WEBVTT - Businessweek Extra - Tom Barrack and Marc Ganzi 0:00:00.960 --> 0:00:04.480 This is Bloomberg Business Week with Carol Masser and Jason 0:00:04.600 --> 0:00:07.840 Kelly from Bloomberg Radio. I'm Jesson Kelly. Welcome to the 0:00:07.840 --> 0:00:11.520 Bloomberg Business Week Extra podcast. It's a look at an 0:00:11.600 --> 0:00:14.640 in depth interview you won't hear anywhere else, my full 0:00:14.720 --> 0:00:18.360 conversation with Tom Barrick, the executive chairman of Colony, and 0:00:18.400 --> 0:00:21.600 the new CEO of Colony, Mark Ganzy. I caught up 0:00:21.640 --> 0:00:24.320 with them for a wide ranging conversation in New York 0:00:24.400 --> 0:00:28.080 City about the future real estate politics and much more so, 0:00:28.200 --> 0:00:33.120 Tom Barrick, dislocation, disruption. They are not unfamiliar to you, 0:00:33.240 --> 0:00:37.080 and yet we throw around the term unprecedented a lot. 0:00:37.520 --> 0:00:41.320 Right now, what is this period of dislocation and disruption 0:00:41.479 --> 0:00:47.920 like for you and for the real estate business? Confusion? Um, 0:00:48.080 --> 0:00:52.720 But confusion is the norm and all of our businesses. 0:00:52.760 --> 0:00:55.240 When you when you think in our lifetime and you 0:00:55.280 --> 0:00:59.160 and I kind of started this adventure together in private 0:00:59.160 --> 0:01:04.680 equity and all alternative assets, the ordinary always reverts to 0:01:04.720 --> 0:01:08.520 the mean. And although I'm cycling away ahead of all 0:01:08.560 --> 0:01:12.760 of you, I've never seen the ordinary. As as soon 0:01:13.040 --> 0:01:22.560 as information becomes efficient and transparent and transmuted, um, the 0:01:22.560 --> 0:01:26.080 the edge is gone, and everybody has a pivot and 0:01:26.120 --> 0:01:30.199 moved to someplace else. It's very difficult for institutional minds 0:01:30.240 --> 0:01:36.160 to do that. But the intersection of financial chaos, social 0:01:36.200 --> 0:01:47.600 up people, political confusion, a global pandemic, the gigantic spread 0:01:47.640 --> 0:01:51.400 between the halves and the have nots, and a move 0:01:51.440 --> 0:01:55.000 away from globalization which we all had a firm belief 0:01:55.000 --> 0:01:58.560 in for the last fifty years, to a kind of 0:01:58.680 --> 0:02:03.880 secular populism has created a perfect storm. And in that 0:02:03.920 --> 0:02:06.640 perfect storm, I think leaders do what they do. They lead, 0:02:06.720 --> 0:02:09.520 but sometimes they actually have no idea to where they're leading. 0:02:11.960 --> 0:02:16.200 So that was a lot Mark Ganzi that Tom just 0:02:16.280 --> 0:02:20.639 laid out financial chaos, social unrest, political confusion, global pandemic. 0:02:21.480 --> 0:02:25.359 That would seem to indicate that from an investor's perspective, 0:02:25.440 --> 0:02:27.839 we are in uncharted waters. I don't think we've ever 0:02:27.880 --> 0:02:32.120 seen this collision of things. As you think about what 0:02:32.360 --> 0:02:36.320 feels to me like a reset in this business, how 0:02:36.320 --> 0:02:40.200 do you attack all of those things? What's the approach? Well, look, 0:02:40.240 --> 0:02:42.480 the one thing that keeps all of this going is digital, 0:02:42.960 --> 0:02:46.280 and so our transformation as a company and where we're 0:02:46.320 --> 0:02:49.800 going is very upproposed for what's happening in the world today. 0:02:50.160 --> 0:02:52.639 If there's one thing that is consistent, it's the ability 0:02:52.720 --> 0:02:56.639 to deliver services across a variety of mediums. That is 0:02:56.720 --> 0:02:59.639 enabling the economy to keep moving forward despite the pandemic. 0:03:00.440 --> 0:03:02.160 And so as we think about the things that are 0:03:02.160 --> 0:03:04.200 important and where we need to go, we're looking ten 0:03:04.280 --> 0:03:08.320 years ahead, and so as we think about where investable 0:03:08.400 --> 0:03:11.400 opportunities are, you have to be thinking around the corners 0:03:12.480 --> 0:03:15.040 and around the corners today isn't so much just about 0:03:15.800 --> 0:03:18.720 this mobilization to digital and this transformation of five G, 0:03:18.840 --> 0:03:22.280 but it's really thinking behind that, what are the key 0:03:22.320 --> 0:03:24.359 building blocks that are going to enable the economy to 0:03:24.440 --> 0:03:30.320 keep going to spite civil unrest, despite pandemics, despite market dislocation. 