1 00:00:02,000 --> 00:00:07,120 Speaker 1: This is mesters in business with very results on Bloomberg Radio. 2 00:00:09,360 --> 00:00:14,280 Speaker 1: Scrap yourself in for this one. It's absolutely fascinating. Kathleen 3 00:00:14,360 --> 00:00:17,600 Speaker 1: McCarthy is the global co head of real Estate for 4 00:00:17,680 --> 00:00:22,400 Speaker 1: private equity giant Blackstone. She and her team manages over 5 00:00:22,960 --> 00:00:27,320 Speaker 1: five hundred and sixty five billion dollars in real estate assets. 6 00:00:27,720 --> 00:00:32,280 Speaker 1: And if you are all interested in commercial real estate, 7 00:00:32,320 --> 00:00:39,199 Speaker 1: residential real estate, logistics, warehouse, laboratory and medical facilities, multi 8 00:00:39,240 --> 00:00:44,120 Speaker 1: family and apartments, offices, on and on in the US, 9 00:00:44,920 --> 00:00:49,879 Speaker 1: in Western Europe, in Asia, India, Japan. UH, this is 10 00:00:50,000 --> 00:00:54,120 Speaker 1: just a tour to force education on how to invest 11 00:00:54,240 --> 00:00:58,280 Speaker 1: in global real estate. UH. Blackstone has been in this 12 00:00:58,360 --> 00:01:03,880 Speaker 1: space for over thirty years. According to their ten K filings, 13 00:01:03,920 --> 00:01:08,279 Speaker 1: their opportunistic fund is up sixteen percent a year over 14 00:01:08,319 --> 00:01:13,280 Speaker 1: those thirty year periods. That that's really an astonishing return. 15 00:01:13,840 --> 00:01:18,319 Speaker 1: Kathleen has been with Blackstone since and I just can't 16 00:01:18,319 --> 00:01:24,560 Speaker 1: say enough as to how absolutely fascinating, um and knowledgeable 17 00:01:24,720 --> 00:01:29,120 Speaker 1: and intriguing this conversation is. That you won't hear the 18 00:01:29,280 --> 00:01:34,319 Speaker 1: gaps between her answers and my questions because we edit 19 00:01:34,360 --> 00:01:38,440 Speaker 1: that out. But she answers a question. I'm just sitting 20 00:01:38,480 --> 00:01:42,520 Speaker 1: there dumbfounded by how She's just like, oh my god, 21 00:01:42,600 --> 00:01:47,520 Speaker 1: that's just an absolutely comprehensive explanation about something I had 22 00:01:47,560 --> 00:01:50,680 Speaker 1: no idea about. And now I feel like I really know. 23 00:01:51,680 --> 00:01:53,880 Speaker 1: I don't even know where to begin other than saying, 24 00:01:53,960 --> 00:01:59,240 Speaker 1: strap yourself in. This is a Monster podcast. My conversation 25 00:01:59,760 --> 00:02:04,920 Speaker 1: with Kathleen McCarthy, Global head of real Estate for Blackstone. 26 00:02:05,240 --> 00:02:09,160 Speaker 1: Kathleen McCarthy, Welcome to Bloomberg. I am so excited to 27 00:02:09,160 --> 00:02:11,079 Speaker 1: be here. Mary, So I'm excited to have you here 28 00:02:11,080 --> 00:02:14,720 Speaker 1: because Wow, what perfect timing to talk about real estate. 29 00:02:16,000 --> 00:02:18,480 Speaker 1: Just at the towards the end of the year. Rates 30 00:02:18,480 --> 00:02:22,079 Speaker 1: are going higher, real estate prices are getting a little wobbly, 31 00:02:22,360 --> 00:02:25,920 Speaker 1: and I have a million questions about all of that. 32 00:02:26,200 --> 00:02:28,400 Speaker 1: But before we get to that, let's talk a little 33 00:02:28,400 --> 00:02:31,920 Speaker 1: bit about you and your background. You started your career 34 00:02:32,120 --> 00:02:34,600 Speaker 1: doing M and A at Goldman Sachs. Tell us a 35 00:02:34,639 --> 00:02:37,760 Speaker 1: little bit about that experience. What was that Like, I 36 00:02:38,240 --> 00:02:40,440 Speaker 1: back back up actually a little bit further and thinking 37 00:02:40,440 --> 00:02:42,200 Speaker 1: about how did I get there, because I don't think 38 00:02:42,280 --> 00:02:45,320 Speaker 1: it was very obvious actually that I would come out 39 00:02:45,320 --> 00:02:48,480 Speaker 1: of Yale with an Ethics, Politics and Economics degree perfect 40 00:02:49,480 --> 00:02:51,880 Speaker 1: and end up in M and A on Wall Street. 41 00:02:52,200 --> 00:02:54,400 Speaker 1: But so much, of course for all of us probably 42 00:02:54,440 --> 00:02:57,000 Speaker 1: comes back to those formative years with our families. And 43 00:02:57,639 --> 00:02:59,520 Speaker 1: in my house, I was the oldest of three girls. 44 00:03:00,120 --> 00:03:02,400 Speaker 1: My mom was a high school science teacher in our 45 00:03:02,400 --> 00:03:06,200 Speaker 1: public high school, and my dad worked for a cosmetics company, 46 00:03:06,560 --> 00:03:09,600 Speaker 1: Avon products, you know, like the Al Ladies. And so 47 00:03:09,680 --> 00:03:11,720 Speaker 1: for most of my life, I mean really for all 48 00:03:11,760 --> 00:03:14,519 Speaker 1: my life that I remember his company, and if I 49 00:03:14,560 --> 00:03:15,960 Speaker 1: would go to visit, they have things on the wall 50 00:03:16,000 --> 00:03:18,560 Speaker 1: that says the company for women. He routinely had women 51 00:03:19,040 --> 00:03:21,280 Speaker 1: who were his managers, his bosses, and there was a 52 00:03:21,400 --> 00:03:23,400 Speaker 1: female CEO for a really long period of time. And 53 00:03:23,440 --> 00:03:26,240 Speaker 1: so as people were thinking about, Okay, what do you 54 00:03:26,280 --> 00:03:29,920 Speaker 1: do after college? I was thinking any number of things, 55 00:03:29,919 --> 00:03:31,600 Speaker 1: and mostly that I didn't really know what I wanted 56 00:03:31,639 --> 00:03:33,240 Speaker 1: to be when I grew up. But I was not 57 00:03:33,440 --> 00:03:37,160 Speaker 1: kind of at all informed by gender norms that people 58 00:03:37,200 --> 00:03:39,840 Speaker 1: ask me a lot about now, in particular, how you 59 00:03:39,840 --> 00:03:41,720 Speaker 1: know a woman? How did you think about ending up 60 00:03:41,720 --> 00:03:43,760 Speaker 1: in this page? So how did that color what you 61 00:03:43,840 --> 00:03:47,840 Speaker 1: focused on at college and how you molded your career? Well? 62 00:03:47,880 --> 00:03:49,800 Speaker 1: I thought about when when I thought about college and 63 00:03:49,800 --> 00:03:51,960 Speaker 1: what I did there and why I selected going to Yale. 64 00:03:52,160 --> 00:03:55,200 Speaker 1: It was largely, I think the start of me recognizing 65 00:03:55,240 --> 00:03:58,680 Speaker 1: that I'm a person who loves to learn and loves 66 00:03:58,720 --> 00:04:04,000 Speaker 1: to just keep expanding skills. And so I in college 67 00:04:04,280 --> 00:04:06,480 Speaker 1: did a lot of reading and writing and thinking, it's 68 00:04:06,520 --> 00:04:08,600 Speaker 1: what you do, I guess, with a liberal arts degree. 69 00:04:09,320 --> 00:04:12,000 Speaker 1: And then when I was going to Goldman, there were 70 00:04:12,040 --> 00:04:14,840 Speaker 1: a couple of objectives. I guess. One was wanting to 71 00:04:14,880 --> 00:04:17,680 Speaker 1: be able to pay for my life in New York 72 00:04:17,800 --> 00:04:21,920 Speaker 1: and pay off student loans exactly, and then also build 73 00:04:21,960 --> 00:04:24,200 Speaker 1: a set of skills that could be used anywhere. And 74 00:04:24,240 --> 00:04:25,839 Speaker 1: I wasn't at that point sure if I would end 75 00:04:25,920 --> 00:04:28,160 Speaker 1: up in a corporate role or I would end up 76 00:04:28,440 --> 00:04:30,359 Speaker 1: in the Peace Corps or something like that. And so 77 00:04:31,000 --> 00:04:34,040 Speaker 1: what investment banking I thought offered, and I'd say ultimately 78 00:04:34,080 --> 00:04:38,080 Speaker 1: really delivered, was an experience where you could learn a 79 00:04:38,080 --> 00:04:42,400 Speaker 1: ton of different analytical skills, writing skills for business contexts, 80 00:04:42,440 --> 00:04:44,760 Speaker 1: persuasion skills, you know, the opportunity to be in a 81 00:04:44,800 --> 00:04:48,320 Speaker 1: boardroom watching senior professionals, whether it was the chairman of 82 00:04:48,320 --> 00:04:50,159 Speaker 1: the board or the CEO of the company, or the 83 00:04:50,160 --> 00:04:53,839 Speaker 1: investment bank, or leading your deal, getting to ideas and 84 00:04:53,880 --> 00:04:57,920 Speaker 1: outcomes that were influenced based on information. And so I 85 00:04:57,960 --> 00:05:00,840 Speaker 1: felt that my experience do doing you know, M and 86 00:05:00,920 --> 00:05:04,359 Speaker 1: A Goldman gave me this whole stable of skills that 87 00:05:04,520 --> 00:05:08,159 Speaker 1: set me up for really just about anything. And how 88 00:05:08,160 --> 00:05:12,000 Speaker 1: did you shift into real estate principal investment at at 89 00:05:12,000 --> 00:05:15,720 Speaker 1: Coleman Sex. That seems like a big leap from traditional 90 00:05:15,839 --> 00:05:18,200 Speaker 1: M and A. Well, I would say that probably the 91 00:05:18,279 --> 00:05:21,800 Speaker 1: vast majority of folks who were in my analysts classic Goldman, 92 00:05:21,880 --> 00:05:24,000 Speaker 1: particularly in the merger group, when they were looking for 93 00:05:24,040 --> 00:05:27,960 Speaker 1: their next thing to do, we're looking more towards private equity, 94 00:05:28,000 --> 00:05:30,200 Speaker 1: more traditional private equity, kind of like what my colleagues 95 00:05:30,360 --> 00:05:34,600 Speaker 1: in there are BCP team do, which is investing in companies. 96 00:05:34,720 --> 00:05:36,640 Speaker 1: Some people maybe we're going to hedge funds as well, 97 00:05:37,000 --> 00:05:40,560 Speaker 1: but I'd say overall folks are more kind of corporate oriented, 98 00:05:41,080 --> 00:05:44,960 Speaker 1: you know, investing in companies, and for me that was interesting. 99 00:05:45,000 --> 00:05:48,280 Speaker 1: I definitely wanted to gain investing skills. I found one 100 00:05:48,320 --> 00:05:50,200 Speaker 1: of the things that was a little unsatisfying as a 101 00:05:50,200 --> 00:05:53,039 Speaker 1: merger bankers. You'd you'd work on a transaction, you'd help 102 00:05:53,040 --> 00:05:55,560 Speaker 1: a company buy something or sell something, or merge with 103 00:05:55,640 --> 00:05:59,120 Speaker 1: another business, but then you really never knew whether your 104 00:05:59,160 --> 00:06:01,440 Speaker 1: model was at all close to accurate, how did it 105 00:06:01,480 --> 00:06:03,400 Speaker 1: work out? Ultimately? All of the things you thought were 106 00:06:03,440 --> 00:06:05,480 Speaker 1: going to happen, did it ultimately happen? And so I 107 00:06:05,560 --> 00:06:07,520 Speaker 1: wanted to be part of that kind of follow through. 108 00:06:07,520 --> 00:06:09,960 Speaker 1: And that's why moving to the investment side was interesting 109 00:06:10,000 --> 00:06:12,880 Speaker 1: to me. But I would say when it when it 110 00:06:12,920 --> 00:06:17,039 Speaker 1: came to kind of what part of investing, I think 111 00:06:17,720 --> 00:06:19,680 Speaker 1: being a merger banker did inform what I wanted to 112 00:06:19,720 --> 00:06:22,920 Speaker 1: do next, because when you're doing that every day, you're 113 00:06:23,200 --> 00:06:26,120 Speaker 1: interacting with different clients and different industries and having to 114 00:06:26,320 --> 00:06:29,120 Speaker 1: learn a whole new set of vocabulary, whole new business. 115 00:06:29,920 --> 00:06:31,839 Speaker 1: And I thought, you know, if I want to start 116 00:06:31,880 --> 00:06:34,839 Speaker 1: to be a great investor, and and in particular I 117 00:06:34,839 --> 00:06:36,719 Speaker 1: didn't know this term at the time, but you know, 118 00:06:36,720 --> 00:06:39,440 Speaker 1: Steve Schwartzman were first to as pattern recognition, great investors 119 00:06:39,440 --> 00:06:42,000 Speaker 1: are really great at pattern recognition. You want to start 120 00:06:42,040 --> 00:06:45,640 Speaker 1: building that building expertise. I felt I wanted to move 121 00:06:45,680 --> 00:06:48,239 Speaker 1: into something that was still large and wasn't gonna piehole 122 00:06:48,279 --> 00:06:50,840 Speaker 1: me or pigeonholed me at a very young age in 123 00:06:50,920 --> 00:06:53,320 Speaker 1: my career um but where I could be working in 124 00:06:53,360 --> 00:06:56,200 Speaker 1: and out of a common vovocabulary that could apply across 125 00:06:56,240 --> 00:06:59,080 Speaker 1: all kinds of geographies and asset classes, and real estate 126 00:06:59,160 --> 00:07:02,600 Speaker 1: offered that um. I'd also say, you know, interestingly, when 127 00:07:02,600 --> 00:07:04,960 Speaker 1: I was going to interviews at different private equity firms 128 00:07:05,000 --> 00:07:08,080 Speaker 1: or different real estate firms, it was noticeable that in 129 00:07:08,120 --> 00:07:12,480 Speaker 1: the real estate brochures of those companies, there was a 130 00:07:12,560 --> 00:07:15,440 Speaker 1: huge amount of diversity in the kinds of people that 131 00:07:15,480 --> 00:07:18,000 Speaker 1: worked at these firms. And it was all sorts of 132 00:07:18,000 --> 00:07:20,920 Speaker 1: dimensions of diversity, including kind of the nature of people's degrees. 133 00:07:21,040 --> 00:07:23,200 Speaker 1: You had people who never had a college degree, folks 134 00:07:23,200 --> 00:07:25,600 Speaker 1: who are architects, folks who are lawyers, folks who had 135 00:07:25,640 --> 00:07:28,040 Speaker 1: a more traditional M b A. And And what I 136 00:07:28,080 --> 00:07:30,679 Speaker 1: found was these were all people who were really interested 137 00:07:30,680 --> 00:07:35,040 Speaker 1: in participating in in a people business ultimately, which is 138 00:07:35,040 --> 00:07:38,440 Speaker 1: where do people live and work and shop, and how 139 00:07:38,600 --> 00:07:41,240 Speaker 1: great cities come together and things like that. And I 140 00:07:41,280 --> 00:07:43,840 Speaker 1: really wanted to be attached to those kinds of those people. 