Bridge Investment Group Holdings Inc. (NYSE:BRDG) Q2 2022 Earnings Conference Call August 9, 2022 8:30 AM ET
Company Participants
Bonni Rosen – Investor Relations Officer
Robert Morse – Executive Chairman
Jonathan Slager – Chief Executive Officer
Katie Elsnab – Chief Financial Officer & Chief Accounting Officer
Dean Allara – Head of Client Solutions Group & Vice Chairman of the Board
Conference Call Participants
Ken Worthington – JPMorgan
Michael Cyprys – Morgan Stanley
Finian O’Shea – Wells Fargo
Operator
Greetings. Welcome to the Bridge Investment Group’s Second Quarter 2022 Earnings Call and Webcast. [Operator Instructions] Please note that this conference is being recorded.
I will now turn the conference over to your host, Bonni Rosen, Head of Shareholder Relations. You may begin.
Bonni Rosen
Good morning, everyone. Welcome to the Bridge Investment Group second quarter 2022 financial results conference call. Our prepared remarks include comments from our Executive Chairman, Robert Morse; Chief Executive Officer, Jonathan Slager; and Chief Financial Officer, Katie Elsnab. We will hold a Q&A session following the prepared remarks, during which Dean Allara, Vice Chairman and Head of the Client Solutions Group, will join.
During the call, we will discuss certain non-GAAP financial metrics. The reconciliation of the non-GAAP metrics are provided in the appendix of our supplemental slides. The supplemental materials are accessible on our IR website, at ir.bridgeig.com. These slides can be found under the Presentations portion of the site, along with the second quarter earnings call event link. They are also available live during the webcast.
It is now my pleasure to turn the call over to Bob.
Robert Morse
Thank you, Bonni, and welcome to all. Bridge reported excellent results for the second quarter, our best quarter ever for distributable earnings, with strong growth across our key financial metrics.
Distributable earnings per share increased 28% year-over-year to $0.32 a share, driven by the consistent growth in management fee revenue and one of our strongest quarters for realized performance fees. Fee-related earnings to the operating company increased 62% year-over-year to $40.5 million. Gross AUM is about $42 billion and fee-earning AUM increased 44% year-over-year to $15.5 billion.
In addition to the strong financial performance, Bridge strengthened its balance sheet via the private placement issuance of $150 million of senior notes, half with a 10-year tenor and half with a 12-year tenor. And we coupled that with an expanded senior secured revolving credit facility of $125 million, with the potential to increase to $225 million in certain circumstances, giving Bridge enhanced liquidity and flexibility.
The market environment has become more turbulent recently, with markets impacted globally by concerns around numerous macro issues including high inflation, aggressive Fed actions and continuing geopolitical risks. The impact of these factors on various markets differs, although all markets, including those in which Bridge participates, have been affected.
For the most part, many of our specialized investment strategies are resilient and in the past have proven to be recession-resistant. Residential rental investments in the U.S., which underpin our multifamily, workforce and affordable housing, single family for-rent and debt strategies investment theses and constitute approximately 85% of our gross AUM, continued to perform well. However, the market turmoil has begun to impact transaction volumes, which have slowed as both buyers and sellers seek price certainty and higher interest rates have made financing more challenging.
The U.S. labor market remains a bright spot for the economy, with the unemployment remaining near record lows. Importantly, nominal wage growth continues to hold up, along with consumer balance sheets. For residential rental real estate, in general, these strengths help to offset the challenges mentioned earlier.
While acknowledging near-term challenges, we continue to have conviction in our views of the investment environment, and our strategies are designed to address and benefit from these themes. First, the U.S. is the preeminent investment destination, and thematic-driven investing in real assets in the U.S. provides our limited partner base with exposure to and safety in flight-to-quality opportunities in these turbulent times. We see this reflected in the continued demand for U.S. exposure by numerous international investors, and we have continued to expand our abilities to access this capital.
Second, housing is critically undersupplied and new development is more difficult in the current environment, which should exacerbate the supply-demand imbalance over time. At Bridge, since 2018, we have invested significantly in our development capabilities, have grown a team of 42 professionals focused on this market and are currently pursuing 76 development projects virtually all in the multifamily sector.
The housing shortage in the U.S. impacts disproportionately the underserved middle class and workforce cohorts in the U.S., and our significant investments in these sectors are expected to perform well, as they are resilient and recession-resistant.