0:03:31.120 --> 0:03:33.480 What is the one thing that can keep going? And 0:03:33.520 --> 0:03:36.720 from our perspective, it's really our ability to continue to 0:03:36.760 --> 0:03:40.560 invest in great businesses, great logos, We have great customer relationships, 0:03:41.160 --> 0:03:43.320 and the reality is all this has to keep going, Jason, 0:03:43.520 --> 0:03:46.120 we have to keep moving forward. And so in that respect, 0:03:46.200 --> 0:03:48.560 we feel like we're very well positioned as we invest 0:03:48.560 --> 0:03:50.600 for the next decade. Perhaps I'd offer to as we 0:03:50.640 --> 0:03:54.040 invest over the next two decades of where this economy 0:03:54.120 --> 0:03:57.480 is moving so Tom, let's go micro for a second, 0:03:57.520 --> 0:03:59.760 which is how you deal with this as a for 0:04:00.680 --> 0:04:03.720 July one, you hand over the reins from Tom to 0:04:03.840 --> 0:04:08.080 Mark in terms of running the combined business following a 0:04:08.120 --> 0:04:10.800 transaction that puts a lot of things together. Help us 0:04:10.880 --> 0:04:16.400 understand from a micro perspective that decision, the timing and 0:04:16.480 --> 0:04:19.839 the mechanics of what it means for colony, this brand 0:04:19.880 --> 0:04:23.359 that has existed, you know now for thirty plus years. 0:04:26.360 --> 0:04:31.239 It's a monumental decision, especially for a founder, right uh. 0:04:31.320 --> 0:04:34.800 And and when when I say founder, it wasn't from 0:04:35.040 --> 0:04:39.640 brilliance or or intellectual creation of a of a great 0:04:39.720 --> 0:04:43.080 theory that I became a founder. We all wander into 0:04:43.720 --> 0:04:47.120 a situation where you start with a deal, and we 0:04:47.200 --> 0:04:49.600 had a great background is you know the bass is 0:04:50.320 --> 0:04:52.680 really where we we kind of learned how to be 0:04:52.720 --> 0:04:56.760 a contrarian investor in this note. But at the end 0:04:56.800 --> 0:05:03.120 of the day, it's all about culture, values and and 0:05:03.200 --> 0:05:06.760 when you look at succession, moving and pivoting. When you 0:05:06.880 --> 0:05:12.200 spend your life building an institution that has permanency, that 0:05:12.279 --> 0:05:15.880 has transparency, that has consistency, that has governance, is really 0:05:15.920 --> 0:05:19.440 difficult even in a private setting. But We're a public company. 0:05:19.520 --> 0:05:21.279 So when you think of the constituencies we have, we 0:05:21.320 --> 0:05:25.600 have public shareholders, we have institutional limited partners, we have associates, 0:05:25.640 --> 0:05:29.400 employees everywhere, we have customers, we have was Mark always says, 0:05:29.440 --> 0:05:33.520 followed the logos moving into digital. Even even the things 0:05:33.560 --> 0:05:36.320 that the gigantic institutions around the world, you have to 0:05:36.320 --> 0:05:38.919 pay attention to. And what they're all concerned about is 0:05:38.960 --> 0:05:44.279 one thing integrity. Right, the longline relationship is more important 0:05:44.279 --> 0:05:48.240 than returns because returns up and flow. So in the 0:05:48.320 --> 0:05:50.839 process of looking at real estate, as you know we've 0:05:50.839 --> 0:05:53.960 talked about before, I've always looked at real estate for trading. 0:05:54.000 --> 0:05:57.719 I've never looked at real estate as permanent ownership because 0:05:57.760 --> 0:06:00.920 nothing has changed in sixty years. Look at the building 0:06:00.960 --> 0:06:03.800 where you look at the buildings across the street, many 0:06:03.839 --> 0:06:06.039 of them were built in the twenties. The streets were 0:06:06.040 --> 0:06:08.600 built in the teens, the tunnels were built in the 0:06:08.680 --> 0:06:12.000 late twenties, and nothing has changed almost a hundred years. 0:06:13.240 --> 0:06:16.440 So the EBB and flow of real estate values has 0:06:16.480 --> 0:06:22.640 always been challenged by functional, physical, and financial obsolescence. And 0:06:22.680 --> 0:06:26.440 what people miss is this battle between cash flow and capex. 