Bridge Investment (BRDG) - 2021 Q4 - Annual Report

Forward-Looking Statements This section outlines forward-looking statements, noting their inherent risks and potential for actual results to differ - This annual report contains forward-looking statements regarding operations, taxes, earnings, financial performance, and dividends, which are not guarantees of future performance and are subject to difficult-to-predict risks, assumptions, and uncertainties[7][8] - Actual results may differ materially from expectations due to factors described in 'Risk Factors' and 'Management's Discussion and Analysis of Financial Condition and Results of Operations'[8] Certain Definitions This section defines key terms used throughout the report, including company entities and financial metrics like AUM and fee-earning AUM - The report defines key terms such as 'we,' 'us,' 'our,' 'Company,' 'Bridge,' and 'Bridge Investment Group' to refer to Bridge Investment Group Holdings Inc. and its subsidiaries post-IPO, and the Operating Company and its subsidiaries and Contributed Bridge GPs pre-IPO[11] - Assets Under Management (AUM) is defined as the sum of the fair value of managed funds/vehicles' assets plus uncalled capital commitments, not reduced by indebtedness[11] - Fee-earning AUM refers to assets from which management fees or other revenue are earned[14] Risk Factor Summary This section summarizes key risks, including performance, growth, valuation, real estate, economic, leadership, and regulatory challenges - Key risks include historical performance not being indicative of future results, challenges in sustaining business growth, subjectivity in asset valuation, and inherent risks in real estate ownership and development[17][18][19] - Other significant risks involve dependence on suitable investment opportunities, difficult economic/market conditions, ability to retain senior leadership, expansion into new asset classes, investor defaults, and the impact of the COVID-19 pandemic[19][21] - The company also faces risks from cybersecurity, intense competition, increased government regulation, dependence on Operating Company distributions, tax rate changes, and increasing scrutiny regarding climate change and ESG impact[21] PART I Item 1. Business Bridge Investment Group is a leading, vertically integrated real estate investment manager with $36.3 billion AUM, operating across ten platforms with a focus on growth Overview Bridge Investment Group is a leading, vertically integrated real estate investment manager with $36.3 billion AUM as of December 31, 2021 - Bridge Investment Group is a leading, vertically integrated real estate investment manager with approximately $36.3 billion of AUM as of December 31, 2021[22] - The company employs a specialized, vertically integrated model spanning ten investment platforms across real estate equity and debt strategies, including active asset management, property management, leasing, and construction management functions[25] - Bridge manages capital for over 180 global institutions and more than 10,000 individual investors, operating across 35 states with a focus on U.S. markets exhibiting strong growth potential[22][26] Our History The company's history traces back to 1991, evolving into a vertically integrated model with significant AUM growth - The founders began investing in multifamily real estate in 1991, adopting the current vertically integrated strategy in 2000[32] - The Operating Company was formed in 2011, and by 2021, Bridge had sponsored 22 funds and various other investment vehicles, adding a tenth investment platform (single-family rental) in January 2022[32] - Since 2009, the company has raised approximately $20 billion of equity commitments and managed approximately $36.3 billion of AUM as of December 31, 2021[33] Market Opportunity The company operates in a large and growing real estate investment management market, with strong growth in alternative assets - The company operates in the large and growing real estate investment management industry, with total global AUM projected to grow from $111.2 trillion in 2020 to $145.4 trillion in 2025 (5.5% CAGR)[34] - Investments in alternative assets are expected to grow even more significantly, from $10.7 trillion to $17.2 trillion over the same timeframe (9.8% CAGR)[34] - Real estate investments offer opportunities for yield and stable income, attracting institutional investors seeking diversification and lower volatility[35] Competitive Strengths Competitive strengths include a vertically integrated model, diversified platforms, and a proven fundraising record with recurring fees - The vertically integrated business model drives competitive advantages by facilitating comprehensive investment strategies, generating asset-level alpha, and increasing efficiency through in-house services[37][38] - Bridge's ten diversified and synergistic investment platforms provide a competitive edge through differentiated underwriting, enhanced collaboration, and a fully scaled corporate infrastructure[39][40][41] - The company benefits from a proven record of fundraising success with a loyal investor base, with 58% of fund investors having invested in two or more funds, and a high proportion of recurring fees from long-duration closed-end funds[43][44][46] Growth Strategy The growth strategy focuses on expanding investor networks, product offerings, and distribution capabilities, including international markets - Bridge aims to strengthen and expand its fund investor network by leveraging its established operating platform and performance history[51] - The company plans to expand its product offerings across the risk-return spectrum and launch new strategies in real estate and adjacent sectors, as well as pursue expanded investment geography, including international markets[53][54][57] - Expansion of