141 00:07:44,120 --> 00:07:46,160 Speaker 1: And they're passionate about what they were doing, So so 142 00:07:46,240 --> 00:07:48,640 Speaker 1: let me engage in a little bit of pattern recognition 143 00:07:49,320 --> 00:07:52,000 Speaker 1: M and A. The success of a of a deal 144 00:07:52,480 --> 00:07:56,360 Speaker 1: depends on that structure. The price paid how it is 145 00:07:56,400 --> 00:08:00,360 Speaker 1: structured in terms of upfront costs, ongoing courts, what you getting, 146 00:08:00,920 --> 00:08:04,679 Speaker 1: and real estate in many ways, especially commercial real estate, 147 00:08:05,120 --> 00:08:07,560 Speaker 1: kind of parallels that thing. What are you paying, what's 148 00:08:07,600 --> 00:08:09,960 Speaker 1: the structure of the deal, how is it financed? Am 149 00:08:09,960 --> 00:08:12,560 Speaker 1: I oversimplifying or is that a fair comparison? Now? I 150 00:08:12,560 --> 00:08:15,520 Speaker 1: mean again, there's so many things that carry over from 151 00:08:15,720 --> 00:08:18,960 Speaker 1: one thing to another. Um and interestingly and happy to 152 00:08:19,000 --> 00:08:22,160 Speaker 1: come back to these things I learned in helping companies 153 00:08:22,160 --> 00:08:26,120 Speaker 1: through murders, particularly around things like communications and shareholder relations 154 00:08:26,200 --> 00:08:29,000 Speaker 1: and and employee engagement that have now served me really 155 00:08:29,040 --> 00:08:31,480 Speaker 1: well a couple of decades later in my career. But 156 00:08:31,560 --> 00:08:35,120 Speaker 1: I'd say those are all similar things, whether you're talking 157 00:08:35,160 --> 00:08:39,480 Speaker 1: about companies that make something or companies that own real 158 00:08:39,600 --> 00:08:42,439 Speaker 1: estate or real estate assets. And I'd say, when when 159 00:08:42,440 --> 00:08:44,920 Speaker 1: I think about Blackstone and how we work on our 160 00:08:44,960 --> 00:08:47,480 Speaker 1: transactions and what has served us so well over time, 161 00:08:48,200 --> 00:08:51,000 Speaker 1: it certainly has to do with buying great quality real 162 00:08:51,080 --> 00:08:52,880 Speaker 1: estate and the price we pay for it. A big 163 00:08:52,880 --> 00:08:54,680 Speaker 1: part of it, also, though, is the capital structure you 164 00:08:54,679 --> 00:08:57,560 Speaker 1: set up and is it able to withstand anything that 165 00:08:57,600 --> 00:08:59,880 Speaker 1: can come your way, including tough environments that you might 166 00:08:59,880 --> 00:09:03,160 Speaker 1: not control. So I'm glad you mentioned that, because before 167 00:09:03,160 --> 00:09:04,920 Speaker 1: we get to two thousand and ten and you moved 168 00:09:04,960 --> 00:09:08,760 Speaker 1: to Blackstone, let's talk about a tough environment. You were 169 00:09:08,760 --> 00:09:12,400 Speaker 1: at Goldman Sachs in the real estate division in the 170 00:09:12,440 --> 00:09:15,560 Speaker 1: middle of two thousand and eight two tho nine, right 171 00:09:15,640 --> 00:09:18,560 Speaker 1: through the worst of the financial crisis, so I have 172 00:09:18,679 --> 00:09:22,000 Speaker 1: to ask, what the hell was that like, Well, it 173 00:09:22,080 --> 00:09:25,920 Speaker 1: was definitely a difficult time. Um, I'm not laughing out 174 00:09:25,920 --> 00:09:27,839 Speaker 1: of joy, but out of you know, kind of. It's 175 00:09:27,840 --> 00:09:32,079 Speaker 1: always still a stunner. All of us who were in markets, 176 00:09:32,080 --> 00:09:34,840 Speaker 1: in real estate and derivatives and trading in anything, who 177 00:09:34,960 --> 00:09:39,199 Speaker 1: survived that baptism of fire. People have told me stories 178 00:09:39,240 --> 00:09:44,320 Speaker 1: that they came through that, and that affects you the 179 00:09:44,360 --> 00:09:47,240 Speaker 1: rest of your career. That colors It leaves a mark 180 00:09:47,360 --> 00:09:50,480 Speaker 1: and colors you forever. Well, I would say, I feel 181 00:09:50,480 --> 00:09:52,880 Speaker 1: like in the first decade of my career I actually 182 00:09:52,880 --> 00:09:56,319 Speaker 1: had to somewhat similar experiences in that way, because I 183 00:09:56,400 --> 00:09:58,400 Speaker 1: remember I came out of college three months after the 184 00:09:58,480 --> 00:10:01,120 Speaker 1: dot com rubble burst. So I was sitting at graduation 185 00:10:01,240 --> 00:10:04,280 Speaker 1: and classmates were getting emails saying their offers were rescinded 186 00:10:04,520 --> 00:10:07,760 Speaker 1: because their company was going out of business, and I 187 00:10:07,800 --> 00:10:10,600 Speaker 1: went from again this merger group at Goldman, which was 188 00:10:11,000 --> 00:10:13,960 Speaker 1: focused only on the biggest possible deals, to working on 189 00:10:14,000 --> 00:10:17,319 Speaker 1: what were relatively small transactions but for important clients. Uh. 190 00:10:17,360 --> 00:10:19,600 Speaker 1: And by the way, for me again with a learning agenda, 191 00:10:19,720 --> 00:10:22,560 Speaker 1: there's learning and all of that, but environments change quickly, 192 00:10:23,240 --> 00:10:26,360 Speaker 1: and whether it's the investment you make or you personally, 193 00:10:26,360 --> 00:10:28,360 Speaker 1: it's your ability to kind of keep putting one foot 194 00:10:28,400 --> 00:10:32,120 Speaker 1: in front of the other and move through that. Two 195 00:10:32,360 --> 00:10:36,360 Speaker 1: and ten was a particularly tough and very formative experience, 196 00:10:36,880 --> 00:10:40,240 Speaker 1: and I would say there are so many important lessons 197 00:10:40,360 --> 00:10:43,680 Speaker 1: learned for me. One is an investor, the importance of 198 00:10:43,679 --> 00:10:48,280 Speaker 1: buying super high quality assets, putting resilient capital structures in place, 199 00:10:48,880 --> 00:10:52,560 Speaker 1: having access to reserves so that in a moment where 200 00:10:52,600 --> 00:10:54,839 Speaker 1: you need to invest more capital in your transaction or 201 00:10:54,880 --> 00:10:57,160 Speaker 1: where you need to or you have an opportunity I 202 00:10:57,160 --> 00:10:59,559 Speaker 1: should say, to buy back debt at a discount, being 203 00:10:59,559 --> 00:11:02,840 Speaker 1: able to capitalize on those kinds of opportunities is so important. 204 00:11:02,880 --> 00:11:05,640 Speaker 1: And frankly, we didn't have all those opportunities, and we 205 00:11:05,640 --> 00:11:10,439 Speaker 1: hadn't set ourselves up as well. I really Blackstone meanwhile, 206 00:11:10,480 --> 00:11:12,480 Speaker 1: and we'll get to that had, and that's a big 207 00:11:12,520 --> 00:11:14,040 Speaker 1: part of how Blackstone has been set up for so 208 00:11:14,120 --> 00:11:16,760 Speaker 1: much success in the decades that followed. But let me 209 00:11:16,840 --> 00:11:19,800 Speaker 1: let me interrupt you one second. So everything you described 210 00:11:19,960 --> 00:11:23,439 Speaker 1: are the sorts of things that you would imagine everybody 211 00:11:24,080 --> 00:11:28,240 Speaker 1: should be prepared for. It does, and I'm kind of 212 00:11:28,280 --> 00:11:33,439 Speaker 1: surprised to hear that one of the largest and savvayest 213 00:11:33,600 --> 00:11:36,640 Speaker 1: shops on the street kind of wasn't prepared for it. 214 00:11:37,720 --> 00:11:41,600 Speaker 1: Is that the sort of thing that the lesson we 215 00:11:41,679 --> 00:11:44,600 Speaker 1: learned from it is that the takeaway Obviously, Goldman has 216 00:11:44,720 --> 00:11:47,960 Speaker 1: so many different moving parts, and the derivatives group on 217 00:11:48,040 --> 00:11:50,880 Speaker 1: that side might be working at cross purposes with long 218 00:11:51,000 --> 00:11:53,960 Speaker 1: term real estate investment on this side. So so hold 219 00:11:53,960 --> 00:11:57,640 Speaker 1: that aside. But is the takeaway from the financial crisis 220 00:11:57,679 --> 00:12:00,600 Speaker 1: that you have to be resilient. You have to reserves, 221 00:12:00,600 --> 00:12:04,040 Speaker 1: You have to purchase assets that are robust enough that 222 00:12:04,080 --> 00:12:06,960 Speaker 1: they could withstand a beating, and you have to have 223 00:12:07,040 --> 00:12:10,400 Speaker 1: enough dry powder that when these opportunities come along to 224 00:12:10,480 --> 00:12:13,680 Speaker 1: buy high quality assets at the stress prices, you have 225 00:12:13,720 --> 00:12:16,400 Speaker 1: to be ready to jump. I think you pretty much 226 00:12:16,440 --> 00:12:19,760 Speaker 1: have it, Barry. I mean, I think about for example, 227 00:12:19,760 --> 00:12:22,360 Speaker 1: Blackstones track record. We've been investing in real estate for 228 00:12:22,400 --> 00:12:24,800 Speaker 1: over thirty years and in our opportunistic funds. So these 229 00:12:24,800 --> 00:12:29,079 Speaker 1: are the funds where we're trying to generate higher returns 230 00:12:29,120 --> 00:12:31,920 Speaker 1: for customers in a relatively shorthold period for the assets 231 00:12:31,960 --> 00:12:35,160 Speaker 1: we buy for them. We've had sixteen percent net returns 232 00:12:35,240 --> 00:12:38,280 Speaker 1: on all of the capital we've invested over thirty years 233 00:12:40,480 --> 00:12:43,040 Speaker 1: net net of feedes. Are we gonna get a red 234 00:12:43,040 --> 00:12:45,160 Speaker 1: flag from a compliance or is that an official It's 235 00:12:45,200 --> 00:12:49,800 Speaker 1: in our public statements. So it's our opportunistic real estate strategy. 236 00:12:50,280 --> 00:12:55,040 Speaker 1: Six per a net of fees thirty years. That's an 237 00:12:55,040 --> 00:12:59,040 Speaker 1: amazing it's an amazing return. And when you look across 238 00:12:59,120 --> 00:13:02,360 Speaker 1: that and what you what I always think about is 239 00:13:03,559 --> 00:13:06,079 Speaker 1: there were a lot of different kinds of environments. We 240 00:13:06,080 --> 00:13:08,280 Speaker 1: were investing in things that felt great, things that felt 241 00:13:08,280 --> 00:13:10,160 Speaker 1: really terrible, things that felt good when we bought real 242 00:13:10,240 --> 00:13:11,880 Speaker 1: estate and didn't feel so good a couple of years 243 00:13:11,920 --> 00:13:14,439 Speaker 1: later perhaps. But what you just touched on is what 244 00:13:14,520 --> 00:13:17,600 Speaker 1: I think is most important. You can't control the environment 245 00:13:17,640 --> 00:13:19,640 Speaker 1: you're in, but you can control the decisions you make 246 00:13:19,920 --> 00:13:22,600 Speaker 1: leading up to that and through it, and the things 247 00:13:22,640 --> 00:13:25,640 Speaker 1: that I think really distinguished what we were able to 248 00:13:25,679 --> 00:13:27,319 Speaker 1: do at Blackstone and what got us to the other 249 00:13:27,360 --> 00:13:29,360 Speaker 1: side of the financial crisis in a way most real 250 00:13:29,440 --> 00:13:33,360 Speaker 1: estate investors did not. Were these things good assets, resilient 251 00:13:33,400 --> 00:13:36,360 Speaker 1: capital structures, access to reserves, access to new capital to 252 00:13:36,400 --> 00:13:39,199 Speaker 1: go on the offensive and and take advantage of moments 253 00:13:39,200 --> 00:13:42,720 Speaker 1: where there's there's distress pricing. So Gullman and you're looking 254 00:13:42,760 --> 00:13:45,360 Speaker 1: around at the end of the financial crisis and you're 255 00:13:45,400 --> 00:13:49,120 Speaker 1: aware of, hey, we missed opportunities here. This could have 256 00:13:49,120 --> 00:13:51,280 Speaker 1: been a little tighter, this could have been and you 257 00:13:51,360 --> 00:13:54,360 Speaker 1: run into Blackstone and it's like, Wow, these guys, I 258 00:13:54,400 --> 00:13:57,000 Speaker 1: wish we had that way we were. How do I 259 00:13:57,000 --> 00:13:59,560 Speaker 1: get involved with that? It's it's interesting, it was it 260 00:13:59,600 --> 00:14:01,040 Speaker 1: was a little they came out I think a little 261 00:14:01,040 --> 00:14:03,280 Speaker 1: differently than that. What I would say is I had 262 00:14:03,559 --> 00:14:06,800 Speaker 1: an amazing experience at Goldman, including i'd say the learnings 263 00:14:06,800 --> 00:14:09,800 Speaker 1: that I had an opportunity to access through the financial crisis, 264 00:14:10,440 --> 00:14:14,600 Speaker 1: um particularly getting those up learnings that are relatively early 265 00:14:14,679 --> 00:14:16,800 Speaker 1: part of my career. I think it is so important. 266 00:14:17,800 --> 00:14:21,680 Speaker 1: What really got me thinking about doing something different was 267 00:14:21,920 --> 00:14:25,200 Speaker 1: was just you was I continuing to learn? Was there 268 00:14:25,200 --> 00:14:28,120 Speaker 1: a will to keep investing in real estate? Having had 269 00:14:28,160 --> 00:14:31,640 Speaker 1: some of those traumatic experiences as a firm, and I 270 00:14:31,680 --> 00:14:33,400 Speaker 1: felt like I wanted to make sure I was in 271 00:14:33,400 --> 00:14:36,040 Speaker 1: a place where I personally was not treading water and 272 00:14:36,040 --> 00:14:39,400 Speaker 1: I had an opportunity to keep learning. And I knew 273 00:14:39,560 --> 00:14:41,640 Speaker 1: that I wanted to continue to be in real estate. 274 00:14:41,720 --> 00:14:46,040 Speaker 1: I was not sure exactly in what aspect. And I 275 00:14:46,080 --> 00:14:49,080 Speaker 1: was actually quite surprised when Blackstone reached out to me 276 00:14:49,240 --> 00:14:52,320 Speaker 1: about a role to work with institutional clients do capital 277 00:14:52,400 --> 00:14:56,000 Speaker 1: raising and investor engagement. And I was surprised mostly because 278 00:14:56,040 --> 00:14:58,840 Speaker 1: I had no experience with that at all. I had 279 00:14:58,880 --> 00:15:01,360 Speaker 1: come at Goldman almost all of our capital had come 280 00:15:01,360 --> 00:15:05,480 Speaker 1: from high net worth clients. Also, I had done acquisitions. 281 00:15:05,480 --> 00:15:10,600 Speaker 1: I didn't have investor experience really, UM and what Blackstone 282 00:15:10,640 --> 00:15:11,960 Speaker 1: was just kind of I think looking at it a 283 00:15:12,000 --> 00:15:15,680 Speaker 1: little differently and saying, if there's a person who understands 284 00:15:15,720 --> 00:15:18,960 Speaker 1: real estate and can understand markets, but also can can 285 00:15:19,560 --> 00:15:21,920 Speaker 1: help our clients understand better, what are we doing with 286 00:15:21,920 --> 00:15:24,440 Speaker 1: their capital? Or if they're not yet a client, why 287 00:15:25,280 --> 00:15:29,160 Speaker 1: but we're offering compelling um there could be an interesting 288 00:15:29,240 --> 00:15:31,720 Speaker 1: match there. And I think just generally a feeling like 289 00:15:32,240 --> 00:15:35,520 Speaker 1: wet Blackstone. Our performance was strong through the financial crisis. 290 00:15:35,760 --> 00:15:38,840 Speaker 1: We were able to open doors and keep open doors 291 00:15:38,840 --> 00:15:42,040 Speaker 1: with clients, but it was all about stewarding those relationships 292 00:15:42,080 --> 00:15:44,800 Speaker 1: and how do we do that better? And so what 293 00:15:44,800 --> 00:15:48,240 Speaker 1: what got me ultimately really excited about the Blackstone opportunity 294 00:15:48,320 --> 00:15:50,200 Speaker 1: was not so much that I had any confidence that 295 00:15:50,240 --> 00:15:52,400 Speaker 1: I want to do investor relations or that you know, 296 00:15:52,440 --> 00:15:54,600 Speaker 1: that was going to be my my long term career destiny. 