalance investment allocations, extend fund durations to weather price volatility, gain liquidity or streamline portfolios. In turn, LPs and secondaries funds benefit from outsized current cash yields, instant exposure to PE asset classes with limited to no J curve, high diversification and structural value protection from buying below NAV.

With Newbury, we will diversify our product offering and add significant assets to the Bridge platform. The transaction also represents an opportunity to expand our investment offerings to both Bridge and Newbury investors by developing real estate secondaries funds as we combine Bridge’s real estate underwriting expertise with Newbury’s sterling reputation as a leading secondary market investor. We are excited about this value-enhancing transaction and see a number of opportunities to scale together in today’s secondary market. We look forward to working closely with Newbury’s highly experienced management team, and we are confident that our firm’s shared values, proven track records, complementary areas of expertise will make for a seamless integration.

This positions Bridge to capitalize on the growing secondaries opportunity set and create significant near and long-term value for our investors. I’ll now turn the call over to Jonathan to more fully describe what Newbury does today and to walk through the financial terms of the Newbury transaction.

Jonathan Slager: Thank you, Bob, and good morning. We are delighted to announce the signing of a definitive agreement to acquire substantially all of the business of Newbury Partners and to enter into long-term employment contracts with the senior professionals who have managed the growth and success of Newbury since its founding in 2006. Newbury is the leader in the secondaries market with a focus on acquiring limited partnership interest in established buyout, growth equity and venture capital funds. Consistent with the way Bridge operates in its real estate investment funds, Newbury’s focus has been on small and middle market transactions, where there is less competition and more attractive pricing. Since its founding in 2006, Newbury has raised over $6.2 billion of committed investor capital across 5 dedicated funds.

The firm has executed more than 200 transactions, investing in over 500 underlying interest on behalf of limited partners. Newbury’s experienced management team has decades long track record of strong performance and has returned over $4 billion of cash distributions to investors since inception. Newbury’s investment performance has been strong and steady and has improved over time. Since the global financial crisis, Newbury funds that have started mark-to-market reporting have had gross annualized returns of greater than 20% and net returns of approximately 15% to 21%. Newbury’s best-in-class management team, middle market investment strategy and strong direct sourcing channel align with our strategy of investing in carefully targeted opportunities that allow us to drive better risk-adjusted returns.

Newbury has more than 250 limited partners worldwide, spanning pension funds and endowments, family offices and investment managers, among others. There is little overlap with Newbury’s limited partners and existing Bridge investors with less than 3% overlap of institutional clients invested with both firms. This allows significant cross-selling opportunities. We believe the Newbury acquisition is highly strategic and financially accretive to the Bridge platform. Newbury has approximately $5.2 billion in assets under management, which will bring Bridge to a total AUM of $48.5 billion. More importantly, fee-paying AUM, which represents most closely the true underlying growth of our business, will increase by 25% or $4.3 billion, bringing us to $21.6 billion as of December 31, 2022, based on combined year-end numbers.

For perspective, Bridge’s fee paying AUM at the time of our IPO was $10.3 billion. So post-closing of Newbury, this represents 110% growth in just 6 quarters. During 2022, Newbury generated $43 million of management fees and $28 million of fee-related earnings, with the duration of their fee earning AUM approximately 8 years. As a result, on a combined basis, we estimate our fee-related earnings would have been $192 million for that same time period, enhancing our FRE profile in a powerful way. In addition, Newbury generated strong estimated FRE margins of 65%, which will enhance the FRE margins for the combined business going forward. Overall, on closing, we expect the transaction would have been accretive to 2022 FRE and FRE margins. On an after-tax DE per share basis, we estimate the transaction would have been mid-single-digits accretive.

In addition to being immediately accretive to earnings, we are excited about the growth prospects of Newbury as we launch successor funds and expand our offerings in the secondaries sector. As we discussed in the past, we have long focused our shareholders on recurring fund management fees as a benchmark of our underlying growth and stability. We recognize that transaction fees can be more inconsistent and seasonal and we clearly saw that in 2022. Our annualized recurring fund management fees were $121 million at the time of IPO. And as of the fourth quarter of 2022, we are now at $200 million, representing 65% growth. When combined with Newbury, they are $243 million, which is more than twice our IPO level. We expect to continue to grow as we raise successor Newbury fund this year.