For context, in our 112 multifamily investments in our current and predecessor funds, Bridge has never lost a dollar of capital and has returned a 2.4x multiple of capital on realized investments. We are especially pleased to see our robust execution in multifamily continue through these past few years of market dislocation, with a 3.1x multiple of capital since the first quarter of 2020.
Third, the U.S. has substantial infrastructure needs to facilitate the sustained growth of e-commerce, onshoring and the normalization of U.S. supply chains. And since the launch of our logistics value-add investment program Bridge has invested nearly $900 million into attractive assets in critical nodes of the U.S. infrastructure system. We have launched the second vintage of this fund and expect to continue to grow our exposure in this area. Some may have seen our recent press releases in which we detail some of the attractive assets we have been able to acquire, often in noncompetitive situations.
Last, notwithstanding recent and expected increases in interest rates, there is a global hunt for sustainable yield without a huge amount of risk which increasingly is satisfied by alternative credit vehicles, as demonstrated by our strong final closing in Debt Strategies Fund IV of $2.9 billion, ongoing carefully structured and hedged investments in AMBS which generate attractive yield and early successes in the Bridge Net Lease Income vehicles.
Bridge has always focused our fundraising and investment in markets and properties underpinned by the long-tailed secular demand drivers I’ve just described. Subsequent to quarter-end, Bridge launched 2 new strategies, Bridge Solar and Bridge Ventures, that we believe will complement our existing investment vehicles.
The Bridge Solar strategy seeks to meet the growing demand for green energy while at the same time providing asset owners with a discount to market energy prices, all while addressing the urgent need to accelerate the delivery of renewable energy. Bridge has partnered with Lumen Energy, a leader in clean energy software and energy project development process technology, to offer best-in-class design, procurement, construction and operation of solar projects on properties owned by Bridge-managed funds and third-party assets.
Our national footprint and local expertise, combined with Lumen’s data-driven technology, will offer attractive efficiencies in the analysis and implementation of solar in a high-demand market that has been largely untapped. Additionally, we see demand from investors seeking ESG solutions for their real estate portfolio as regulators implement new roles.
Our near-term goals include the development of 700 megawatts of clean energy, the equivalent of over 400,000 tons of coal usage, and the creation of a distributed network of power generation. Small-scale solar installations on commercial real estate have addressed only about 5% of potential, and we believe the market is ripe for further expansion while offering significant returns to investors. Our strategy and execution is the result of about 2 years of planning, and we are very excited about the launch.
The Bridge Ventures strategy will target PropTech investment opportunities. Bridge is uniquely positioned as a forward-integrated PropTech investor to leverage its platform and vast industry relationships to access and profitably invest in compelling PropTech companies. Our Chief Investment Officer, Jeremy Ford, and the Bridge Ventures team bring over 25 years of relevant experience in technology, real estate investing and building and operating high-growth technology companies. With the recent retreat in venture pricing, we believe it is a great time to be entering this market.
We’re excited to expand into these segments where we see growth potential for our business and have already generated strong interest from new and existing investors. We believe that Bridge is well positioned in the current environment to continue to perform for our investors and for our shareholders with our resilient and recession-resistant investment strategies. Our forward integration into property management positions Bridge as a best-in-class operator driving alpha and differentiated results across our existing portfolio. We have successfully raised capital in many of our investment vehicles to continue to invest in a buyer’s market and have significant dry powder. In past downturns, Bridge has executed cautious but continued deployment to take advantage of opportunities as they arise in a turbulent market.
Finally, as mentioned, we are in a strong position from a capital and balance sheet perspective to perform well while the broader markets work through challenges.
With that, let me turn the call over to Jonathan to further detail our results and strategy.
Jonathan Slager
Thank you, Bob, and good morning, everyone. Bridge delivered another strong quarter, with solid fundraising, deployment and realized performance fees. We are a premier real estate investment manager with many of our funds ranked in the top quartile by Preqin. This has contributed to our continued fundraising success, resulting in $1.5 billion of inflows during the quarter, bringing us to $2.6 billion year-to-date, which is $1.4 billion ahead of where we were during the same time frame in 2021.