distribution capabilities domestically and internationally is a key focus, particularly to high-net-worth individuals and global institutional investors in Asia, Europe, the Middle East, and Africa[55][56][57] Our Organizational Structure The organizational structure positions Bridge Investment Group Holdings Inc. as the managing member of the Operating Company - Bridge Investment Group Holdings Inc. was incorporated on March 18, 2021, as a Delaware corporation and acts as the sole managing member of Bridge Investment Group Holdings LLC (the Operating Company)[58] - The Operating Company controls various Fund Managers that provide real estate and fund investment advisory services and receive management fees[60] - Prior to the IPO, Bridge GPs (general partners for each fund) were entitled to performance fees, and the Operating Company and Bridge GPs were under common control by Original Equity Owners[60] Our Investment Platforms Bridge operates ten specialized and synergistic real estate investment platforms, covering diverse equity and debt strategies - Bridge operates in a single segment, real estate investment management, with ten specialized and synergistic investment platforms: Multifamily, Workforce and Affordable Housing, Seniors Housing, Office, Development, Net Lease, Logistics Properties, Debt Strategies, Agency MBS, and Single-Family Rental[61] Investment Platforms AUM (as of December 31, 2021) | Platform | AUM (approx. $ billions) | | :--------------------------- | :----------------------- | | Multifamily | $8.4 | | Seniors Housing | $4.5 | | Workforce and Affordable Housing | $4.3 | | Development | $3.7 | | Office | $2.5 | | Agency MBS | $1.8 | | Debt Strategies | $10.6 | | Logistics Properties | $0.24 | | Net Lease | $0.2 | - The Single-Family Rental platform was launched in Q1 2022 with the acquisition of Gorelick Brothers Capital's operations, adding over 2,700 SFR properties and a vertically integrated property management team[73] Our Investment and Asset Management Process The investment process is vertically integrated, leveraging data-driven tools and local expertise for active asset management - Bridge's investment process is vertically integrated, combining detailed market research with top-down sub-market analysis and bottom-up local market expertise[76] - Proprietary data-driven tools are used across all platforms to support underwriting new investments and increase the value of existing ones through active asset management[76] - Frequent involvement from investment committees and integrated review from localized teams provide a significant competitive advantage[76] Structure and Operation of Our Investment Vehicles Investment vehicles are structured as partnerships or LLCs, managed by SEC-registered advisers, with key person provisions - Investment vehicles are primarily structured as partnerships or limited liability companies, accepting subscriptions from institutional and high-net-worth investors[77] - Day-to-day operations are managed by SEC-registered investment adviser subsidiaries, with general partners making investment decisions[78] - Governing agreements may include 'key person' provisions, allowing investors to accelerate or terminate the investment period if specified time commitments are not met[78] Our Fund Investors Bridge maintains a balanced global investor base, with significant capital from both individual and institutional investors - Bridge has a balanced global fund investor base, with approximately 68% of committed capital from individual investors and 32% from institutional investors as of December 31, 2021[79] - Individual investors, including high-net-worth individuals, invest through wirehouse relationships and RIAs, with Bridge having deep relationships with major wirehouses[81] - Institutional investors include public/private pension funds, sovereign wealth funds, and insurance companies across four continents, with 58% of Bridge fund investors having invested in two or more funds[84] Human Capital Management Bridge manages human capital through competitive compensation, comprehensive benefits, and a commitment to diversity and inclusion - As of December 31, 2021, Bridge had approximately 1,800 employees, including 140 investment professionals and 450 support staff, plus 2,450 professionals employed through a PEO at Bridge Senior Living sites[88] - The company is committed to fostering a culture of diversity and inclusion, implementing annual mandatory diversity awareness training and establishing a DE&I Committee and various employee resource groups[89][90][99] - Bridge focuses on attracting, developing, and retaining talent through competitive compensation (salaries, bonuses, share-based compensation), comprehensive benefits, and professional growth opportunities, with employees eligible for profits interests and performance allocations[92][94][95][96] Environmental, Social and Governance, or ESG, Commitment Bridge integrates ESG across operations, focusing on sustainable development goals and community enhancement initiatives - Bridge is integrating ESG across its operations to improve decision-making and risk management, being a signatory to the UNPRI and recognized for its impact in Workforce and Affordable Housing funds[100][101] - The company incorporates IRIS metrics for detailed reporting on ESG initiatives in its Workforce and Affordable Housing strategy, aligning with UN Sustainable Development Goals[101] - Key initiatives include the Bridge Community Enhancement Initiative (BCEI), Bridge CARES: COVID-19 Relief Fund, a solar power program, and participation in Freddie Mac's Green Advantage program[102] COVID-19 Safety The company implements comprehensive health and safety protocols to ensure a safe environment for all stakeholders - Bridge is committed to providing a safe environment for employees, residents, and