297 00:15:54,720 --> 00:15:57,200 Speaker 1: Was that I wanted to work with these people who 298 00:15:57,200 --> 00:16:01,160 Speaker 1: were really focused on doing a great job, not only 299 00:16:01,200 --> 00:16:03,680 Speaker 1: through the investments they made, but through the interactions they 300 00:16:03,760 --> 00:16:06,480 Speaker 1: created with their clients. And I felt like that move 301 00:16:06,480 --> 00:16:09,000 Speaker 1: would allow me to continue to learn and grow and 302 00:16:09,160 --> 00:16:11,520 Speaker 1: frankly diversify my skill sets, so I'd be better set 303 00:16:11,600 --> 00:16:13,480 Speaker 1: up to be a leader in in a bunch of 304 00:16:13,480 --> 00:16:15,840 Speaker 1: different capacities in the future. So let me ask you 305 00:16:15,880 --> 00:16:20,920 Speaker 1: a very obvious question. You shift from high net worth individuals, 306 00:16:21,560 --> 00:16:25,280 Speaker 1: and no matter how high net worth they are, their individuals, 307 00:16:25,760 --> 00:16:29,520 Speaker 1: they react to markets. They can be emotional. The So 308 00:16:29,880 --> 00:16:32,400 Speaker 1: I remember, I have a vivid recollection. In the midst 309 00:16:32,680 --> 00:16:36,840 Speaker 1: of the financial crisis, the news flow was just re 310 00:16:37,600 --> 00:16:39,680 Speaker 1: and we were on the right side of it, but 311 00:16:39,840 --> 00:16:43,880 Speaker 1: it was so relentlessly negative even people making money in 312 00:16:43,880 --> 00:16:48,080 Speaker 1: the downturn were unhappy. Um. And then you shift to 313 00:16:48,560 --> 00:16:52,600 Speaker 1: institutions that have a much longer time horizon and a 314 00:16:52,880 --> 00:16:56,960 Speaker 1: very different headspace. Even though there are individuals at those 315 00:16:57,040 --> 00:17:01,840 Speaker 1: various endowments, institutions, what have you. How does the energy 316 00:17:02,000 --> 00:17:05,359 Speaker 1: and the vibe and the conversations change. Is it's still 317 00:17:05,480 --> 00:17:08,199 Speaker 1: people or people and they're freaking out, or hey, we 318 00:17:08,280 --> 00:17:11,960 Speaker 1: have a perpetual lifespan and so we don't care about 319 00:17:12,040 --> 00:17:15,000 Speaker 1: next quarter, we care about the next century. Am I 320 00:17:15,280 --> 00:17:18,640 Speaker 1: exaggerating or well? I would say I think for all 321 00:17:18,720 --> 00:17:22,880 Speaker 1: investors of any type, whether it's size or whether you're 322 00:17:22,880 --> 00:17:26,120 Speaker 1: an individual investor or institutional investor, really what matters most 323 00:17:26,160 --> 00:17:30,240 Speaker 1: is performance in the end especially we as a manager, 324 00:17:30,240 --> 00:17:32,480 Speaker 1: if we can show up and say we continue to 325 00:17:32,520 --> 00:17:36,840 Speaker 1: generate great performance on your investments. It could be any 326 00:17:36,920 --> 00:17:38,359 Speaker 1: kind of client on the other side of the table 327 00:17:38,520 --> 00:17:41,399 Speaker 1: that is the most important, That the most important. I 328 00:17:41,400 --> 00:17:45,760 Speaker 1: think that from my perspective, the biggest difference and this 329 00:17:45,800 --> 00:17:48,280 Speaker 1: may evolve over time, but the biggest difference between an 330 00:17:48,320 --> 00:17:52,080 Speaker 1: institutional client, so that state pension plan or charitable foundation 331 00:17:52,200 --> 00:17:55,040 Speaker 1: or university and down in versus an individual investor. I think, 332 00:17:55,240 --> 00:17:59,200 Speaker 1: for the most part, institutional investors have decided that they 333 00:17:59,240 --> 00:18:01,920 Speaker 1: want a knee real estate to be a core position 334 00:18:01,920 --> 00:18:05,879 Speaker 1: in their portfolio in and out of cycles. And that's 335 00:18:06,119 --> 00:18:10,600 Speaker 1: because real estate in strong economies can generate basically very 336 00:18:10,600 --> 00:18:14,159 Speaker 1: strong alpha. In weaker times or in an inflationary environment 337 00:18:14,160 --> 00:18:17,600 Speaker 1: we're in right now, for example, as a real asset 338 00:18:17,640 --> 00:18:21,399 Speaker 1: a hard asset, it preserves value as cost to replace 339 00:18:21,440 --> 00:18:23,920 Speaker 1: those assets go up. It's a cash flowing asset where 340 00:18:23,920 --> 00:18:26,720 Speaker 1: you can remark your rents to market in a in 341 00:18:26,800 --> 00:18:31,440 Speaker 1: a rising cost environment, and so um I think those 342 00:18:31,480 --> 00:18:35,960 Speaker 1: institutional investors are really committed to real estate. Individual investors, 343 00:18:35,960 --> 00:18:39,720 Speaker 1: for the most part, have not yet determined that real 344 00:18:39,840 --> 00:18:42,919 Speaker 1: estate is something they want and need to leave as 345 00:18:42,960 --> 00:18:44,800 Speaker 1: core to their portfolio in and out of cycles. I 346 00:18:44,840 --> 00:18:47,880 Speaker 1: think that is changing, and I think in particular, when 347 00:18:47,880 --> 00:18:50,200 Speaker 1: you look back to environments similar to what we're in now, 348 00:18:50,240 --> 00:18:53,960 Speaker 1: where you see rising interest rates persistent inflation, you think 349 00:18:54,000 --> 00:18:56,720 Speaker 1: about how well real estate has performed in those moments. 350 00:18:57,440 --> 00:19:01,200 Speaker 1: I think individual investors are starting to appreciate how attractive 351 00:19:01,240 --> 00:19:02,920 Speaker 1: this is as a part of their portfolio. But that 352 00:19:03,000 --> 00:19:06,200 Speaker 1: is a different kind of approach to portfolio construction and 353 00:19:06,320 --> 00:19:09,359 Speaker 1: for individual investors. I always run into the when we 354 00:19:09,600 --> 00:19:12,959 Speaker 1: discuss real estate. I find I have to say, stop 355 00:19:13,080 --> 00:19:17,639 Speaker 1: focusing on individual homes. That's just one tiny aspect of 356 00:19:17,720 --> 00:19:20,840 Speaker 1: real estate. You have to think in broader, longer terms 357 00:19:20,880 --> 00:19:24,880 Speaker 1: and commercial sides, not your neighbor's household for thirty less 358 00:19:24,880 --> 00:19:29,040 Speaker 1: than the expected. Let's talk about warehouses, Let's talk about farmland. 359 00:19:29,119 --> 00:19:32,320 Speaker 1: Let's talk about things that it doesn't matter necessarily what 360 00:19:32,440 --> 00:19:34,959 Speaker 1: the economy is doing. People got to eat, goods are 361 00:19:34,960 --> 00:19:39,040 Speaker 1: still being moved around the country. I mean, I think 362 00:19:39,160 --> 00:19:43,760 Speaker 1: separating the for sale residential market from for rent commercial 363 00:19:43,840 --> 00:19:47,120 Speaker 1: real estate, including rental apartments, is so important. These are 364 00:19:48,040 --> 00:19:50,600 Speaker 1: different things, and I think you can't just mark what's 365 00:19:50,600 --> 00:19:53,840 Speaker 1: going on in the single family for sale housing environment 366 00:19:54,240 --> 00:19:58,240 Speaker 1: with what might be happening in warehouses or rental apartment 367 00:19:58,280 --> 00:20:03,400 Speaker 1: complexes or office buildings. Quite quite fascinating. So let's talk 368 00:20:03,400 --> 00:20:05,560 Speaker 1: a little bit about your team that you run. How 369 00:20:06,000 --> 00:20:09,639 Speaker 1: large is the real estate team in Blackstone? The real 370 00:20:09,720 --> 00:20:13,480 Speaker 1: estate team at black Stones about nine people globally. That's 371 00:20:13,480 --> 00:20:15,400 Speaker 1: a big chunk of the phone. It's a big chunk 372 00:20:15,400 --> 00:20:17,679 Speaker 1: of the firm. And I think what what actually that 373 00:20:17,840 --> 00:20:20,320 Speaker 1: under states is the impact we have through all the 374 00:20:20,359 --> 00:20:23,159 Speaker 1: portfolio companies we we own in our funds, So we 375 00:20:23,200 --> 00:20:27,399 Speaker 1: own fifty five portfolio companies, and that really forms a 376 00:20:27,480 --> 00:20:30,160 Speaker 1: huge extension of what we're able to do and then 377 00:20:30,200 --> 00:20:32,879 Speaker 1: also see in terms of people on the ground across 378 00:20:32,920 --> 00:20:35,600 Speaker 1: the world operating in specific real estate sectors and then 379 00:20:35,640 --> 00:20:38,840 Speaker 1: sending back the information they're working with every day. So 380 00:20:38,960 --> 00:20:42,040 Speaker 1: when you say portfolio companies, I immediately think of like 381 00:20:42,200 --> 00:20:46,520 Speaker 1: Bornado or are you talking about specific privately held companies 382 00:20:46,760 --> 00:20:49,800 Speaker 1: who themselves own lots of various commercial real estates. So 383 00:20:49,880 --> 00:20:53,080 Speaker 1: these are specific privately held companies by our funds. So 384 00:20:53,200 --> 00:20:55,200 Speaker 1: and these are companies that for the most part, we 385 00:20:55,280 --> 00:20:58,760 Speaker 1: own and control a hundred percent of the company. And 386 00:20:59,160 --> 00:21:02,600 Speaker 1: sometimes we buy companies and then continue to help grow 387 00:21:02,680 --> 00:21:05,560 Speaker 1: them by new asset acquisitions or just growth in their 388 00:21:05,560 --> 00:21:09,520 Speaker 1: cash flows. In other circumstances, we will build up companies 389 00:21:09,560 --> 00:21:12,600 Speaker 1: through a series of smaller acquisitions. So an example would 390 00:21:12,600 --> 00:21:15,120 Speaker 1: be in the US, were one of the largest owners 391 00:21:15,160 --> 00:21:18,000 Speaker 1: of warehouse properties. We have a company called link Logistics. 392 00:21:18,000 --> 00:21:21,520 Speaker 1: It owns about four hundred million square feet of warehouses. 393 00:21:22,040 --> 00:21:23,800 Speaker 1: That is a company that we have built through a 394 00:21:23,800 --> 00:21:27,880 Speaker 1: series of acquisitions. We identified a world class management team, 395 00:21:27,920 --> 00:21:29,960 Speaker 1: and we said we want to build a great company, 396 00:21:30,000 --> 00:21:32,639 Speaker 1: but we're not doing it through just one acquisition of 397 00:21:32,640 --> 00:21:34,080 Speaker 1: one company. We're going to build it up through a 398 00:21:34,080 --> 00:21:36,760 Speaker 1: series of transactions and the ideas. As the things grow, 399 00:21:36,840 --> 00:21:40,960 Speaker 1: there's massive economies of scale and expertise, and what might 400 00:21:41,000 --> 00:21:45,359 Speaker 1: have been a reasonable investment at one X, when it 401 00:21:45,400 --> 00:21:48,560 Speaker 1: becomes a hundred X, it becomes a very very different experience. 402 00:21:48,680 --> 00:21:50,480 Speaker 1: I would say yes, And I think one of the 403 00:21:50,520 --> 00:21:53,520 Speaker 1: things that's so important about the scale of these businesses 404 00:21:53,520 --> 00:21:56,040 Speaker 1: and the scale of our business together across all of 405 00:21:56,040 --> 00:21:59,320 Speaker 1: these companies and our funds, is that we have a 406 00:21:59,440 --> 00:22:04,439 Speaker 1: huge information advantage. We get data, real time, proprietary to 407 00:22:04,600 --> 00:22:08,520 Speaker 1: us constantly coming off these businesses, and it really helps 408 00:22:08,600 --> 00:22:11,800 Speaker 1: us make better decisions and you otherwise would be able 409 00:22:11,840 --> 00:22:13,600 Speaker 1: to do if you didn't have access to this. And 410 00:22:13,640 --> 00:22:16,160 Speaker 1: so rather than wait for a research report to tell 411 00:22:16,240 --> 00:22:19,359 Speaker 1: us what's really happening in apartment rent growth or in 412 00:22:20,160 --> 00:22:23,600 Speaker 1: new leases for warehouses in Northern Europe, we're getting those 413 00:22:23,640 --> 00:22:26,159 Speaker 1: data points real time and that can help us inform 414 00:22:26,200 --> 00:22:28,680 Speaker 1: on whether we're going to buy more of something I 415 00:22:28,720 --> 00:22:32,560 Speaker 1: want to sell something, pivot, how we're managing assets and 416 00:22:32,920 --> 00:22:36,479 Speaker 1: those are all just important decision making tools for us. 417 00:22:36,680 --> 00:22:38,639 Speaker 1: You know, so much of what our work is is 418 00:22:38,640 --> 00:22:40,879 Speaker 1: not just buying the real estate, but it's all about 419 00:22:41,040 --> 00:22:42,760 Speaker 1: what is the value we can create? How can we 420 00:22:42,800 --> 00:22:45,360 Speaker 1: grow cash flows? That's that's most most of the time, 421 00:22:45,359 --> 00:22:46,760 Speaker 1: how you make money in real estate is growing the 422 00:22:46,760 --> 00:22:49,800 Speaker 1: cash flow and those those data points coming from all 423 00:22:49,840 --> 00:22:52,240 Speaker 1: across the world, and what's really happening in these assets, 424 00:22:52,240 --> 00:22:56,439 Speaker 1: how our tenants making decisions help inform those strategies. I 425 00:22:56,560 --> 00:22:59,880 Speaker 1: have heard from a variety of different companies that they're 426 00:22:59,880 --> 00:23:05,760 Speaker 1: in internal data creation and analytics is just a huge thing. 427 00:23:06,240 --> 00:23:08,840 Speaker 1: Used to take like a year or two. You get 428 00:23:08,880 --> 00:23:12,480 Speaker 1: reports out back from the field, what's selling, what's not selling, 429 00:23:12,520 --> 00:23:16,960 Speaker 1: what's rising. Now it's almost real time, it's almost instant. Yeah, 430 00:23:17,160 --> 00:23:19,439 Speaker 1: we we definitely benefit from that, and I think we 431 00:23:19,560 --> 00:23:22,879 Speaker 1: have the good fortune that there's there's been a heritage 432 00:23:22,920 --> 00:23:26,320 Speaker 1: kind of from day one of using insights that we 433 00:23:26,400 --> 00:23:30,639 Speaker 1: uniquely have access to, and the technology infrastructure around that 434 00:23:30,720 --> 00:23:33,479 Speaker 1: has definitely improved. It's needed to improve at our scale 435 00:23:33,520 --> 00:23:35,600 Speaker 1: for us to really be able to use all that information. 436 00:23:35,640 --> 00:23:38,640 Speaker 1: But I think even just twelve or so years ago 437 00:23:38,640 --> 00:23:41,719 Speaker 1: when I joined the firm, you'd have senior professionals with 438 00:23:41,880 --> 00:23:44,320 Speaker 1: legal pads taking notes and meeting sal who what what 439 00:23:44,359 --> 00:23:46,080 Speaker 1: did we what do we what do we just learn 440 00:23:46,160 --> 00:23:48,000 Speaker 1: from that sale? Or how many people are in our process? 441 00:23:48,000 --> 00:23:49,919 Speaker 1: What do they want to pay? You know? And and 442 00:23:50,040 --> 00:23:52,719 Speaker 1: using those notes to kind of inform the thinking around 443 00:23:52,760 --> 00:23:56,320 Speaker 1: next investment choices. Not exactly cutting edge, not exactly cutting edge, 444 00:23:56,320 --> 00:23:57,960 Speaker 1: but I think this is one of the things that 445 00:23:58,080 --> 00:24:01,399 Speaker 1: is so special about not just the real safe business 446 00:24:01,400 --> 00:24:03,320 Speaker 1: of Black So, but really about our whole firm is 447 00:24:03,359 --> 00:24:07,080 Speaker 1: the way we not only use data provided to us 448 00:24:07,080 --> 00:24:10,520 Speaker 1: through tools, but also we're in constant conversation. I mean, 449 00:24:10,520 --> 00:24:13,320 Speaker 1: we are a meeting heavy culture. We are a conversation 450 00:24:13,359 --> 00:24:17,040 Speaker 1: heavy culture, and so much of that is about harnessing 451 00:24:17,160 --> 00:24:21,320 Speaker 1: information and insights people have that can help make those decisions. 