Bridge Investment (BRDG) - 2022 Q4 - Annual Report

Cautionary Note Regarding Forward-Looking Statements This section outlines inherent uncertainties and risks associated with future-looking statements Certain Definitions This section provides key terms and their definitions used throughout the report Risk Factor Summary This section summarizes the principal risks that could impact the company's business and financial performance PART I This part covers the company's business, risk factors, and unresolved staff comments Item 1. Business Bridge Investment Group Holdings Inc. is a leading, vertically integrated real estate investment manager with approximately $43.3 billion in Assets Under Management (AUM) as of December 31, 2022, focusing on generating alpha through a high-touch owner-operator approach - Bridge Investment Group is a vertically integrated real estate investment manager with approximately $43.3 billion of AUM as of December 31, 2022[100] - The company employs a specialized, vertically integrated model spanning 12 investment platforms across real estate equity and debt strategies, including Multifamily, Workforce and Affordable Housing, Seniors Housing, Office, Development, Net Lease Income, Logistics, Debt Strategies, Agency MBS, Single-Family Rental, PropTech, and Renewable Energy[37][102] - Growth strategy focuses on strengthening and expanding the fund investor network, adding complementary investment products across risk profiles and yield objectives, and expanding distribution capabilities domestically and internationally[11][13][15][28][29][30][31][32] - The company is committed to fostering a culture of diversity and inclusion, with initiatives like annual diversity awareness training, a DE&I Committee, and employee resource groups[66][67][71][72][75][76] - Bridge integrates ESG across operations, is a signatory to UNPRI, and has received awards for its Workforce and Affordable Housing funds' social impact[78][79][80][391] Overview Market Opportunity Competitive Strengths Growth Strategy Our Organizational Structure Our Investment Platforms Our Investment and Asset Management Process Structure and Operation of Our Investment Vehicles Our Fund Investors Capital Invested In and Alongside Our Investment Vehicles Human Capital Management Environmental, Social and Governance ("ESG") Commitment Competition Regulatory and Compliance Available Information Website and Social Media Disclosures Item 1A. Risk Factors This section outlines significant risks that could materially affect the company's business, financial condition, results of operations, and cash flows - Historical performance of fund investments may not be indicative of future results due to changing market conditions, increased competition, and the early stage of newer funds[96][135][141] - Valuation methodologies for illiquid assets held by funds are highly subjective, and realized values may differ significantly from estimated fair values, potentially impacting revenue and fundraising[96][144][145][146] - Revenues are exposed to risks inherent in real estate ownership and development, including economic conditions, interest rates, supply/demand changes, environmental liabilities, and natural disasters[96][150][151][152] - Cybersecurity risks and data breaches could lead to data loss, business interruptions, reputational damage, regulatory actions, and financial losses, with the company having experienced a cyber-attack in 2017[96][179][180][186][188] - The company's principal asset is its interest in the Operating Company, making it dependent on distributions from the Operating Company to pay taxes, expenses (including TRA payments), and dividends to Class A common stockholders[96][216][218] - The Tax Receivable Agreement (TRA) requires substantial cash payments to Continuing Equity Owners, potentially exceeding actual tax benefits or accelerating payments upon certain events, impacting liquidity[219][221][223][231][749] - The dual-class stock structure, with Continuing Equity Owners controlling over 95% of voting power, may result in a lower or more volatile market price for Class A common stock and exclusion from certain stock indices[227][229][236][237] Item 1B. Unresolved Staff Comments This section indicates that there are no unresolved staff comments applicable to the company's filings - No unresolved staff comments are applicable[274] PART II This part details properties, legal proceedings, mine safety, market for