0:06:27.560 --> 0:06:31.800 So colony has always been in the forefront of kind 0:06:31.839 --> 0:06:37.320 of contrarian views of switching at impact points, at inflection 0:06:37.440 --> 0:06:41.440 points in which you're seeing something different than other seas. 0:06:42.320 --> 0:06:46.480 How do you do that? Um? Steve Jobs had a 0:06:46.520 --> 0:06:48.839 great speech that he gave it to a bunch of 0:06:48.839 --> 0:06:53.040 teenagers saying, and I'm not comparing myself to Steve Jobs. 0:06:53.040 --> 0:06:55.760 I admire Steve Jobs and look for leadership qualities there 0:06:56.520 --> 0:07:00.320 and saying most people are navigating streets and alleys at 0:07:00.400 --> 0:07:04.360 street level, and some very good and talented people find 0:07:04.400 --> 0:07:07.320 ways to navigate through those streets by looking in front 0:07:07.360 --> 0:07:10.680 of them. Great leaders look at it from eighty stories 0:07:10.720 --> 0:07:14.960 above and they can see the destination without having to 0:07:15.040 --> 0:07:17.840 go through the perian thrust of what ordinary people are 0:07:17.920 --> 0:07:21.040 doing to find an extraordinary event. But to do that 0:07:21.080 --> 0:07:24.280 you have to have extraordinary experiences. And right, we've lived 0:07:24.280 --> 0:07:28.040 in a in a place where experiences are very ordinary, 0:07:28.080 --> 0:07:30.000 and we put a premium on those ordinaries. If you 0:07:30.040 --> 0:07:31.880 go to great school, you go to prep school, you 0:07:31.920 --> 0:07:34.240 go to great business school, you can now you go 0:07:34.280 --> 0:07:39.560 to work for a financial institution. That's the norm. As 0:07:40.160 --> 0:07:43.360 as I was trying to navigate the next iteration of 0:07:43.440 --> 0:07:47.320 colonies life because We've had lots of them, right. We 0:07:47.400 --> 0:07:50.920 transition from a great beginning with the basses really in 0:07:51.280 --> 0:07:55.000 the eighties, and the contraining environment with the RTC, and 0:07:55.040 --> 0:08:00.640 then beginning the acquisition of Western hotels a districts period. 0:08:00.960 --> 0:08:05.840 Nobody thought these were really businesses at the time. Europe 0:08:05.920 --> 0:08:09.880 ends up in the same distress Asian contagion two thousands, 0:08:09.920 --> 0:08:13.800 the Internet boom and bust two thousand seven, housing boom 0:08:13.800 --> 0:08:18.400 and bust, and we kept reinventing ourselves. So at this stage, 0:08:19.040 --> 0:08:22.559 the dilemma of saying what's the leadership for the next 0:08:22.560 --> 0:08:27.600 two decades, to me, was about who can really define 0:08:27.640 --> 0:08:29.640 where the ball is going now? Where the ball is 0:08:30.880 --> 0:08:34.720 and who had that culture, who had that brand, and 0:08:34.760 --> 0:08:37.080 who had two very important things which usually don't come 0:08:37.080 --> 0:08:42.439 in the same package brilliance, scarce rare very difficult to 0:08:42.480 --> 0:08:47.600 find and courage. And I had invested with Mark. I've 0:08:47.600 --> 0:08:49.600 known Mark actually since he was a danger. His dad 0:08:49.679 --> 0:08:51.280 was a friend of mine, So I watched his kind 0:08:51.280 --> 0:08:55.640 of meteor career in this arena as an entrepreneur and 0:08:55.720 --> 0:08:58.240 digital infrastructure, and there were none, right, there was no 0:08:58.360 --> 0:09:03.160 soup to nuts master of this universe. And I invested 0:09:03.160 --> 0:09:05.320 with him on a personal basis way before we got 0:09:05.360 --> 0:09:09.480 together in in two thousand sixteen, two thousand seventeen, where 0:09:09.480 --> 0:09:12.360 I was trying to convince him that moving into this 0:09:12.480 --> 0:09:17.880 format of professionally managed funds with a with a public 0:09:18.200 --> 0:09:21.760 entity as the anchor would be a great go forward path, 0:09:23.040 --> 0:09:29.400 and I really became enamored with that, with his vision, 0:09:29.520 --> 0:09:33.040 with his ability to see it from eighty stories, with 0:09:33.200 --> 0:09:37.000 his never ending work ethic in an arena that was 0:09:37.080 --> 0:09:39.559 really interesting to me because it was the railroad, it 0:09:39.640 --> 0:09:42.840 was the