Second quarter results included the strong final closing of Debt Strategies Fund IV, in which we raised $2.9 billion in total equity commitments, almost 2x the amount raised in Debt Strategies III. Of note, $830 million of this capital is not yet included in fee-earning AUM until it’s deployed.
Our Workforce and Affordable Housing Fund II will have its final closing in the third quarter, and we look forward to announcing the final results of a very strong capital raise. These impressive results in our capital raising successes are reflected in our higher ranking by PERE of the global private equity real estate firms for capital raise, where we rose from number 19 to number 13. This ranking is based on the amount of equity raised for discretionary value-add or opportunistic real estate strategies between January 2017 through the end of March 2022 and do not include the amounts raised in our fixed income-focused verticals. These results position Bridge as one of the most successful real estate investment managers globally in attracting capital.
Diversity of fundraising sources is a meaningful strength of our company. We have a healthy mix of both retail and institutional investors, with 37% of new commitments in Q2 from individual investors and 63% from institutions.
As we have expanded our capital raising activity internationally, I am pleased to report our AIFM license in Luxembourg was approved as of this July. This important milestone allows us to expand our marketing efforts in Europe in a more direct and efficient manner. 55% of our new commitments in the quarter came from international clients. Despite some meaningful headwinds, our capital raising success in the second quarter is a result of the strong performance we continue to deliver to our investors.
We recognize that in a turbulent market environment investors are more cautious and have less capital capacity, whether due to the so-called denominator effect or simply a wait-and-see attitude prior to committing capital. That said, due to the attractiveness of our sectors and our performance track record, we believe that we are well positioned to continue to raise capital and outperform other alternative managers as we navigate the current environment. This certainly was evidenced during Q2, as we welcomed 15 new institutional investors into our roster, meaningfully furthered our relationship with key consultants and broadened the global network of investors with which we have a strong and consistent dialogue.
Over the quarter, fee-earning AUM grew 6% to $15.5 billion, which is up 44% compared to a year ago. We also had one of our largest quarters for realized performance fees, at $33.6 million. This was driven mostly by Multifamily Fund III, which is in Year 7 of its anticipated 8-year term. We plan to continue to monetize assets during 2022 and 2023, as we see continued strong interest in well-run, stabilized and fully occupied multifamily assets.
We also had an active quarter in the transaction side of the business, with $938 million deployed across all of our funds. More recently, we’ve observed a slowdown in commercial real estate transactions. In many cases, we are seeing transactions coming to us at very attractive pricing after more aggressive but less experienced investors fail. Sellers appreciate the certainty of close with a best-in-class manager, which in this market drives deal flow at more favorable pricing.
While debt markets were volatile in the quarter, our internal Debt Capital Markets Group helped us manage our financing costs, leveraging our strong relationships with national and regional banks. In our carefully curated high-growth markets, we continue to be a selective buyer and underwrite conservatively while deploying into high-quality assets in strong locations, always at a discount to replacement costs.
One of the biggest challenges for real estate is the volatility and overall contraction of the debt markets, which is impacting investors’ ability to obtain well-priced leverage in the capital stack of individual assets. We’ve seen significant slowdowns in securitizations, which provide liquidity to the debt capital markets. This has had a chilling effect on the confidence of lenders, resulting in higher spreads and lower leverage overall. While we do think these markets will recover in the near to midterm, until they do, this will continue to impact transaction volumes and pricing. As a result, we have a more cautious view of transaction revenue for the third and fourth quarters. We hope to see some recovery before year-end.
Bridge continues to see positive fundamentals in our specialized strategies, particularly in our residential and logistics verticals, which are supported by long-term secular demand drivers. Housing stock in the U.S. remains chronically undersupplied, which has only intensified with the recent increase of interest rates. Similarly, penetration of e-commerce and onshoring in the United States will continue to reshape how consumer goods are distributed for years to come. These dynamics are contributing to meaningful rent growth, which continues to outpace inflation. Our multifamily portfolios generated rent increases of 19% during the second quarter.
In logistics, we’ve seen substantial rent growth across our core global gateway markets, well above expectations. Rental rates on executed leases and those in late-stage negotiations have exceeded pro forma by 27% on assets acquired in the last 12 months, providing significant support to our underwritten yields.
As you have heard from Bob earlier, Bridge continues to add investment strategies, such as Bridge Solar and Bridge Ventures, while we execute and scale our existing business focused on some of the most attractive sectors within real estate. This point is illustrated well by our most recent vintage of Bridge Debt Strategies, which raised almost 2x the capital commitments of its predecessor.