tenants by adopting comprehensive health and safety protocols based on CDC and local health official recommendations[103] - Measures include social distancing, mask policies, increased cleaning, contact tracing, and facilitating remote working arrangements[103] Competition The investment management business is intensely competitive, driven by performance, service quality, and brand recognition - The investment management business is intensely competitive, with Bridge competing against a large number of asset management firms, commercial banks, broker-dealers, and other financial institutions[105][107] - Competition is based on factors such as investment performance, quality of service, brand recognition, ability to customize product offerings, and capacity to consistently generate attractive returns[106] Regulatory and Compliance The business is subject to extensive federal, state, and international regulations, including SEC oversight for investment advisers - Bridge's business is subject to extensive federal and state regulation in the United States, including by the SEC, and regulatory oversight in several foreign jurisdictions (e.g., UK, EU, South Korea)[108][113] - Certain subsidiaries are SEC-registered investment advisers, subject to the Investment Advisers Act, which imposes substantive regulations on fiduciary duties, transactions, compliance, fees, and disclosures[109] - The company's funds are not registered under the 1940 Act, relying on exemptions for 'qualified purchasers', and some funds include 'benefit plan investors' subject to ERISA-related regulations[110][112] Available Information Publicly available reports and information are filed with the SEC and accessible on the company's website - Bridge Investment Group Holdings Inc. files annual, quarterly, and current reports with the SEC, which are publicly available on www.sec.gov and the company's website www.bridgeig.com[117](index=117&type=chunk) Website and Social Media Disclosures The company uses its investor relations website and social media for distributing material company information - The company uses its investor relations website, Facebook, Twitter, and LinkedIn accounts as channels for distributing material company information, and investors are encouraged to monitor these channels[118] Item 1A. Risk Factors This section details significant risks impacting the company's business, industry, organizational structure, and stock ownership Risks Related to Our Business Business risks include performance not indicative of future results, growth sustainability, asset valuation, and real estate market volatility - Historical performance of fund investments may not be indicative of future results, and poor performance could lead to a decline in revenue and difficulty raising future capital[121][122][131] - The substantial growth of the business may be difficult to sustain, placing significant demands on resources and increasing expenses, while valuation methodologies for illiquid assets are subject to significant subjectivity and may not reflect realized values[124][125][127][128] - Revenues are exposed to inherent risks of real estate ownership and development, difficult economic/market conditions, potential investor defaults, and the adverse impacts of the COVID-19 pandemic on fundraising and investment returns[134][143][158][159] Risks Related to Our Industry Industry risks include intense competition, difficult market conditions, and increasing government regulation and compliance burdens - The investment management business is intensely competitive, with competition based on investment performance, service quality, and brand recognition, potentially affecting the ability to make successful investments and raise future funds[204][205] - Difficult market conditions, including rising interest rates, inflation, and geopolitical conflicts, can adversely affect business by reducing asset values, hindering capital raising, and impacting profitability[207][208][209][210] - Increased government regulation, compliance failures, and changes in laws (e.g., Dodd-Frank Act, SEC scrutiny) could adversely affect operations, increase compliance costs, and lead to sanctions or reputational harm[212][213][214][216] Risks Related to Our Organizational Structure Organizational structure risks involve dependence on Operating Company distributions and potential TRA payment complexities - As a holding company, Bridge Investment Group Holdings Inc. depends on distributions from the Operating Company to pay taxes and expenses, including substantial payments under the Tax Receivable Agreement (TRA), which may be subject to limitations[225][226][229] - Payments under the TRA to Continuing Equity Owners may be accelerated or significantly exceed actual tax benefits realized, and there is no reimbursement if tax benefits are disallowed, potentially impacting liquidity[234][235][238][239] - Unanticipated changes in effective tax rates or adverse audit outcomes could affect financial condition, and being deemed an investment company under the 1940 Act could make business impractical[240][244][245] Risks Related to Ownership of Our Class A Common Stock Risks related to Class A common stock ownership include significant control by continuing equity owners and dual-class structure impacts - Continuing Equity Owners hold significant influence (over 95% voting power), controlling stockholder decisions and potentially acting against other stockholders' interests[247][248] - The dual-class structure may negatively affect the market price of Class A common stock due to restrictions by certain index providers, and the 'controlled company' status under NYSE rules allows exemptions from corporate governance requirements, potentially reducing stockholder protections[250][251][252][253] - Future sales or the perception of future