electricity of the future. The only thing has 0:09:42.880 --> 0:09:45.720 changed his Internet and computing in fifty years. Right, this 0:09:45.840 --> 0:09:49.560 building is basically the same, residences are basically the same, 0:09:49.559 --> 0:09:54.280 shopping centers are basically the same, and eventually that continual 0:09:54.400 --> 0:09:59.560 cap X will erode away returns. And what Mark was 0:09:59.600 --> 0:10:04.240 doing was was what I thought the future had in store, 0:10:04.600 --> 0:10:08.480 and his personality, his character, and his integrity fit into 0:10:08.480 --> 0:10:13.679 what I as a founder had helped the continuation of 0:10:13.679 --> 0:10:17.400 of that culture for colony would be. So Mark, let's 0:10:17.480 --> 0:10:21.400 let's get down the level and help people understand exactly 0:10:21.440 --> 0:10:24.600 what it is you're investing in, what is digital infrastructure, 0:10:24.640 --> 0:10:26.960 And then let's we're going to talk about sort of 0:10:26.960 --> 0:10:30.400 how it relates and what it means for the entire 0:10:30.720 --> 0:10:34.360 enterprise going forward. But I mean, what are we talking 0:10:34.360 --> 0:10:36.880 about here when when we get down to brass tacks, 0:10:37.320 --> 0:10:39.199 you know. For for me to distill it in the 0:10:39.200 --> 0:10:42.359 most simplistic form, it's really the plumbing that enables information 0:10:42.400 --> 0:10:44.880 to flow. And so the way that we communicate, the 0:10:44.880 --> 0:10:46.920 way that we do commerce, the way that we conduct 0:10:46.960 --> 0:10:49.760 our fitness where kids are going to school today, um, 0:10:49.800 --> 0:10:52.000 the way that we conduct business to resume call, all 0:10:52.000 --> 0:10:56.599 of that requires mission critical infrastructure to enable the origination 0:10:57.640 --> 0:11:01.440 of a communication and ultimately to terminated communication point. And 0:11:01.480 --> 0:11:04.160 so along that road, Jason, we touch a lot of 0:11:04.200 --> 0:11:08.360 different elements in the ability to enable that technology. And 0:11:08.400 --> 0:11:10.280 so it could be a mobile tower that you see 0:11:10.280 --> 0:11:13.200 along the Hutchinson Parkway. It could be fiber that runs 0:11:13.240 --> 0:11:15.960 underneath sixth Avenue. It could be a data center that 0:11:16.040 --> 0:11:19.320 sits in for example, Ashburn, Virginia. Or it could be 0:11:19.320 --> 0:11:21.320 a small cell that literally sits at the corner of 0:11:22.000 --> 0:11:25.440 Madison where we have a micro tower that's providing amplified coverage. 0:11:25.720 --> 0:11:30.080 There's so many different forms of digital infrastructure today and 0:11:30.120 --> 0:11:33.920 it's only growing. It's really becoming an asset class unto itself, 0:11:34.440 --> 0:11:36.480 and as we try to place it as an investor, 0:11:36.480 --> 0:11:37.760 and we try to think about where is it is 0:11:37.800 --> 0:11:40.520 at private equity, is it infrastructure? Is it? Is it 0:11:40.600 --> 0:11:42.640 real estate? And the reality is it's a it's a 0:11:42.640 --> 0:11:46.199 little bit of all three things from an institutional investor perspective, 0:11:46.200 --> 0:11:49.120 trying to distill it down to one thing. And on 0:11:49.120 --> 0:11:52.760 one hand, it has operational complexities, right think about the 0:11:52.800 --> 0:11:57.080 trust that's given to us in terms of managing those 0:11:57.120 --> 0:12:03.000 networks for Amazon or Microsoft, or Verizon or Vota Phone, Telefonica, Google. 0:12:03.040 --> 0:12:06.080 I mean, these are the customers that entrust us daily 0:12:06.080 --> 0:12:10.640 with their information, they trust us with the delivery mechanism 0:12:10.679 --> 0:12:14.200 of their communication services. And so what we've tried to 0:12:14.200 --> 0:12:16.839 do to make it easy for institutional investors understand, we say, look, 0:12:16.840 --> 0:12:19.160 there's sort of four key swim lanes right now in 0:12:19.200 --> 0:12:23.760 digital instructure. There's there's towers, there's fiber optic cables, there's 0:12:23.840 --> 0:12:26.839 data centers, and there's small cell infrastructure. Those are really 0:12:26.880 --> 0:12:29.720 sort of the four biggest verticals to think about as 0:12:29.760 --> 0:12:32.080 an asset class today. Now, of course there's a lot 0:12:32.120 --> 0:12:36.559 of nuances and in between the lines there, but once again, 0:12:36.600 --> 0:12:38.360 the easiest way to think about this is these are 0:12:38.400 --> 0:12:41.600 really the new railroads, and you think about, you know 0:12:41.640 --> 0:12:44.080 what the Rockefellers did, and you think about these transformative 0:12:44.120 --> 0:12:46.680 moments in the history of the time of our country. 