How Bridge Investment Group Is Winning Industrial Deals
The firm has developed a differentiated acquisition strategy to compete with institutions and other investors.
Industrial assets are the new favorite among net lease investors, but with the tremendous opportunity has also come tremendous competition. There has never been more capital competing in the sector than today. US industrial transaction activity increased from $28 billion in 2011 to $100 billion in 2020, just to paint a picture of the growth in activity.
To curb the competition, Bridge Investment Group has curated a differentiated acquisition strategy, which focuses on lower to middle market product with institutional-quality ownership. From the same growth period, from 2011 to 2020, lower-to-middle market deals represented only 25% of the transaction activity, totaling $23 billion.
Matt Tucker, partner and co-chief investment officer at Bridge Investment Group, spoke about the firm’s investment strategy at the recent GlobeSt.com Net Lease conference and outlined its four-pronged strategy, which aims to drive value through asset management.
Starting with location, Bridge is buying in prime growth markets in the sub-$50 million, but specifically in the $10 million to $25 million range, which the firm calls a “sweet spot.” It sources deals to buy below replacement cost and the strategy favors alterative deal types, like sale-leasebacks or build-to-suit forward purchases. Tucker added that the company bog box and high quality assets that support tenant operations.
Despite playing in the lower-to-middle market field, Bridge still employs institutional underwriting standards and tenant credit on its acquisitions as a way to optimize the risk-return profile, according to Tucker. This includes targeting properties with strong and long-term in-place leases and built-in rent escalations. However, to optimize returns, the company has a diversified portfolio of both institutional-quality tenants and non-rated tenants with strong financials in growth industries.
Bridge drives value through asset and portfolio management, which includes a “proactive approach to asset management, tenant engagement and credit risk monitoring,” explained Tucker in his presentation.
The firm plans to deploy $1 billion-plus per year to acquire industrial properties within this strategy. This year, it has $500 in equity ready to purchase new deals. The firm has managed to maintain 95% occupancy portfolio-wide, even through the pandemic, a .04% average annual default rate and an annual renewal rate of 80%.