sales by existing stockholders could cause the market price for Class A common stock to decline, and the company's ability to pay dividends is discretionary and subject to various limitations[272][273][278][262][263] General Risk Factors General risks include geopolitical events, public company operating costs, and the impact of climate change and ESG scrutiny - Brexit may negatively affect global economic conditions, financial markets, and the company's business[282][283][284] - Operating as a public company incurs significant costs and strains resources, and failure to maintain effective internal control over financial reporting could lead to inaccurate financial reports and stock price decline[285][286][287] - Climate change may adversely impact properties owned by funds, leading to additional compliance obligations, costs, and taxes, and increasing scrutiny on ESG matters may constrain investment opportunities and capital raising[296][297][298][299][300] Item 1B. Unresolved Staff Comments There are no unresolved staff comments from the SEC regarding the company's previous filings Item 2. Properties The company's headquarters are in Salt Lake City, Utah, with other principal leased offices across several states - Bridge Investment Group is headquartered in Salt Lake City, Utah[304] - Other principal operations are located in New York, California, Florida, Georgia, North Carolina, and Virginia[304] - All office facilities are leased and considered suitable and adequate for business operations[304] Item 3. Legal Proceedings The company is not currently involved in any material legal proceedings or actions - The company is not currently subject to any pending legal proceeding (judicial, regulatory, administrative or arbitration) that is expected to have a material impact on its business, consolidated financial statements or results of operations[305] Item 4. Mine Safety Disclosures This item is not applicable to the company PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section covers the market for common equity, including trading, dividend policy, stock performance, and equity compensation plans Common Stock Bridge Investment Group Holdings Inc.'s Class A common stock is traded on the NYSE under the symbol 'BRDG' - Bridge Investment Group Holdings Inc.'s Class A common stock is traded on the NYSE under the symbol 'BRDG'[309] - As of March 1, 2022, there were 62 holders of record for Class A common stock and 80 for Class B common stock[309] - As of March 1, 2022, 28,136,101 shares of Class A common stock and 86,612,489 shares of Class B common stock were outstanding[3] Dividend Policy The company expects to continue paying regular quarterly cash dividends on Class A common stock, subject to board discretion - In December 2021, the company declared and paid a quarterly dividend of $0.24 per share of Class A common stock, totaling $6.0 million[310] - In March 2022, a quarterly dividend of $0.21 per share on Class A common stock was declared, payable on March 25, 2022[310] - The company expects to continue paying regular cash dividends quarterly, subject to board discretion, earnings, capital requirements, and legal/contractual restrictions; Class B common stock holders are not entitled to dividends[310] Stock Performance Graph The stock performance graph compares Class A common stock returns against key market indices from July to December 2021 - The graph compares the total cumulative stockholder return of Class A common stock from July 16, 2021, through December 31, 2021, against the S&P 500 Index and the Dow Jones U.S. Asset Managers Index[312] Total Cumulative Stockholder Return (July 16, 2021 - December 31, 2021) | Index | July 16, 2021 | December 31, 2021 | | :-------------------------------------- | :------------ | :---------------- | | Bridge Investment Group Holdings Inc. | $100 | $161 | | Dow Jones U.S. Asset Managers Index | $100 | $111 | | S&P 500 Index | $100 | $111 | Unregistered Sales of Equity Securities No unregistered equity securities were sold during 2021, beyond previously disclosed reports - No unregistered equity securities were sold from January 1, 2021, to December 31, 2021, other than those previously disclosed in quarterly and current reports[314] Securities Authorized for Issuance Under Equity Compensation Plans Information on securities authorized under equity compensation plans is incorporated by reference from Item 12 - Information regarding securities authorized for issuance under equity compensation plans is incorporated by reference from Item 12 of the Form 10-K[315] Item 6. Reserved This item is intentionally left blank Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes financial condition and results of operations, covering business overview, trends, COVID-19 impact, and key financial metrics Overview Bridge Investment Group is a leading, vertically integrated real estate investment manager with $36.3 billion AUM - Bridge Investment Group is a leading, vertically integrated real estate investment manager with approximately $36.3 billion of AUM as of December 31, 2021[318] - In December 2021, the company entered into agreements to acquire a 60% interest in Gorelick Brothers Capital's asset and property management business for $30 million, launching a single-family rental (SFR) strategy[318] - Also in December 2021, a joint venture was formed with the Townsend Group to deploy up to $400 million for global gateway institutional logistics assets in the United States[318] Trends Affecting Our Business Business performance is influenced by financial markets, economic conditions, and regulatory policies, with future growth dependent on capital attraction - Business performance is influenced by financial markets, economic and political conditions, and regulatory policies, but a disciplined investment philosophy has historically