0:12:46.920 --> 0:12:49.800 In digital we're having that moment right now. This is 0:12:49.880 --> 0:12:54.439 really the next major migration path in technology in this country. 0:12:55.040 --> 0:12:57.200 You know, whether it's cloud computing or five G there's 0:12:57.600 --> 0:13:00.880 many thematics happening at the same time. And then you 0:13:00.920 --> 0:13:03.280 put that against a backdrop of COVID and a pandemic, 0:13:03.320 --> 0:13:06.000 and all of this is accelerating. So I want to 0:13:06.280 --> 0:13:07.920 I'm glad you said that because I wanted to press 0:13:07.920 --> 0:13:11.520 you on that, which is we've heard essentially people say that, 0:13:11.640 --> 0:13:16.640 especially on the digital side and from a transform transformational perspective. 0:13:16.679 --> 0:13:19.000 And we'll talk about cities and suburbs in a second, 0:13:19.080 --> 0:13:24.640 but the acceleration of that trend. How can you quantify 0:13:24.720 --> 0:13:28.000 the acceleration in terms of as you've looked out at Okay, 0:13:28.000 --> 0:13:31.200 this is where we think digital infrastructure is going. We 0:13:31.240 --> 0:13:33.400 thought it was gonna take ten years, it's actually gonna 0:13:33.400 --> 0:13:37.280 take a year. Like, what how do you think about that? Well, 0:13:37.320 --> 0:13:39.120 I think there's there's a couple of things happening at 0:13:39.120 --> 0:13:41.439 the same time, and once again to try to keep 0:13:41.440 --> 0:13:44.240 it simple for for investors in from main street, I 0:13:44.240 --> 0:13:47.800 think that the biggest thematic is mobility. So once again, 0:13:47.800 --> 0:13:49.439 as we as we think about our devices and we 0:13:49.480 --> 0:13:52.040 think about where we conduct business, where we conduct commerce, 0:13:52.040 --> 0:13:54.640 where we conduct education, and at the same time, we 0:13:54.679 --> 0:13:56.760 want to be mobile. We want to constantly be on 0:13:56.800 --> 0:13:59.360 the move, and we want it faster, cheaper, better, and 0:13:59.400 --> 0:14:01.280 so as we move to five G. Five G is 0:14:01.320 --> 0:14:04.600 probably in my twenty six years of building networks, it's 0:14:04.640 --> 0:14:08.000 the most exciting step function and technology that we've ever seen. 0:14:08.840 --> 0:14:11.920 Think about an environment where you've got lower latency, which 0:14:11.960 --> 0:14:14.400 is the distance between the antenna and the actual device. 0:14:15.000 --> 0:14:18.120 Think about an environment where the device operates ten times 0:14:18.160 --> 0:14:21.480 faster than you're existing four G phone, and think about 0:14:21.520 --> 0:14:24.720 more applications, think about more entertainment, think about all the 0:14:24.800 --> 0:14:26.880 things that you can do from a mobile perspective. It's 0:14:26.920 --> 0:14:29.920 a it's a massive change into the consumer. They don't 0:14:29.920 --> 0:14:32.400 see it yet, right because you haven't touched a five 0:14:32.400 --> 0:14:34.520 G device yet, which you're which we're now rolling out 0:14:34.520 --> 0:14:37.520 five G devices, So this is exciting. It's a probably 0:14:37.560 --> 0:14:41.240 a seven to eight year investment cycle for us, we're 0:14:41.240 --> 0:14:44.040 talking about one point one trillion of CAPEX that's going 0:14:44.120 --> 0:14:47.240 to be put into build five g Um we think 0:14:47.240 --> 0:14:50.080 about cloud computing, we're really in the infancy and cloud computing. 