Speaker 1: This is Bloomberg Business Week with Carol Masser and Jason
Speaker 1: Kelly from Bloomberg Radio. I'm Jesson Kelly. Welcome to the
Speaker 1: Bloomberg Business Week Extra podcast. It's a look at an
Speaker 1: in depth interview you won't hear anywhere else, my full
Speaker 1: conversation with Tom Barrick, the executive chairman of Colony, and
Speaker 1: the new CEO of Colony, Mark Ganzy. I caught up
Speaker 1: with them for a wide ranging conversation in New York
Speaker 1: City about the future real estate politics and much more so,
Speaker 1: Tom Barrick, dislocation, disruption. They are not unfamiliar to you,
Speaker 1: and yet we throw around the term unprecedented a lot.
Speaker 1: Right now, what is this period of dislocation and disruption
Speaker 1: like for you and for the real estate business? Confusion? Um,
Speaker 1: But confusion is the norm and all of our businesses.
Speaker 1: When you when you think in our lifetime and you
Speaker 1: and I kind of started this adventure together in private
Speaker 1: equity and all alternative assets, the ordinary always reverts to
Speaker 1: the mean. And although I'm cycling away ahead of all
Speaker 1: of you, I've never seen the ordinary. As as soon
Speaker 1: as information becomes efficient and transparent and transmuted, um, the
Speaker 1: the edge is gone, and everybody has a pivot and
Speaker 1: moved to someplace else. It's very difficult for institutional minds
Speaker 1: to do that. But the intersection of financial chaos, social
Speaker 1: up people, political confusion, a global pandemic, the gigantic spread
Speaker 1: between the halves and the have nots, and a move
Speaker 1: away from globalization which we all had a firm belief
Speaker 1: in for the last fifty years, to a kind of
Speaker 1: secular populism has created a perfect storm. And in that
Speaker 1: perfect storm, I think leaders do what they do. They lead,
Speaker 1: but sometimes they actually have no idea to where they're leading.
Speaker 1: So that was a lot Mark Ganzi that Tom just
Speaker 1: laid out financial chaos, social unrest, political confusion, global pandemic.
Speaker 1: That would seem to indicate that from an investor's perspective,
Speaker 1: we are in uncharted waters. I don't think we've ever
Speaker 1: seen this collision of things. As you think about what
Speaker 1: feels to me like a reset in this business, how
Speaker 1: do you attack all of those things? What's the approach? Well, look,
Speaker 1: the one thing that keeps all of this going is digital,
Speaker 1: and so our transformation as a company and where we're
Speaker 1: going is very upproposed for what's happening in the world today.
Speaker 1: If there's one thing that is consistent, it's the ability
Speaker 1: to deliver services across a variety of mediums. That is
Speaker 1: enabling the economy to keep moving forward despite the pandemic.
Speaker 1: And so as we think about the things that are
Speaker 1: important and where we need to go, we're looking ten
Speaker 1: years ahead, and so as we think about where investable
Speaker 1: opportunities are, you have to be thinking around the corners
Speaker 1: and around the corners today isn't so much just about
Speaker 1: this mobilization to digital and this transformation of five G,
Speaker 1: but it's really thinking behind that, what are the key
Speaker 1: building blocks that are going to enable the economy to
Speaker 1: keep going to spite civil unrest, despite pandemics, despite market dislocation.
Speaker 1: What is the one thing that can keep going? And
Speaker 1: from our perspective, it's really our ability to continue to
Speaker 1: invest in great businesses, great logos, We have great customer relationships,
Speaker 1: and the reality is all this has to keep going, Jason,
Speaker 1: we have to keep moving forward. And so in that respect,
Speaker 1: we feel like we're very well positioned as we invest
Speaker 1: for the next decade. Perhaps I'd offer to as we
Speaker 1: invest over the next two decades of where this economy
Speaker 1: is moving so Tom, let's go micro for a second,
Speaker 1: which is how you deal with this as a for
Speaker 1: July one, you hand over the reins from Tom to
Speaker 1: Mark in terms of running the combined business following a
Speaker 1: transaction that puts a lot of things together. Help us
Speaker 1: understand from a micro perspective that decision, the timing and
Speaker 1: the mechanics of what it means for colony, this brand
Speaker 1: that has existed, you know now for thirty plus years.
Speaker 1: It's a monumental decision, especially for a founder, right uh.
Speaker 1: And and when when I say founder, it wasn't from
Speaker 1: brilliance or or intellectual creation of a of a great
Speaker 1: theory that I became a founder. We all wander into
Speaker 1: a situation where you start with a deal, and we
Speaker 1: had a great background is you know the bass is
Speaker 1: really where we we kind of learned how to be
Speaker 1: a contrarian investor in this note. But at the end
Speaker 1: of the day, it's all about culture, values and and
Speaker 1: when you look at succession, moving and pivoting. When you
Speaker 1: spend your life building an institution that has permanency, that
Speaker 1: has transparency, that has consistency, that has governance, is really
Speaker 1: difficult even in a private setting. But We're a public company.
Speaker 1: So when you think of the constituencies we have, we
Speaker 1: have public shareholders, we have institutional limited partners, we have associates,
Speaker 1: employees everywhere, we have customers, we have was Mark always says,
Speaker 1: followed the logos moving into digital. Even even the things
Speaker 1: that the gigantic institutions around the world, you have to
Speaker 1: pay attention to. And what they're all concerned about is
Speaker 1: one thing integrity. Right, the longline relationship is more important
Speaker 1: than returns because returns up and flow. So in the
Speaker 1: process of looking at real estate, as you know we've
Speaker 1: talked about before, I've always looked at real estate for trading.
Speaker 1: I've never looked at real estate as permanent ownership because
Speaker 1: nothing has changed in sixty years. Look at the building
Speaker 1: where you look at the buildings across the street, many
Speaker 1: of them were built in the twenties. The streets were
Speaker 1: built in the teens, the tunnels were built in the
Speaker 1: late twenties, and nothing has changed almost a hundred years.
Speaker 1: So the EBB and flow of real estate values has
Speaker 1: always been challenged by functional, physical, and financial obsolescence. And
Speaker 1: what people miss is this battle between cash flow and capex.
Speaker 1: So colony has always been in the forefront of kind
Speaker 1: of contrarian views of switching at impact points, at inflection
Speaker 1: points in which you're seeing something different than other seas.
Speaker 1: How do you do that? Um? Steve Jobs had a
Speaker 1: great speech that he gave it to a bunch of
Speaker 1: teenagers saying, and I'm not comparing myself to Steve Jobs.
Speaker 1: I admire Steve Jobs and look for leadership qualities there
Speaker 1: and saying most people are navigating streets and alleys at
Speaker 1: street level, and some very good and talented people find
Speaker 1: ways to navigate through those streets by looking in front
Speaker 1: of them. Great leaders look at it from eighty stories
Speaker 1: above and they can see the destination without having to
Speaker 1: go through the perian thrust of what ordinary people are
Speaker 1: doing to find an extraordinary event. But to do that
Speaker 1: you have to have extraordinary experiences. And right, we've lived
Speaker 1: in a in a place where experiences are very ordinary,
Speaker 1: and we put a premium on those ordinaries. If you
Speaker 1: go to great school, you go to prep school, you
Speaker 1: go to great business school, you can now you go
Speaker 1: to work for a financial institution. That's the norm. As
Speaker 1: as I was trying to navigate the next iteration of
Speaker 1: colonies life because We've had lots of them, right. We
Speaker 1: transition from a great beginning with the basses really in
Speaker 1: the eighties, and the contraining environment with the RTC, and
Speaker 1: then beginning the acquisition of Western hotels a districts period.