contributed to stability[319] - Future performance depends on attracting new capital, generating strong returns, sourcing attractive investments, and offering appealing products to a growing investor base, amidst trends like increasing demand for alternative and private market investments[320][322] - Maintaining a data advantage through proprietary platforms and deep industry knowledge is crucial for providing customized investment solutions and sustaining revenue growth[322] Impact of COVID-19 The COVID-19 pandemic caused significant market disruption, with potential adverse impacts on fundraising and investment performance - The COVID-19 pandemic caused significant disruption and uncertainty in global financial markets, with potential future adverse impacts on fundraising, capital deployment, and rental income collection[323][325] - Ongoing economic pressures from the pandemic include global supply chain disruptions, labor shortages, rising commodity prices, inflation, and increasing interest rates[325] Segments Bridge Investment Group operates as a single business segment: a fully integrated real estate investment manager - Bridge Investment Group operates as a single business segment: a fully integrated real estate investment manager[326] Key Financial Measures Key financial measures include fund management fees, various other revenue streams, and performance fees/allocations - Fund Management Fees are generally based on a defined percentage of total commitments, invested capital, or net asset value (NAV) of managed investment portfolios[328] - Other revenue streams include Property Management and Leasing Fees, Construction Management Fees, Development Fees, Transaction Fees, Insurance Premiums, and Other Asset Management and Property Income[329][330][332][333][334] - Performance Fees consist of incentive fees (recognized when realized and no longer subject to significant reversal) and performance allocations (carried interest, accounted for under the equity method, subject to reversal/clawback)[335][336][337] Operating Metrics Operating metrics show AUM growth, driven by new capital and fair value changes, with detailed fee-earning AUM by fund - Assets Under Management (AUM) increased by 44% to $36.3 billion as of December 31, 2021, from $25.2 billion in 2020, driven by new capital/commitments and changes in fair value[356] AUM Rollforward (in millions) | (in millions) | Year Ended December 31, 2021 | Year Ended December 31, 2020 | Year Ended December 31, 2019 | | :-------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Balance as of beginning of year | $25,214 | $20,298 | $14,491 | | New capital / commitments raised | $5,161 | $2,530 | $3,738 | | Distributions / return of capital | $(1,196) | $(1,819) | $(75) | | Change in fair value and acquisitions | $7,136 | $4,205 | $2,144 | | AUM as of end of year | $36,315 | $25,214 | $20,298 | | Increase | $11,101 | $4,916 | $5,807 | | Increase % | 44% | 24% | 40% | Fee-Earning AUM by Fund (in millions) | (in millions) Fee-Earning AUM by Fund | 2021 | December 31, 2020 | 2019 | | :------------------------------------ | :---------- | :---------------- | :---------- | | Bridge Multifamily Fund III | $269 | $401 | $527 | | Bridge Multifamily III JV Partners | $4 | $10 | $13 | | Bridge Multifamily Fund IV | $1,284 | $1,574 | $1,579 | | Bridge Multifamily Fund V | $976 | — | — | | Bridge Workforce Fund I | $556 | $499 | $608 | | Bridge Workforce Fund II | $915 | $166 | — | | Bridge Opportunity Zone Fund I | $482 | $482 | $466 | | Bridge Opportunity Zone Fund II | $408 | $408 | $414 | | Bridge Opportunity Zone Fund III | $1,019 | $1,028 | — | | Bridge Opportunity Zone Fund IV | $1,490 | — | — | | Bridge Office Fund I | $499 | $500 | $548 | | Bridge Office I JV Partners | $130 | $154 | $154 | | Bridge Office Fund II | $176 | $89 | $81 | | Bridge Office II JV Partners | $6 | $21 | $7 | | Bridge Seniors Housing Fund I | $626 | $626 | $626 | | Bridge Seniors Housing Fund II | $805 | $769 | $937 | | Bridge Seniors Housing Fund III | $33 | $33 | — | | Bridge Debt Strategies Fund I | — | $41 | $48 | | Bridge Debt Strategies I JV Partners | $18 | $18 | $18 | | Bridge Debt Strategies Fund II | $354 | $678 | $933 | | Bridge Debt Strategies II JV Partners | $195 | $343 | $408 | | Bridge Debt Strategies Fund III | $1,286 | $1,549 | $1,279 | | Bridge Debt Strategies III JV Partners| $308 | $416 | $81 | | Bridge Debt Strategies Fund IV | $1,133 | $305 | — | | Bridge Debt Strategies Fund IV JV Partners| $129 | — | — | | Bridge Net Lease Fund | $29 | — | — | | Bridge Logistics U.S. Venture I | $110 | — | — | | Bridge Agency MBS Fund | $123 | $104 | — | | Total Fee-Earning AUM | $13,363 | $10,214 | $8,727 | Our Performance Bridge demonstrates a strong record of attractive returns for fund investors across equity and debt strategies - Bridge has a demonstrated record of producing attractive returns for fund investors, with its last three multifamily funds and first workforce and affordable housing funds ranked in the top quartile by Preqin Ltd[365] Performance Summary for Closed-End Funds (as of December 31, 2021) | Fund Category | Committed Capital ($M) | Unreturned Drawn Capital + Accrued Pref ($M) | Cumulative Invested Capital ($M) | Realized Proceeds ($M) | Remaining Fair Value (RFV) ($M) | Unrealized MOIC | Total Fair Value (TFV) ($M) | TFV MOIC | Gross IRR (%) | Net IRR (%) | | :---------------------- | :--------------------- | :------------------------------------------- | :------------------------------- | :--------------------- | :------------------------------ | :-------------- | :-------------------------- | :------- | :------------ | :---------- | | Equity Strategies Funds | | | | | | | | | | | | Multifamily | $3,221 | $1,451 | $2,968 | $3,145 | $3,121 | 2.13x | $6,266 | 2.11x | 29.6% | 23.2% | | Workforce Housing I | $619 | $636 | $558 | $81 | $1,118 | 2.15x | $1,199 | 2.15x | 40.1% | 32.2% | | Office | $781 | $769 | $777 | $185 | $809 | 1.27x | $995 | 1.28x | 11.1% | 7.8% | | Seniors Housing | $1,399 | $1,593 | $1,342 | $462 | $1,336 | 1.32x | $1,798 | 1.34x | 8.1% | 5.3% | | Total Equity Strategies | $6,020 | $4,449 | $5,645 | $3,873 | $6,384 | 1.74x | $10,257 | 1.82x| 24.0% | 18.0% | | Debt Strategies Funds | | | | | | | | | | | | Total Debt Strategies | $2,757 | $1,739 | $7,917 | $7,178 | $1,812 | 1.27x | $8,990 | 1.14x | 12.6% | 9.9% | - The presented returns are for primary funds and do not include joint ventures or separately managed accounts, and are not indicative of future returns for the company's Class A common stock or any current/future funds[369] Results of Operations Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 Revenues (in thousands) | Revenues: | Year Ended 2021 | December 31, 2020 | Amount Change | % Change | | :--------------------------------------- | :-------------- | :---------------- | :------------ | :------- | | Fund management fees | $155,928 | $110,235 | $45,693 | 41% | | Property management and leasing fees | $69,654 | $59,986 | $9,668 | 16% | | Construction management fees | $8,292 | $8,155 | $137 | 2% | | Development fees | $3,703 | $1,966 | $1,737 | 88% | | Transaction fees | $75,073 | $39,298 | $35,775 | 91% | | Insurance premiums | $10,051 | $6,291 | $3,760 | 60% | | Other asset management and property income | $7,313 | $6,017 | $1,296 | 22% | | Total revenues | $330,014 | $231,948 | $98,066 | 42% | Investment Income (in thousands) | Investment income: | Year Ended 2021 | December 31, 2020 | Amount Change | % Change | | :------------------------- | :-------------- | :---------------- | :------------ | :------- | | Incentive fees | $2,469 | — | $2,469 | NA | | Performance allocations: | | | | | | Realized gains | $80,970 | $42,365 | $38,605 | 91% | | Unrealized gains | $248,647 | $61,803 | $186,844 | 302% | | Earnings from real estate | $2,132 | $522 | $1,610 | 308% | | Total investment income | $334,218 | $104,690 | $229,528 | 219% | Expenses (in thousands) | Expenses: | Year Ended 2021 | December 31, 2020 | Amount Change | % Change | | :--------------------------------------- | :-------------- | :---------------- | :------------ | :------- | | Employee compensation and benefits | $142,707 | $100,932 | $41,775 | 41% | | Incentive fee compensation | $215 | — | $215 | NA | | Performance allocations compensation: | | | | | | Realized gains | $6,611 | $4,281 | $2,330 | 54% | | Unrealized gains | $31,069 | $8,983 | $22,086 | 246% | | Loss and loss adjustment expenses | $8,075 | $3,119 | $4,956 | 159% | | Third-party operating expenses | $33,427 | $28,415 | $5,012 | 18% | | General and administrative expenses | $24,815 | $17,249 | $7,566 | 44% | | Depreciation and amortization | $2,830 | $3,214 | $(384) | (12%) | | Total expenses | $249,749 | $166,193 | $83,556 | 50% | Year Ended December 31, 2020 Compared to Year Ended December 31, 2019 Revenues (in thousands) | Revenues: | Year Ended 2020 | December 31, 2019 | Amount Change | % Change | | :--------------------------------------- | :-------------- | :---------------- | :------------ | :------- | | Fund management fees | $110,235 | $118,194 | $(7,959) | (7%) | | Property management and leasing fees | $59,986 | $59,754 | $232 | 0% | | Construction management fees | $8,155 | $7,312 | $843 | 12% | | Development fees | $1,966 | $555 | $1,411 | 254% | | Transaction fees | $39,298 | $48,088 | $(8,790) | (18%) | | Insurance premiums | $6,291 | $5,246 | $1,045 | 20% | | Other asset management and property income | $6,017 | $7,127 | $(1,110) | (16%) | | Total revenues | $231,948 | $246,276 | $(14,328) | (6%) | Investment Income (in thousands) | Investment income: | Year Ended 2020 | December 31, 2019 | Amount Change | % Change | | :------------------------- | :-------------- | :---------------- | :------------ | :------- | | Incentive fees | — | $5,898 | $(5,898) | NA | | Performance allocations: | | | | | | Realized gains | $42,365 | $41,738 | $627 | 2% | | Unrealized gains | $61,803 | $30,051 | $31,752 | 106% | | Earnings from real estate | $522 | $1,697 | $(1,175) | (69%) | | Total investment income | $104,690 | $79,384 | $25,306 | 32% | Expenses (in thousands) | Expenses: | Year Ended 2020 | December 31, 2019 | Amount Change | % Change | | :--------------------------------------- | :-------------- | :---------------- | :------------ | :------- | | Employee compensation and benefits | $100,932 | $95,156 | $5,776 | 6% | | Incentive fee compensation | — | $581 | $(581) | NA | | Performance allocations compensation: | | | | | | Realized gains | $4,281 | $3,895 | $386 | 10% | | Unrealized gains | $8,983 | $5,461 | $3,522 | 64% | | Loss and loss adjustment expenses | $3,119 | $2,622 | $497 | 19% | | Third-party operating expenses | $28,415 | $32,853 | $(4,438) | (14%) | | General and administrative expenses | $17,249 | $17,953 | $(704) | (4%) | | Depreciation and amortization | $3,214 | $2,769 | $445 | 16% | | Total expenses | $166,193 | $161,290 | $4,903 | 3% | Non-GAAP Financial Measures Non-GAAP financial measures like Distributable Earnings and Fee Related Earnings provide insights into core operating performance - Bridge uses non-GAAP financial measures, including Distributable Earnings, Fee Related Earnings, Fee Related Revenues, and Fee Related Expenses, to supplement GAAP results and provide insights into core operating performance[414][417] - Distributable Earnings excludes non-cash items like depreciation, unrealized performance allocations, and share-based compensation, while Fee Related Earnings further excludes realized performance allocations, net insurance income, and net interest[419][420] Reconciliation of Net Income to Distributable Earnings and Fee Related Earnings (in thousands) | (in thousands) | 