Additionally, Newbury has a loyal investor base with nearly 80% of its Fund V capital coming from repeat investors. With respect to the funding of the transaction, Bridge will provide $320 million in cash for substantially all of the business of Newbury, which includes the acquisition of existing management agreements and in-place workforce. We are not acquiring the carried interest associated with Funds I through V. However, we will earn carried interest on future funds and anticipate 40% of that carry attributable to our ownership in the platform will be allocated to the operating company. Bridge intends to fund this acquisition using existing balance sheet resources, including the $150 million of proceeds from the recent private placement of debt.

The private placement was priced in January and will include 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 purchase agreement is contingent upon us closing the Newbury transaction and funding would occur at that time. We also expanded our revolving credit facility to $225 million with full capacity currently available. We expect the transaction to close in the first half of 2023 subject to customary closing conditions, including investor consents and regulatory approvals. I want to end our prepared remarks by reiterating how excited we are to be partnering with Richard, Chris, Warren, Gerry and the entire Newbury team. Their culture of teamwork excellence and specialization is aligned with our values, and we look forward to working together in the years to come.

This transaction is highly strategic for Bridge and provides another area of dynamic potential growth going forward. It is now my pleasure to turn the call over to Chris Jaroch of Newbury Partners to say a few words.

Christopher Jaroch: Thanks, Jonathan. As you know, we spent a lot of time thinking about the future growth and development of our business, and we are excited about the common vision and cultural fit between Bridge and Newbury. We believe that this partnership will accelerate our growth both within our existing investment strategy as well as into adjacent secondaries opportunities. The team at Newbury is confident that this transaction will position us for shared success, and we very much look forward to working closely with the entire Bridge team to realize the benefits of this complementary combination.

Robert Morse: Thank you, Chris. We are likewise thrilled about this new opportunity we have together. Operator, we will now open up the line for questions. Thank you.

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Operator: Our first question is coming from the line of Michael Cyprys with Morgan Stanley.

Michael Cyprys: Congratulations on the transaction. Maybe just start off on the Newbury transaction. I was hoping you might be able to elaborate a bit more on the opportunities you see to scale the Newbury business. You mentioned cross-selling. How do you think about that? What does that take? Expanding into real estate secondaries I think another area, I think you also alluded to maybe some other products. Just curious how you think about doing that? What are some of the actions that you guys might take this year and into ’24? What does that require in terms of team build? And then I think you also alluded to raising a fund — a successor fund at Newbury. Just any sort of thoughts around the market environment for raising capital today there? And how you think about sizing that? And if that fund might scale just given the strong performance track record.

Robert Morse: Thanks, Michael. This is Bob speaking. I might start off a little bit and then ask Chris to elaborate as well. We have tried to be very both strategic and tactical as we look for opportunities to expand, and we feel that the secondaries — broadly speaking, the secondaries business is one that offers significant growth potential going forward. And our interpretation of Newbury’s history and track record is such that it sets the foundation for strong growth going forward. The Newbury team has created an enviable track record. They have a philosophy, a middle-market philosophy, if you will, that parallels so closely, how Bridge has created its track record as well. So we think that there’s a significant fit between our 2 firms in how to do business.

Newbury has just about completed the deployment of capital in their Fund V. So we collectively anticipate the successful launch of a Fund VI to continue precisely what they’ve been doing with their very strong list of investors. We, as Jonathan alluded to, would expect that we can do some significant cross-sell between our investor base and their investor base, both for raising capital for the secondaries business as well as raising capital for our fundamental real estate activities. But the secondaries business, like the real estate business has a lot of different aspects to it, focusing on PE, venture capital and buyout opportunities has been the main focus of Newbury. Looking backwards, we think that there’s meaningful opportunity in the more nascent, but growing real estate secondaries business.