common equity, and management's discussion and analysis Item 2. Properties The company's headquarters are in Salt Lake City, Utah, with other principal operations in New York, California, Florida, Georgia, Virginia, and North Carolina, all leased and considered adequate - The company's headquarters are in Salt Lake City, Utah, with other principal operations in New York, California, Florida, Georgia, North Carolina, and Virginia[275] - All office facilities are leased and considered suitable and adequate for business operations[275] Item 3. Legal Proceedings The company is not currently subject to any pending legal proceedings expected to have a material impact on its business, financial statements, or results of operations - 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[276] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[277] Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's Class A common stock trades on the NYSE under "BRDG," with a closing price of $14.07 per share as of February 22, 2023, and quarterly dividends of $1.04 per share paid in 2022 - Class A common stock is traded on the NYSE under the symbol "BRDG"; no public market for Class B common stock[280] - The company declared and paid quarterly dividends of $1.04 per share of Class A common stock in 2022, totaling $30.2 million[281][595] - Future dividends are at the sole discretion of the board of directors and depend on the Operating Company's financial results and cash flows[284][285][287] Class A Common Stock Price and Holders (as of Feb 22, 2023) | Metric | Value | | :---------------------- | :---------- | | Last Reported Sale Price| $14.07 | | Holders of Record | 57 | Class A Common Stock Outstanding (as of Feb 22, 2023) | Class of Stock | Shares Outstanding | | :---------------------- | :----------------- | | Class A common stock | 32,641,060 | | Class B common stock | 85,301,127 | Cumulative Stockholder Return (July 16, 2021 - Dec 31, 2022) | Index | July 16, 2021 | Dec 31, 2021 | Dec 31, 2022 | | :------------------------------------ | :------------ | :----------- | :----------- | | Bridge Investment Group Holdings Inc. | $100 | $161 | $83 | | Dow Jones U.S. Asset Managers Index | $100 | $111 | $84 | | S&P 500 Index | $100 | $111 | $91 | Item 6. Reserved This item is reserved and contains no information - Item 6 is reserved[293] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting its status as a vertically integrated real estate investment manager with $43.3 billion in AUM as of December 31, 2022, and detailing recent strategic events and market trends - Bridge Investment Group is a leading, vertically integrated real estate investment manager with approximately $43.3 billion of AUM as of December 31, 2022[295] - The company operates as a single business segment: real estate investment management[296][520] - Recent events include the acquisition of Gorelick Brothers Capital's asset and property management business in January 2022, launching the Single-Family Rental (SFR) platform, and the launch of Renewable Energy and PropTech investment strategies in 2022[297][298][299][554] - In February 2023, affiliates of Bridge entered a definitive agreement to acquire substantially all assets of Newbury Partners LLC, a private equity secondaries market investment manager, for $320.1 million in cash, expected to close in H1 2023[301][621] - Global markets experienced significant volatility in 2022 due to persistent inflation, rising interest rates, slowing economic growth, and geopolitical uncertainty, creating headwinds for fundraising and capital deployment[305][310] Overview Business Segment Recent Events Trends Affecting Our Business Key Financial Measures Revenues Expenses Other Income (Expense) Operating Metrics Our Performance Results of Operations Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 In 2022, total revenues increased by 24% to $409.0 million, driven by a 42% rise in fund management fees, while total investment income decreased by 44% due to a 54% decrease in unrealized performance allocations - Fund management fees increased by $65.7 million (42%) due to a 30% increase in fee-earning AUM, largely from new fund launches in 2021 and 2022[365] - Transaction fees decreased by $18.9 million (25%) due to a slowdown in commercial real estate transactions in the second half of 2022, attributed to volatility in debt capital markets[370] - Unrealized performance allocations decreased by $133.5 million (54%), largely due to the reversal of realized performance allocations income from dispositions in Bridge Multifamily Fund III and Bridge Debt Strategies Funds II and III, partially offset by market appreciation from newer funds[373][374] - Employee compensation and benefits increased by $53.9 million (38%) due to a $43.3 million increase in salaries, bonuses, and benefits from higher headcount and a $10.6 million increase from share-based compensation awards[377] - General and administrative expenses increased by $16.3 million (66%) due to higher insurance, professional services, software licensing fees, travel costs, and public company/acquisition-related costs[381] - Interest expense increased by $3.8 million (45%) due to the funding of $150 million in private placement notes in July 2022 with a weighted-average interest rate of 5.05%[20][382] Total Revenues (2022 vs 2021) | Revenue Type | 2022 ($ thousands) | 2021 ($ thousands) | Amount Change ($ thousands) | % Change | | :----------------------------------------- | :----------------- | :----------------- | :-------------------------- | :------- | | Fund management fees | 221,584 | 155,928 | 65,656 | 42% | | Property management and leasing fees | 76,210 | 69,654 | 6,556 | 9% | | Construction management fees | 10,973 | 8,292 | 2,681 | 32% | | Development fees | 4,688 | 3,703 | 985 | 27% | | Transaction fees | 56,205 | 75,073 | (18,868) | (25%) | | Fund administration fees | 15,031 | — | 15,031 | N/A | | Insurance premiums | 12,856 | 10,051 | 2,805 | 28% | | Other asset management and property income | 11,502 | 7,313 | 4,189 | 57% | | Total revenues | 409,049 | 330,014 | 79,035 | 24% | Total Investment Income (2022 vs 2021) | Investment Income Type | 2022 ($ thousands) | 2021 ($ thousands) | Amount Change ($ thousands) | % Change | | :------------------------------------- | :----------------- | :----------------- | :-------------------------- | :------- | | Incentive fees | — | 2,469 | (2,469) | (100%) | | Performance allocations: Realized | 69,280 | 80,970 | (11,690) | (14%) | | Performance allocations: Unrealized | 115,175 | 248,647 | (133,472) | (54%) | | Earnings from investments in real estate | 2,169 | 2,132 | 37 | 2% | | Total investment income | 186,624 | 334,218 | (147,594) | (44%)| Total Expenses (2022 vs 2021) | Expense Type | 2022 ($ thousands) | 2021 ($ thousands) | Amount Change ($ thousands) | % Change | | :------------------------------------ | :----------------- | :----------------- | :-------------------------- | :------- | | Employee compensation and benefits | 196,629 | 142,707 | 53,922 | 38% | | Incentive fee compensation | — | 215 | (215) | (100%) | | Performance allocations compensation: Realized | 4,396 | 6,611 | (2,215) | (34%) | | Performance allocations compensation: Unrealized | 24,870 | 31,069 | (6,199) | (20%) | | Loss and loss adjustment expenses | 6,520 | 8,075 | (1,555) | (19%) | | Third-party operating expenses | 25,675 | 33,427 | (7,752) | (23%) | | General and administrative expenses | 41,070 | 24,815 | 16,255 | 66% | | Depreciation and amortization | 2,936 | 2,830 | 106 | 4% | | Total expenses | 302,096 | 249,749 | 52,347 | 21% | Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 In 2021, total revenues increased by 42% to $330.0 million, driven by a 41% rise in fund management fees and a 91% surge in transaction fees, while total investment income significantly increased by 219% - Fund management fees increased by $45.7 million (41%) due to new fund launches and capital raises, contributing to a 31% increase in fee-earning AUM[387][395] - Transaction fees increased by $35.8 million (91%), driven by a $29.6 million increase in due diligence fees from deploying $4.5 billion of capital and a $6.2 million increase in debt origination fees[397] - Performance allocations increased by $225.4 million (216%), primarily due to market appreciation from multifamily and workforce and affordable housing real estate equity funds and favorable market conditions in debt funds[400] - Employee compensation and benefits increased by $41.8 million (41%) due to a $26.4 million increase in salaries, benefits, and bonuses from increased headcount, and a $15.4 million increase from profits interests awards and Restricted Stock/RSUs issued in connection with the IPO[402] - General and administrative expenses increased by $7.6 million (44%) due to higher insurance and professional fees related to becoming a publicly traded company, increased