2021 | Year Ended December 31, 2020 | 2019 | | :-------------------------------------------------------------------------- | :---------- | :--------------------------- | :---------- | | Net income | $408,627 | $166,457 | $160,633 | | Income before provision for income taxes | $416,889 | $167,463 | $161,618 | | Distributable Earnings attributable to the Operating Company | $156,463 | $103,922 | $133,844 | | Total Fee Related Earnings attributable to the Operating Company | $103,963 | $65,557 | $86,701 | Liquidity and Capital Resources Liquidity is supported by operating cash flow, credit, and IPO proceeds, with details on operating, investing, and financing activities Operating Activities Net cash provided by operating activities increased to $209.2 million in 2021, driven by adjusted net income - Net cash provided by operating activities was $209.2 million in 2021, primarily driven by net income adjusted for non-cash items like unrealized performance allocations and share-based compensation[440][442] Net Cash Provided by Operating Activities (in thousands) | (in thousands) | 2021 | Year Ended December 31, 2020 | 2019 | | :--------------------------------------- | :---------- | :--------------------------- | :---------- | | Net cash provided by operating activities | $209,224 | $130,096 | $153,468 | Investing Activities Net cash used in investing activities was $114.3 million in 2021, mainly for notes receivable and acquisitions - Net cash used in investing activities was $114.3 million in 2021, primarily due to issuances of notes receivable to affiliate entities and a deposit for the GBC acquisition, partially offset by collections from notes receivables[447] Net Cash (Used in) Provided by Investing Activities (in thousands) | (in thousands) | 2021 | Year Ended December 31, 2020 | 2019 | | :---------------------------------------------- | :------------ | :--------------------------- | :--- | | Net cash (used in) provided by investing activities | $(114,259) | $(47,813) | $306 | Financing Activities Net cash used in financing activities was $118.4 million in 2021, primarily for distributions and membership interest purchases - Net cash used in financing activities was $118.4 million in 2021, largely due to distributions to members and non-controlling interests, and the purchase of membership interests in the Operating Company, partially offset by IPO proceeds[450] Net Cash Used in Financing Activities (in thousands) | (in thousands) | 2021 | Year Ended December 31, 2020 | 2019 | | :--------------------------------------- | :------------ | :--------------------------- | :------------ | | Net cash used in financing activities | $(118,447) | $(35,039) | $(129,393) | Capital Resources Capital resources include operating cash flow, credit lines, and IPO proceeds, with compliance to debt covenants - Bridge's liquidity needs are met by operating cash flow, credit sources, and IPO proceeds, with $78.4 million in cash and cash equivalents as of December 31, 2021[435][436] - The company has $150.0 million in Private Placement Notes (issued July 2020) and a $75.0 million secured revolving line of credit, with no outstanding borrowings on the LOC as of December 31, 2021[453][455] - Bridge was in compliance with all debt covenants (total leverage ratio, minimum EBITDA, minimum unencumbered cash) as of December 31, 2021 and 2020[456] Contractual Obligations and Commitments Contractual obligations include operating leases, long-term debt, and standby letters of credit, with TRA payments being indeterminable Contractual Obligations (as of December 31, 2021, in thousands) | | Total | One year or less | Payments Due by Over one year through three years | Over three years through five years | Over five years | Indeterminable maturity | | :----------------------------- | :---------- | :--------------- | :------------------------------------------------ | :---------------------------------- | :-------------- | :---------------------- | | Operating lease obligations | $18,191 | $3,606 | $6,199 | $5,765 | $2,621 | $— | | Long-term debt obligations (1) | $150,000 | — | — | $75,000 | $75,000 | — | | Interest on debt obligations (2)| $27,695 | $6,037 | $12,075 | $7,852 | $1,731 | — | | Standby letters of credits | $3,362 | $3,362 | — | — | — | — | | Capital commitments (3) | $23,321 | — | — | — | — | $23,321 | | Total contractual obligations | $222,569 | $13,005 | $18,274 | $88,617 | $79,352 | $23,321 | - Payments under the Tax Receivable Agreement (TRA) are expected to be substantial but are not included in the table due to indeterminable timing, as they depend on future taxable income[459] Off-Balance Sheet Arrangements Off-balance sheet arrangements include guarantees for standby letters of credit related to self-insurance and operating leases - As of December 31, 2021, the company guaranteed a $3.0 million standby letter of credit for the self-insurance program of properties owned by its funds and a $362,000 standby letter of credit for an operating lease[461] Critical Accounting Policies and Estimates Critical accounting policies involve consolidation, revenue recognition, fair value measurements, and income taxes, requiring significant judgment - Critical accounting policies and estimates include consolidation, revenue recognition, fair value measurements, share-based compensation, performance fee-related compensation, and accounting for income taxes, all requiring significant judgment and assumptions[464] - Consolidation involves assessing variable interest entities (VIEs) and determining the primary beneficiary, while revenue recognition follows ASC 606, depicting the transfer of promised goods or services[465][466][467][468][469] - Fair value measurements use a hierarchical framework (Levels 1, 2, 3), and income taxes are accounted for using the asset and liability method, recognizing