It’s our view that the power of Bridge’s real estate expertise and Newbury’s secondaries expertise will create a strong entrant in that field. And there are other areas to focus on as well, whether it be infrastructure or other opportunities in the secondaries business. It’s a growing business. So we think that it adds to the various growth vectors that we already have in our quiver, and we believe that the Newbury team will be really effective in terms of capturing some of those opportunities. Chris, anything that you’d like to add there?

Christopher Jaroch: Well, Michael, first off, I’d say we’re delighted that the opening question is focused on our business and we’re delighted with this combination. And as Bob said, the secondaries market is really even in its middle innings of its tremendous growth. I mean when we started this business back in 2006, just the regular way private equity secondaries market was probably $10 billion or $15 billion in size, if that. Today, we’re looking at $100-plus billion markets year-over-year. So there’s been enormous growth in the business, but we think that the overall market still has another 2 to 3x in the next few years. And so there’s just tremendous underlying growth in the business. And so I think what we’ve been looking at going forward is, one, as Bob said, raising the successor fund to our Fund V, which was a $2 billion U.S. fund, and we’re looking forward to that imminent launch.

And then two, as we talk to sellers in the universe looking for liquidity or other rebalancing solutions, we see in their portfolios, a whole series of other types of fund interest, not just the buyout and venture and growth equity that we’ve been focused on through our in Newbury, but we see real estate funds in there, we see credit funds. We see other types of funds in these portfolios. So as we look to address the broader market as it’s evolving, I think these incremental capabilities that we can develop together with the Bridge folks will give us, one, better solutions for the people that we’re dealing with, but also create avenues for continued growth of the platform.

Michael Cyprys: Great. And just maybe to follow up on that. You mentioned Fund VI launching that here just given broadly, we’re hearing about a more challenging fundraising backdrop today. So just curious to what extent are you guys seeing that on the secondaries front? And if you think that, that Fund V at $2 billion could scale in this market environment to raise a larger sized fund? And given the focus on the smaller and mid-market that you alluded to, maybe you could just talk a little bit about the capacity that you see for raising larger-sized funds given the focus on the smaller end of the marketplace. And then following up on the point around extending into real estate. Maybe you could just speak Bob to what does that require in terms of hiring platform builds? What actions you guys might have to take in order to actually bring such a new product into the marketplace together?

Robert Morse: Perhaps, Chris could address the first part of that question with respect to appetite in the secondaries business. And then I’ll talk a little bit about team building.

Christopher Jaroch: Michael, all great questions. I think the general overlay around sort of fundraising in the private equity space is that 2022 was definitely a slower year, but it was still the third largest fundraising year on record. So — and again, enormous amounts of capital still flowing into private equity. Within the secondary space, specifically, I think if you look at the size of the market and the growth in the market, the interest and the acknowledgment of where secondaries sort of fits in the space is as great as it’s ever been. I mean we’ve just seen the Blackstone Strategic Partners platform go out and raise a $25 billion fund. So the largest fund in — sort of raised in the past 12 months. So there’s enormous interest and appetite for secondaries and the growth in that business.

And in some ways, the issues that a lot of LPs are facing right now, which is causing some of the slowdown in the LP market. So for instance, they’re overallocated. They need to rebalance in some way. Those are exactly the problems that secondaries funds solve for limited partners. So we’re very much the solution just sort of the meta problem that’s going on with the fundraising market right now. And again, a lot of LPs understand that, and we would expect that we would have a very successful fundraising as a result, not just because we have a very strong investor base that has supported us historically through multiple funds, but we see lots of inbound interest in secondaries right now because in some ways, this is exactly the exposure in the market that a lot of people are looking for.

So we’re very, very excited about that. As we look into other adjacencies, we would certainly need to add teams and fund vehicles to support those specific activities because they are different activities, and they do have different investor levels of interest. So we would need to continue to build out the team to address these things. But I think that from a core activity perspective, as we face sellers, as I was describing before, we’re seeing so much of this stuff in the flow already, and we can’t address it in our current format. And so again, we see lots of easy ability to leverage into those spaces going forward.