Speaker 1: Nobody thought these were really businesses at the time. Europe
Speaker 1: ends up in the same distress Asian contagion two thousands,
Speaker 1: the Internet boom and bust two thousand seven, housing boom
Speaker 1: and bust, and we kept reinventing ourselves. So at this stage,
Speaker 1: the dilemma of saying what's the leadership for the next
Speaker 1: two decades, to me, was about who can really define
Speaker 1: where the ball is going now? Where the ball is
Speaker 1: and who had that culture, who had that brand, and
Speaker 1: who had two very important things which usually don't come
Speaker 1: in the same package brilliance, scarce rare very difficult to
Speaker 1: find and courage. And I had invested with Mark. I've
Speaker 1: known Mark actually since he was a danger. His dad
Speaker 1: was a friend of mine, So I watched his kind
Speaker 1: of meteor career in this arena as an entrepreneur and
Speaker 1: digital infrastructure, and there were none, right, there was no
Speaker 1: soup to nuts master of this universe. And I invested
Speaker 1: with him on a personal basis way before we got
Speaker 1: together in in two thousand sixteen, two thousand seventeen, where
Speaker 1: I was trying to convince him that moving into this
Speaker 1: format of professionally managed funds with a with a public
Speaker 1: entity as the anchor would be a great go forward path,
Speaker 1: and I really became enamored with that, with his vision,
Speaker 1: with his ability to see it from eighty stories, with
Speaker 1: his never ending work ethic in an arena that was
Speaker 1: really interesting to me because it was the railroad, it
Speaker 1: was the electricity of the future. The only thing has
Speaker 1: changed his Internet and computing in fifty years. Right, this
Speaker 1: building is basically the same, residences are basically the same,
Speaker 1: shopping centers are basically the same, and eventually that continual
Speaker 1: cap X will erode away returns. And what Mark was
Speaker 1: doing was was what I thought the future had in store,
Speaker 1: and his personality, his character, and his integrity fit into
Speaker 1: what I as a founder had helped the continuation of
Speaker 1: of that culture for colony would be. So Mark, let's
Speaker 1: let's get down the level and help people understand exactly
Speaker 1: what it is you're investing in, what is digital infrastructure,
Speaker 1: And then let's we're going to talk about sort of
Speaker 1: how it relates and what it means for the entire
Speaker 1: enterprise going forward. But I mean, what are we talking
Speaker 1: about here when when we get down to brass tacks,
Speaker 1: you know. For for me to distill it in the
Speaker 1: most simplistic form, it's really the plumbing that enables information
Speaker 1: to flow. And so the way that we communicate, the
Speaker 1: way that we do commerce, the way that we conduct
Speaker 1: our fitness where kids are going to school today, um,
Speaker 1: the way that we conduct business to resume call, all
Speaker 1: of that requires mission critical infrastructure to enable the origination
Speaker 1: of a communication and ultimately to terminated communication point. And
Speaker 1: so along that road, Jason, we touch a lot of
Speaker 1: different elements in the ability to enable that technology. And
Speaker 1: so it could be a mobile tower that you see
Speaker 1: along the Hutchinson Parkway. It could be fiber that runs
Speaker 1: underneath sixth Avenue. It could be a data center that
Speaker 1: sits in for example, Ashburn, Virginia. Or it could be
Speaker 1: a small cell that literally sits at the corner of
Speaker 1: Madison where we have a micro tower that's providing amplified coverage.
Speaker 1: There's so many different forms of digital infrastructure today and
Speaker 1: it's only growing. It's really becoming an asset class unto itself,
Speaker 1: and as we try to place it as an investor,
Speaker 1: and we try to think about where is it is
Speaker 1: at private equity, is it infrastructure? Is it? Is it
Speaker 1: real estate? And the reality is it's a it's a
Speaker 1: little bit of all three things from an institutional investor perspective,
Speaker 1: trying to distill it down to one thing. And on
Speaker 1: one hand, it has operational complexities, right think about the
Speaker 1: trust that's given to us in terms of managing those
Speaker 1: networks for Amazon or Microsoft, or Verizon or Vota Phone, Telefonica, Google.
Speaker 1: I mean, these are the customers that entrust us daily
Speaker 1: with their information, they trust us with the delivery mechanism
Speaker 1: of their communication services. And so what we've tried to
Speaker 1: do to make it easy for institutional investors understand, we say, look,
Speaker 1: there's sort of four key swim lanes right now in
Speaker 1: digital instructure. There's there's towers, there's fiber optic cables, there's
Speaker 1: data centers, and there's small cell infrastructure. Those are really
Speaker 1: sort of the four biggest verticals to think about as
Speaker 1: an asset class today. Now, of course there's a lot
Speaker 1: of nuances and in between the lines there, but once again,
Speaker 1: the easiest way to think about this is these are
Speaker 1: really the new railroads, and you think about, you know
Speaker 1: what the Rockefellers did, and you think about these transformative
Speaker 1: moments in the history of the time of our country.
Speaker 1: In digital we're having that moment right now. This is
Speaker 1: really the next major migration path in technology in this country.
Speaker 1: You know, whether it's cloud computing or five G there's
Speaker 1: many thematics happening at the same time. And then you
Speaker 1: put that against a backdrop of COVID and a pandemic,
Speaker 1: and all of this is accelerating. So I want to
Speaker 1: I'm glad you said that because I wanted to press
Speaker 1: you on that, which is we've heard essentially people say that,
Speaker 1: especially on the digital side and from a transform transformational perspective.
Speaker 1: And we'll talk about cities and suburbs in a second,
Speaker 1: but the acceleration of that trend. How can you quantify
Speaker 1: the acceleration in terms of as you've looked out at Okay,
Speaker 1: this is where we think digital infrastructure is going. We
Speaker 1: thought it was gonna take ten years, it's actually gonna
Speaker 1: take a year. Like, what how do you think about that? Well,
Speaker 1: I think there's there's a couple of things happening at
Speaker 1: the same time, and once again to try to keep
Speaker 1: it simple for for investors in from main street, I
Speaker 1: think that the biggest thematic is mobility. So once again,
Speaker 1: as we as we think about our devices and we
Speaker 1: think about where we conduct business, where we conduct commerce,
Speaker 1: where we conduct education, and at the same time, we
Speaker 1: want to be mobile. We want to constantly be on
Speaker 1: the move, and we want it faster, cheaper, better, and
Speaker 1: so as we move to five G. Five G is
Speaker 1: probably in my twenty six years of building networks, it's
Speaker 1: the most exciting step function and technology that we've ever seen.
Speaker 1: Think about an environment where you've got lower latency, which
Speaker 1: is the distance between the antenna and the actual device.
Speaker 1: Think about an environment where the device operates ten times
Speaker 1: faster than you're existing four G phone, and think about
Speaker 1: more applications, think about more entertainment, think about all the
Speaker 1: things that you can do from a mobile perspective. It's
Speaker 1: a it's a massive change into the consumer. They don't
Speaker 1: see it yet, right because you haven't touched a five
Speaker 1: G device yet, which you're which we're now rolling out
Speaker 1: five G devices, So this is exciting. It's a probably
Speaker 1: a seven to eight year investment cycle for us, we're
Speaker 1: talking about one point one trillion of CAPEX that's going
Speaker 1: to be put into build five g Um we think
Speaker 1: about cloud computing, we're really in the infancy and cloud computing.
