Jonathan Slager: Yes. I’m happy —
Robert Morse: Go ahead, Jonathan. I’d like to add something, but you should go first.
Jonathan Slager: You want to jump in first, Bob?
Robert Morse: No, no. Well, I was sure. What I was going to say is that the — from a broad perspective, I think that Bridge — Bridge’s philosophy related to leverage has been quite straightforward. We have, in the past, used leverage, primarily just senior leverage to create a capital structure for our assets. And we intentionally over the course of the last decade plus have not sought to push the edge of the envelope as it relates to using leverage that works when it does, and it comes back to really hurt you when it doesn’t. And we’re not in that position. Having said that, of course, the rapid rise in rates has created stresses. Those stresses are for mild in some sectors and more intense in other sectors. And we’ve taken a — we’ve done a great deal of work to make sure we recognize where those stresses are and that we address those stresses with preemptive actions to make sure that our assets are safe and secure.
And maybe with that comment about philosophy, Jonathan, you could dive into some of the details.
Jonathan Slager: Well, I mean I think — I honestly think you covered things pretty well. I mean, we very, very assiduously track our maturities. We — it’s a constant review of our overall portfolio situation to try to keep any loan maturities or any near-term financing issues at Bay, we get ahead of it, make sure everything is structured right and make sure that we have the extensions taken care of. So we feel very confident about the current liquidity in our funds. We continue, again, as I said, to actively that one of the benefits of our vertical integration is that we have an internal debt team that spends 100% of its time with all of the lending relationships, both private and bank and agency relationships, making sure that we have our credit side covered.
So we’re in a very strong position with respect to liquidity and have a high degree of confidence. In terms of your question about whether or not we’re rebalancing or using incremental equity, I think right now is a time as Bob alluded to, where the credit is actually non-accretive in many cases. So we’ve always been focused on trying to drive the appropriate balance of how much leverage to have. And now is a time when less leverage is better. So we are delevering some of our portfolios at the right — with the right balance in mind.
Operator: Thank you. Our next question comes from Ken Worthington with J.P. Morgan. Please proceed with your question.
Ken Worthington: Hi, good morning, and thanks for taking the question. I’ve got a couple around the conversion to the continuation fund. So maybe first, what was the impact of the conversion on 3Q deployment? Second, can you talk about the economics of the conversion to Bridge and how fee and carry rates compare between was it Fund III and then the conversion fund as we look forward. And then, the continuation fund raised new capital, what is the appetite that you’re seeing from investors to contribute new capital to continuation funds may be broadly? And do you see more opportunity for more conversion funds in your portfolio if the environment remained kind of challenging as it is today. So thanks for all.
Robert Morse: Jonathan, do you want to talk to the metrics of the Fund III continuation vehicle and then perhaps we can both share some comments on the overall environment for continuation funds.
Jonathan Slager: Actually I’m going to let Katie give some of the specific numbers that are actually in the financials, so I don’t get any of those wrong. She — I think she has some up. So I’ll let her give the answer, so I will give you round numbers. But before I do, I will say that I think you understand the logic that, that fund was not only at the end, but beyond the end, it was in its first extension period. And we had a development asset and a handful; I think it was three to be exact assets that were in Fund III that we felt were not in their optimal position to realize. We all know that the market conditions are not super attractive to exit assets, but the assets that have had the best success in achieving a realization of in the assets that have been in extremely strong positions, which these were not.
So rather than asking the Fund III investors to continue with longer extensions and putting more capital into these assets, we created the option for them of staying in and continuing or taking the capital that they had. And I would point out that people receive basically a 2x multiple and approximately a 20% IRR. So it was a very successful vehicle and about 90% of the people opted to take the capital and redeploy it into hopefully other Bridge funds, but into other things. So Katie, you can give the exact metrics perhaps.
Katie Elsnab: So for capital raising included in our Q3 total $200 million was related to the continuation vehicle and $173 million was related to the recap or deployment.
Ken Worthington: Okay. So both those numbers are in deployment.
Katie Elsnab: Sorry, $200 million in capital raise and $173 million in deployment.
Ken Worthington: Okay. Thank you.
Robert Morse: And to the point about appetite for continuation funds and the use of the continuation fund structure as a path to monetization. We approach all of our funds with a common philosophy that our fiduciary duty to achieve the best results for investors. We felt at the time that we completed the continuation fund for Multifamily Fund III that it was a tougher market in which to sell assets. We didn’t want to be misinterpreted as a motivated or seller who had to sell assets. We felt in assessing all the alternatives that the continuation vehicle, as Jonathan said, provided both optionality for the investors a very positive result if they chose to monetize, and a really attractive outlook if they chose to roll and continue to. So it seemed to tick all the boxes. Our continuation funds, the best tool in all environments, probably not, but are they a useful tool to have in the toolbox as we look to create optimal value for investors; they’re a good tool to have.