Robert Morse: Michael, I would add just a couple of things. Number one, certainly acknowledging that in the fourth quarter, there was a modest slowdown in fundraising activity. I think a lot of investors were looking forward to turning the calendar page at the end of the year. The amount of dialogue, the amount of activity that we see in early 2023 has been quite strong both internationally as well as domestically as investors — institutional investors, high net worth investors, family offices, et cetera, look to allocate capital in 2023. So we have probably a record amount of dialogue with investors. Dialogue generally results in some strong fundraising capabilities. To the point about building teams, that’s how Bridge has grown to where we are today.

Remember, we stood up a net lease team in late 2021. We stood up a logistics value-add team, which is doing a fantastic job, in late 2021 as well. So incrementalizing the Newbury organization to include whether it be a real estate secondaries capability or a continuation fund capability or other aspects of the secondaries business seems like a natural adjunct to what we’ve done on an ongoing basis.

Operator: Our next questions is coming from the line of Ken Worthington with JPMorgan.

Ken Worthington: So more on Newbury here. How are you thinking about introducing Newbury secondary products to Bridge’s wealth management distribution channels? What might new products for wealth management look like? And then what are you thinking about in terms of timing of products and launch? Do you need to wait for Newbury IV. Can you do it sort of in advance? Would it be concurrent? Is it going to take 4 years? How are you thinking about products and timing?

Robert Morse: Thanks, Ken, for the question. First of all, Newbury IV is imminent, so not much of a weight there in terms of launching that fund. Bridge has a broad suite of relationships with wealth management platforms. I don’t think there’s a single major wealth management platform with whom we don’t have good dialogue at this point. And over the course of 2022, we expanded the distribution of funds on that platform. Of course, we are at the very beginning stages of introducing a secondaries concept in that dialogue. We couldn’t really talk about that much before we announced the transaction, which took place earlier this morning. We think having said that, that there’s a meaningful appetite in the wealth management channels with whom we do business for a variety of products.

We think that as a company, we’ve built a strong track record as a capable, high-performing, good partner to the wealth management channels with whom we do business. So there’s — we expect that there will be meaningful receptivity to expanding that product suite to include the secondaries business as well, but certainly more on that to follow. The investor base that has traditionally supported Newbury’s business has been both ultra-high net worth family, office as well as institutional. So it’s a big, broad global investor base. The addition of a wealth management distribution channel should be purely 100% augmenting to the distribution that they’ve successfully built in the past.

Christopher Jaroch: And Ken maybe I’d follow on that a little bit. I mean I think secondaries — because of the diversification because of the risk mitigation sort of comes with that, the cash flowing aspects to it, the shorter duration version of it is very well tailored for the wealth management channel in the sense that if you’re looking for an entry point into private equity, what better way to get into it through a highly diversified portfolio of secondary opportunities. So I think from that standpoint, the product itself will be very attractive for that end market.

Ken Worthington: Great. Maybe in terms of the quarter and the results, income from top property operations and insurance income were a bit higher than trend. What drove the better results here? And I guess we’re kind of looking for sustainability, if they are sustainable.

Katherine Elsnab: Let me speak to the insurance results first. That was really driven by claim history that occurred during 2022. And that will vary just based upon actual incidents that occur. As we think about the property operations, as our fee earning AUM continues to grow, that balance will continue to increase. And so those are really the largest drivers, and we continue to deploy properties — deploy capital, particularly in the Multifamily sector and — Multifamily and Workforce sectors, those will continue to scale.

Jonathan Slager: Right. They kind of go hand in hand with that recurring fee income that we like to focus on in terms of kind of the core business.

Robert Morse: Ken, we mentioned this, I believe, in an earlier earnings call, the strategic decision to be forward integrated into property management, we think is really an important component of how we post performance. We think that we can generate alpha at the asset level. We think, particularly in the changed interest rate environment, where leverage has gone from being an unmitigated positive in terms of financing real estate acquisitions to something that’s more in the neutral range probably in the whole scheme of things. In this new environment, property management gives us an element of alpha that investors who are not forward integrated just don’t enjoy. And so we’ve worked hard over the years, and we continue to work hard to optimize that approach to property management. We think we’ve had a lot of learnings over the past 32 years or so as we’ve grown our property management, and we think it’s a huge asset for us and for our investors going forward.