Speaker 1: You know, less than twenty percent of the information sits
Speaker 1: on the cloud today, and we're transforming. We're moving a
Speaker 1: lot of that information and applications towards the cloud. Because
Speaker 1: remember and compute, Jason, You've got two things happening at
Speaker 1: the same time. You have your applications that are running
Speaker 1: in real time and any of your storage where all
Speaker 1: your data is stored, and all of that is transforming
Speaker 1: at the same time too, as we think about a
Speaker 1: new migration path for where data is stored and where
Speaker 1: data is ultimately computed. So these two thematics are so
Speaker 1: massive and um I think, look, every quarter we're measuring
Speaker 1: the performance of our companies. We've got sixteen businesses around
Speaker 1: the globe that operate in the digital realm, and you know,
Speaker 1: we had businesses that we're growing at seven Now they're
Speaker 1: growing at the organic growth that we've experienced in the first,
Speaker 1: second and third quarter down at the portfolio company level
Speaker 1: is astounding because our customers are sort of saying to us, look,
Speaker 1: we need more We need more fiber, we need more towers,
Speaker 1: you know, we need more data center capacity, we need
Speaker 1: more mega wats in terms of power for compute, and
Speaker 1: we have to deliver. We have to wake up every
Speaker 1: day and we have to deliver for our customers. And
Speaker 1: so Tom square that with the traditional quote unquote realist
Speaker 1: business and what that means in terms of if you're
Speaker 1: doing this, you're obviously doing less of traditional real estate.
Speaker 1: How do you map that out in terms of talking
Speaker 1: to your investors, talking to potential investors, talking to the
Speaker 1: world about that transition, Because yes, it's an inflection point,
Speaker 1: but it also feels pretty radically different to some extent. Yeah,
Speaker 1: and for sure it is I view as an accelerat. Right.
Speaker 1: This pandemic is just an accelerat of what was happening
Speaker 1: in any event. And I think the difficult thing for
Speaker 1: great entrepreneurs like Mark Rolling to a great public company
Speaker 1: CEO public companies like Consistency and themes they can see
Speaker 1: a decade ahead, and what that produces most of the
Speaker 1: time is a bureaucracy in ordinary returns, Right, I mean,
Speaker 1: that's really what it is. So if you looked at Reatland,
Speaker 1: reat land was all about dividends. Just give me long
Speaker 1: term contractual obligors on the other and let me collect
Speaker 1: net rents. And that doesn't exist anywhere. We were already
Speaker 1: on that path, right, we were air B and B,
Speaker 1: Amazon dot Com. My garage looks like a Simon shopping
Speaker 1: center right by ordering whatever you want online. So the
Speaker 1: value of real estate has become less and less important
Speaker 1: in the midst of this accelerated um disintermediation of all
Speaker 1: those things are important, including information. By the way, because
Speaker 1: our businesses grew up by saying, well, we have some
Speaker 1: little competitive edge. You look at this office billing and say, okay,
Speaker 1: real real estate is very simple. I have to find
Speaker 1: a piece of land. That's gonna take me a year.
Speaker 1: Then I have to get it entitled, and I have
Speaker 1: to go to mayor, a mayor of any great city
Speaker 1: and say I need entitlements. That takes another year. Then
Speaker 1: I need an architecture design it. That's another year. Then
Speaker 1: I need to build it. That's two years. Then I
Speaker 1: needed less it's another two years. It's five years from
Speaker 1: the time you have an idea to the time that
Speaker 1: it's created. It now you have ideas being created in
Speaker 1: an afternoon. Right, innovation and technology is the norm. So
Speaker 1: in convincing our investors say, look, this intersection, what isn't
Speaker 1: going to change is the infrastructure of what it takes
Speaker 1: these great logos to be able to amass the new
Speaker 1: distribution of everything that we need socially, intellectually, healthcare wise, physically,
Speaker 1: entertainment wise. It's just changed. And what it isn't going
Speaker 1: to be is obsolescent because it's reinventing itself on a
Speaker 1: constant basis. So to me, net cash flow is all
Speaker 1: you can need forget about whatever these other factors, a FFO, FFO, earnings, dividends,
Speaker 1: It all comes from net cash flow, and net cash
Speaker 1: flow is created by contractual revenues for simple investors like
Speaker 1: ourselves saying we have to create something that these customers
Speaker 1: and clients will use, and that infrastructure is a different
Speaker 1: kind of real estate. I remember ten years ago there
Speaker 1: were no digital rates. Five years ago there were a couple. Today,
Speaker 1: the dominant factors in the industry, the biggest multiples, are
Speaker 1: digital companies. They didn't think when Mark first started, he
Speaker 1: had to convince people that radio cell towers were real estate.
Speaker 1: David Simon didn't have to convince anybody that a shopping
Speaker 1: center was real estate, or or Steve Roth that the
Speaker 1: Great Tornado buildings were real estate. So I think if
Speaker 1: you want extraordinary returns, if you want to get out
Speaker 1: of the norm, which the problem today is that, right
Speaker 1: there's too much liquidity with too few places to go,
Speaker 1: which is we're seeing this boom in the and the
Speaker 1: equity market while we're having this devastating financial and pandemic
Speaker 1: crisis in the world, Unemployment across the globe at higher
Speaker 1: levels than we've ever seen, an anarchy in just about
Speaker 1: every nation imaginable. So to me, you go where the
Speaker 1: puck is going, and real estate is a very unmoved,
Speaker 1: stable asset, which is the good news and the bad news.
Speaker 1: And if you don't pivot, if you don't move, eventually
Speaker 1: those bricks will fall on your head. And that's been
Speaker 1: the history of it. So let's let's push on that
Speaker 1: a little bit, because I would add to the list
Speaker 1: that you gave the beginning of this conversation around financial chaos,
Speaker 1: social unrest, political confusion, an existential crisis. When it comes
Speaker 1: to real estate, commercial and residential, we don't know where
Speaker 1: we're going to work. We don't know where we're going
Speaker 1: to live. So it what we talked about accelerance here.
Speaker 1: I mean, this is a massive dislocation in the entire
Speaker 1: way we think about real estate. Do you agree and
Speaker 1: so what do you do with your existing holdings in
Speaker 1: the context of that um as as a coward, what
Speaker 1: we've done is selling. So investors are are looking for
Speaker 1: some diversification from the equity market in real estate is
Speaker 1: always been that right. If you look at the institutional investment,
Speaker 1: the purpose of it has really been diversification. That it's
Speaker 1: a that the co variant factor of it is strong.
Speaker 1: I don't believe that to be true. I don't believe
Speaker 1: real estate is going to vanish. What's gonna vanishes the
Speaker 1: balance sheet, the difference and assets and liabilities. This this
Speaker 1: real estate, this office building will always be a value
Speaker 1: bet at a new basis to someone else, because I,
Speaker 1: as an occupant of this office building, I'm going to
Speaker 1: do something that has never been done in the last
Speaker 1: fifty years, which is to say, I'm not going to
Speaker 1: pay contractual rent and whatever my business is. If I'm
Speaker 1: a retail operator in a shopping center. Now every retail
Speaker 1: operator saying, you owner of the shopping center, going to
Speaker 1: be my partner, so I'll pay you a percentage of
Speaker 1: my gross rent. But I don't know what my contractual is.
Speaker 1: I don't know if I have customers, I don't know
Speaker 1: if I'm going to get deliveries. I don't know what
Speaker 1: the regulatory framework of this pandemic is. I have no idea.
Speaker 1: So if you want me to occupy it, you're going
Speaker 1: to share that risk with me. Well, that's not what
Speaker 1: real estate investors were used to. So I think it changes.