452 00:24:21,359 --> 00:24:24,439 Speaker 1: And it's how we've built our investment committee process one 453 00:24:24,480 --> 00:24:27,800 Speaker 1: global investment committee, or you're drawing in insights and expertise 454 00:24:27,840 --> 00:24:30,680 Speaker 1: from around the world. It's just trying to say, Okay, 455 00:24:30,920 --> 00:24:35,000 Speaker 1: we have access to advantages through information that others may not, 456 00:24:35,119 --> 00:24:37,479 Speaker 1: and let's use that rather than kind of risk that 457 00:24:37,480 --> 00:24:40,920 Speaker 1: that just stays on the sideline. That's really interesting. So 458 00:24:40,920 --> 00:24:44,919 Speaker 1: SO let's talk about market timing. You're a fantastic market 459 00:24:44,920 --> 00:24:47,800 Speaker 1: time and what I mean by that is you joined 460 00:24:47,880 --> 00:24:51,480 Speaker 1: Blackstone right at the tail end of the financial crisis 461 00:24:51,520 --> 00:24:54,520 Speaker 1: when real estate was the worst that's been in decades, 462 00:24:55,080 --> 00:24:57,879 Speaker 1: and from there you've had the wind at you're back 463 00:24:58,359 --> 00:25:02,000 Speaker 1: for a dozen years. I have to ask a silly question, 464 00:25:02,640 --> 00:25:05,360 Speaker 1: how much of what's happened the past twelve years has 465 00:25:05,440 --> 00:25:09,119 Speaker 1: just been spectacular timing and how much of it is 466 00:25:09,200 --> 00:25:14,760 Speaker 1: just recognizing, Hey, things are very cheap, financing isn't expensive. 467 00:25:15,119 --> 00:25:17,880 Speaker 1: Now is the time to get aggressive? Well, I would 468 00:25:17,920 --> 00:25:21,640 Speaker 1: say timing can matter, and we're definitely in a moment 469 00:25:21,640 --> 00:25:23,600 Speaker 1: where we think dislocation in the market is going to 470 00:25:23,640 --> 00:25:26,960 Speaker 1: create interesting buying opportunities at values that are going to 471 00:25:27,000 --> 00:25:30,399 Speaker 1: feel like very attractive basis. But in the future or 472 00:25:30,600 --> 00:25:33,320 Speaker 1: are we there yet? We're not there yet. We're getting there, 473 00:25:33,320 --> 00:25:36,560 Speaker 1: but not quite there yet. I'd say, seventh inning, I 474 00:25:36,600 --> 00:25:38,560 Speaker 1: don't know, I'm really bad. I want you to tell 475 00:25:38,560 --> 00:25:43,480 Speaker 1: me Tuesday at the truck If I knew that, I 476 00:25:43,520 --> 00:25:45,919 Speaker 1: would turn that with you, Barry Um. But you know, 477 00:25:45,960 --> 00:25:47,760 Speaker 1: I would say, on the on the general idea of 478 00:25:47,760 --> 00:25:50,320 Speaker 1: like market timing, it can be helpful, of course, to 479 00:25:50,400 --> 00:25:53,760 Speaker 1: pick a really interesting moment to enter a market by 480 00:25:53,760 --> 00:25:55,919 Speaker 1: a company by bineid. I would say, though, if you 481 00:25:55,960 --> 00:25:57,879 Speaker 1: look at the history of Blacks on real estate, some 482 00:25:57,960 --> 00:25:59,920 Speaker 1: of our best investments were made at the worst post, 483 00:26:00,240 --> 00:26:02,679 Speaker 1: of course. I mean Hilton Hotels is always the example 484 00:26:02,720 --> 00:26:04,920 Speaker 1: we give. You could argue buying that in two thousand 485 00:26:05,040 --> 00:26:07,119 Speaker 1: seven was the worst possible time. But going back to 486 00:26:07,160 --> 00:26:12,720 Speaker 1: what we were talking about earlier, we bought a great company. No, no, 487 00:26:12,880 --> 00:26:15,080 Speaker 1: we would, we took we took the company private. It 488 00:26:15,119 --> 00:26:17,440 Speaker 1: was definitely not a distressed company. But what we were 489 00:26:17,480 --> 00:26:20,840 Speaker 1: excited about was the ability to grow the company and 490 00:26:20,880 --> 00:26:23,960 Speaker 1: really capitalize on its ability to to grow in a 491 00:26:24,000 --> 00:26:27,360 Speaker 1: capital light way, and by bringing in an incredible management 492 00:26:27,359 --> 00:26:29,840 Speaker 1: team led by Christmas Setta, we were able to help 493 00:26:30,000 --> 00:26:31,880 Speaker 1: propel the growth and we were excited about that from 494 00:26:31,960 --> 00:26:35,119 Speaker 1: day one. Probably the time. Well, we then hit the 495 00:26:35,119 --> 00:26:37,600 Speaker 1: financial crisis and there were a lot of really dark 496 00:26:37,680 --> 00:26:40,200 Speaker 1: days and I think if we we did probably an 497 00:26:40,320 --> 00:26:42,760 Speaker 1: article search right now, you have found a lot of 498 00:26:42,760 --> 00:26:46,440 Speaker 1: prognosticators in two thousand eight nine in ten saying this 499 00:26:46,480 --> 00:26:48,000 Speaker 1: was this was going to be a you know, a 500 00:26:48,119 --> 00:26:51,040 Speaker 1: terrible black spot for us, and goes back to exactly 501 00:26:51,040 --> 00:26:55,359 Speaker 1: what you said by robust properties and a good structure 502 00:26:55,520 --> 00:26:59,600 Speaker 1: that can tolerate and if it survived that hurricane, right 503 00:26:59,600 --> 00:27:04,920 Speaker 1: and if in the most profitable private equity investment ever made. 504 00:27:03,040 --> 00:27:07,960 Speaker 1: And so that's why again buying in in more distressed 505 00:27:08,000 --> 00:27:10,920 Speaker 1: environments definitely helpful, but it's not really the only way 506 00:27:10,960 --> 00:27:13,399 Speaker 1: to find success, I think, in anything. And to your 507 00:27:13,480 --> 00:27:16,760 Speaker 1: question about when I joined Blackstone and what's what's been happening, 508 00:27:17,320 --> 00:27:19,359 Speaker 1: the way I think about the last twelve years for 509 00:27:19,400 --> 00:27:22,440 Speaker 1: me and for our business, it's really that story of 510 00:27:22,600 --> 00:27:25,399 Speaker 1: what happened coming out of the financial crisis and the 511 00:27:25,400 --> 00:27:28,520 Speaker 1: fact that during that period of time, most real estate 512 00:27:28,560 --> 00:27:32,119 Speaker 1: companies struggled to return capital to their investors, let alone 513 00:27:32,760 --> 00:27:35,280 Speaker 1: generate a profit, and black Stones funds to that period 514 00:27:35,400 --> 00:27:38,359 Speaker 1: generated substantial profits because we had made those good choices 515 00:27:38,359 --> 00:27:41,080 Speaker 1: not just about the investments, but the capital structures, about 516 00:27:41,080 --> 00:27:44,000 Speaker 1: the reserves, about having dry powder. And when we got 517 00:27:44,000 --> 00:27:47,080 Speaker 1: to the other side of the financial crisis, our clients 518 00:27:47,119 --> 00:27:50,080 Speaker 1: really trusted us to start doing more for them than 519 00:27:50,119 --> 00:27:52,399 Speaker 1: just those opportunistic funds I was talking about, and that 520 00:27:52,520 --> 00:27:56,440 Speaker 1: has given us an opportunity to serve more clients and 521 00:27:56,520 --> 00:27:59,040 Speaker 1: with more products that acts as more parts of the 522 00:27:59,040 --> 00:28:02,040 Speaker 1: real estate market it than just those opportunistic strategies I 523 00:28:02,040 --> 00:28:05,520 Speaker 1: talked about. I have used the phrase financial crisis PTSD 524 00:28:05,720 --> 00:28:09,160 Speaker 1: and in no way being disrespectful to people who actually 525 00:28:09,320 --> 00:28:14,480 Speaker 1: suffer PTSD in combat or whatever. But everybody who came 526 00:28:14,520 --> 00:28:19,960 Speaker 1: through that felt felt the use the phrase trauma. But 527 00:28:20,080 --> 00:28:24,240 Speaker 1: you're now saying something even more interesting, which is when 528 00:28:24,240 --> 00:28:28,320 Speaker 1: you come through that intact and demonstrating an ability to 529 00:28:28,440 --> 00:28:32,959 Speaker 1: navigate that environment for your clients. At that point, hey, 530 00:28:33,119 --> 00:28:35,359 Speaker 1: we want to go pedal to the metal. They open 531 00:28:35,440 --> 00:28:39,080 Speaker 1: up the floodgates and say, if you survive that craziness 532 00:28:39,120 --> 00:28:42,000 Speaker 1: in a normal economy, whatever you say, go with it. 533 00:28:42,480 --> 00:28:45,080 Speaker 1: How does the trust that's built up over that time 534 00:28:45,720 --> 00:28:51,800 Speaker 1: get get put to use following a crisis like the GFC. Well, 535 00:28:51,840 --> 00:28:55,120 Speaker 1: I'd say, um, you're really in two ways. One is 536 00:28:55,160 --> 00:28:57,720 Speaker 1: that our clients have given us more capital. And I 537 00:28:57,720 --> 00:29:00,160 Speaker 1: think many clients came through the GFC deciding rather than 538 00:29:00,200 --> 00:29:02,760 Speaker 1: sprinkle their investments around with a lot of managers, they 539 00:29:02,800 --> 00:29:05,280 Speaker 1: want to do more with their more successful managers, and 540 00:29:05,320 --> 00:29:08,040 Speaker 1: we've definitely been a beneficiary of that. I think that 541 00:29:08,120 --> 00:29:10,840 Speaker 1: trust has also allowed us, like I said, to expand 542 00:29:11,160 --> 00:29:13,880 Speaker 1: into different types of real estates. So really, so much 543 00:29:13,920 --> 00:29:17,440 Speaker 1: of our focus today is on growing and expanding our 544 00:29:17,720 --> 00:29:19,880 Speaker 1: core plus business. This is real estate that has a 545 00:29:19,960 --> 00:29:23,680 Speaker 1: very stable cash flow profile where we're able to generate 546 00:29:24,040 --> 00:29:29,920 Speaker 1: compounding returns over time by adding value in assets that 547 00:29:30,000 --> 00:29:31,520 Speaker 1: we want to own for a long periods of time 548 00:29:31,560 --> 00:29:34,480 Speaker 1: and structures that allow us to do that. And we've 549 00:29:34,760 --> 00:29:37,680 Speaker 1: done that more and more for institutional clients. We've expanded 550 00:29:37,680 --> 00:29:40,720 Speaker 1: to doing that also for individual clients. And it's really 551 00:29:40,880 --> 00:29:43,920 Speaker 1: that trust from the good performance in tougher environments and 552 00:29:43,960 --> 00:29:48,040 Speaker 1: really any environment that allows us to do that. So 553 00:29:48,200 --> 00:29:51,840 Speaker 1: I want to put a little context around the five 554 00:29:52,280 --> 00:29:56,120 Speaker 1: sixty five billion in commercial real estate assets that you 555 00:29:56,120 --> 00:29:59,880 Speaker 1: guys own globally. What is the real estate market? Some 556 00:30:00,120 --> 00:30:03,920 Speaker 1: thing like it's like three times at It's like yeah. 557 00:30:04,080 --> 00:30:07,040 Speaker 1: And that's because where I was leading to is, hey, 558 00:30:07,080 --> 00:30:09,160 Speaker 1: at what point does this get too big? At what 559 00:30:09,240 --> 00:30:13,120 Speaker 1: points are you picking b deals or sea deals? Three 560 00:30:13,200 --> 00:30:16,960 Speaker 1: hundred trillion versus half a trillion, I'm assuming that means 561 00:30:17,000 --> 00:30:19,640 Speaker 1: you have a ton of head room to just keep 562 00:30:19,720 --> 00:30:21,959 Speaker 1: growing this. That's how we feel about it. I mean, 563 00:30:22,080 --> 00:30:26,400 Speaker 1: the real estate market is so widely held, it's in 564 00:30:26,680 --> 00:30:29,880 Speaker 1: so many places, there's so many different opportunities and interestingly, 565 00:30:30,040 --> 00:30:32,640 Speaker 1: we should come back to this, but the opportunities change, 566 00:30:32,720 --> 00:30:35,840 Speaker 1: right and based on kind of how people are using assets, 567 00:30:36,240 --> 00:30:39,840 Speaker 1: and so we feel like there are plenty of opportunities 568 00:30:39,880 --> 00:30:42,760 Speaker 1: that we can create. And I'd say again, our capital 569 00:30:42,800 --> 00:30:45,520 Speaker 1: also is structured in a way that we're never under 570 00:30:45,520 --> 00:30:48,920 Speaker 1: pressure to deploy capital and then sit in cash and 571 00:30:48,960 --> 00:30:51,360 Speaker 1: nobody complains. And this is this is part of the trust, 572 00:30:51,440 --> 00:30:53,800 Speaker 1: right is the is the structure the investors give you 573 00:30:53,880 --> 00:30:56,560 Speaker 1: in terms of the flexibility of when you draw their 574 00:30:56,640 --> 00:30:59,680 Speaker 1: capital to deploy into opportunities and what those look like. 575 00:30:59,720 --> 00:31:02,920 Speaker 1: We have a lot of flexibility in our capital to 576 00:31:02,960 --> 00:31:06,280 Speaker 1: move across sectors, to move across geographies, to wait to 577 00:31:06,360 --> 00:31:09,840 Speaker 1: deploy the capital that they've committed until we find great opportunities. 578 00:31:10,280 --> 00:31:13,120 Speaker 1: That's that's all a relationship built on trust. But it 579 00:31:13,160 --> 00:31:16,840 Speaker 1: also means that we can be patient. So do you do, Hey, 580 00:31:16,840 --> 00:31:19,120 Speaker 1: someone says I'm gonna give you a billion dollars, here's 581 00:31:19,120 --> 00:31:21,400 Speaker 1: a hundred million, and you do a capital core and 582 00:31:21,480 --> 00:31:24,040 Speaker 1: the balance as deals come up, or do they shovel 583 00:31:24,080 --> 00:31:25,640 Speaker 1: all the money to you and you have to find 584 00:31:25,640 --> 00:31:29,040 Speaker 1: a home for it until the correct opportunity comes along. 585 00:31:29,240 --> 00:31:32,080 Speaker 1: I would say the vast majority of our capital, it's 586 00:31:32,120 --> 00:31:35,360 Speaker 1: the former where use a capital calls a capital call 587 00:31:35,440 --> 00:31:38,200 Speaker 1: as needed exactly, and that's got to help our o I. 588 00:31:38,280 --> 00:31:40,720 Speaker 1: It's got to make numbers look really good because you're 589 00:31:40,760 --> 00:31:43,680 Speaker 1: not forced to make a decision because you don't want 590 00:31:43,680 --> 00:31:47,160 Speaker 1: to sit there earning half a percent, absolutely and more 591 00:31:47,160 --> 00:31:49,480 Speaker 1: than anything, you don't want to be ever in a 592 00:31:49,520 --> 00:31:51,960 Speaker 1: situation where you're either a force buyer or a force seller. 