Operator: Our next question is coming from the line of Sumeet Mody with Piper Sandler.

Sumeet Mody: Wondering if you guys could talk broadly about the deployment opportunity today versus 3 months ago? Any changes you might be seeing there? And then on the transaction fees in the quarter came in a little lower than we were expecting. Can you help us frame how to think about those fees for this year kind of given the backdrop that we see?

Robert Morse: Jonathan, how about over to you on that?

Jonathan Slager: Sure. Sure. On the transaction fees, I think we are seeing, I think, the very interesting opportunities that the debt markets have sort of presented, which on the negative side, I think there’s been this bid-ask spread that I think was alluded to in our call. We’ve seen a much slower market. I think that the broad statistics are saying the overall commercial real estate market is down like 70% in terms of volume, which, of course, everyone is subject to. We’re starting to see some green shoots of that coming back. We’re also starting to see some of the opportunistic things that might be coming from the impact of higher rates, including the significant need for reserves to be put aside for rate cap purchases and other things that are connected to floating rate debt.

So the markets are starting to open up a little bit again. I think what we really need is a little bit more stability in the debt markets. And then our assumption is that there’s really kind of a stability to kind of the steady growth in transaction volume in commercial real estate over time, especially in the segments like multifamily and industrial that we focus in. And so this kind of pause in the market will probably be followed by a very active period in the market, which we hope will happen in the second half of the year. Of course, we don’t know for sure exactly when that resurges. But what we do know is there’s a lot of capital and a lot of focus and these, call it, long-term secular demand benefits that we see between supply and demand have not changed.

So at this stage, we still have a very bullish outlook on the segments — the real estate segments that we operate in.

Robert Morse: I would only add, I think we feel quite comfortable and responsible having been patient in the fourth quarter. Asset prices continued to adjust in many markets, and we were appropriately cautious. We have approximately $3.5 billion of dry powder across our various funds. We think that 2023 will be a very attractive vintage, if you will, in order to deploy some of that capital. And our specialized investment teams are in the markets all day, every day, looking for opportunities. As Jonathan said, there are some green shoots and more that are beginning to surface, and we think that the combination of dry powder, the ability to accurately analyze and assess assets in the markets that we prioritize is going to create some really good opportunity in 2023.

Operator: Our next question is coming from the line of Adam Beatty with UBS.

Adam Beatty: A fair bit of discussion. Much appreciate around the idea of product extensions with Newbury. So I just wanted to — just a quick follow-up on timing around that. If we were to think about sort of — assuming a transaction closed first half of this year, if we were to think about sort of mid-’24 for some kind of product extension launch. Is that conservative? Is that aggressive? How are you thinking about timing on that?

Robert Morse: I think that without committing to a particular time zone, job #1 is closing the transaction. Job #2 is a successful launch and capital raise for Fund VI — Newbury Fund VI. And so that will be the immediate focus. We’re not going to take our eyes off the ball as it relates to that. Having said that, the dialogue with investors, the dialogue with traditional Bridge investors, the dialogue with traditional Newbury investors shows a strong demand in alternative secondaries products, shows a strong interest in working with our combined firm to access that demand. So we’re going to be commercial as it relates to launching new products as we think that the organization has evolved and is capable, and our first 2 jobs are completely done. Richard or Chris, anything you’d like to add there?

Richard Lichter: Well, what I would say is Newbury Fund V is at this point, 95% committed. And so as soon as this transaction closes, we’ll launch Fund VI. We’re very close to our investors, and that’s why we’ve been getting 80% or more re-ups and then new investors as we raise the size of the funds. And we would expect the same sort of thing now. Most of our investors have been with us multiple funds and some have even invested before Newbury was even founded. We have so there’s no surprise on timing of when we launch these funds. So that will be the first order of business once we close the transaction. As Chris said earlier, we — when we do transactions, we see other types of assets. Because typically, when a seller sells to us since we’re operating in the inefficient part of the private equity space, they show us all of their assets or most of their assets and asking us what we want to buy.

And then we naturally focus on the things we know like buyouts and growth equity. But we could easily pick up their real estate funds or other things. And I think that’s one of the opportunities going forward.