overhead from capital deployment, and transaction costs for the GBC Acquisition[406] - Interest expense increased by $3.4 million (68%) due to increased indebtedness under the 2020 Private Placement Notes[729] Total Revenues (2021 vs 2020) | Revenue Type | 2021 ($ thousands) | 2020 ($ thousands) | Amount Change ($ thousands) | % 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% | Total Investment Income (2021 vs 2020) | Investment Income Type | 2021 ($ thousands) | 2020 ($ thousands) | Change ($ thousands) | % Change | | :------------------------------------- | :----------------- | :----------------- | :------------------- | :------- | | Incentive fees | 2,469 | — | 2,469 | NA | | Performance allocations: Realized | 80,970 | 42,365 | 38,605 | 91% | | Performance allocations: Unrealized | 248,647 | 61,803 | 186,844 | 302% | | Earnings from investments in real estate | 2,132 | 522 | 1,610 | 308% | | Total investment income | 334,218 | 104,690 | 229,528 | 219% | Total Expenses (2021 vs 2020) | Expense Type | 2021 ($ thousands) | 2020 ($ thousands) | Amount Change ($ thousands) | % Change | | :------------------------------------ | :----------------- | :----------------- | :-------------------------- | :------- | | Employee compensation and benefits | 142,707 | 100,932 | 41,775 | 41% | | Incentive fee compensation | 215 | — | 215 | N/A | | Performance allocations compensation: Realized | 6,611 | 4,281 | 2,330 | 54% | | Performance allocations compensation: Unrealized | 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% | Non-GAAP Financial Measures Liquidity and Capital Resources Critical Accounting Estimates JOBS Act Item 7A. Quantitative and Qualitative Disclosures About Market Risk PART III This part presents the audited financial statements and supplementary data Item 8. Financial Statements and Supplementary Data This section presents the audited consolidated and combined financial statements for Bridge Investment Group Holdings Inc. for the years ended December 31, 2022, 2021, and 2020, including balance sheets, statements of operations, comprehensive income, changes in equity, cash flows, and extensive notes - The financial statements are prepared in accordance with GAAP and include consolidated and combined statements for 2022, 2021, and 2020[311][450][771] - The company adopted ASC 842 (Leases) on January 1, 2022, recording a right-of-use (ROU) asset of $13.7 million and a lease liability of $15.8 million, with no material impact on the consolidated statement of operations[462] - Goodwill increased significantly from $9.8 million in 2021 to $56.0 million in 2022, primarily due to the GBC Acquisition, which was accounted for as a business combination[420][842] - The company's effective tax rate was 7.53% in 2022, 1.98% in 2021, and 1.20% in 2020, lower than the statutory rate due to income allocation to non-controlling interests and the company not being subject to U.S. federal taxes prior to the IPO[907] Consolidated Balance Sheet Highlights (as of Dec 31, 2022 vs 2021) | Metric | 2022 ($ thousands) | 2021 ($ thousands) | | :-------------------------- | :----------------- | :----------------- | | Total assets | 1,154,835 | 846,292 | | Cash and cash equivalents | 183,576 | 78,417 | | Accrued performance allocations | 554,723 | 439,548 | | Goodwill | 55,982 | 9,830 | | Total liabilities | 508,516 | 296,555 | | Notes payable | 297,294 | 148,142 | | Total shareholders' equity | 646,319 | 549,737 | Consolidated and Combined Statements of Operations Highlights (2022 vs 2021 vs 2020) | Metric | 2022 ($ thousands) | 2021 ($ thousands) | 2020 ($ thousands) | | :-------------------------- | :----------------- | :----------------- | :----------------- | | Total revenues | 409,049 | 330,014 | 231,948 | | Total investment income | 186,624 | 334,218 | 104,690 | | Total expenses | 302,096 | 249,749 | 166,193 | | Income before tax provision | 294,565 | 416,889 | 167,463 | | Net income | 272,370 | 408,627 | 166,457 | | Basic and Diluted EPS | $0.92 | $0.93 | — | Consolidated and Combined Statements of Cash Flows Highlights (2022 vs 2021 vs 2020) | Cash Flow Activity | 2022 ($ thousands) | 2021 ($ thousands) | 2020 ($ thousands) | | :---------------------------------- | :----------------- | :----------------- | :----------------- | | Net cash provided by operating activities | 228,353 | 209,224 | 130,096 | | Net cash used in investing activities | (21,883) | (114,259) | (47,813) | | Net cash used in