Speaker 1: It doesn't go away. It just reprices itself. Right, every
Speaker 1: aspect will reprice itself and reinvent itself, and entrepreneurs will
Speaker 1: figure out how to do it, and investors will be
Speaker 1: frustrated because that contractual, net rent and cash flow. If
Speaker 1: you think of an office building today, somebody owns a
Speaker 1: prime office building, and which we used to think that
Speaker 1: marble and granite and burled would and individual offices were
Speaker 1: the premium coming back. What we're sure of is none
Speaker 1: of that is true. Right. The way people are going
Speaker 1: to be together if they're together, and what we've all
Speaker 1: learned is zoom is pretty interesting. It's not socially or
Speaker 1: culturally rewarding to us as it is to our kids
Speaker 1: who develop their personalities on these devices, right, I mean,
Speaker 1: they have virtual personalities, they have virtual lives, they create
Speaker 1: virtual images, selfies, Facebook, Snapchat, it's it's it's a new
Speaker 1: medium to communicate, which eliminates a lot of things. I
Speaker 1: think all of the existing things will stay. They're just
Speaker 1: not going to stay in the kind of investment theme
Speaker 1: that investors looked at over history, and so Mark, what
Speaker 1: does that look like for the overall now is the
Speaker 1: CEO of the whole shebang? What does it look like
Speaker 1: for the mix going forward between traditional real estate and
Speaker 1: digital infrastructure? Well, look, as as a firm colony, two
Speaker 1: years ago, Jason, we had two percent of our assets
Speaker 1: were in digital. You know, fast forward to today, we're
Speaker 1: almost at fifty rotation of our assets under management to digital.
Speaker 1: So we've we've had enormous transformation of the company in
Speaker 1: the last two years. The work's not finished yet. What
Speaker 1: we've told investors is where we'll be, you know, by
Speaker 1: Q one of next year the year following, so by
Speaker 1: the end of next year, we should be about over
Speaker 1: rotated in a digital as we continue to find the
Speaker 1: right homes for some of these legacy ass that Tom
Speaker 1: talked about. And so monetizations have gone as as we
Speaker 1: would have expected, I think, probably better than we would
Speaker 1: have expected. We had a really graceful departure from our
Speaker 1: industrial real estate portfolio Blackstone. We had a great departure
Speaker 1: of our European office assets to Acca. We we left
Speaker 1: a great partnership with Scott Reckler here in New York
Speaker 1: City earlier this year. And we're finding the right homes
Speaker 1: for these assets. And and really given that the acceleration
Speaker 1: part on the digital side has gone far better than
Speaker 1: we had expected, it's given us a little bit of
Speaker 1: a longer runway to make sure that we have the
Speaker 1: right the right cadence to where we're gonna just you know,
Speaker 1: ultimately dispose of those assets. And on the digital side,
Speaker 1: we're growing, and we're growing at an incredible pace. I
Speaker 1: think this year, Jason, we've done seven significant transactions. We've
Speaker 1: deployed twenty billion dollars of capital at Colony. I think
Speaker 1: that would make us one of the most active investors
Speaker 1: in the world. UM and so we're finding really good
Speaker 1: opportunities to put capital to work. We're forming capital at
Speaker 1: an accelerated pace. I think as the market leader in
Speaker 1: digital infrastructure, it's given us the mantle to go forward
Speaker 1: and continue to raise capital on a private basis where
Speaker 1: we can find really good opportunities to back back our customers.
Speaker 1: And meanwhile, at the same time, we we've made just
Speaker 1: enormous progress on the corporate side, you know, really having
Speaker 1: a great deal of success deleveraging the business. The last
Speaker 1: six months, we've we've brought leverage down from twelve to
Speaker 1: eight times. We've cut gen A by over seventy five
Speaker 1: million dollars in last year, and we're making all of
Speaker 1: the right moves to get us into a position to
Speaker 1: be a leaner and a better read and candidly a
Speaker 1: read of the future. If you think about where real
Speaker 1: estate investment is going in the future, where we are
Speaker 1: in converge network solutions is where you want to be
Speaker 1: long term, and so are you getting. Is the appetite
Speaker 1: out there for those traditional real estate assets, especially in
Speaker 1: hospitality and commercial, It's incredible. I think, you know, we've
Speaker 1: been pleasantly surprised at how we've been able to not
Speaker 1: only exit some of these asset assets, but really exited
Speaker 1: at positive netbook value. Which is the key, so that
Speaker 1: we're returning capital back to the balance sheet where we
Speaker 1: can redeploy that capital into what we believe are the
Speaker 1: best opportunities in digital. So, you know, exiting the community
Speaker 1: shopping center space, which we did earlier this year in
Speaker 1: a transaction. We had a series of community shopping centers
Speaker 1: anchored by Albertson's. Somebody else felt like that was a
Speaker 1: great opportunity, and guess what it probably is. Think about
Speaker 1: in the pandemic, what has worked retail shopping centers that
Speaker 1: are anchored by big grocery stores. So that worked out
Speaker 1: really well for that particular investor. I think the lodging
Speaker 1: sector is interesting. I think I've one of the things
Speaker 1: I was telling tomu other day that I noticed is
Speaker 1: we're seeing private equity come into lodging, which is something
Speaker 1: I haven't seen in twenty years. And I'm not talking
Speaker 1: about Barry and Starwood. I'm talking about real private equity
Speaker 1: firms backing management teams and management companies looking to acquire
Speaker 1: hotel assets, not only management platforms, but actual assets. So
Speaker 1: we've got to actually a pretty good limited service portfolio.
Speaker 1: And so we've done great work of the last six
Speaker 1: months restructuring all of our debt. We're now in a
Speaker 1: great place where we can think about what is the
Speaker 1: right path for those set of assets, and so we'll
Speaker 1: spend the rest of this year thinking about the logical
Speaker 1: home for our lodging assets, and I think we're gonna
Speaker 1: actually see probably a pretty good result. Um. Looking at
Speaker 1: the total amount of capital that's sitting on the sidelines,
Speaker 1: it's incredible to me that you know, you think about
Speaker 1: fundraising right now. We've had a great amount of success
Speaker 1: fundraising because people are excited to be reallocating assets and
Speaker 1: the real asset category from traditional real estate and traditional
Speaker 1: infrastructure into digital. But by the way, there's opportunistic real
Speaker 1: estate capital being raised all around the globe right now
Speaker 1: to take advantage of what Tom just talked about. So UM,
Speaker 1: I think we'll see we'll see good up good opportunity.
Speaker 1: An interesting factoid if you think that real estate is
Speaker 1: the hospitality business is going to be there. Hotels are
Speaker 1: going to be there, the pier is going to be there,
Speaker 1: the plaza is going to be their limited service is
Speaker 1: going to be there. All that changes is the nature
Speaker 1: of the contracts and the services. So you have sea Corps,
Speaker 1: you have highatt Alton Marriott that had a contractual relationship
Speaker 1: with an owner saying I want to percentage of the growth.
Speaker 1: I want to presentage of the net. I want a
Speaker 1: brand fee. I want a franchise fee. Here's what you
Speaker 1: have to deliver to your customer in order to keep
Speaker 1: my franchise. I want to turn down services. I want
Speaker 1: three fitness centers, I want six restaurants. I want food
Speaker 1: service twenty four hours a day. And the owners are saying, whoa,
Speaker 1: there's no way. So now the sea corps are changing
Speaker 1: their relationship with the owners, So the liability side is
Speaker 1: coming down, down, down. So I think what you're going
Speaker 1: to see in all this is Marcus saying we're seeing
Speaker 1: values because now you have a new kind of manager
Speaker 1: owner coming and saying I can take advantage of this
Speaker 1: disruption of the sixceler This is where it was going.