593 00:31:52,040 --> 00:31:53,800 Speaker 1: And we set up all of our structures to make 594 00:31:53,840 --> 00:31:57,120 Speaker 1: sure that we're we're able to generate continued great performance 595 00:31:57,400 --> 00:32:00,160 Speaker 1: by deploying capital too great opportunities when we find them, 596 00:32:00,200 --> 00:32:02,680 Speaker 1: and then also selling when we think the opportunities right now, 597 00:32:02,720 --> 00:32:04,760 Speaker 1: because we're forced to do so. What's the great war 598 00:32:04,800 --> 00:32:08,000 Speaker 1: on Buffett quote? The difference between baseball and investing is 599 00:32:08,000 --> 00:32:09,920 Speaker 1: there no cold strikes? You could just sit there with 600 00:32:09,960 --> 00:32:12,680 Speaker 1: the bat on your shoulder and wait for the pitch 601 00:32:12,760 --> 00:32:17,640 Speaker 1: you like, and there's no there's no they're calling strikes 602 00:32:17,680 --> 00:32:19,560 Speaker 1: on you. You can really be patient, and it has 603 00:32:19,560 --> 00:32:22,000 Speaker 1: to make a huge difference. Patience matters a lot to say, 604 00:32:22,080 --> 00:32:25,160 Speaker 1: To say, the least. I'm very re helts. You're listening 605 00:32:25,240 --> 00:32:28,440 Speaker 1: to Masters and Business on Bloomberg Radio. My extra special 606 00:32:28,440 --> 00:32:31,440 Speaker 1: guest today is Kathleen McCarthy. She is the global co 607 00:32:31,600 --> 00:32:34,360 Speaker 1: head of real Estate at black Stone. They manage over 608 00:32:34,440 --> 00:32:37,440 Speaker 1: five hundred and sixty five billion dollars in real estate 609 00:32:37,720 --> 00:32:40,640 Speaker 1: investments around the world. So let's talk a little bit 610 00:32:40,760 --> 00:32:43,720 Speaker 1: what's going on today. There's a quote of yours that 611 00:32:43,760 --> 00:32:48,160 Speaker 1: I found really fascinating. We are entering this tougher economic 612 00:32:48,240 --> 00:32:52,920 Speaker 1: moment with capital and with cranes more in check than 613 00:32:52,960 --> 00:32:55,840 Speaker 1: they have been in prior cycles, and I think that 614 00:32:55,920 --> 00:32:59,080 Speaker 1: positions are real estate assets to do quite well. So 615 00:32:59,280 --> 00:33:02,880 Speaker 1: I love the idea of capital and cranes and check. 616 00:33:03,000 --> 00:33:06,600 Speaker 1: That's a great phrase. You're referring to people waiting to 617 00:33:06,760 --> 00:33:11,840 Speaker 1: invest and people waiting to build well. I think where 618 00:33:11,920 --> 00:33:14,600 Speaker 1: that quoe came from. It's just the concept that most 619 00:33:14,960 --> 00:33:18,840 Speaker 1: real estate down cycle, so periods of time where real 620 00:33:18,920 --> 00:33:22,040 Speaker 1: estate is under more pressure from a performance perspective, come 621 00:33:22,080 --> 00:33:26,920 Speaker 1: about because there's been a lot of new capital, often 622 00:33:27,040 --> 00:33:30,960 Speaker 1: lent to people who then go build speculative real estate 623 00:33:30,960 --> 00:33:33,640 Speaker 1: meaning and speculative meaning that they're building and office building 624 00:33:33,640 --> 00:33:38,320 Speaker 1: without a tenant in mind um and oftentimes what what 625 00:33:38,440 --> 00:33:42,320 Speaker 1: you've seen in prior cycles is that the market gets 626 00:33:42,480 --> 00:33:45,880 Speaker 1: really nice and healthy, people are really happy with performance, 627 00:33:45,960 --> 00:33:49,760 Speaker 1: Lenders get more comfortable, they lend folks provide equity to 628 00:33:49,840 --> 00:33:51,960 Speaker 1: new projects. You end up with a lot of construction, 629 00:33:52,040 --> 00:33:54,720 Speaker 1: and something happens, either there's been too much construction or 630 00:33:54,760 --> 00:33:58,680 Speaker 1: the economy softens, and then real estate is in real 631 00:33:58,800 --> 00:34:00,640 Speaker 1: estate is that under pressure because there's been too much 632 00:34:00,680 --> 00:34:03,280 Speaker 1: capital and too many cranes. And I think what feels 633 00:34:03,400 --> 00:34:07,520 Speaker 1: very different about this moment is that we really never 634 00:34:07,600 --> 00:34:11,080 Speaker 1: got back to those more heady levels of lending and 635 00:34:11,600 --> 00:34:16,960 Speaker 1: more significant amounts of new construction prior to for example, 636 00:34:16,960 --> 00:34:20,520 Speaker 1: the FED responding to inflation and interest rates, and so 637 00:34:20,560 --> 00:34:25,520 Speaker 1: we're heading into whatever we're heading into with record low 638 00:34:25,640 --> 00:34:31,239 Speaker 1: levels of vacancy relatively, i'd say disciplined capital structures. That's 639 00:34:31,280 --> 00:34:34,200 Speaker 1: not to say people won't be under pressure from either 640 00:34:34,320 --> 00:34:37,239 Speaker 1: debt service coverage challenges or loan to value challenges. But 641 00:34:38,280 --> 00:34:40,680 Speaker 1: I think the combination of as you talked about, some 642 00:34:40,760 --> 00:34:43,560 Speaker 1: of the learnings from the global financial crisis, some of 643 00:34:43,600 --> 00:34:47,520 Speaker 1: the restrictions on banks. I think also we can't underestimate 644 00:34:47,600 --> 00:34:51,440 Speaker 1: how COVID did create an interruption to what was a 645 00:34:51,520 --> 00:34:55,040 Speaker 1: very healthy market and probably change things in terms of 646 00:34:55,320 --> 00:34:57,080 Speaker 1: not every project that was ready to go was put 647 00:34:57,080 --> 00:35:00,160 Speaker 1: into production in the summer of for example. And so 648 00:35:00,960 --> 00:35:05,040 Speaker 1: what we're seeing on the ground now is that fundamentals 649 00:35:05,200 --> 00:35:08,000 Speaker 1: when particularly in our preferred sectors, which are our biggest 650 00:35:08,000 --> 00:35:13,600 Speaker 1: sectors are warehouses. That's our portfolio globally rental housing. UM 651 00:35:14,960 --> 00:35:18,319 Speaker 1: I had no idea logistics and warehouse yeah. They We 652 00:35:18,440 --> 00:35:21,680 Speaker 1: are high conviction investors and we pick themes that we 653 00:35:21,719 --> 00:35:25,240 Speaker 1: think are really benefiting from the way people are living 654 00:35:25,239 --> 00:35:28,959 Speaker 1: and working and shopping and just mega trends. And so 655 00:35:29,000 --> 00:35:32,279 Speaker 1: starting actually in two thousand and ten, we started buying warehouses, 656 00:35:32,800 --> 00:35:35,239 Speaker 1: not I think at first even recognizing what was happening 657 00:35:35,280 --> 00:35:37,200 Speaker 1: with the e commerce, but like I mentioned, we pay 658 00:35:37,239 --> 00:35:40,600 Speaker 1: really careful attention to what's happening in our portfolio, and 659 00:35:40,640 --> 00:35:42,920 Speaker 1: we started to realize what e commerce was doing to 660 00:35:43,040 --> 00:35:47,440 Speaker 1: drive demand for warehouse space and how there was a 661 00:35:47,480 --> 00:35:51,360 Speaker 1: fundamental shift that started happening. Historically, warehouse performance just tracked 662 00:35:51,360 --> 00:35:54,120 Speaker 1: GDP performance. It was basically a one to one correlation, 663 00:35:54,719 --> 00:35:58,719 Speaker 1: and the house performance tracks g and then what you 664 00:35:58,760 --> 00:36:01,799 Speaker 1: saw is with e commerce demand and the shift moving 665 00:36:01,800 --> 00:36:04,480 Speaker 1: off goods online. It just changed. It just it just 666 00:36:04,520 --> 00:36:09,360 Speaker 1: totally changed, you know, I don't I don't know, but 667 00:36:09,400 --> 00:36:11,640 Speaker 1: it's definitely more than one to one. And I would 668 00:36:11,640 --> 00:36:14,200 Speaker 1: say again, like going back to the point of cranes 669 00:36:14,719 --> 00:36:16,919 Speaker 1: the news, there has been new supply, but it really 670 00:36:16,920 --> 00:36:19,440 Speaker 1: has not kept up with the explosive growth in demand 671 00:36:19,840 --> 00:36:22,279 Speaker 1: for a warehouse space, particularly in urban areas, so what 672 00:36:22,320 --> 00:36:25,719 Speaker 1: we call sometimes last mile logistics, so where the warehouses 673 00:36:25,760 --> 00:36:29,319 Speaker 1: closest to the densest population centers. Those assets are in 674 00:36:29,360 --> 00:36:33,319 Speaker 1: demand because of e commerce retailers wanting to get things 675 00:36:33,360 --> 00:36:35,680 Speaker 1: to people in the same day or within a few hours. 676 00:36:35,719 --> 00:36:39,360 Speaker 1: Even we're also seeing really the impact of restoring and 677 00:36:39,400 --> 00:36:43,040 Speaker 1: realignment of supply chains, and that is ongoing, and that 678 00:36:43,120 --> 00:36:45,440 Speaker 1: is both of these phenomenal are global. One of the 679 00:36:45,480 --> 00:36:48,600 Speaker 1: most interesting things is that these are often global stories. 680 00:36:48,640 --> 00:36:52,320 Speaker 1: These these themes um the mega trends are rarely isolated 681 00:36:52,360 --> 00:36:55,160 Speaker 1: to just one economy and so U when when you 682 00:36:55,200 --> 00:36:59,680 Speaker 1: think about the performance of our warehouse portfolio in this year, 683 00:37:00,400 --> 00:37:03,080 Speaker 1: in you it's been some of the strongest fundamentals that 684 00:37:03,120 --> 00:37:06,480 Speaker 1: we've we've seen and and you know, things are softening 685 00:37:06,480 --> 00:37:10,560 Speaker 1: in certain pockets, but it's it's still really benefiting from 686 00:37:10,560 --> 00:37:14,520 Speaker 1: that that lower new supply environment. You mentioned the pandemic 687 00:37:14,640 --> 00:37:17,120 Speaker 1: first Blackstone and you guys hybrid Are you in the 688 00:37:17,160 --> 00:37:20,160 Speaker 1: office at what what is your We're fully in We're 689 00:37:20,200 --> 00:37:23,439 Speaker 1: in really in five days. So that's really interesting because 690 00:37:23,480 --> 00:37:26,200 Speaker 1: I wanted to ask the question Bloomberg. This is a 691 00:37:26,239 --> 00:37:29,759 Speaker 1: big building, it's hybrid, but they're encouraging people to be 692 00:37:29,800 --> 00:37:33,400 Speaker 1: in more often. My my own office, we're kind of 693 00:37:33,440 --> 00:37:36,319 Speaker 1: always been virtual and we tell people we do a 694 00:37:36,360 --> 00:37:39,640 Speaker 1: Monday morning meeting which you can call in on, but 695 00:37:39,719 --> 00:37:41,359 Speaker 1: we asked people come in the office one of two 696 00:37:41,400 --> 00:37:45,000 Speaker 1: days a week. I'm hearing more and more offices are 697 00:37:45,080 --> 00:37:49,560 Speaker 1: moving to a hybrid with an anchor day. So all 698 00:37:49,640 --> 00:37:53,480 Speaker 1: of this back and forth is really what will cities 699 00:37:53,560 --> 00:37:56,920 Speaker 1: look like post pandemic. Is there going to be a 700 00:37:57,160 --> 00:38:01,680 Speaker 1: huge piece of the commercial office space that's going to 701 00:38:01,800 --> 00:38:06,120 Speaker 1: suffer from some form of a hybrid workforce? Because it 702 00:38:06,200 --> 00:38:09,680 Speaker 1: doesn't feel like we're ever going back to every office 703 00:38:09,719 --> 00:38:13,440 Speaker 1: in every city five days a week. That you guys 704 00:38:13,440 --> 00:38:17,439 Speaker 1: are an exception. Most companies are not full five. It's 705 00:38:17,520 --> 00:38:20,320 Speaker 1: three and two or four and one or two and three, 706 00:38:20,760 --> 00:38:22,800 Speaker 1: like five days a week is kind of a rarity. 707 00:38:22,880 --> 00:38:26,080 Speaker 1: I know Jamie Diamond wants everybody back in Chase five 708 00:38:26,120 --> 00:38:29,080 Speaker 1: days a week, but it ain't happening. We come at it, 709 00:38:29,120 --> 00:38:31,759 Speaker 1: I think as part of a mission orientation, which is 710 00:38:31,800 --> 00:38:35,120 Speaker 1: we have this incredible responsibility from our investors to do 711 00:38:35,440 --> 00:38:37,840 Speaker 1: the absolute best job we possibly can with their capital. 712 00:38:37,880 --> 00:38:40,160 Speaker 1: That's such a smart thing to say, can I tell you? 713 00:38:40,360 --> 00:38:44,839 Speaker 1: Because as much as the younger generation loves the hybrid workforce, hey, 714 00:38:44,960 --> 00:38:48,560 Speaker 1: we're stewards of capital, and our clients expect to expect 715 00:38:48,680 --> 00:38:51,600 Speaker 1: us to be here every day. Yes do it? I mean, 716 00:38:51,840 --> 00:38:53,560 Speaker 1: and and so many of our customers as well, I 717 00:38:53,560 --> 00:38:58,440 Speaker 1: would say, our frontline workers and emergency workers and teachers 718 00:38:58,480 --> 00:39:02,040 Speaker 1: and firefighters. And so I feel like, how can we say, Okay, 719 00:39:02,040 --> 00:39:03,960 Speaker 1: you you all need to be at work every day. 720 00:39:04,000 --> 00:39:06,319 Speaker 1: You're protecting us, teaching our children. But we're gonna We're 721 00:39:06,320 --> 00:39:08,799 Speaker 1: gonna be hybrid and not necessarily delivered the best we 722 00:39:08,880 --> 00:39:11,839 Speaker 1: possibly Nobody wants their money manager and their pajamas with 723 00:39:11,880 --> 00:39:15,400 Speaker 1: their in their fuzzy slippers when they're responsible for billions 724 00:39:15,440 --> 00:39:18,719 Speaker 1: of dollars a huge responsibility. And I would say I 725 00:39:18,800 --> 00:39:21,319 Speaker 1: also personally think we have a huge responsibility to our 726 00:39:21,360 --> 00:39:24,720 Speaker 1: own team to training and learning. I mean, I'm learning 727 00:39:24,800 --> 00:39:26,800 Speaker 1: and training all the time, and I think about it 728 00:39:26,840 --> 00:39:30,520 Speaker 1: a lot. Like all the research on children in school, right, 729 00:39:30,600 --> 00:39:34,000 Speaker 1: the learning loss from children not in school, It's the 730 00:39:34,040 --> 00:39:36,400 Speaker 1: same thing in a workplace where all they're learning and 731 00:39:36,440 --> 00:39:39,440 Speaker 1: then doing better. And so I think being together is 732 00:39:39,760 --> 00:39:42,600 Speaker 1: so important now, as you know, I would love to 733 00:39:42,640 --> 00:39:45,480 Speaker 1: convince everyone in the world that you know, being back 734 00:39:45,520 --> 00:39:48,000 Speaker 1: in five days is really, you know, the right thing 735 00:39:48,040 --> 00:39:51,720 Speaker 1: to do for for the whole ecosystem, the economy around 736 00:39:51,719 --> 00:39:54,040 Speaker 1: where you work, and your own professional development and your 737 00:39:54,040 --> 00:39:57,520 Speaker 1: customers experience. I firmly believe it. But I would say, 738 00:39:57,560 --> 00:39:59,440 Speaker 1: as we think about what is happening in the broader 739 00:39:59,480 --> 00:40:02,359 Speaker 1: world and how that's impacting office demand, I think we're 740 00:40:02,360 --> 00:40:06,560 Speaker 1: in an era of experimentation. We believe that the office, 741 00:40:07,600 --> 00:40:10,279 Speaker 1: in some format and for some periods of time in 742 00:40:10,280 --> 00:40:13,360 Speaker 1: a week, will continue to be a really critically important 743 00:40:13,800 --> 00:40:18,799 Speaker 1: part of culture for for organizations and corporations. And what 744 00:40:18,840 --> 00:40:22,239 Speaker 1: we're seeing happening is really actually, i'd say, an acceleration 745 00:40:22,239 --> 00:40:24,359 Speaker 1: of a trend that was started pre pandemic. I mean, 746 00:40:24,400 --> 00:40:27,240 Speaker 1: it's so interesting. COVID really did accelerate so many trends 747 00:40:27,719 --> 00:40:32,000 Speaker 1: in so many ways remote work cloud that It's funny 748 00:40:32,000 --> 00:40:35,719 Speaker 1: because when we launched a firm, we had a national footprint, 749 00:40:35,800 --> 00:40:38,839 Speaker 1: but we were New York based, So all the things 750 00:40:38,840 --> 00:40:42,799 Speaker 1: that we've been doing during COVID, we started in and 751 00:40:43,400 --> 00:40:47,920 Speaker 1: I was shocked in like people discovered FaceTime. It's like, 752 00:40:47,960 --> 00:40:50,680 Speaker 1: you know that this technology is came out in two 753 00:40:50,680 --> 00:40:54,000 Speaker 1: thousand eight. This is not a but it was a 754 00:40:54,040 --> 00:40:59,200 Speaker 1: massive I feels like the pandemic brought forward a decade. 