financing activities | (97,077) | (118,447) | (35,039) | | Net increase (decrease) in cash | 109,393 | (23,482) | 47,244 | Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2022 and 2021 Consolidated and Combined Statements of Operations for the Years Ended December 31, 2022, 2021, and 2020 Consolidated and Combined Statements of Comprehensive Income for the Years Ended December 31, 2022, 2021, and 2020 Consolidated and Combined Statements of Changes in Shareholders'/Members' Equity for the Years Ended December 31, 2022, 2021, and 2020 Consolidated and Combined Statements of Cash Flows for the Years Ended December 31, 2022, 2021, and 2020 Notes to Consolidated and Combined Financial Statements 1. ORGANIZATION 2. SIGNIFICANT ACCOUNTING POLICIES 3. REVENUE 4. MARKETABLE SECURITIES 5. INVESTMENTS 6. NOTES RECEIVABLES FROM AFFILIATES 7. FAIR VALUE MEASUREMENTS 8. INTANGIBLE ASSETS 9. BUSINESS COMBINATION AND GOODWILL 10. INSURANCE LOSS RESERVES AND LOSS AND LOSS ADJUSTMENT EXPENSES 11. SELF-INSURANCE RESERVES 12. GENERAL PARTNER NOTES PAYABLE 13. LINE OF CREDIT 14. NOTES PAYABLE 15. REALIZED AND UNREALIZED GAINS (LOSSES) 16. INCOME TAXES 17. SHAREHOLDERS' EQUITY 18. COMMITMENTS AND CONTINGENCIES 19. VARIABLE INTEREST ENTITIES 20. RELATED PARTY TRANSACTIONS 21. SHARE-BASED COMPENSATION AND PROFITS INTERESTS 22. EARNINGS PER SHARE 23. SUBSEQUENT EVENTS Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in or disagreements with accountants on accounting and financial disclosure[623] Item 9A. Controls and Procedures The company's management concluded that disclosure controls and procedures were effective as of December 31, 2022, and as an "emerging growth company," it is exempt from external attestation on internal control over financial reporting - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2022[653][675] - As an "emerging growth company" under the JOBS Act, the company's independent public accounting firm is not required to attest to the effectiveness of internal control over financial reporting[654][676] - There have been no changes in internal control over financial reporting during the three months ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[655][677] Item 9B. Other Information This item states that there is no other information to report - No other information is reported under this item[655] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable[655] PART III This part covers directors, executive compensation, security ownership, related transactions, and principal accountant fees Item 10. Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information for this item is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[657][679] Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information for this item is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[658][679] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information for this item is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[659][679] Item 13. Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships and related transactions, and director independence, is incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information for this item is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[660][679] Item 14. Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information for this item is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[350][661][679] PART IV This part lists exhibits, financial statement schedules, and the Form 10-K summary Item 15. Exhibit and Financial Statement Schedules This section lists the financial statements and exhibits filed as part of the 10-K report, including the Report of Independent Registered Public Accounting Firm, Consolidated and Combined Statements, and an Exhibit Index - The report includes the Report of Independent Registered Public Accounting Firm, Consolidated and Combined Statements of Operations, Cash Flows, and Comprehensive Income[662][680] - All financial statement schedules not required or inapplicable have been omitted[662] - An Exhibit Index details various corporate documents, including the Amended and Restated Certificate of Incorporation, Bylaws, Tax Receivable Agreement, Stockholders Agreement, and the 2021 Incentive Award Plan[663][682] Item 16. Form 10-K Summary This item indicates that there is no Form 10-K Summary provided - No Form 10-K Summary is provided[666] SIGNATURES This section contains the official signatures for the report filing