BridgeInvest, a US-based specialty asset manager, reached a “milestone” $1bn (£737.5bn) in assets under management this year, as traditional institutions continued to exit the US commercial real estate mortgage market, making way for private lenders.
Founder and managing partner Alex Horn (pictured) told Alternative Credit Investor that having historically been serviced by traditional banks, institutions are now “systematically reducing their exposure to CRE and concentrating their exposure to clients making big deposits”.
BridgeInvest focuses on the US middle market, with loans between $15m to $150m and has three main lending programmes: development lending, special situations, and value-add bridge funding.
Read more: Borrowers get creative as $957bn of CRE debt matures in 2025
“Over the past 12 months, we closed $700m of loans, which doubled our origination volume compared to the prior year and that’s despite a tighter credit market,” Horn said. “Traditional institutions are exiting this space, leaving this huge void for private lenders.”
At the same time, investors are benefitting from fixed income-like returns with real estate-backed assets, he explained.
“In this environment, investors value hard asset-backed loans with income streams that they can rely on,” he added.
He has also seen BridgeInvest’s investors continue to expand their portfolio to include more alternative investments, with high-net-worth institutions willing to “forego liquidity for consistent yield”.
“What we hear a lot from our foreign investors is that, despite all the volatility and the geopolitical tensions around the world, US commercial real estate remains one of the most consistent assets over decades,” he said. “So, investing in senior secured credit in that asset class is what they view as a good alternative for corporate debt worldwide.”
Read more: Peachtree Group launches $250m commercial RE special situations fund
Horn, who founded BridgeInvest in 2011, notes that it is an interesting time for private lenders because “when I started the business… borrowers didn’t want to take money from private lenders, that was really the lender of last resort back in 2011”.
“Today, they are a viable alternative to a traditional lender,” he added. “The more institutional names that become private lenders, the more it adds legitimacy to the sector as a whole.”
Horn said that BridgeInvest has looked at $46bn of transactions in the past 12 months. Of those, it identified $870m that it wanted to do, and ended up closing the vast majority, at just under $700m.
BridgeInvest has been taking advantage of the “industrial hangover” in the US to invest in the industrial asset class, in a “contrarian” play, Horn explained.
The over-supply of industrial real estate is a result of the pandemic, which triggered an influx of new developments, particularly in the logistics and warehouses space. Horn said this has created a “big supply overhang” and an increase in vacancies, with rental rates decelerating rapidly.
However, he insists that the industrial asset class “is not going anywhere” on the basis that, without new stock being built, tenants are forced to look at existing developments.
“Our conviction today is that where assets used to take three to six months to lease, [they] are going to take 12 to 24 months to lease, but they will eventually get leased,” he said.
Read more: Why ‘alternative’ real estate is now institutional