Our second vintage of our Workforce and Affordable Housing Fund will be substantially larger than its predecessor, and Multifamily Fund V is expected to be significantly larger than Multifamily Fund IV.
We are incredibly proud of these results and see a long runway ahead with a large and growing total addressable market of U.S. real estate approximating $25 trillion today.
Over to you, Katie.
Katie Elsnab
Thanks, Jonathan, and good morning, everyone. Our strong performance continued into Q2. GAAP net income to the operating company was $124.4 million, versus $83.2 million in the prior year, and our GAAP earnings per share was $0.44.
Most importantly, reoccurring fund management fees continue their consistent growth, which provides our investors with a true perspective on the underlying growth and stability of our business. Reoccuring fund management fees grew to $49.4 million, up from $34.5 million a year ago, an increase of 43% year-over-year and a 44% compounded growth rate over the last 5 years. This outstanding growth have been driven by the scaling of existing strategies and expansion into new verticals.
In this more volatile macro environment, our business has proven to be durable and resilient. Our management fees are long-duration in nature, with an tenure of 7.9 years, and are almost entirely from closed-end vehicles with no redemption features. Essentially, all of our fund management fees are based upon either committed or invested capital from our limited partners, and as such, management fees are not subject to market volatility.
Our non-GAAP financial metrics are found on Slide 4 of the investor presentation. As Jonathan mentioned, fee-earning AUM continued on its trajectory of strong double-digit growth, up 44% year-over-year to $15.5 billion and increasing 6% from last quarter. Total fund-level fee revenue for the second quarter increased 32% year-over-year to $67.0 million, which was primarily due to a 43% increase in fund management fees on the higher fee-earning AUM.
Total fee-related revenues grew by 37% over last year to end the quarter at $76.2 million. The performance was driven by continued strong fundraising, fee-earning AUM growth and effective deployment. Total fee-related earnings to the operating company increased 62% year-over-year to $40.5 million, and our fee-related earnings margin was a healthy 52%. Quarter-over-quarter, our margins were impacted by the timing of catch-up and transaction fees.
Pretax distributable earnings to the operating company for the quarter was a record $54.6 million, up 49% compared to a year ago on a pro forma basis. Our after-tax distributable earnings per share increased 28% on a pro forma basis to $0.32 per share and a 14% increase from Q1, representing our best quarter on record. This was driven by all of the components of our business we’ve detailed, including our strong fee-earning AUM growth, fee-related earnings and realized performance allocations.
Bridge declared a dividend of $0.30 per share, in line with our goal to distribute substantially all of distributable earnings to our shareholders. If we turn to investment performance, you can see the value that has been created through our focus on value-add assets in high-growth markets. Realized performance and incentive fees were $33.6 million for the second quarter. The performance fees were driven by realizations in the multifamily vertical. Unrealized performance allocations increased by $70.1 million and includes the impact of the large realizations within the quarter. This brings the unrealized carried interest on the balance sheet to $575.5 million. As a reminder, our accrued performance allocations are recorded one quarter in arrears. As such, the marks recorded as of June 30, 2022, reflect the values as of March 31, 2022.
As Bob mentioned, we strengthened our balance sheet with the issuance of $150 million of senior notes at a weighted-average interest rate of 5.05% and average duration of 11 years. These notes closed in July and, therefore, will be reflected on the balance sheet next quarter. In addition, we refinanced our senior secured revolving credit facility, increasing it from $75 million to $125 million, with an accordion feature for another $100 million. We expect to use these proceeds for general operating purposes and to grow our business.
As we look forward to the second half of the year, we are proud of the business model that we have built. While there are many uncertainties in the world, our experienced vertically integrated teams, specialized focused on the highest-growth property sectors, solid investment performance and our long-duration capital base has positioned us well to continue to generate strong results. Finally, I want to thank each of our employees for their hard work this quarter and express my appreciation to our investors.
With that, I will turn the call back to the operator so that we can take your questions.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question is from Ken Worthington with JPMorgan.
Ken Worthington
Maybe first, can you talk a bit about how you plan to monetize your investment in solar and PropTech? If you can give us some idea how you’re thinking about the funds you plan to launch around those investments and how we should think about sort of timing, size, fee rates, fee sharing with your partners, sort of all of the logistics around monetization.