755 00:40:59,680 --> 00:41:02,520 Speaker 1: I think in many ways and in different different sectors. 756 00:41:02,520 --> 00:41:04,160 Speaker 1: For real state, it feels like whether it's like three 757 00:41:04,239 --> 00:41:06,880 Speaker 1: years of an acceleration or ten, it's definitely that that 758 00:41:07,000 --> 00:41:10,960 Speaker 1: pull forward. And what I'd say for office buildings, if 759 00:41:11,000 --> 00:41:15,840 Speaker 1: we had met in two thousand sixteen, let's say, one 760 00:41:15,880 --> 00:41:17,960 Speaker 1: of the things I would have probably called to your 761 00:41:18,000 --> 00:41:21,000 Speaker 1: attention is the fact that so many office buildings, particularly 762 00:41:21,000 --> 00:41:24,680 Speaker 1: whether you think at the lobbies or them the amenity 763 00:41:24,719 --> 00:41:28,400 Speaker 1: floors for tenants, it started to feel more like a hotel. 764 00:41:28,400 --> 00:41:31,280 Speaker 1: I mean, look at this beautiful Bloomberg building with the food. 765 00:41:33,160 --> 00:41:34,920 Speaker 1: It's first all, it's a beautiful building, and then you 766 00:41:34,920 --> 00:41:36,799 Speaker 1: have your food and amenities, and I don't know if 767 00:41:36,800 --> 00:41:38,879 Speaker 1: you have a fitness center, but so many buildings now 768 00:41:38,960 --> 00:41:41,759 Speaker 1: do all of these up on the roof. It's unbelievable, 769 00:41:41,880 --> 00:41:44,640 Speaker 1: all these things to really attract people into the office 770 00:41:44,719 --> 00:41:47,879 Speaker 1: and to create a sense of community while they're here. 771 00:41:48,000 --> 00:41:53,440 Speaker 1: Cultural community, cultry and collaboration. That's really the fascinating thing 772 00:41:53,480 --> 00:41:56,040 Speaker 1: about this building is kind of designed the way the 773 00:41:56,120 --> 00:42:00,360 Speaker 1: original Pixar building was designed and ultimately the Apple space ship, 774 00:42:00,760 --> 00:42:04,279 Speaker 1: which is everybody comes in the elevators through the sixth floor, 775 00:42:04,360 --> 00:42:07,239 Speaker 1: no matter where you work, because it just creates these 776 00:42:07,360 --> 00:42:11,840 Speaker 1: random interactions and you'd be amazed how often things spiral 777 00:42:11,920 --> 00:42:17,080 Speaker 1: from that. That collaborative force, collaboration. It's really a very 778 00:42:17,080 --> 00:42:19,840 Speaker 1: impressive thing when when as it works, it's super important. 779 00:42:19,840 --> 00:42:21,920 Speaker 1: And again that goes that feeds our theory that the 780 00:42:21,960 --> 00:42:24,200 Speaker 1: office and is definitely going to continue to be a 781 00:42:24,239 --> 00:42:29,200 Speaker 1: part of culture and building culture and creating more from 782 00:42:29,239 --> 00:42:31,560 Speaker 1: the team you have. So wait, let me interrupt you again. 783 00:42:31,640 --> 00:42:36,759 Speaker 1: So the consensus seems to be, Hey, I want to 784 00:42:36,760 --> 00:42:41,080 Speaker 1: invest in real estate, but not offices. They're distressed. Offices 785 00:42:41,120 --> 00:42:45,560 Speaker 1: are going away. Put me into hospitality or farmland, but 786 00:42:45,680 --> 00:42:49,000 Speaker 1: no office space. You guys aren't buying into that. Well, 787 00:42:49,040 --> 00:42:51,960 Speaker 1: I would say for office specifically, or what is known 788 00:42:52,000 --> 00:42:56,920 Speaker 1: as traditional office, we're seeing a real bifurcation in demand 789 00:42:57,600 --> 00:43:02,600 Speaker 1: between with really the greatest man going to the highest quality, newest, 790 00:43:02,800 --> 00:43:07,279 Speaker 1: best amenetize, most sustainable office buildings. And New York is 791 00:43:07,320 --> 00:43:10,279 Speaker 1: a is a you know, a perfect example. I think 792 00:43:10,280 --> 00:43:12,680 Speaker 1: of what is happening. The office stock in New York 793 00:43:12,760 --> 00:43:15,120 Speaker 1: is very old compared to the giant I don't know, 794 00:43:15,120 --> 00:43:17,280 Speaker 1: I was New York Times, a Wall Street Journal article. 795 00:43:17,280 --> 00:43:19,440 Speaker 1: I think it was the Times about all of this 796 00:43:19,560 --> 00:43:23,680 Speaker 1: real estate along Park Avenue that we're built in the fifties, sixties, 797 00:43:23,719 --> 00:43:28,040 Speaker 1: seventies and have none of the amenities that my modern 798 00:43:28,080 --> 00:43:30,920 Speaker 1: clients want today. And I think it's it goes beyond amenities. 799 00:43:30,960 --> 00:43:34,240 Speaker 1: It's also the ability to create flexible space and create 800 00:43:34,280 --> 00:43:36,520 Speaker 1: open spaces that you can move and change as your 801 00:43:36,520 --> 00:43:40,960 Speaker 1: company's needs change, gathering places, and so I think that 802 00:43:41,080 --> 00:43:43,799 Speaker 1: is real, real challenge for older office buildings in New York. 803 00:43:43,840 --> 00:43:46,160 Speaker 1: The average age of an office building is sixty seven 804 00:43:47,160 --> 00:43:50,000 Speaker 1: so and only about seven percent of the office stock 805 00:43:50,040 --> 00:43:52,799 Speaker 1: in New York is less than ten years old. And listen, 806 00:43:52,800 --> 00:43:55,040 Speaker 1: there's you don't have to be less than ten years 807 00:43:55,040 --> 00:43:56,799 Speaker 1: old to get the demand. But I would say we're 808 00:43:56,880 --> 00:44:01,320 Speaker 1: seeing those assets attract much more to and at higher prices, 809 00:44:01,480 --> 00:44:04,680 Speaker 1: and so, uh, we think those are going to come 810 00:44:04,680 --> 00:44:10,160 Speaker 1: out as more winners in this kind of this. So 811 00:44:10,920 --> 00:44:13,799 Speaker 1: you want little to do with the older spaces. At 812 00:44:13,880 --> 00:44:16,040 Speaker 1: what point do you take a sixty or seventy year 813 00:44:16,040 --> 00:44:18,759 Speaker 1: old building and say knock it down put up a 814 00:44:18,760 --> 00:44:22,000 Speaker 1: new one. Well, I would say these traditional office assets 815 00:44:22,040 --> 00:44:25,040 Speaker 1: have been a relatively small part of our portfolio for 816 00:44:25,080 --> 00:44:28,560 Speaker 1: a while because going back to our thematic investing, our 817 00:44:28,600 --> 00:44:32,640 Speaker 1: portfolio is eighty percent concentrated in warehouses, rental housing, lab 818 00:44:32,640 --> 00:44:37,040 Speaker 1: office space, and hospitality assets. So we'll get to biomedical 819 00:44:37,080 --> 00:44:41,240 Speaker 1: research happening. Is that substantial enough that it's an asset 820 00:44:41,239 --> 00:44:43,919 Speaker 1: class in your because I would imagine there's a lab here, 821 00:44:43,960 --> 00:44:47,200 Speaker 1: there's lab there. You're saying this is much more substantial, 822 00:44:47,360 --> 00:44:50,120 Speaker 1: much more substantial. And actually, was I think is super 823 00:44:50,160 --> 00:44:54,160 Speaker 1: interesting is that there are a few critical nodes in 824 00:44:54,200 --> 00:44:57,240 Speaker 1: the world. There's basically our whole portfolio is concentrated really 825 00:44:57,239 --> 00:45:02,440 Speaker 1: in five Cambridge, US, Cambridge, UK, South San Francisco, Seattle, 826 00:45:02,560 --> 00:45:05,680 Speaker 1: San Diego, and actually now Boulder, Colorado is emerging but 827 00:45:05,719 --> 00:45:08,040 Speaker 1: these are like we sometimes describe as kind of the 828 00:45:08,080 --> 00:45:14,280 Speaker 1: pulsing heart of research, and there is not enough space 829 00:45:14,320 --> 00:45:17,759 Speaker 1: actually for all of the demand from biomedical tenants in 830 00:45:17,800 --> 00:45:20,560 Speaker 1: these places, and going like, how how did we even 831 00:45:20,600 --> 00:45:24,160 Speaker 1: come upon this theory and why this versus traditional office 832 00:45:24,880 --> 00:45:27,640 Speaker 1: going I mentioned two thousand six fifteen, going back to 833 00:45:27,640 --> 00:45:30,360 Speaker 1: that period of time when we started recognizing, wow, tastes 834 00:45:30,400 --> 00:45:34,279 Speaker 1: and trends are changing a lot for more traditional office assets, 835 00:45:34,440 --> 00:45:37,479 Speaker 1: and we were quite concerned actually to your question about 836 00:45:37,520 --> 00:45:40,160 Speaker 1: if you have an older office building, it could be 837 00:45:40,239 --> 00:45:44,920 Speaker 1: quite expensive to try to repurpose it, reconfigure it to 838 00:45:45,080 --> 00:45:49,400 Speaker 1: really attract tenants that are are great, the best tenants 839 00:45:49,440 --> 00:45:51,719 Speaker 1: in the world. And so we started thinking, Okay, if 840 00:45:51,760 --> 00:45:54,000 Speaker 1: if office is going to be under pressure, are there 841 00:45:54,040 --> 00:45:56,600 Speaker 1: segments or sub segments of the office market that we 842 00:45:56,640 --> 00:45:59,960 Speaker 1: think will do better. And what we started to realize 843 00:46:00,080 --> 00:46:03,319 Speaker 1: is that there was all of this capital and and 844 00:46:03,320 --> 00:46:07,240 Speaker 1: and really a changing tide in terms of the research 845 00:46:07,560 --> 00:46:12,240 Speaker 1: demand and dollars being funded into it. Everything from immunotherapies, 846 00:46:12,280 --> 00:46:13,759 Speaker 1: which of course now we all know a lot about 847 00:46:13,800 --> 00:46:19,040 Speaker 1: things in the pandemic, genomics, big data intersecting with personalized medicine, 848 00:46:19,640 --> 00:46:22,600 Speaker 1: and and UH and a change also and how and 849 00:46:22,600 --> 00:46:24,319 Speaker 1: where this research was being done. Like if you think 850 00:46:24,320 --> 00:46:27,319 Speaker 1: about when I was growing up, all of the big 851 00:46:27,320 --> 00:46:32,560 Speaker 1: pharmaceutical companies had these corporate campuses that were highly securitized 852 00:46:32,600 --> 00:46:35,880 Speaker 1: deep in suburbs. And what started happening is all of 853 00:46:35,880 --> 00:46:38,640 Speaker 1: those researchers and we want to be in cities adjacent 854 00:46:38,680 --> 00:46:41,080 Speaker 1: to some of the best research institutions in the world, 855 00:46:41,680 --> 00:46:44,840 Speaker 1: and and companies needed to be where they're their talent 856 00:46:44,880 --> 00:46:48,080 Speaker 1: wanted to be. And so we UH in two thousand 857 00:46:48,160 --> 00:46:51,200 Speaker 1: sixteen took private a nearly nine billion dollar company called 858 00:46:51,200 --> 00:46:55,640 Speaker 1: BioMed and really concentrated the business in those best markets 859 00:46:56,239 --> 00:46:58,400 Speaker 1: and then helped it grow. One of the great things 860 00:46:58,440 --> 00:47:00,319 Speaker 1: about having the capital we have access to is that 861 00:47:00,400 --> 00:47:03,719 Speaker 1: we were able to help continue to grow their footprint 862 00:47:03,800 --> 00:47:07,320 Speaker 1: in those different cities and then therefore serve the tenants 863 00:47:07,360 --> 00:47:09,240 Speaker 1: that we think are the most attractive in that space. 864 00:47:09,280 --> 00:47:12,359 Speaker 1: And so that is an example of why you can't 865 00:47:12,360 --> 00:47:14,879 Speaker 1: just pay the whole office market with a broadbrush. Lab 866 00:47:14,920 --> 00:47:19,160 Speaker 1: office was was never a darling of real estate investors 867 00:47:19,560 --> 00:47:21,920 Speaker 1: until the world changed and and the nature of the 868 00:47:21,960 --> 00:47:24,080 Speaker 1: research happening, the volume of it and where it was 869 00:47:24,080 --> 00:47:27,480 Speaker 1: getting done changed, and we I think we're at the 870 00:47:27,520 --> 00:47:30,200 Speaker 1: forefront of really participating in that for our investors because 871 00:47:30,200 --> 00:47:33,400 Speaker 1: we were looking for, okay, what does a megatrend and 872 00:47:33,440 --> 00:47:36,879 Speaker 1: what's changing in the world. That's totally fascinating. The lab 873 00:47:36,960 --> 00:47:40,400 Speaker 1: stuff is really I had no idea it was that huge. 874 00:47:40,440 --> 00:47:43,839 Speaker 1: You can see obviously labs are large and important. I 875 00:47:43,920 --> 00:47:46,319 Speaker 1: just didn't know it was large enough to be a 876 00:47:46,360 --> 00:47:50,560 Speaker 1: substantial asset class. The other area you have been very 877 00:47:50,680 --> 00:47:54,680 Speaker 1: enthusiastic about is hospitality sector. You guys are super bullish 878 00:47:54,680 --> 00:47:58,600 Speaker 1: on that. We have been long believers in hospitality, and 879 00:47:58,719 --> 00:48:01,480 Speaker 1: part of this is just a very long term growing 880 00:48:01,520 --> 00:48:05,920 Speaker 1: demand trend for hospitality, for experiences, for travel and tourism. 881 00:48:05,920 --> 00:48:08,560 Speaker 1: If you look at just about any graph of demand 882 00:48:08,560 --> 00:48:11,800 Speaker 1: for air travel, demand for hotel room nights, whether it 883 00:48:11,840 --> 00:48:13,759 Speaker 1: be leisure or business, you've seen a long term trend 884 00:48:13,840 --> 00:48:16,239 Speaker 1: up into the right and pretty much only interrupted in 885 00:48:16,239 --> 00:48:19,040 Speaker 1: a meaningful way by COVID and the great news I 886 00:48:19,040 --> 00:48:21,200 Speaker 1: think if you're a hospitality owner is that you've seen 887 00:48:21,200 --> 00:48:24,439 Speaker 1: a very strong balance back uh. In fact, I think 888 00:48:24,680 --> 00:48:28,040 Speaker 1: demand for our hospitality assets is well exceeding what we 889 00:48:28,080 --> 00:48:32,640 Speaker 1: saw in so we we remain very enthusiastic about it. Now, 890 00:48:32,800 --> 00:48:37,160 Speaker 1: Hospitality assets are, you know, a more operational asset class. 