deferred tax assets and liabilities[476][477][478][483][484] Recent Accounting Pronouncements Recent accounting pronouncements include adopted ASUs with no material impact and upcoming lease standards adoption - The company adopted ASU 2018-17 (Consolidations), ASU No. 2018-13 (Fair Value Measurement), and ASU 2019-12 (Income Taxes) in 2020 and 2021, with no material impact on financial statements[616][617][618] - ASU 2016-02 (Leases) and ASU 2018-11 (Leases) will be adopted on January 1, 2022, using the modified retrospective method, expected to result in recording a right-of-use asset and lease liability of approximately 2% and 5% of total assets and liabilities, respectively, as of December 31, 2021[619][621] - ASU 2016-13 (Financial Instruments—Credit Losses) is effective after December 15, 2022, and is not expected to have a material impact[622] JOBS Act As an 'emerging growth company' under the JOBS Act, Bridge benefits from reduced disclosure requirements - As an 'emerging growth company' (EGC) under the JOBS Act, Bridge can take advantage of an extended transition period for complying with new or revised accounting standards[489] - EGC status allows for reduced disclosure requirements, such as only two years of audited financial statements and no auditor attestation for internal control over financial reporting under Section 404(b) of Sarbanes-Oxley[259] - The company will remain an EGC until the earliest of five years post-IPO, reaching $1.07 billion in annual gross revenue, issuing $1.0 billion in non-convertible debt, or becoming a 'large accelerated filer'[491] Item 7A. Quantitative and Qualitative Disclosures About Market Risk This section details exposure to market, interest rate, credit, and foreign exchange risks, and their management Market Risk Predominant market risk relates to fund investment fair value movements, with management fees less impacted by these changes - The predominant market risk exposure is related to the company's role as general partner or investment manager for specialized funds, with sensitivities to movements in the fair value of their investments[493] - Management fee and advisory fee revenue is not significantly impacted by changes in investment values, as it is generally based on commitments or invested capital[493] Interest Rate Risk The company has limited interest rate risk, with no derivative financial instruments used for management - As of December 31, 2021, the company had limited interest rate risk, with $52.0 million in non-interest-bearing accounts and $26.4 million in interest-bearing accounts[494] - Bridge does not engage in investments for trading or speculative purposes and has not used derivative financial instruments to manage interest rate risk exposure[494] Credit and Counterparty Risk Credit and counterparty risk arises from potential investor defaults and reliance on reputable financial institutions - The company is exposed to the risk of fund investors defaulting on payments and depends on counterparties to meet agreement terms for financial services and transactions[495] - To minimize risk, Bridge generally limits its counterparties to reputable financial institutions[495] Foreign Exchange Rate Risk Foreign exchange rate risk is not material due to limited foreign assets or non-USD transactions - Bridge does not possess significant assets in foreign countries or engage in material transactions in currencies other than the U.S. dollar[496] - Therefore, changes in exchange rates are not expected to materially impact the company's financial statements[496] Item 8. Financial Statements and Supplementary Data This section presents audited consolidated and combined financial statements for 2019-2021, including balance sheets and cash flows - The section includes the Report of Independent Registered Public Accounting Firm, Consolidated and Combined Balance Sheets, Statements of Operations, Comprehensive Income, Changes in Shareholders'/Members' Equity, and Cash Flows[497] - These financial statements are presented for the years ended December 31, 2021, 2020, and 2019, and are accompanied by detailed Notes to Consolidated and Combined Financial Statements[497] Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure There are no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in and disagreements with accountants on accounting and financial disclosure[736] Item 9A. Controls and Procedures This section details disclosure controls and procedures, management's report on internal control, and changes, noting EGC status Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures Disclosure controls and procedures were concluded to be effective as of December 31, 2021 - As of December 31, 2021, the company's Chief Executive Officer and Chief Financial Officer concluded that its disclosure controls and procedures were effective[738] Management's Report on Internal Control over Financial Reporting Management's report on internal control over financial reporting omits attestation due to EGC status - The report does not include management's assessment or an attestation report from the registered public accounting firm on internal control over financial reporting due to the company's status as an 'emerging growth company' under the JOBS Act[739][740] Changes in Internal Control Over Financial Reporting No material changes in internal control over financial reporting occurred during the three months ended December 31, 2021 - There have been no changes in internal control over financial reporting during the three months ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[741] Item 9B. Other Information This item states that there is no other information to report Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company PART III Item 10. Directors, Executive Officers and Corporate Governance Information on direct