0:14:50.560 --> 0:14:52.760 You know, less than twenty percent of the information sits 0:14:52.760 --> 0:14:55.440 on the cloud today, and we're transforming. We're moving a 0:14:55.440 --> 0:14:58.920 lot of that information and applications towards the cloud. Because 0:14:58.960 --> 0:15:01.320 remember and compute, Jason, You've got two things happening at 0:15:01.320 --> 0:15:04.120 the same time. You have your applications that are running 0:15:04.120 --> 0:15:06.800 in real time and any of your storage where all 0:15:06.840 --> 0:15:09.360 your data is stored, and all of that is transforming 0:15:09.360 --> 0:15:11.640 at the same time too, as we think about a 0:15:11.640 --> 0:15:13.840 new migration path for where data is stored and where 0:15:13.920 --> 0:15:17.880 data is ultimately computed. So these two thematics are so 0:15:18.000 --> 0:15:22.520 massive and um I think, look, every quarter we're measuring 0:15:22.520 --> 0:15:25.160 the performance of our companies. We've got sixteen businesses around 0:15:25.160 --> 0:15:28.760 the globe that operate in the digital realm, and you know, 0:15:28.800 --> 0:15:31.440 we had businesses that we're growing at seven Now they're 0:15:31.440 --> 0:15:35.840 growing at the organic growth that we've experienced in the first, 0:15:35.840 --> 0:15:38.480 second and third quarter down at the portfolio company level 0:15:38.560 --> 0:15:42.080 is astounding because our customers are sort of saying to us, look, 0:15:42.760 --> 0:15:45.720 we need more We need more fiber, we need more towers, 0:15:46.000 --> 0:15:48.040 you know, we need more data center capacity, we need 0:15:48.080 --> 0:15:50.800 more mega wats in terms of power for compute, and 0:15:50.840 --> 0:15:52.400 we have to deliver. We have to wake up every 0:15:52.480 --> 0:15:54.560 day and we have to deliver for our customers. And 0:15:54.600 --> 0:16:00.200 so Tom square that with the traditional quote unquote realist 0:16:00.200 --> 0:16:03.920 business and what that means in terms of if you're 0:16:03.920 --> 0:16:08.120 doing this, you're obviously doing less of traditional real estate. 0:16:08.720 --> 0:16:14.520 How do you map that out in terms of talking 0:16:14.560 --> 0:16:18.360 to your investors, talking to potential investors, talking to the 0:16:18.400 --> 0:16:22.720 world about that transition, Because yes, it's an inflection point, 0:16:23.120 --> 0:16:27.480 but it also feels pretty radically different to some extent. Yeah, 0:16:27.840 --> 0:16:30.960 and for sure it is I view as an accelerat. Right. 0:16:31.000 --> 0:16:33.560 This pandemic is just an accelerat of what was happening 0:16:33.640 --> 0:16:36.640 in any event. And I think the difficult thing for 0:16:36.760 --> 0:16:41.720 great entrepreneurs like Mark Rolling to a great public company 0:16:41.760 --> 0:16:46.040 CEO public companies like Consistency and themes they can see 0:16:46.040 --> 0:16:49.320 a decade ahead, and what that produces most of the 0:16:49.320 --> 0:16:52.280 time is a bureaucracy in ordinary returns, Right, I mean, 0:16:52.320 --> 0:16:54.840 that's really what it is. So if you looked at Reatland, 0:16:54.840 --> 0:16:57.360 reat land was all about dividends. Just give me long 0:16:57.480 --> 0:17:01.640 term contractual obligors on the other and let me collect 0:17:01.760 --> 0:17:04.720 net rents. And that doesn't exist anywhere. We were already 0:17:04.720 --> 0:17:07.560 on that path, right, we were air B and B, 0:17:08.359 --> 0:17:12.120 Amazon dot Com. My garage looks like a Simon shopping 0:17:12.160 --> 0:17:16.520 center right by ordering whatever you want online. So the 0:17:16.680 --> 0:17:20.840 value of real estate has become less and less important 0:17:20.920 --> 0:17:27.720 in the midst of this accelerated um disintermediation of all 0:17:27.760 --> 0:17:30.080 those things are important, including information. By the way, because 0:17:30.080 --> 0:17:32.640 our businesses grew up by saying, well, we have some 0:17:32.800 --> 0:17:36.800 little competitive edge. You look at this office billing and say, okay, 0:17:37.720 --> 0:17:39.840 real real estate is very simple. I have to find 0:17:39.880 --> 0:17:41.480 a piece of land. That's gonna take me a year. 0:17:41.840 --> 0:17:43.399 Then I have to get it entitled, and I have 0:17:43.480 --> 0:17:46.560 to go to mayor, a mayor of any great city 0:17:46.560 --> 0:17:49.240 and say I need entitlements. That takes another year. Then 0:17:49.280 --> 0:17:51.760 I need an architecture design it. That's