891 00:48:37,239 --> 00:48:38,880 Speaker 1: When you think about if you have a warehouse or 892 00:48:38,960 --> 00:48:42,400 Speaker 1: rental apartment, you have very limited exposure to labor costs, 893 00:48:42,760 --> 00:48:46,160 Speaker 1: very limited exposure to capital costs, and so in uh 894 00:48:46,280 --> 00:48:51,319 Speaker 1: inflationary environment, your cash flow growth is can be more 895 00:48:51,440 --> 00:48:54,000 Speaker 1: robust in those asset classes because you can really you 896 00:48:54,120 --> 00:48:57,000 Speaker 1: see top line rent growth pushing through to the bottom 897 00:48:57,040 --> 00:48:59,520 Speaker 1: line cash flow. In a hospitality asset, it can be 898 00:48:59,560 --> 00:49:02,120 Speaker 1: more challenge lenged. But I think the good news is 899 00:49:02,520 --> 00:49:04,640 Speaker 1: that is something that we have a lot of experience 900 00:49:04,680 --> 00:49:06,760 Speaker 1: with and and we have the opportunity as a private 901 00:49:06,760 --> 00:49:09,759 Speaker 1: investor to to work into our underwriting as we're thinking 902 00:49:09,760 --> 00:49:14,160 Speaker 1: about buying assets, recognizing the environment you're in, recognizing higher costs, 903 00:49:14,280 --> 00:49:18,000 Speaker 1: and so we we remain really attracted to attaching ourselves 904 00:49:18,080 --> 00:49:20,120 Speaker 1: to the growth in demand for that asset class. So 905 00:49:20,200 --> 00:49:22,480 Speaker 1: let's talk a little bit about the structure for hospitality, 906 00:49:22,480 --> 00:49:26,480 Speaker 1: because I suspect a lot of people may not understand 907 00:49:26,680 --> 00:49:29,759 Speaker 1: when they look at a hotel, any of the big 908 00:49:29,760 --> 00:49:33,920 Speaker 1: brands with Hilton, whatever, very often individual hotels are owned 909 00:49:33,960 --> 00:49:38,040 Speaker 1: by separate people, but the management company comes in and 910 00:49:38,160 --> 00:49:42,000 Speaker 1: it's of the same management company, but every hotel might 911 00:49:42,040 --> 00:49:46,320 Speaker 1: be distinctly owned by a separate investment group, individual owner, 912 00:49:46,360 --> 00:49:51,959 Speaker 1: family owner. How does that challenge your investment process? We were, 913 00:49:52,040 --> 00:49:55,120 Speaker 1: first of all, very accustomed to operating in a world 914 00:49:55,120 --> 00:49:57,759 Speaker 1: where we may own, like we did with Hilton, both 915 00:49:57,760 --> 00:50:00,480 Speaker 1: the real estate and the brand on it. We've actually 916 00:50:00,480 --> 00:50:02,640 Speaker 1: seen a lot of opportunities in something like that to 917 00:50:02,760 --> 00:50:06,040 Speaker 1: basically grow the brand and those franchises even onto real 918 00:50:06,160 --> 00:50:08,600 Speaker 1: estate that the company may not own. Um And then 919 00:50:08,640 --> 00:50:11,440 Speaker 1: there's other circumstances where we just own the asset and 920 00:50:11,440 --> 00:50:14,040 Speaker 1: we work in partnership with a brand to help us 921 00:50:14,360 --> 00:50:16,440 Speaker 1: operate in branded and I would say there's great power 922 00:50:16,640 --> 00:50:19,200 Speaker 1: in great brands in real estate, like you know, just 923 00:50:19,239 --> 00:50:22,719 Speaker 1: like any other segment of the economy. One of our 924 00:50:23,000 --> 00:50:25,919 Speaker 1: our hotel companies that we own today is something called 925 00:50:25,960 --> 00:50:29,600 Speaker 1: Great Wolf Lodges. Many of your listeners may have been there. 926 00:50:29,600 --> 00:50:35,200 Speaker 1: It's it's water parks with hotels, and these assets are 927 00:50:35,360 --> 00:50:37,920 Speaker 1: located within a couple hours driving distance of something like 928 00:50:38,680 --> 00:50:40,879 Speaker 1: of the U S population, and it's a very affordable, 929 00:50:41,120 --> 00:50:45,160 Speaker 1: attractive drive to destination vacation for families. And so that's 930 00:50:45,160 --> 00:50:47,640 Speaker 1: an example where we've invested in a company that has 931 00:50:47,640 --> 00:50:50,719 Speaker 1: a brand, and we're really trying to propel both the 932 00:50:50,760 --> 00:50:53,120 Speaker 1: real estate strategy and the brand strategy to help it 933 00:50:53,200 --> 00:50:57,040 Speaker 1: be a growing and faster growing company. As we're speaking 934 00:50:57,080 --> 00:51:01,600 Speaker 1: on looking up the name of the tell in the 935 00:51:01,680 --> 00:51:08,279 Speaker 1: Grand Caymans that I remember collapsing early in the financial 936 00:51:08,400 --> 00:51:15,840 Speaker 1: crisis because because the underlying owner just kept leveraging and 937 00:51:15,920 --> 00:51:19,239 Speaker 1: leveraging and leveraging, and somebody very smart in private equity 938 00:51:19,440 --> 00:51:23,279 Speaker 1: went out and brought up the debt for pennies on 939 00:51:23,320 --> 00:51:25,880 Speaker 1: the dollar, and the next time they went to refindance, 940 00:51:25,920 --> 00:51:29,080 Speaker 1: they said, nope, pay, Oh you can't pay. Thanks, we'll 941 00:51:29,080 --> 00:51:33,239 Speaker 1: take that billion dollar hotel. That story is just fascinating. 942 00:51:33,520 --> 00:51:38,719 Speaker 1: How often do you see sort of unusual crazy investment 943 00:51:38,800 --> 00:51:42,080 Speaker 1: themes blowing up like that? Well, or is that just 944 00:51:42,239 --> 00:51:45,759 Speaker 1: leverage and don't Yeah, I would think too much that 945 00:51:45,760 --> 00:51:48,040 Speaker 1: that's that. I think, you know it sounds I I'm 946 00:51:48,120 --> 00:51:50,720 Speaker 1: a little bit familiar with that story. I'm definitely familiar 947 00:51:50,719 --> 00:51:53,359 Speaker 1: with that hotel. I think it's a U. It's just 948 00:51:53,400 --> 00:51:55,560 Speaker 1: an example of a capital structure that didn't work and 949 00:51:55,680 --> 00:52:01,040 Speaker 1: wasn't prepared to withstand capital structure, and and and that's 950 00:52:01,040 --> 00:52:04,800 Speaker 1: something in the hospitality space. Certainly, you can have cash 951 00:52:04,800 --> 00:52:07,960 Speaker 1: flows that dip in a in a tougher environment UM 952 00:52:08,239 --> 00:52:10,120 Speaker 1: or if you're not managing it well and you need 953 00:52:10,160 --> 00:52:13,360 Speaker 1: a capital structure really built to withstand it. You mentioned 954 00:52:13,400 --> 00:52:17,160 Speaker 1: that earlier, But every time I think about um a 955 00:52:17,239 --> 00:52:20,400 Speaker 1: hotel that changes hands sort of in a very rapid 956 00:52:20,400 --> 00:52:24,160 Speaker 1: period of time, it always feels like somebody took on 957 00:52:24,239 --> 00:52:28,799 Speaker 1: too much, that bad capital structure, not building enough resiliency 958 00:52:29,360 --> 00:52:33,680 Speaker 1: to withstand any sort of change in conditions. Yeah, definitely, 959 00:52:33,680 --> 00:52:36,440 Speaker 1: I mean in a positive way, and an inflationary environment, 960 00:52:37,320 --> 00:52:40,719 Speaker 1: hotel has the ultimate short duration least. So so we 961 00:52:40,719 --> 00:52:45,440 Speaker 1: we talked ab Yeah, average rely sturation one night in 962 00:52:45,440 --> 00:52:48,040 Speaker 1: the hospitality world. And you know, if you're managing it well, 963 00:52:48,040 --> 00:52:49,080 Speaker 1: if you want a great outset, if you have a 964 00:52:49,120 --> 00:52:51,120 Speaker 1: great capital structure, that can be a really good thing. 965 00:52:51,360 --> 00:52:54,479 Speaker 1: And when rates are rising, um. But certainly if if 966 00:52:54,520 --> 00:52:56,400 Speaker 1: you're not operating it well or if those rates come 967 00:52:56,480 --> 00:52:58,120 Speaker 1: under pressure, it can be really tough of you. So 968 00:52:58,600 --> 00:53:02,480 Speaker 1: let's talk about a related hospit fatality issue casinos. The 969 00:53:02,520 --> 00:53:05,799 Speaker 1: Supreme Court decision said, sorry, Nevada, you don't get to 970 00:53:05,880 --> 00:53:09,000 Speaker 1: be the only state that has gambling. How has this 971 00:53:09,120 --> 00:53:12,080 Speaker 1: changed the landscape for investing? Is this a growth area 972 00:53:12,560 --> 00:53:15,160 Speaker 1: or are we pretty well casino up in the United 973 00:53:15,200 --> 00:53:18,799 Speaker 1: States or or around the world. Well, our focus in 974 00:53:19,000 --> 00:53:21,960 Speaker 1: hotels that have casinos as part of their offering is 975 00:53:22,000 --> 00:53:27,120 Speaker 1: really trying to find world class destination resorts that have 976 00:53:27,200 --> 00:53:29,880 Speaker 1: demand drivers beyond just what's going on in that casino. 977 00:53:29,960 --> 00:53:33,200 Speaker 1: And and actually our most profitable single asset investment ever 978 00:53:33,360 --> 00:53:36,600 Speaker 1: was the Cosmopolitan Hotel in Las Vegas, which was an 979 00:53:36,640 --> 00:53:40,120 Speaker 1: investment that we purchased from a bank that had had 980 00:53:40,160 --> 00:53:43,480 Speaker 1: to foreclose in complete construction on the project. And we 981 00:53:43,520 --> 00:53:45,480 Speaker 1: saw it not just as an opportunity to kind of 982 00:53:45,520 --> 00:53:48,640 Speaker 1: reset and reset operations versus how a bank was handling it, 983 00:53:48,880 --> 00:53:51,640 Speaker 1: but we tried, we thought really creatively about how could 984 00:53:51,640 --> 00:53:53,719 Speaker 1: we turn this whole opportunity on its head make it 985 00:53:53,960 --> 00:53:57,160 Speaker 1: the coolest place as a destination in Las Vegas. And 986 00:53:57,200 --> 00:53:59,960 Speaker 1: we renovated every into the property five million dollars of 987 00:54:00,080 --> 00:54:03,960 Speaker 1: capital invested to not only offer better guest rooms, but 988 00:54:04,040 --> 00:54:07,799 Speaker 1: also you know, an amazing set of food choices and 989 00:54:07,960 --> 00:54:11,439 Speaker 1: shows and entertainment. And when we sold it also we 990 00:54:11,440 --> 00:54:13,839 Speaker 1: had a very creative exit that that found the right 991 00:54:13,880 --> 00:54:15,719 Speaker 1: capital for the property itself and a right and the 992 00:54:15,800 --> 00:54:19,160 Speaker 1: right capital for the operations. And what I think is, 993 00:54:19,360 --> 00:54:21,880 Speaker 1: you know that that's just emblematic of buying an asset 994 00:54:21,920 --> 00:54:23,719 Speaker 1: that is somebody might have just said, oh, that's a 995 00:54:24,040 --> 00:54:27,120 Speaker 1: casino or casino hotel. We saw this as an entertainment 996 00:54:27,160 --> 00:54:30,719 Speaker 1: destination and a strategy that we can then apply in 997 00:54:30,760 --> 00:54:33,279 Speaker 1: other places as well. We recently took private company in 998 00:54:33,320 --> 00:54:36,680 Speaker 1: Australia called Crown Resorts and it's really taking that same 999 00:54:36,760 --> 00:54:39,359 Speaker 1: playbook of how do we how do we transform these 1000 00:54:39,360 --> 00:54:42,400 Speaker 1: assets operations in that case as well, you know, really 1001 00:54:42,440 --> 00:54:46,680 Speaker 1: help support a very carefully constructed compliance and legal structure 1002 00:54:46,680 --> 00:54:49,120 Speaker 1: around it as well. Um, but I think you know 1003 00:54:49,120 --> 00:54:51,960 Speaker 1: it's it's it's for us beyond just a casino. It's 1004 00:54:52,000 --> 00:54:55,760 Speaker 1: about that whole entertainment and tourism experience we can deliver. 1005 00:54:56,000 --> 00:54:58,680 Speaker 1: So let's look a little bit about multifamily and apartments. 1006 00:54:58,719 --> 00:55:03,479 Speaker 1: It feels like the financial crisis we have wildly unto 1007 00:55:03,560 --> 00:55:07,880 Speaker 1: builds single family homes, multi family homes, large apartment buildings. 1008 00:55:08,160 --> 00:55:11,319 Speaker 1: It seems like the demand for rentals is a key 1009 00:55:11,440 --> 00:55:16,759 Speaker 1: driver of inflation because they're just ain't enough apartments. What 1010 00:55:16,840 --> 00:55:19,279 Speaker 1: does that space look like, yeah, I think you you 1011 00:55:19,760 --> 00:55:22,200 Speaker 1: nailed it. We as a country, we have not built 1012 00:55:22,320 --> 00:55:25,120 Speaker 1: enough housing of all forms since the financial crisis. Depending 1013 00:55:25,120 --> 00:55:27,600 Speaker 1: on how you're calculating, it's something like we're short forward 1014 00:55:27,680 --> 00:55:31,239 Speaker 1: to six million units. Unbelievable, and it's really like a 1015 00:55:31,280 --> 00:55:34,000 Speaker 1: growth opportunity, really really tough to dig out. And I 1016 00:55:34,000 --> 00:55:36,200 Speaker 1: would say the environment we're in is actually making that 1017 00:55:36,239 --> 00:55:39,759 Speaker 1: affordability question more challenging because you've seen homebuilders pull back 1018 00:55:39,800 --> 00:55:42,480 Speaker 1: from new construction. It's harder for people to afford to 1019 00:55:42,480 --> 00:55:45,239 Speaker 1: buy a home today. The monthly cost of owning a 1020 00:55:45,280 --> 00:55:48,440 Speaker 1: home is I think something like nationwide one and a 1021 00:55:48,520 --> 00:55:51,319 Speaker 1: half times the rent monthly cost to rent a home, 1022 00:55:51,680 --> 00:55:54,879 Speaker 1: and so that is driving demand for rental housing, and 1023 00:55:54,920 --> 00:55:57,840 Speaker 1: so that is a big part of why we've continued 1024 00:55:57,880 --> 00:56:00,799 Speaker 1: to see rental housing be so resilient and and it's 1025 00:56:00,840 --> 00:56:02,640 Speaker 1: already I would say if you look back to prior 1026 00:56:02,680 --> 00:56:05,520 Speaker 1: tough periods, two thousand two ten is not an exception either. 