Robert Morse
Ken, thanks for your question. This is Bob Morse speaking. It’s early days for both of those funds. As I mentioned in my prepared remarks, from a solar perspective this is an initiative we’ve been working on for quite some time. And we are contemplating raising capital to fund our solar investments in a fund format. We think that the appetite for ESG-oriented investments in renewable energy is quite strong. We think that the business case for solar installations on commercial and industrial real estate is very strong. And particularly with the recently passed new Inflation Reduction Act and the climate provisions of the Inflation Reduction Act, the economics of that have gotten just better, not worse, in a lot of respects.
We said we’ve partnered with Lumen Energy. What that translates to is Bridge has made an investment in Lumen Energy. Lumen Energy is a minority GP participant in the fund. And we think that we bring the best of both Bridge and our real estate expertise, our network of assets around the country for which, in many cases, solar is highly applicable, along with the evaluation technology, the knowledge of markets, of regulations, of renewable energy construction management that Lumen brings to be an entity that is better in the aggregate than either one of us would be separately.
How big is the market? It’s a huge market. I don’t think there’s much good statistics on how big the market is, but it certainly is relevant that virtually every commercial real estate asset is worthy of analysis and investigation to understand whether solar is applicable there. Our initial objective, as mentioned, is to build about 700 megawatts of renewable energy, and we hope we can go from there. The fund that we’re launching is a closed-end fund, although it has the flexibility of transforming into other ownership structures over time as well, and we’re in the early stages of raising capital for that fund.
I think the same philosophy is behind the launch of our PropTech fund. We were fortunate to hire a terrific CIO, Jeremy Ford. We interviewed a lot of people. He stood out head and shoulders above everybody else as somebody with deep experience and knowledge of PropTech. Bridge has been investing in selective PropTech opportunities for 4 or 5 years at this point. And we’ve developed on our balance sheet a smattering of PropTech investments which we will be contributing to the fund.
And we think that the combination of Jeremy and his team’s overall knowledge of the venture and PropTech space, the fact that we’re forward-integrated into property management and so we can quickly and, we believe, very accurately assess the viability of proposed technologies in the actual operation and management of commercial real estate, gives us a leg up over a traditional venture investor because we have that forward integration and boots on the ground into property management. Again, this is a vehicle that’s going to be raised in a fund format and will be in the structure of a closed-end fund.
Ken Worthington
Brilliant. And then just maybe on retail, we’ve heard from others throughout earnings season that retail engagement and alternative products sort of slowed from the beginning of the quarter through the end and into July. And we’re also seeing new entrants, generally, outside of real estate use a combination of brand and, in some cases, lower fees to try to penetrate various retail channels. So in terms of retail appetite, what are you seeing in your wealth channels? And is there any dialogue that comes up with your wealth channel distribution partners with regard to fees? Or is that sort of a topic that’s still not really on the table?
Dean Allara
Ken, this is Dean. Great question. We’re obviously reading what you’re reading and it’s publicly available. We’re not seeing any pushback on fees. I mean, just a full stop there from that perspective. Understand that we have QP vehicles, qualified purchaser vehicles. So we’re at the upper end of the retail channel from that perspective. I would say that in the quarter we did fine from that perspective in the retail channel. I would say that we’re seeing continued white space in the RIA retail channel. Said differently, I think we’re going to outperform there year-over-year from that perspective. And we’re actually having dialogue — this week I’m in New York with Bob. We’re meeting with a number of platform retail partners right now and continuing to look at next year and late this year and closing out this year and beyond into next year overall.
So, I think the volatility by the retail investor, in the marketplace that the retail investor has seen, there’s certainly some of that. We’re not seeing quite the growth we saw sort of quarter-over-quarter, year-over-year from that perspective. That’s coming — I see that coming back right now. But more importantly, there is white space in the RIA channel, in particular, as well as we continue to expand into just about every warehouse out there. So it — and no fee pushback at all that we’ve seen at this point in time.
Operator
Our next question is from Michael Cyprys with Morgan Stanley.