another year. Then 0:17:51.760 --> 0:17:53.359 I need to build it. That's two years. Then I 0:17:53.400 --> 0:17:56.960 needed less it's another two years. It's five years from 0:17:57.160 --> 0:17:59.520 the time you have an idea to the time that 0:17:59.520 --> 0:18:01.480 it's created. It now you have ideas being created in 0:18:01.520 --> 0:18:05.960 an afternoon. Right, innovation and technology is the norm. So 0:18:06.000 --> 0:18:09.920 in convincing our investors say, look, this intersection, what isn't 0:18:09.920 --> 0:18:14.200 going to change is the infrastructure of what it takes 0:18:14.320 --> 0:18:18.560 these great logos to be able to amass the new 0:18:18.680 --> 0:18:26.280 distribution of everything that we need socially, intellectually, healthcare wise, physically, 0:18:26.720 --> 0:18:31.480 entertainment wise. It's just changed. And what it isn't going 0:18:31.520 --> 0:18:34.960 to be is obsolescent because it's reinventing itself on a 0:18:35.040 --> 0:18:40.880 constant basis. So to me, net cash flow is all 0:18:40.920 --> 0:18:45.800 you can need forget about whatever these other factors, a FFO, FFO, earnings, dividends, 0:18:46.240 --> 0:18:48.840 It all comes from net cash flow, and net cash 0:18:48.840 --> 0:18:52.879 flow is created by contractual revenues for simple investors like 0:18:52.960 --> 0:18:56.400 ourselves saying we have to create something that these customers 0:18:56.400 --> 0:19:00.480 and clients will use, and that infrastructure is a different 0:19:00.560 --> 0:19:03.639 kind of real estate. I remember ten years ago there 0:19:03.640 --> 0:19:08.080 were no digital rates. Five years ago there were a couple. Today, 0:19:08.240 --> 0:19:13.000 the dominant factors in the industry, the biggest multiples, are 0:19:13.040 --> 0:19:15.679 digital companies. They didn't think when Mark first started, he 0:19:15.680 --> 0:19:19.040 had to convince people that radio cell towers were real estate. 0:19:19.720 --> 0:19:22.640 David Simon didn't have to convince anybody that a shopping 0:19:22.680 --> 0:19:26.000 center was real estate, or or Steve Roth that the 0:19:26.000 --> 0:19:31.640 Great Tornado buildings were real estate. So I think if 0:19:31.680 --> 0:19:33.879 you want extraordinary returns, if you want to get out 0:19:33.920 --> 0:19:35.959 of the norm, which the problem today is that, right 0:19:36.040 --> 0:19:38.439 there's too much liquidity with too few places to go, 0:19:38.440 --> 0:19:40.000 which is we're seeing this boom in the and the 0:19:40.000 --> 0:19:43.200 equity market while we're having this devastating financial and pandemic 0:19:43.240 --> 0:19:46.840 crisis in the world, Unemployment across the globe at higher 0:19:46.920 --> 0:19:49.679 levels than we've ever seen, an anarchy in just about 0:19:49.720 --> 0:19:54.720 every nation imaginable. So to me, you go where the 0:19:54.720 --> 0:19:59.920 puck is going, and real estate is a very unmoved, 0:20:00.359 --> 0:20:02.960 stable asset, which is the good news and the bad news. 0:20:03.000 --> 0:20:06.000 And if you don't pivot, if you don't move, eventually 0:20:06.080 --> 0:20:08.000 those bricks will fall on your head. And that's been 0:20:08.000 --> 0:20:11.240 the history of it. So let's let's push on that 0:20:11.320 --> 0:20:16.080 a little bit, because I would add to the list 0:20:16.160 --> 0:20:19.639 that you gave the beginning of this conversation around financial chaos, 0:20:19.640 --> 0:20:24.320 social unrest, political confusion, an existential crisis. When it comes 0:20:24.359 --> 0:20:28.200 to real estate, commercial and residential, we don't know where 0:20:28.200 --> 0:20:29.800 we're going to work. We don't know where we're going 0:20:29.840 --> 0:20:34.920 to live. So it what we talked about accelerance here. 0:20:35.280 --> 0:20:40.120 I mean, this is a massive dislocation in the entire 0:20:40.160 --> 0:20:42.920 way we think about real estate. Do you agree and 0:20:43.000 --> 0:20:46.760 so what do you do with your existing holdings in 0:20:46.800 --> 0:20:50.880 the context of that um as as a coward, what 0:20:50.960 --> 0:20:57.199 we've done is selling. So investors are are looking for 0:20:57.240 --> 0:20:59.760 some diversification from the equity market in real estate is 0:21:00.000 --> 0:21:03.480 always been that right. If you look at the institutional investment, 0:21:03.520 --> 0:21:06.880 the purpose of it has really been diversification. That it's 0:21:06.880 --> 0:21:10.200 a that the co variant factor of it is strong. 