Newbury acquisition is a Bridge to more dry powder for secondaries

Listed manager Bridge Investment Group is eyeing further secondaries strategy growth, particularly when it comes to its own area of focus: real estate.

Yet another alternative asset manager snapped up a secondaries player this week as private markets participants continue to flock to the fast-growing market.

Salt Lake City-based real estate investment manager Bridge Investment Group, which is New York-listed, said this week it would acquire mid-market secondaries player Newbury Partners. The $320.1 million transaction, which is expected to close in the first half of this year, will bring BIG’s assets under management to $48.5 billion, according to a statement.

BIG carried out a comprehensive analysis of the secondaries market as it evaluated opportunities to expand, marking the space out as an area for significant growth potential, executive chairman Robert Morse said on its earnings call on Tuesday. He added that BIG met with at least a dozen secondaries firms before settling on the Newbury tie up.

“The secondaries market is really even in its middle innings of its tremendous growth,” Newbury partner Chris Jaroch said on the same call. Having started out in 2006 when the market was around $10 billion to $15 billion in size, he believes today’s annual $100-plus billion market has another two to three times growth over the next few years, he told analysts.

BIG is the 13th largest firm in affiliate title PERE’s annual ranking of the 100 biggest private real estate managers by equity raised for discretionary value-add or opportunistic strategies. It brought in $11.24 billion from institutional investors over the time period.

Just last month BIG closed the largest dedicated multifamily fund on record, PERE reported. Bridge Multifamily Fund V brought in $2.26 billion in capital commitments. In October, it also raised the largest dedicated workforce housing fund with Bridge Workforce and Affordable Housing Fund II closing on $1.74 billion.

Where does that growth lie for the new partnership? Once the deal is closed the first order of business will be to raise another Newbury flagship fund.

Newbury Equity Partners V – which closed on $2 billion in 2021 against a $1.75 billion target – is 95 percent committed, Newbury managing partner Richard Lichter said on the call. That vehicle had a net IRR of 27 percent, and a net distributed to paid in capital multiple of 0.09x as of 30 September, according to documents prepared by BIG on rationale for the acquisition.

Newbury is close to its investors, which is why it had been getting 80 percent or more re-ups as well as new investors flocking to its existing funds, Lichter said. “We would expect the same sort of thing now,” he added.

In the longer term, BIG is eyeing expansion into real estate secondaries, Morse said. Infrastructure, too, could be attractive, as could a continuation fund capability.

On Newbury’s side, Lichter explained sellers often show the firm all or most of their assets and ask what the firm wants to buy. “We naturally focus on the things we know like buyouts and growthequity, but we could easily pick up their real estate funds or other things. And I think that’s one of the opportunities going forward.”

BIG joins the ranks of Ares Management, Franklin Templeton and CVC Capital Partners among others opting to buy up secondaries shops to expand into the rapidly growing market designed as a liquidity solve for illiquid markets – a trend that’s particularly attractive to outsiders in current volatile markets.

BIG executives noted on the call that the firm’s private wealth channels will be helpful to Newbury when raising its next programmes. If BIG is serious about adding real estate and infrastructure secondaries capabilities to Newbury’s offerings, this should come as welcome news to a market that often laments the lack of sufficient dry powder to execute on dealflow.