Speaker 1: Young people don't want all of this stuff. They have
Speaker 1: grub Hub. You don't need twenty four hour food service,
Speaker 1: you don't need a health facility, you don't need two
Speaker 1: times turndown service. So I think the metamorphosis on the
Speaker 1: good side will happen. So the value of whatever you
Speaker 1: think an urban location or suburban location. How that ebbs
Speaker 1: and flows, it'll still neither. Tom. I'm sitting here listening
Speaker 1: to you though, and thinking maybe at a different time this,
Speaker 1: this would be your you'd be feasting on this to
Speaker 1: some extent. I mean, these are the periods of real
Speaker 1: estate dislocation that you have found great success in over
Speaker 1: the years, and yet you're on the cell side, not
Speaker 1: not the buy side of this. And I find that interesting. Yeah,
Speaker 1: I'll tell you why. Is as we developed kind of
Speaker 1: the distress ideas and theories and people, people never see
Speaker 1: it when it's happening, right, So a contrarian theme in
Speaker 1: real estate always seems foolish at the beginning. So while
Speaker 1: while we had the great tenure at Bass with the
Speaker 1: bottom and occulture in Kelvin Davis in the whole history
Speaker 1: of of what Bob had created, when we bought American Savings,
Speaker 1: people thought we were out of our minds. Why would
Speaker 1: you buy thirty billion dollars of troubled assets and a
Speaker 1: regulated entity. Then the RTC started in ninety was the
Speaker 1: same thing. People said, you're out of your mind. You're
Speaker 1: buying this junk for thirty cents on the dollar. Four
Speaker 1: years later they said that was nothing. You guys are
Speaker 1: anybody could have made money by buying thirty cents on
Speaker 1: the dollar. What was the key was nobody had the information.
Speaker 1: We had an edge. Real estate people had an edge.
Speaker 1: Financial investors had an edge because the proliferation and the
Speaker 1: transparency of information and all of those things was limited
Speaker 1: to certain silos. Today everybody has all the information. We
Speaker 1: have no edge. What edge do you have? There's zero edge.
Speaker 1: So to me, the thematic shift is more important than
Speaker 1: the distress of an economic component in a moment and
Speaker 1: value because now we have a public company, we have
Speaker 1: five fifty institutional limited partners who are all looking for
Speaker 1: outsized returns. Why we're trying to produce replicatable dividends to
Speaker 1: the shareholders, and that happens over a decade. So it's
Speaker 1: hard for me to see these physically obsolescentum structures which
Speaker 1: are always going to be here. Just the liabilities will
Speaker 1: be repriced. It's a longer, harder road than taking the
Speaker 1: thousands of threads that Mark has weaved over a lifetime,
Speaker 1: the hundreds of threads of the colonies weaved and trust
Speaker 1: what we talked about in culture and brand and managing
Speaker 1: institutional money and putting it together in this tapestry of digital,
Speaker 1: which to me has the best component of net cash
Speaker 1: flow from contractually credit worthy obligers. Look at the look
Speaker 1: at the stock mark. It's all driven by five logos.
Speaker 1: Those are the five logos that you want on the
Speaker 1: other side of our transaction. I don't know anymore how
Speaker 1: to do a We work with individuals who are entrepreneurs,
Speaker 1: who are innovating technology, which is we we need more,
Speaker 1: but there's no contractual credit on the other side of this.
Speaker 1: So I just think it's a unique opportunity for that
Speaker 1: disintermediation by going to a new theme and going to
Speaker 1: the railroad and the utility of the future, which is
Speaker 1: all things digital. So mark in terms of and then
Speaker 1: we'll move on from the disposal side. But in terms
Speaker 1: of the disposal side, given the economic just confluence of
Speaker 1: events out there, are you getting what you need from
Speaker 1: the private market? Is there still a need for the
Speaker 1: government to step in on the CMDS side? I mean,
Speaker 1: I know that that's something that both of you have
Speaker 1: discussed it to some extent. What's the right remedy for
Speaker 1: where we are right now? Well, Look, the reality is
Speaker 1: we don't wait for government to solve our problems. What
Speaker 1: we decided many many months ago is we're going to
Speaker 1: decide we're gonna we're gonna pave our own path and
Speaker 1: we'll have to make our own decisions without any help
Speaker 1: from external forces. And that's just the bunker plan we
Speaker 1: made seven months ago, and it's worth doubt reasonably well
Speaker 1: for us. I would say, I think on the on
Speaker 1: the dead side, on the lodging side, there was no
Speaker 1: there was no lifeboat for the lodging industry. Um greater
Speaker 1: than fifty of the hotels in this country are basically
Speaker 1: insolvent today, and we knew that. We identified that early,
Speaker 1: and so we worked with Mulus, we worked at our
Speaker 1: lodging team, and ultimately we we had to work very
Speaker 1: hard across seven different credit facilities to exact the correct result,
Speaker 1: which now puts us in a place where we can
Speaker 1: ultimately monetize and harvest those assets. I think, thinking through
Speaker 1: our mortgage Read, I'm very pleased with what as He
Speaker 1: has done there. We've we we only had to touch
Speaker 1: two different loans on our RepA lines, which is fantastic
Speaker 1: on when you think about the pool of assets that
Speaker 1: mortgage Read represents today. Now they've got a big cash position.
Speaker 1: They're starting to play offense and think about ways where
Speaker 1: they can deploy capital. So once again, decisions made six
Speaker 1: seven months ago are now reaping the rewards today. And
Speaker 1: then the last thing is just the corporate balancy, one
Speaker 1: of the highest priorities that I told Tom when I
Speaker 1: came here, and as his partner, I said, look, we've
Speaker 1: got to deliver our balancy. So we paid down some
Speaker 1: debt last December. We made a series of constructive moves
Speaker 1: in the second quarter to rebalance our balance sheet, getting
Speaker 1: net leverage down about eight times, and we're going to
Speaker 1: continue to do that. We want to be really as
Speaker 1: a digital read as a diversified digital re Jason, we
Speaker 1: want to be in that sort of five and a
Speaker 1: half to six times leverage level alongside of our peer
Speaker 1: groups like Digital Realty in American Tower. So we're making
Speaker 1: tremendous progress on the balance Look, the world gives you
Speaker 1: no credit for it, right, you deliver and people sort
Speaker 1: of on and say, well, good for you, But um,
Speaker 1: we know that that's the hard work that had to
Speaker 1: be done, and I think a lot of that hard
Speaker 1: work is now behind us, which has enabled us to
Speaker 1: play offense on the digital side, and that offense has
Speaker 1: never been been better today. In terms of the twenty
Speaker 1: six years that I've been doing this, I've I've never
Speaker 1: seen an environment like this where all of our customers
Speaker 1: are growing at the same time. It's pretty pretty remarkable. Actually, Okay,
Speaker 1: can I give you a little different point of view?
Speaker 1: So Secretary Manuchin, Chairman Poue have done an amazing job
Speaker 1: with four five into Jewels trying to figure out how
Speaker 1: do we get a plan to the people. It's not
Speaker 1: to us, right, it's not to the big companies, it's
Speaker 1: not the balance sheets. People are panicked for survival. That
Speaker 1: that average individual trying to figure out how do I live,
Speaker 1: how do I go forward? What's what's happening with my rent,
Speaker 1: what's happening with my homeland, what's happening with my check.