Adam Beatty: That makes total sense. I appreciate all the detail around Newbury V and VI. Sounds good going forward. Just bigger picture. I wanted to get maybe thoughts from each of the different legacy management teams in this new partnership as to what drew you together presumably both firms had and may still have alternatives in terms of partnership and what have you. So what was distinct about this partner, be it Bridge or Newbury that really was attractive and seemed like a good fit even despite — it’s a bit of an extension for both sides.

Robert Morse: That’s a great question. Thanks for that. Go ahead, Richard.

Richard Lichter: I can speak from the Newbury side. I mean, secondary assets are in high demand now, secondary firms. And there’s been a number of transactions. So we naturally saw a number of possible acquirers contact us. I was particularly pleased to see Bridge. I thought their common vision fit with us. I thought they’re focused on the types of size investments that we do, made some sense. And so to me, there were natural synergies. And then ultimately, at least the way I look at it, it all comes down to the people. So you can have a good business plan, but are those the people you want to work with, are those the people you want to partner with. So we very much wanted to do this transaction with Bridge rather than someone else. And we’re pretty excited about going forward to combine the firms. And I think it’s a case of 1 plus 1 equals more than 2.

Robert Morse: I would certain — from the Bridge side, I would certainly underscore all of those comments that Richard made about philosophy, about culture, about business practices, approach to the market, et cetera. From our perspective, we have a pretty well-established strategic focus on different opportunities in the alternative asset investment management market broadly defined. Prior to engaging in meaningful discussions with Newbury, we have done a very comprehensive analysis of the secondary space in general. It was a space that we were attracted to for a lot of different reasons. It expanded into a near-term adjacency, what we were doing. We felt that the investor appetite was strong and growing, and it was a growth market.

Newbury very quickly distinguished itself. We met with, if not dozens, probably at least a dozen or so different secondaries firms. And in those meetings, we learned a lot about the sector. And the Newbury team and the individuals who manage Newbury, Richard, Chris, Warren, Gerry, the full team, they distinguish themselves very quickly as a quality team that had the same philosophy and focus that we felt had underpinned a lot of Bridge success in the past. And so we were delighted that we could construct a win-win transaction for them and for us.

Operator: Our next question is coming from the line of Michael Cyprys with Morgan Stanley.

Michael Cyprys: Just wanted to circle back on the Bridge results and expenses and margin. I was hoping you might be able to elaborate on the expense outlook, on comp and noncomp expense here in ’23 as well as the FRE margin outlook here in ’23.

Robert Morse: So I’ll make some early comments and then ask Katie to comment as well if I miss anything. We said in our prepared remarks that we were disciplined on expenses in the fourth quarter in light of reduced transaction activity. And we think we run, Michael, a pretty lean ship. We have tried to manage headcount appropriately, allocating headcount to those areas that are growing. A lot of the expense growth you saw in 2022 was to fund some of those growth opportunities, whether it be in logistics or net lease or solar or PropTech, all those newly launched initiatives are doing well, growing well, attracting capital, delivering results, finding good assets to acquire, et cetera. And many of those investments, expenses are completed at this point.

We continue to have a need to manage our business well and to continue to grow headcount. The headcount growth should be more modest in 2023, borrowing some other strategic initiative that we see. And we’re, of course, conscious of delivering good margins and good bottom line profitability to our investors. Katie, anything to add there?

Katherine Elsnab: I think the only thing that I would just emphasize as well is just the importance of looking at our margins on a long-term basis, that quarter-over-quarter, we do have volatility as it relates to transactions that occurred during the quarter. And so that’s one thing. It’s just to focus on looking at our margins on a long-term basis.

Operator: There are no further questions at this time. I’d now like to hand the call back over to management for any closing comments.

Robert Morse: Thank you, operator, and thank you to all who joined us today. We are delighted to complete the review of 2022, fourth quarter and 2022. We’re delighted to announce the Newbury transaction. We know we have a great deal of opportunity looking forward in 2023. We think we’re well positioned to capture a meaningful amount of that opportunity, and we look forward to future dialogue as we progress through the year. Thanks so much.

Operator: Thank you. This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.