Bridge IG’s Dean Allara Discusses Socially Responsible Investment
Commercial Observer caught up with Bridge IG's Dean Allara at IMN's Winter Forum to discuss ESG investing.
Salt Lake City-headquartered Bridge Investment Group is keeping busy, to say the least. The firm’s investment activities are split across seven strategies and it currently has $20 billion in assets under management. Environmental, social and governance [ESG] initiatives are central to Bridge’s approach to sustainable real estate investments, and the firm is focused on improving communities while simultaneously driving value to its investors. Commercial Observer caught up with Dean Allara, Bridge’s head of capital markets and a vice chairman at the firm, at IMN’s Winter Forum in sunny Laguna Beach, to learn why non-gateway markets are what piques the firm’s interest today and what’s top of his agenda for 2020.
How was the conference for you?
It was great. I spoke on the Opportunity Zones panel about our successes in raising two Opportunity Zone vehicles in 2019. That was about $1 billion that we put to work across 21 projects; mainly multifamily-focused projects from coast to coast and projects that really stand on their own from an investment perspective despite the tax benefits.
Tell us about Bridge Investment Group.
Bridge was founded in 1991, I met [Bridge IG Partners] Dan [Stanger] and Chris [Young] in 1995. We grew up in the multifamily space but we always had a mission to create communities. Today we have 7 distinctive investment teams, all focused on U.S. real estate investment. One is traditional multifamily; the second is in workforce and affordable housing; the third is seniors housing; the fourth is Opportunity Zone developments—mainly multifamily; then we have two debt teams, one focused on direct lending and one that focuses on agency mortgage-backed securities. Our success over the decades has come from executing a business plan while making a difference to the community and driving value to our investors, lenders, residents and tenants.
Which of your business lines is the busiest?
There are a couple of flavors that are very important right now within our business. A year ago, ESG [Environmental, Social and Governance investing] was thought about and our institutional partners would ask “What’s your ESG perspective?” Now it’s part of our fiber, and spills across our offerings. That said, there are two areas that have a bit of a buzz around them. The first is Opportunity zones, from a tax benefit perspective and creating communities and affordable housing—that’s important as opposed to developing a five-star hotel. The other area is workforce and affordable housing. There’s fundamentally a housing shortage in the U.S. and there are four states that currently have rent control legislation under review. Fundamentally, what we’ve done within our workforce and affordable housing offering is we’ve come up with a private-sector solution and created housing where the majority of tenants can be 80 percent AMI or below and we retain that level and overlay [the project] with a nonprofit social services program, or an after school program for the kids. So there’s been quite a bit of interest in that space. Right now you look at the political landscape and see certain states pushing [for change] and they can certainly get it done, but we believe if you can come up with a private-sector solution you can do a much better job overall.
How would you describe your investor base?
We started with high net worth investors who were a mix of family and friends, then today we also have endowments and foundations, private wealth management family offices, pension plans— both private and public—Middle East sovereign wealth funds, and also investors from locations such as Taiwan, Singapore, Hong Kong and Australia. It’s pretty diversified.
Is the U.S. still a safe haven for foreign capital?
Despite our political angst, I think it is. I have the fortune of traveling around the world and speaking with investors and there is continued interest in deploying capital into the U.S., for that safe haven reason overall.
Any sense for where we are in the cycle?
We work with a number of banks and the agencies [Fannie Mae and Freddie Mac] and one thing that is very clear in that specific world is that they do not want to be the ones to put us into the next recession. So, I don’t think the next recession comes from a real estate driven event. Market fundamentals are good, job growth is still good, and there’s an extremely tight labor market. Even with moderate GDP growth it’s still ‘steady as she goes.’
Any trends that are worrying you right now?
It sounds like some debt funds are getting more lenient in terms of offering interest-only loans or reduced covenants and that’s when I say “Don’t do that!” [laughs]. I think the big banks haven’t strayed off course, their credit committees are in the appropriate place. Discipline, for the most part, is intact and fundamentals seem good.
Do you prefer to invest in gateway or secondary markets?
While we do have some minimal activity in gateway markets—Downtown San Francisco being one—the vast majority of our $20 billion in assets under management is in non-gateway markets. Not tertiary markets though, as we all learned lessons there during the late ‘90s. That’s the value of real estate, there’s dislocation in these markets that then leads to opportunities. You don’t quite see that opportunity in the gateway markets.
How are you staying ahead of your competitors today?
Relationships, execution and reputation. There’s a lot of capital in the multifamily space, but we’re also finding more opportunities in the office sector, which is reflected in the returns we’re seeing.
What’s high on your agenda as we go into 2020?
We’re front and center with ESG; that is seen in the communities we’re developing but also spills into, for example, solar projects. We also feel we need to be in the mix in the proptech space. We have a lot of data available to us via our various business lines so ESG and proptech are our main focuses. A year ago ESG was a check-the box-thing for many investors, but now — whether it be state pension plans, insurance companies or family offices—they want to make sure they’re not going into a space that damages mother earth. You don’t have to sacrifice returns and that’s reflected in our offerings where the returns have been at-market or above.