Speaker 1: It's not coming from that employer anymore. And that that
Speaker 1: confusion and dismay when you have three to five trillion
Speaker 1: dollars being flushed into the economy and how you disperse it.
Speaker 1: You have to give them all great credit. But at
Speaker 1: the end of the day, the solution to all of
Speaker 1: that has got to be a resurgence of confidence across
Speaker 1: all the things that we talked about pandemic. I honestly
Speaker 1: never thought I would see a global submission as bad
Speaker 1: as this is and as horrible as one death is,
Speaker 1: and and how in an environment like this we can't
Speaker 1: find a solution or cure is another quandary. But the
Speaker 1: cessation of revenue in the world is a problem, and
Speaker 1: the unintended consequences of that, the the the openness of
Speaker 1: the division between the have and the have nots. What
Speaker 1: we're seeing in black lives matter, what we're seeing in
Speaker 1: Kenosha and Portland, in Chicago, and and the anarchy certainly
Speaker 1: is part political which we've which we've always had, is
Speaker 1: being displayed in in a different way than it's it's been.
Speaker 1: But as part of this financial frustration of people just
Speaker 1: not having a GPS as what is their life going
Speaker 1: to be and can they sustain themselves? And until we
Speaker 1: fix that, I think nothing is going to work. So
Speaker 1: what you're referring to is is something that you mentioned
Speaker 1: at the top of the conversation, which is this moved
Speaker 1: away from globalization towards secular populism. Just using the words
Speaker 1: that you used earlier. UM, many people put that squarely
Speaker 1: at the foot of this administration, at the feet of
Speaker 1: this administration and the Trump administration. It was almost exactly
Speaker 1: four years ago that you were on stage at the
Speaker 1: r n C telling the world about your friend Donald Trump.
Speaker 1: Many people would blame him for exactly these ills that
Speaker 1: you're describing in this widening disparity. What do you say
Speaker 1: to that? I say that, and thank God we're in
Speaker 1: America where we can all criticize the powers that be
Speaker 1: and hold them accountable for whatever variances that we feel
Speaker 1: that that are at state now. Starting with our position,
Speaker 1: in my position as a public chairman, is I support
Speaker 1: whatever regulatory body is in power at the time, and
Speaker 1: whatever those set of rules regulations are, will live within
Speaker 1: and will will abide by um. Donald Trump has been
Speaker 1: a friend of mine for forty years as I started
Speaker 1: this adventure. I have great admiration respect for him as
Speaker 1: an individual and for President United States. This is not
Speaker 1: an easy job, as it is not for the four
Speaker 1: thirty five individuals who are paid a hundred and seventy
Speaker 1: four thousand dollars a year to take all the abuse
Speaker 1: that they all take and try and figure out how
Speaker 1: how do we solve these these global ills at the
Speaker 1: same time, I don't agree all the time with how
Speaker 1: he messages or or what happens, as I don't agree
Speaker 1: with a lot of world leaders. And the political political
Speaker 1: situation I think is frustrating because people are in agony
Speaker 1: and that decision will be in the polls. That Joe
Speaker 1: Biden has been a friend, I have great respect and
Speaker 1: admiration for him also, and I think that the process
Speaker 1: is the right process. President Trump came in to disintermediate
Speaker 1: a system that at the time his core believed was
Speaker 1: the proper thing to do. Well. Now have a report
Speaker 1: card and a process in which a democracy which is
Speaker 1: which is threatened. I mean, what's happening is we're testing
Speaker 1: our democracy. It's not working well. Right. The rich seemed
Speaker 1: to be getting richer and the poor seemed to be
Speaker 1: getting poorer, and people are frightened for their education and
Speaker 1: primarily for healthcare, just the basic needs that's got to
Speaker 1: be fixed. Whether that all lies on the hands of
Speaker 1: a president or Congress or ourselves as individuals. The complexity
Speaker 1: of it is beyond the scope of anything that I
Speaker 1: can I can look at, but this globalization versus protectionism
Speaker 1: is not just America, It's every country post war around
Speaker 1: the world today, this idea of America subsidizing all of
Speaker 1: the national or international institutions, the United Nations, the w
Speaker 1: t O, all of these organizations around the world that
Speaker 1: we fuel thinking that we're going to alive. Those individual
Speaker 1: nations are also suffering from the same dilemma between haves
Speaker 1: and have nots, corruption, political dismay. It's a it's a
Speaker 1: torturous time in the in the world, and everybody's connected.
Speaker 1: So what's different today is Mark's twenty seven years in
Speaker 1: this business and building a digital infrastructure is communicated instantly.
Speaker 1: So a better one sitting in the middle of Saudi
Speaker 1: Arabia has a device that better one knows what's happening
Speaker 1: in the middle of Beverly Hills. He knows what's happening
Speaker 1: in London, Paris, Hong Kong, Japan in an instant. So
Speaker 1: the cloister of information by all of these political regimes
Speaker 1: around the world has crumbled, and it's crumbled into monopolies
Speaker 1: and duopolies. And the monopolies and duopolies are digital. And
Speaker 1: President Trump, whatever people think of him, and and I
Speaker 1: really look at it simply is these these people, these senators,
Speaker 1: these congressmen, the presidents are all well meaning, They're all
Speaker 1: well meaning, and there is no perfect answer to everybody.
Speaker 1: It's it's it's it's a torture situation with almost three
Speaker 1: hundred million people trying to figure out where you go.
Speaker 1: But respect, trust confidence can only come when people are
Speaker 1: confident that they can feed their family, that they can
Speaker 1: educate their family, that they have a future, that the
Speaker 1: American dream is someplace in front of them. And I
Speaker 1: think people are confused, what what is the American dream today?
Speaker 1: What is the global direct And that's not a presidential issue.
Speaker 1: Well to the point of the American dream, you know,
Speaker 1: one of the big questions that I would pose to
Speaker 1: both of you because the work that you're doing, both
Speaker 1: digitally and in more traditional real estate sort of cuts
Speaker 1: the core of this, especially as I look across the
Speaker 1: history of of colony, which is we are facing big
Speaker 1: and I am overusing this word existential because it feels
Speaker 1: that way. Questions about the future of cities, the future
Speaker 1: of suburbs, that in itself the suburbs have become a
Speaker 1: political issue, and in the last few weeks and really
Speaker 1: ratcheted up the rhetoric from President Trump specifically, what is
Speaker 1: as you look around and you think about the digital enablement,
Speaker 1: and you think about that, and I'll start with you, Mark,
Speaker 1: what is the future of the city versus the suburb
Speaker 1: at this moment? Well, I think we're in transition, um.
Speaker 1: And as the engineers and the builders of this infrastructure,
Speaker 1: we see where the traffic's going, because once again we're
Speaker 1: entrusted with that information. And what I would tell you
Speaker 1: today is is from a network perspective, from a digital perspective,
Speaker 1: workloads are shifting from the urban core out of the
Speaker 1: suburbs in a in a pace that we've never seen
Speaker 1: in three decades. And what I mean by that is
Speaker 1: the proliferation of network infrastructure is more prominent in the
Speaker 1: suburbs than it is in the urban cored today. So
Speaker 1: data centers are now being built, Jason on the edge.
Speaker 1: You know what's the edge? Um? The edge for us is,
Speaker 1: for example, bluff Dale, Utah. We just built a massive
Speaker 1: data center there at Colony and nobody would know what
Speaker 1: bluff Dale, Utah is, but it's the suburbs of Salt
Speaker 1: Lake City. But there are are our biggest customers sitting
Speaker 1: there saying we need to be there, we need to
Speaker 1: put our workloads there because in the core of that city,
Speaker 1: that's not where the activity is. That the activity is
Speaker 1: happening outside the city. And so as we think about
Speaker 1: where we've got to you know, once again, get rights
Speaker 1: of ways, get permits, um we actually we we we
Speaker 1: buy fee, we go through the complicated process of entitlements.
