SALT LAKE CITY—Private real estate firm Bridge Investment Group has raised $1.6 billion in equity commitments for its commercial real estate debt strategy, Private Debt Investor reported last week. It will be managed by the company's subsidiary, Bridge Debt Strategies Fund Manager LLC, which invests in debt instruments backed primarily by US multifamily, commercial office, seniors housing and medical properties.
James Chung, hired in 2014 as CIO of Bridge Debt Strategies, told Private Debt Investor that Bridge's deployment in real estate fixed-income investments had quickened during the first two quarters of this year. Chung cited today's low-interest environment as a catalyst.
Bridge Debt Strategies will deploy the newly raised equity into first mortgage floating-rate loans, mezzanine loans, preferred equity and Freddie Mac securities. Citing the “high current pay and attractive risk metrics” that are achievable through its debt strategy, Bridge says the opportunity to achieve enhanced risk-adjusted yields is driven by “a differentiated focus in underserved debt markets where Bridge employs local resources to analyze deals and can thus carefully manage risk.
“We bring an 'owner's mentality' to our efforts and only lend against assets we would be comfortable owning. Our primary investment focus is on Freddie Mac K-Series B-pieces and first mortgage lending on 'value-add' opportunities.”
The company originates first mortgage loans to finance assets primarily in areas where it has operating capabilities, including multifamily, office and seniors housing. The loans are LIBOR-based and are collateralized by properties in light transition where there is a “value add” opportunity. “Given these properties resemble the type of assets our operating platforms invest in, we believe we have a distinct advantage in assessing the risk of these investments,” according to the company's website.
Earlier this year, the company launched Bridge Office Manager, a dedicated initiative to invest in value-add commercial office assets in prime suburban submarkets. The new initiative will focus on acquiring assets in select US markets that are projected to materially outperform national averages.
“Expanding office demand from employment growth, lack of new supply and an aging stock of existing inventory have created attractive opportunities to acquire quality office assets,” John Ward, CIO of Bridge Office Manager, said in February. “Our investment strategy combines a disciplined asset selection process with a focus on operational improvements that increase tenant satisfaction and solve vacancy issues.
“We expect to acquire quality office assets at a substantial discount to replacement cost, meaningfully enhance the tenant experience through targeted incremental capital investment managed locally, and, as a result, drive NOI growth and returns for our investors,” Ward continued. All told, Bridge currently has about $7.4 billion in assets under management, including 5.6 million square feet of office, 29,000 apartments and 1,600 seniors housing units.
The year to date has been an active one for fundraising in the real estate debt space. In June, Brookfield Real Estate Finance Fund V reported to the SEC that it had raised $2.43 billion. The fund will make subordinated debt investments on high-quality properties in major US markets. As of May, PIMCO had raised about $2.25 billion for BRAVO Fund III, which will target special situations in commercial real estate and other sectors. Another special situations fund, StepStone Real Estate Partners III, closed in February at $700 million, exceeding its $500-million target.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