Michael Cyprys
Maybe we could start off talking about deployment. You guys alluded to a more challenging backdrop, a tougher financing environment here, leading to a slowdown or an expected slowdown in transactions. I was just hoping you could elaborate a bit around that. What are you seeing out there in the marketplace? How is that impacting your ability to put capital to work? How are you pivoting and navigating yet still able to put capital to work? And what areas are you able to do that and find most compelling in this backdrop?
Robert Morse
Jonathan, do you want to handle that question?
Jonathan Slager
Yes, I do. Nice to hear from you. We are — this is a time when I think maybe Bridge, more than most times, really differentiates itself. And I think what we’re seeing is really a lot less swings at the plate, less pitches thrown at us, if you will, using the baseball analogy, because there’s less product in the market, right? So by definition, that means there’s going to be some slowdown in volume. But offsetting that is a lot fewer competitors. There’s many, many of our fellow investment funds with significant dry powder that are just full-on pencils-down. Literally, almost every one of the regional sponsors who’s counting on equity capital from a fund allocator, they’re pencils-down. And so the field is a little more wide open, I guess, to Bridge.
And what we’re seeing is the assets that are on the market are ones that meet a couple of characters. One is it’s an asset where someone’s bought it years ago. So their basis is very low, and they’re going to do extremely well, and it’s just time for them to monetize. And so even though they are not getting what they might have gotten 3 months ago or 6 months ago, they’re still getting a tremendous return. They’re still willing to go ahead and transact. But what they’re looking for is certainty of execution, a safe pair of hands, someone who will perform in the way that they say. And that is distinctively Bridge’s strong reputation in the markets in which it participates.
With respect to the debt side of the equation, we have a couple of really great advantages. And we talk a lot about Bridge’s vertical integration, but I’ve got to give kudos to our Debt Capital Markets team. They are constantly developing and expanding regional bank relationships. Because some of the larger national money center banks are almost the same way. Considering how large their balance sheets are, they’re very cocooned in. They’re being very conservative. The debt funds right now, because of the challenges in the CLO market and the lack of liquidity for them, they’re being very cocooned in.
So basically, our lenders of choice tend to be regional banks who are looking for opportunities to get with large national sponsors like Bridge and build relationships. And our track record of execution and performing on loans and everything is attractive to them. So we’ve developed some tremendous relationships. We have a lot of flexibility. Obviously, with the way the yield curve is right now, we’re favoring more fixed-rate debt because floating-rate debt requires caps and/or swaps, neither of which looks super attractive to us right now.
And we’re continuing to find deals. Like, literally, just the other day, we were awarded a really attractive multifamily deal that was a relatively newer asset, super high quality, but old enough that there’s quite a bit of opportunity for us to do our value-add play. But with incredibly conservative debt assumptions, it’s still yielding yields that are similar to our historical yields and well below placement cost.
So we’re still out there swinging at the plates, and we think everything that we hit is going to be something we love. And in terms of the volume increasing, it’s not ours to decide, right? It’s a market issue. But I think all of us are believing that after Labor Day we’re going to start to see a little bit more return to that. I still have belief that the back end of the debt markets is going to right itself because it just will as we start to see some stability in long-term rates.
And so if that all happens, I think we’re going to start to see transaction volume pick up pretty significantly. But right now, I think our short answer, which we delivered in our prepared remarks, is that we’re cautious about deployment levels for the next 2 quarters. So we’re just going to see what happens.
Michael Cyprys
Great. And just a follow-up question on capital management. Maybe you could just talk a little bit about the debt issuance that you guys did and upsize in the credit facility, how you’re thinking about potential uses there? And then just more broadly, if you could update us on your thinking around capital management and potential for strategic opportunities in this market backdrop.
Robert Morse
Michael, it’s Bob. Those questions clearly are related. At the beginning of the year, we concluded that we felt that it would be beneficial to have some additional capital on our balance sheet, which prompted our exploration of the private placement markets. And the receptivity was very strong to put some additional capital on our balance sheet. We’re seeing uses of that capital related to GP investments. Having said that, we’re committed to an asset-light model. We’re seeing opportunities like the Gorelick Brothers acquisition that we made continue to manifest themselves. And so we’re confident that we will be able to find appropriate uses for some of that cash on the balance sheet as we think about things.