Speaker 1: It used to be those were really complicated issues in
Speaker 1: state Maine, which was really downtown New York City, downtown
Speaker 1: Los Angeles. That's totally changed. We're now fighting to deploy
Speaker 1: infrastructure or build that next generation of real estate on
Speaker 1: the edge, which is happening in smaller cities where people
Speaker 1: have moved. You know, my belief is some of this
Speaker 1: is somewhat overblown. I think people will come back to
Speaker 1: the urban core. Urban cores where really from a from
Speaker 1: a social a perspective and from a cultural perspective, that
Speaker 1: is where people like to be, where they want to
Speaker 1: entertain themselves. So I don't view this as being binary
Speaker 1: in terms of you know, nobody coming back to New
Speaker 1: York City or nobody going back to Los Angeles or Miami.
Speaker 1: People will come back when they feel confident and they
Speaker 1: feel confident that there's a good vaccine and that they
Speaker 1: ultimately feel like that there's a good cure. But in
Speaker 1: the meantime, the activity in the suburbs, which was largely
Speaker 1: neglected from a digital perspective, is where we're spending all
Speaker 1: of our time. We think about boots on the street
Speaker 1: of where we're building and where customers are saying, this
Speaker 1: is where we have a problem. That's where we're putting
Speaker 1: our energy, that's where we're putting our capital. And by
Speaker 1: the way, it's not just in the United States. I
Speaker 1: think about some of the things that we're doing in Europe.
Speaker 1: I think about the things that we're doing in Latin
Speaker 1: America as a firm, and and it's no longer just
Speaker 1: building those big cities. It's starting to take network architecture
Speaker 1: and push it further out to the edge, which is
Speaker 1: candidly where people feel safe, where they feel comfortable, and
Speaker 1: also where they're where they're conducting their lives. And our
Speaker 1: lives are happening digitally at home, as Tom's it earlier,
Speaker 1: So it's it's pretty interesting. It is a pretty big shift,
Speaker 1: you know, from an actual construction, entitlement and ultimate leasing perspective,
Speaker 1: there's a lot more activity happening outside of the urban
Speaker 1: core than than happening you know here in big cities.
Speaker 1: And so Tom, what do you make of that? Is
Speaker 1: someone who's been looking at at real estate and it's
Speaker 1: the buying and selling of it, the consumption of it,
Speaker 1: the creation of it. I mean, is this a Is
Speaker 1: this a catalytic or moment or an inflection point that
Speaker 1: we will look back on and say our cities were changed,
Speaker 1: our lives were changed. I don't think so. I'm long
Speaker 1: New York City. By the way, if you were asking
Speaker 1: me if I go back with my distress hat on,
Speaker 1: the first place I would be is here. The last
Speaker 1: place I would be is in in the other end
Speaker 1: of the transportation right. So what's happened is great great
Speaker 1: places to live around New York City have grown from
Speaker 1: where does the train and and the subway a goo?
Speaker 1: And that was the key consideration is I could buy
Speaker 1: a place in Granted at a thousand dollars of foot
Speaker 1: versus a co opera condo in Manhattan at four thousand
Speaker 1: foot and I can commute back and forth in the
Speaker 1: subway or train. I think young people are going to
Speaker 1: get very tired of the suburbs very quickly. The financial
Speaker 1: engines will exist in places like New York, London, Paris,
Speaker 1: Los Angeles. But again it's just an accelleran. People here
Speaker 1: were already thinking of moving to Florida, with a confiscatory
Speaker 1: tax regime and a political situation which they weren't happy with,
Speaker 1: whether the mayor is doing a good job or a
Speaker 1: bad job. It was perceived that it's um, it's not working.
Speaker 1: You have an infrastructure here. People were worried about building
Speaker 1: a brand new condo or co op. The streets are
Speaker 1: falling apart, the subway doesn't work, the bridges and tunnels
Speaker 1: are a hundred years old. It's just accelerating everybody's thought
Speaker 1: and saying, you know what, this this, this has frightened me.
Speaker 1: Life is short. I want to enjoy my kids because
Speaker 1: of the digital frontier, I have other opportunities to do,
Speaker 1: and I want to be where I don't feel the
Speaker 1: pressure of this, of this epidemic. Every time I touch
Speaker 1: an elevator. My belief is that will vantish, that will
Speaker 1: go away the aftermath after this election cycle, whatever that
Speaker 1: is will will start to dissipate with with a vaccine,
Speaker 1: with the cure. And I always ask my friends, I said, great,
Speaker 1: a vaccine you're gonna take one half of them to
Speaker 1: say never. Right, So I think cities are here to stay.
Speaker 1: Suburbs are here to stay. The utilization of them is
Speaker 1: going to be different, and and in a in a
Speaker 1: replicat Herble way, it's impossible to replicate New York City.
Speaker 1: At the same time, you as an individual looking at
Speaker 1: how you want your children to live, how we want
Speaker 1: to live our lives, how you entertain transportation and entertainment.
Speaker 1: One of the problems as corporations are getting spoiled, right,
Speaker 1: TNA budgets are zero. Now does that go back to
Speaker 1: a Bloomberg saying great, I want to send three hundred
Speaker 1: and sixty of my people to St. Barts for a
Speaker 1: convention so that they can bond. Right, I'm not so sure,
Speaker 1: So I think again, it's just accelerated everybody's thought pattern.
Speaker 1: How do you want to live, the frailty of life,
Speaker 1: the the enormity and importance of a home. Now we've
Speaker 1: all been working out of our bedrooms and living rooms,
Speaker 1: and see why I need a little more room. And
Speaker 1: my kids now can't recreate the way they used to
Speaker 1: have athletics, So I want more room and eventually that
Speaker 1: gives way to saying, you know, my kids only communicate
Speaker 1: in in three syllables or with emojis. There's got to
Speaker 1: be some form of social interaction and connection. How do
Speaker 1: I how do I recreate that in a cultural and
Speaker 1: ironment where they can have languages and diversity and and
Speaker 1: different experiences than everybody else is having on Snapchat. So
Speaker 1: I think it all, It all will come back. It
Speaker 1: just takes time, all right. So want to wrap up
Speaker 1: sort of where we started, which is this handover and
Speaker 1: the founder to the next generation? Tom, You and I
Speaker 1: have seen it across some of the best known investment
Speaker 1: firms in the world, many of which you've grown up with. Um,
Speaker 1: what does this feel like to you to to to
Speaker 1: hand off and and what is the next thing look like?
Speaker 1: This actually feels euphoric to me because I've known Mark
Speaker 1: and Melissa and his family for decades. So we had
Speaker 1: we had an issue at the beginning, and the issue
Speaker 1: was my board said okay, great because when I came back.