0:21:10.320 --> 0:21:12.520 I don't believe that to be true. I don't believe 0:21:12.520 --> 0:21:15.000 real estate is going to vanish. What's gonna vanishes the 0:21:15.040 --> 0:21:19.679 balance sheet, the difference and assets and liabilities. This this 0:21:19.840 --> 0:21:22.440 real estate, this office building will always be a value 0:21:22.520 --> 0:21:26.280 bet at a new basis to someone else, because I, 0:21:26.400 --> 0:21:29.040 as an occupant of this office building, I'm going to 0:21:29.119 --> 0:21:31.720 do something that has never been done in the last 0:21:31.760 --> 0:21:34.280 fifty years, which is to say, I'm not going to 0:21:34.320 --> 0:21:38.760 pay contractual rent and whatever my business is. If I'm 0:21:39.119 --> 0:21:43.400 a retail operator in a shopping center. Now every retail 0:21:43.640 --> 0:21:46.280 operator saying, you owner of the shopping center, going to 0:21:46.320 --> 0:21:49.280 be my partner, so I'll pay you a percentage of 0:21:49.320 --> 0:21:51.960 my gross rent. But I don't know what my contractual is. 0:21:51.960 --> 0:21:53.200 I don't know if I have customers, I don't know 0:21:53.200 --> 0:21:54.639 if I'm going to get deliveries. I don't know what 0:21:54.680 --> 0:21:57.840 the regulatory framework of this pandemic is. I have no idea. 0:21:58.240 --> 0:21:59.879 So if you want me to occupy it, you're going 0:21:59.920 --> 0:22:02.480 to share that risk with me. Well, that's not what 0:22:02.600 --> 0:22:07.200 real estate investors were used to. So I think it changes. 0:22:07.240 --> 0:22:10.879 It doesn't go away. It just reprices itself. Right, every 0:22:10.960 --> 0:22:14.840 aspect will reprice itself and reinvent itself, and entrepreneurs will 0:22:14.880 --> 0:22:16.679 figure out how to do it, and investors will be 0:22:16.720 --> 0:22:22.480 frustrated because that contractual, net rent and cash flow. If 0:22:22.480 --> 0:22:25.200 you think of an office building today, somebody owns a 0:22:25.240 --> 0:22:28.680 prime office building, and which we used to think that 0:22:28.800 --> 0:22:32.720 marble and granite and burled would and individual offices were 0:22:32.720 --> 0:22:36.480 the premium coming back. What we're sure of is none 0:22:36.480 --> 0:22:38.800 of that is true. Right. The way people are going 0:22:38.800 --> 0:22:41.439 to be together if they're together, and what we've all 0:22:41.560 --> 0:22:46.040 learned is zoom is pretty interesting. It's not socially or 0:22:46.200 --> 0:22:50.480 culturally rewarding to us as it is to our kids 0:22:50.480 --> 0:22:54.040 who develop their personalities on these devices, right, I mean, 0:22:54.040 --> 0:22:56.800 they have virtual personalities, they have virtual lives, they create 0:22:56.880 --> 0:23:02.840 virtual images, selfies, Facebook, Snapchat, it's it's it's a new 0:23:02.880 --> 0:23:06.439 medium to communicate, which eliminates a lot of things. I 0:23:06.480 --> 0:23:09.600 think all of the existing things will stay. They're just 0:23:09.680 --> 0:23:12.040 not going to stay in the kind of investment theme 0:23:12.160 --> 0:23:18.439 that investors looked at over history, and so Mark, what 0:23:18.520 --> 0:23:21.199 does that look like for the overall now is the 0:23:21.200 --> 0:23:23.840 CEO of the whole shebang? What does it look like 0:23:23.960 --> 0:23:27.159 for the mix going forward between traditional real estate and 0:23:27.240 --> 0:23:30.520 digital infrastructure? Well, look, as as a firm colony, two 0:23:30.600 --> 0:23:32.879 years ago, Jason, we had two percent of our assets 0:23:32.920 --> 0:23:35.920 were in digital. You know, fast forward to today, we're 0:23:35.920 --> 0:23:40.080 almost at fifty rotation of our assets under management to digital. 0:23:40.200 --> 0:23:43.840 So we've we've had enormous transformation of the company in 0:23:43.880 --> 0:23:46.399 the last two years. The work's not finished yet. What 0:23:46.440 --> 0:23:49.080