From a capital management perspective, if I can interpret your question a bit, we are, as I said, committed to a relatively asset-light type of model. Some of our larger investors, particularly some of our larger international investors, have the expectation that there will be perhaps modestly more significant GP investments in our funds going forward than has been the case in the past. Remember, we as an employee group and management team are very closely aligned with our limited partner investors. We, in the past, have funded the majority of the GP investments personally with after-tax dollars. We’re supplementing that with some — we’re continuing that practice, but supplementing that with some balance sheet capital as well, particularly as our fund sizes grow and our investor base grows to include meaningfully more institutions than has been the case in the past.
We alluded to this in the prepared remarks. We brought on 15 new institutional investors in the second quarter, and we’ve been pretty relentless in terms of finding additional opportunities to create relationships with investors. Jonathan, as I, left his vacation in July to travel to a Central Asian sovereign wealth fund meeting. I’m not sure whether we’re going to win that beauty contest or not, but I think it’s indicative of the enthusiasm and fervor with which we’re growing our capital base.
Operator
Our next question is from Finian O’Shea with Wells Fargo.
Finian O’Shea
Just a question on the rent growth you’re seeing. I think you called out multifamily and logistics as being very strong. Can you touch on broadly the other strategies, if there are any parts where performance is slowing or you’re not able to pass on the inflation or higher rents?
Robert Morse
Jonathan, do you want to handle that question?
Jonathan Slager
Sure, Bob. I mean, I think if you look across — certainly, single-family residential is in the same boat. The demand for single-family rental housing is extremely high, particularly as home prices rise and interest rates continue to be higher than they were at their nadir. We’re seeing the affordability of those become more challenging. You’re hearing a slowdown in uptake of people buying the new homes that are coming in. But at the same time, we’re seeing an uptake in people seeking a single-family rental. So that particular strategy is continuing to have tailwinds behind it.
With respect to office, it’s an interesting dynamic, and I think a tale of 2 cities, right? You’re continuing to see some of the gateway markets which have traditionally been the most stable continuing to have really low reoccupancy rates. And questions about — the biggest question about return to work tends to be, I think, in some of the larger corporations. The small to midsize companies I think all have a need to be together, to have collaborative and creative work processes, and that requires office space. And we’re seeing continued demand in terms of that. In terms of rental rate, I think really the kind of offsetting factors have kind of kept rental rates relatively flat. We have some markets where we do see a little bit of rent growth, but for the most part the rental rates are relatively flat. And there’s built-in escalations in a lot of those leases, but probably not sufficient to cover the expense issues today.
And in seniors housing, I think it’s a really interesting space. We look at that space, in particular, as being kind of finally really at the early stages of what has been referred to as the Silver Tsunami. We’re starting to see reoccupancy rates, we’re probably almost at the prepandemic levels. But we see those as being things that — the occupancy is going to really move up over the next little bit, which is going to drive pricing power. And we are already starting to see some meaningful movement in our rental rates in our stronger, better-quality assets. But as you can imagine, the wage growth in the kind of support you need, the human-intensive part of caregiving has been pretty tremendous. So right now they’re probably not quite at the breakeven level, but I think that’s just short term. I think we’re going to start to see that change really quickly. So I think we remain bullish with respect to that strategy.
And then, of course, the fixed income strategies are mostly oriented around floating rate, which get the benefit of movements in the curve. So the actual yields are improving. I think that we might have noted that there’s marks that are down by that nature, but the reality is we are hold-to-maturity type of funds. So for us, that just means greater yields and greater cash flows and returns over the hold period. So I think that covers it.
Did I miss anything, Bob, or anyone?
Robert Morse
I don’t think so. Finian, anything else?
Operator
We have reached the end of the question-and-answer session, and I will now turn the call over to Robert Morse for closing remarks.
Robert Morse
Thank you, Kyle, and thank you all to those of you who have taken the time to review with us our second quarter results. We feel that we’ve navigated through a turbulent second quarter with a great deal of success. We have continued to invest in our company, not just on the balance sheet, as we discussed, but in our personnel, in our processes and in our investment activities. And we continue to believe, as we stated, that we’re focused on really attractive and prolific areas within the U.S. real estate market in which to invest. We hope that we can continue to navigate well in the current environment. In the past, it’s been Bridge’s experience that those times that separate good investors from bad investors has been a time that we’ve been able to distinguish ourselves.
We look forward to your continued support, and we hope that we’ll have occasion to speak on a frequent basis. Thanks so much.
Operator
This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.
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