Speaker 1: I came back two years ago to be CEO, and
Speaker 1: I had a mission of two things. Turn this company around,
Speaker 1: get rid of this diversified read base with an investment
Speaker 1: management toggle which the market didn't like, they didn't understand
Speaker 1: what it was, so to turn that ship and find
Speaker 1: my own successor. So, of course, the the the initial
Speaker 1: response is great, find a new successful le's hire three
Speaker 1: search firms, will go out and find the best proven
Speaker 1: public market, alternative asset private equity CEO, and we'll put
Speaker 1: them in place, and thank goodness to a fantastic board
Speaker 1: that we have. I told them to me that was
Speaker 1: exactly the wrong way to proceed, because you and I
Speaker 1: have witnessed my peers much smarter, much more prolific, much
Speaker 1: wealthier than I trying to make that succession to third
Speaker 1: parties they had no relationship with that didn't have those
Speaker 1: two essential ingredients brilliance of courage and experience together, so
Speaker 1: there's no surprises as you move forward. So my concern
Speaker 1: was to a series of constituency, starting with the thousand
Speaker 1: and the people that work for us all over the world,
Speaker 1: with their lives, with their families, with their inspiration, with
Speaker 1: their future, with the shareholders of the public company, with
Speaker 1: the banks of the public company, and with the hundreds
Speaker 1: of limited partner financial institutions we have who believe in
Speaker 1: us to invest with us. And that's based on character, integrity, consistency.
Speaker 1: So I didn't start this process with Mark casually. We
Speaker 1: we I've invested with him first as an individual investor,
Speaker 1: we became friends. I saw how he was conducting all
Speaker 1: of the elements of his global empire as well as
Speaker 1: his personal empire, and so I was really certain when
Speaker 1: I brought this to the board as an idea, and
Speaker 1: they took their time and they vetted the process. So
Speaker 1: by the time that we got here, we accelerated the process.
Speaker 1: Originally we were talking about Mark not becoming CEO until
Speaker 1: January and I went to the board and I said, look,
Speaker 1: he is ready. This is the time. We're at the
Speaker 1: right moment. I'm really good. I can concentrate on the
Speaker 1: things that I do best, which are getting less and
Speaker 1: less because the organization is getting better and better. And
Speaker 1: in order to make it work, and the reason it
Speaker 1: hasn't worked in some of our peers as founders, as
Speaker 1: much as they talk about succession, they can't spell it
Speaker 1: right while they're still alive. They occupy all the air
Speaker 1: in the room, and the new CEO doesn't have a chance.
Speaker 1: So what I've done with Mark is say the rains
Speaker 1: are years. You've got those pieces I'm not going to interfere.
Speaker 1: The board has given you the authority and the mandate
Speaker 1: to go forward. I'll do those few things that I
Speaker 1: can do that add value. And he's done an amazing job.
Speaker 1: So I'm I couldn't be more happy and more hopeful. Um,
Speaker 1: it's the world that we need to worry about. Colony
Speaker 1: will will will be great and will dominate in this
Speaker 1: accelerated period. So what are you going to do about
Speaker 1: the world. Then we could use your help, use somebody.
Speaker 1: So look, I think I think we need to build
Speaker 1: a tapestry of trust, which is really really difficult, right,
Speaker 1: I don't, I don't. I don't know the solution. So
Speaker 1: I think we do it one brick at a time.
Speaker 1: And and I go back again to say, and I
Speaker 1: think the President has done as good a job is
Speaker 1: anybody good do. Nobody works harder than he works, and
Speaker 1: and whatever the political framework that all of these individuals
Speaker 1: have is complicated. And and the four and thirty five
Speaker 1: congressmen and senators that we have also do a great jo.
Speaker 1: It's not Democrats and Republicans. Everybody's just looking for different venues.
Speaker 1: But the world is at a loss for this pattern, right,
Speaker 1: great we have. We have to press on China and
Speaker 1: push back. Everybody understands that economic component. But to think
Speaker 1: that we can exist without having a hand in glove
Speaker 1: relationship with China, or with Europe, or with Mexico, or
Speaker 1: with Canada or with Russia as a feudal idea. So
Speaker 1: I think I have to challenge a little bit on
Speaker 1: that because it feels like part of what this administration
Speaker 1: has done has taken a go it alone type approach. Well,
Speaker 1: I don't know. I'm I'm not well versed enough on
Speaker 1: the political situation to give you an intelligent answer on that,
Speaker 1: but what I can what I can say is since
Speaker 1: the war, when you when you looked at the transition
Speaker 1: of of what we did in order to reunite the world,
Speaker 1: we did subsidize all of the major institutions in the
Speaker 1: world to subsidize those countries, and we brought them back.
Speaker 1: It was to our benefit, and we exported our intellectual
Speaker 1: property to have stuff manufactured less expensively than we could
Speaker 1: in the U S which crushed our labor unions right,
Speaker 1: which which crushed crushed our manufacturing sectors. And we bought
Speaker 1: them back, which was hand in glove because we also
Speaker 1: had to sell our debt because we were at a
Speaker 1: bigger and bigger deficits. So the manufacturers of those things,
Speaker 1: we're buying our debt and we get into this very
Speaker 1: complicated situation. So I am personally and I'm not talking
Speaker 1: from a public point of view of colony. Colony is
Speaker 1: neutral on all political effects. Is pushing back on those
Speaker 1: institutions makes sense and saying look, you have to take
Speaker 1: economic accountability now, Europe, Japan, China, everybody has their their
Speaker 1: own play. But to think that at this stage in
Speaker 1: that all of us don't want the same thing. I
Speaker 1: don't want my son's to be killed in Afghanistan. I
Speaker 1: don't want to afghanistan kids to be killed by our
Speaker 1: kids anywhere. It's our chaic to to think that this
Speaker 1: adversarial relationship exists. But it's happening at home right. The
Speaker 1: outer frustration of people is causing an anarchy. That is
Speaker 1: the most frightening thing to us. These economic things, financial things,
Speaker 1: brilliant people like you and market You're going to figure
Speaker 1: them out. But at the basis of this compassion, trust, confidence,
Speaker 1: empathy for each other. And it's not a political decision,
Speaker 1: it's a decision on all of our parts, and this,
Speaker 1: this pandemic, I think will end up being a good
Speaker 1: thing because it's made all of a step back for
Speaker 1: a moment and say what's important. I don't know what
Speaker 1: the answer is. These political mechanisms are so complicated. I
Speaker 1: have great trust and confidence in all of them, the Democrats,
Speaker 1: the Republicans, the system, the process. But there is no
Speaker 1: easy answer. We're a very diverse country and nation, and
Speaker 1: that's the great thing is through the process, hopefully something
Speaker 1: other than aren't anarchy, right. I mean, Martin Luther King
Speaker 1: did a fantastic job by using the system to change it,
Speaker 1: and I think that's what needs to happen. If people
Speaker 1: feel that way, we have a method of doing that.
Speaker 1: But I'm I'm hopeful for America. I I still as
Speaker 1: I wander around the world, which is the only thing
Speaker 1: I think my competitive advantage is that I show up.
Speaker 1: I'll still show I look at my brilliant peers and
Speaker 1: I say, how many you're gonna be smarter than Steve
Speaker 1: Schwarzman or David Bonderman, or or Leon Black or David Rubin.
Speaker 1: Seemed very difficult to do. Um, what you can do
Speaker 1: is show up and to listen and to create that tapestry,
Speaker 1: and I think everybody all over the world is at
Speaker 1: the point where they're saying, we need, we need to
Speaker 1: bond somehow, and it's not a political decision, it's an
Speaker 1: individual decision. And that was Tom Berrick, the executive airmen
Speaker 1: of Colony Capital, and the new CEO, Mark Ganzi joining
Speaker 1: me in New York City, my first in person interview
Speaker 1: since March. Really grateful to them for sharing their thoughts.
Speaker 1: You've been listening to Bloomberg business Week Extra, be sure
Speaker 1: to tune into Bloomberg Business Week Radio Live Monday through
Speaker 1: Friday at two pm Wall Street Time on Bloomberg Radio.
Speaker 1: I'm Jason Kelly. This is Bloomberg