1027 00:56:05,840 --> 00:56:09,160 Speaker 1: I'd say rental housing tends to perform quite well in 1028 00:56:09,160 --> 00:56:12,200 Speaker 1: in tougher economic environments. It does really well in inflationary 1029 00:56:12,280 --> 00:56:14,719 Speaker 1: environments as well. I mentioned the shorter duration lease at 1030 00:56:14,760 --> 00:56:17,239 Speaker 1: the average lease of a rental house rental apartments about 1031 00:56:17,440 --> 00:56:22,160 Speaker 1: a year um. And so these are assets that are 1032 00:56:22,200 --> 00:56:25,200 Speaker 1: in great demand today and I think you're poised to 1033 00:56:25,280 --> 00:56:28,240 Speaker 1: perform well in the environment ahead as well. Lest anybody 1034 00:56:28,280 --> 00:56:31,120 Speaker 1: accused me of suffering from home country bias, which it 1035 00:56:31,200 --> 00:56:34,640 Speaker 1: certainly sounds like I have been, let's talk about around 1036 00:56:34,680 --> 00:56:39,320 Speaker 1: the world. Where else does Blackstone see real estate opportunities 1037 00:56:39,640 --> 00:56:41,799 Speaker 1: outside of the United States. So in our business we 1038 00:56:41,880 --> 00:56:45,080 Speaker 1: invest not only US Canada, but also Western Europe and 1039 00:56:45,120 --> 00:56:49,279 Speaker 1: then across both developed and developing markets. In Asia, it's 1040 00:56:49,320 --> 00:56:54,120 Speaker 1: developed meaning Japan, Korea, Australia, and then more developing would 1041 00:56:54,120 --> 00:56:57,600 Speaker 1: be India is one of our our biggest markets globally 1042 00:56:57,680 --> 00:57:00,879 Speaker 1: and in particular in Asia as well and uh so. 1043 00:57:00,960 --> 00:57:02,880 Speaker 1: And in terms of what we what we like outside 1044 00:57:02,880 --> 00:57:04,320 Speaker 1: of the U S, there's a lot of consistency in 1045 00:57:04,360 --> 00:57:09,680 Speaker 1: the themes I would say, in terms of logistics, rental housing, hospitality, assets, 1046 00:57:10,040 --> 00:57:17,400 Speaker 1: lab office, every ex Yeah, there's of course nuances in 1047 00:57:17,480 --> 00:57:20,360 Speaker 1: different markets and and in particular rental housing is not 1048 00:57:20,600 --> 00:57:22,240 Speaker 1: something that exists in the same way and a lot 1049 00:57:22,280 --> 00:57:24,640 Speaker 1: of markets around the world, So for example, Australia has 1050 00:57:24,640 --> 00:57:28,680 Speaker 1: hardly any official rental housing market the way we would 1051 00:57:28,680 --> 00:57:30,800 Speaker 1: have it here. It's just just beginning. There's lots of 1052 00:57:30,800 --> 00:57:32,760 Speaker 1: people that own a condo and rented out. There's not 1053 00:57:32,840 --> 00:57:35,360 Speaker 1: a lot of owners who own a couple of hundred 1054 00:57:35,440 --> 00:57:37,880 Speaker 1: units and professionally managed it and rent it out and 1055 00:57:37,880 --> 00:57:39,760 Speaker 1: and so. But that's just beginning. But that's you know, 1056 00:57:39,800 --> 00:57:41,800 Speaker 1: that's an example of where things are a little different 1057 00:57:41,800 --> 00:57:43,800 Speaker 1: in different parts of the world. But I do think 1058 00:57:43,880 --> 00:57:46,200 Speaker 1: for us, one of the advantages we have of being 1059 00:57:46,240 --> 00:57:49,320 Speaker 1: so connected globally is this, as we talked about kind 1060 00:57:49,320 --> 00:57:52,080 Speaker 1: of the powdern recognition of saying, okay, we had a 1061 00:57:52,120 --> 00:57:54,920 Speaker 1: theme in warehouses that was working really well in the US. 1062 00:57:55,040 --> 00:57:57,000 Speaker 1: Where else in the world do we see that and 1063 00:57:57,040 --> 00:58:00,120 Speaker 1: maybe other people don't, And for us that was the 1064 00:58:00,240 --> 00:58:04,560 Speaker 1: UK and Western Europe because the UK is having a 1065 00:58:04,600 --> 00:58:06,400 Speaker 1: real hard time. The UK is having a hard time, 1066 00:58:06,560 --> 00:58:09,240 Speaker 1: but I would say we um the UK though. For 1067 00:58:09,280 --> 00:58:11,880 Speaker 1: the assets where we focus on, which our main focus 1068 00:58:12,000 --> 00:58:17,280 Speaker 1: is in the UK, have been warehouses, also really affordable housing, 1069 00:58:17,320 --> 00:58:20,760 Speaker 1: providing an affordable housing capital um that those have been 1070 00:58:20,760 --> 00:58:22,520 Speaker 1: are the biggest parts of our investment activity in the 1071 00:58:22,520 --> 00:58:25,360 Speaker 1: performance has continued to be very strong there. Let me 1072 00:58:25,400 --> 00:58:29,360 Speaker 1: ask you a challenging question. So you talk about Steve 1073 00:58:29,400 --> 00:58:32,840 Speaker 1: Schwartzman says, is a pattern recognition. One of the things 1074 00:58:32,880 --> 00:58:36,280 Speaker 1: we preach to investors all the time is don't fool 1075 00:58:36,320 --> 00:58:40,880 Speaker 1: yourself with pattern recognition, meaning don't think that every setup 1076 00:58:40,960 --> 00:58:43,680 Speaker 1: is the same and oh, this is a great opportunity 1077 00:58:43,840 --> 00:58:47,040 Speaker 1: where really only looks a little bit like a previous 1078 00:58:47,120 --> 00:58:52,480 Speaker 1: great opportunity. How do you protect yourself against being fooled 1079 00:58:52,520 --> 00:58:55,840 Speaker 1: by what looks like, oh I see this pattern when 1080 00:58:55,920 --> 00:58:58,440 Speaker 1: it's not really what what we all think it is. 1081 00:58:58,720 --> 00:59:01,240 Speaker 1: I do think one of the really I mean, I 1082 00:59:01,280 --> 00:59:03,280 Speaker 1: guess you could say challenging but really fun things about 1083 00:59:03,320 --> 00:59:06,959 Speaker 1: investing is that the environment does change constantly. So something 1084 00:59:07,000 --> 00:59:09,480 Speaker 1: that worked yesterday or transaction you were able to create usterday, 1085 00:59:09,520 --> 00:59:12,760 Speaker 1: you can't create again today, or you shouldn't maybe. And 1086 00:59:12,800 --> 00:59:15,040 Speaker 1: I would say one of the ways we protect ourselves 1087 00:59:15,040 --> 00:59:19,000 Speaker 1: goes back to this process where it is highly collaborative 1088 00:59:19,040 --> 00:59:22,840 Speaker 1: process and we're bringing together insights from all around our business. 1089 00:59:23,240 --> 00:59:25,680 Speaker 1: And I would say we we force a lot of 1090 00:59:25,720 --> 00:59:29,480 Speaker 1: connectivity and collaboration between our investment team and our asset 1091 00:59:29,520 --> 00:59:32,160 Speaker 1: management team, who is with our portfolio companies every day 1092 00:59:32,200 --> 00:59:35,200 Speaker 1: creating value. And so What that allows us to do 1093 00:59:35,280 --> 00:59:38,760 Speaker 1: is I think spot as early as we probably possibly 1094 00:59:38,800 --> 00:59:42,480 Speaker 1: can where things might be changing, where those conditions are changing, 1095 00:59:42,720 --> 00:59:45,560 Speaker 1: and it's not always that something has turned negative, it 1096 00:59:45,680 --> 00:59:49,560 Speaker 1: just maybe less positive. So an example of this would 1097 00:59:49,560 --> 00:59:52,280 Speaker 1: be just to keep drawing back to the warehouse example. 1098 00:59:53,960 --> 00:59:58,800 Speaker 1: The e commerce revolution and reassoring and supply chain realignment 1099 00:59:58,960 --> 01:00:02,280 Speaker 1: has really propelled demand for all types of warehouse space, 1100 01:00:03,040 --> 01:00:05,959 Speaker 1: but where it has driven the most rent and cash 1101 01:00:05,960 --> 01:00:08,760 Speaker 1: flow growth is in these more urban areas that are 1102 01:00:08,800 --> 01:00:12,400 Speaker 1: more supply constrained almost by nature, less land available, and 1103 01:00:12,440 --> 01:00:15,720 Speaker 1: more demand because tenants really need to be there both 1104 01:00:15,760 --> 01:00:18,200 Speaker 1: to access their customers and to reduce the cost of 1105 01:00:18,200 --> 01:00:21,480 Speaker 1: transportation and labor to move goods around. And so we 1106 01:00:21,640 --> 01:00:25,640 Speaker 1: pivoted our portfolio to focus on those markets and assets 1107 01:00:25,640 --> 01:00:29,040 Speaker 1: in those markets, away from other elements of the markets 1108 01:00:29,080 --> 01:00:31,200 Speaker 1: that are again doing well, doing fine, but just not 1109 01:00:31,200 --> 01:00:33,400 Speaker 1: growing as quickly. Our job, we feel, is to end 1110 01:00:33,440 --> 01:00:36,200 Speaker 1: up in the assets with the best possible performance, and 1111 01:00:36,240 --> 01:00:39,640 Speaker 1: I think that leads to shifts that might feel, you know, 1112 01:00:39,680 --> 01:00:41,400 Speaker 1: a little nuanced or a little minor at the time, 1113 01:00:41,440 --> 01:00:44,960 Speaker 1: but ultimately lead to much better outcomes. I feel like 1114 01:00:45,040 --> 01:00:48,040 Speaker 1: I am getting on real estate education like no other. 1115 01:00:48,560 --> 01:00:52,680 Speaker 1: If we're talking about real estate of all sorts and 1116 01:00:52,920 --> 01:00:56,440 Speaker 1: capital structure, we obviously have to talk about the cost 1117 01:00:56,480 --> 01:01:00,560 Speaker 1: of capital and interest rates. Where you, guys, the Federal 1118 01:01:00,640 --> 01:01:04,800 Speaker 1: Reserve is obviously really important, Jerome Palace, in the midst 1119 01:01:04,880 --> 01:01:09,680 Speaker 1: of a unprecedented rate hiking regime, how do you look 1120 01:01:09,680 --> 01:01:12,840 Speaker 1: at what's going on with the Fed? Well, I would 1121 01:01:12,880 --> 01:01:15,120 Speaker 1: say this is an environment that we feel like we've 1122 01:01:15,120 --> 01:01:17,959 Speaker 1: been preparing for for a long time. For forty years, 1123 01:01:17,960 --> 01:01:21,840 Speaker 1: we haven't seen anything like this since eighty one. Yeah, 1124 01:01:21,880 --> 01:01:25,320 Speaker 1: And I would say going back seven or eight years, 1125 01:01:25,360 --> 01:01:27,400 Speaker 1: maybe a little more, we were spending a lot of 1126 01:01:27,440 --> 01:01:30,320 Speaker 1: time thinking about, Okay, how do we get in ourselves 1127 01:01:30,360 --> 01:01:33,120 Speaker 1: invested in assets that are going to perform well? Should 1128 01:01:33,160 --> 01:01:35,800 Speaker 1: we be in a higher inflation, higher interest rate environment. 1129 01:01:35,840 --> 01:01:39,000 Speaker 1: The last interest rate spike we saw was mid two 1130 01:01:39,080 --> 01:01:42,920 Speaker 1: thousands leading up to the financial crisis, but that was 1131 01:01:43,000 --> 01:01:46,280 Speaker 1: nothing like one and twenty two. No, and again, it 1132 01:01:46,320 --> 01:01:49,400 Speaker 1: wasn't that we called this environment. It was more just 1133 01:01:49,440 --> 01:01:52,520 Speaker 1: a recognition that we had been in a very persistently, 1134 01:01:52,760 --> 01:01:57,000 Speaker 1: very low interest rate, very low inflation environment, and we 1135 01:01:57,040 --> 01:02:00,720 Speaker 1: started talking with our investors and amongst ourselves a about Okay, 1136 01:02:00,840 --> 01:02:02,560 Speaker 1: you know what happens in the world with higher rates, 1137 01:02:02,640 --> 01:02:07,000 Speaker 1: higher inflation, maybe sustained geopolitical uncertainty, feels like a lot 1138 01:02:07,920 --> 01:02:11,040 Speaker 1: more gaming difference, just different scenarios. And when you think 1139 01:02:11,080 --> 01:02:14,240 Speaker 1: about at the at the most simplistic level, the way 1140 01:02:14,880 --> 01:02:17,040 Speaker 1: you value real estate, the way you make money in 1141 01:02:17,080 --> 01:02:20,400 Speaker 1: real estate is it's a combination of your cash flow 1142 01:02:20,840 --> 01:02:23,120 Speaker 1: and the multiple you can put on that cash flow. 1143 01:02:23,560 --> 01:02:26,120 Speaker 1: In real estate parlance, it's the inverse of a multiple 1144 01:02:26,280 --> 01:02:28,440 Speaker 1: cap rate to yield. People think about in yields. By 1145 01:02:28,440 --> 01:02:30,160 Speaker 1: the way, when I switched from M and A to 1146 01:02:30,280 --> 01:02:32,640 Speaker 1: real estate, I spent basically eighteen months in my mind 1147 01:02:32,720 --> 01:02:36,560 Speaker 1: just converting yields into multiples, because you know, learning relearning 1148 01:02:36,560 --> 01:02:38,920 Speaker 1: the lingos of valuation. It's the same thing, you're just 1149 01:02:38,960 --> 01:02:41,640 Speaker 1: looking at it from different different perspective, just just flip 1150 01:02:41,640 --> 01:02:45,440 Speaker 1: it around. And so, you know, what we think about 1151 01:02:45,640 --> 01:02:47,760 Speaker 1: is that if you have an environment like the one 1152 01:02:47,800 --> 01:02:50,800 Speaker 1: we're in where there's upward pressure on interest rates, therefore 1153 01:02:51,080 --> 01:02:54,280 Speaker 1: upward pressure on cap rates or said like another way, 1154 01:02:54,440 --> 01:02:58,400 Speaker 1: downward pressure on multiples. The way to mitigate that is 1155 01:02:58,400 --> 01:03:00,240 Speaker 1: through cash flow growth. So you want to be in 1156 01:03:00,360 --> 01:03:04,560 Speaker 1: assets where you can grow cash flows both because as 1157 01:03:04,600 --> 01:03:06,439 Speaker 1: a matter of what's happening in the economy, the wind 1158 01:03:06,480 --> 01:03:08,040 Speaker 1: might be at your back, and also because of what 1159 01:03:08,120 --> 01:03:11,000 Speaker 1: we can do with our interventions for value creation. And 1160 01:03:11,040 --> 01:03:12,680 Speaker 1: that is a big part of how we ended up 1161 01:03:12,680 --> 01:03:15,880 Speaker 1: with this very concentrated portfolio and warehouses and rental housing 1162 01:03:15,920 --> 01:03:19,200 Speaker 1: and lab office and hotels where you have short duration leases, 1163 01:03:19,360 --> 01:03:21,680 Speaker 1: so as rents are going up, you can capture that 1164 01:03:21,760 --> 01:03:26,040 Speaker 1: higher rent like short duration bonds, like short duration bonds exactly. Also, 1165 01:03:26,200 --> 01:03:28,240 Speaker 1: the vast majority of those assets, as I mentioned, have 1166 01:03:28,360 --> 01:03:32,080 Speaker 1: relatively low input costs, so you're not as exposed to 1167 01:03:32,280 --> 01:03:36,240 Speaker 1: higher input cost pressure in an inflationary environment. And again 1168 01:03:36,400 --> 01:03:38,680 Speaker 1: you may have headwinds in terms of what's happening with 1169 01:03:38,760 --> 01:03:41,440 Speaker 1: rates or what's then happening with cap rates, but you 1170 01:03:41,480 --> 01:03:44,360 Speaker 1: can still perform well because of the cash flow growth 1171 01:03:44,360 --> 01:03:46,720 Speaker 1: we're able to generate. And and and there's you know, we're 1172 01:03:46,720 --> 01:03:48,920 Speaker 1: not just it's making this up. There's precedent for it 1173 01:03:48,920 --> 01:03:50,880 Speaker 1: if you look at if you look back to too, 1174 01:03:51,000 --> 01:03:53,600 Speaker 1: I think it's nine eighty two, the last time we 1175 01:03:53,600 --> 01:03:55,920 Speaker 1: were in a you know, a significant rate hiking cycle. 1176 01:03:56,640 --> 01:04:00,760 Speaker 1: You saw that rental growth in apartments opped up with 1177 01:04:01,000 --> 01:04:04,800 Speaker 1: inflation even though actually interestingly, supply was two x what 1178 01:04:04,880 --> 01:04:06,480 Speaker 1: it is right now. This this is part of why 1179 01:04:06,480 --> 01:04:08,680 Speaker 1: we have confidence. Yes, you could also look in the 1180 01:04:08,760 --> 01:04:11,560 Speaker 1: in UK because I think it was between nineteen seventy 1181 01:04:11,560 --> 01:04:15,560 Speaker 1: and nineteen eighty. UM real estate returns something like sixteen 1182 01:04:15,640 --> 01:04:19,720 Speaker 1: percent in an environment with you very very substantial inflation, 1183 01:04:19,760 --> 01:04:22,320 Speaker 1: and so we know again we we wanted to position 1184 01:04:22,320 --> 01:04:25,000 Speaker 1: our portfolios for this environment. And so you know what 1185 01:04:25,080 --> 01:04:28,760 Speaker 1: we see happening now is the FED is hard at 1186 01:04:28,760 --> 01:04:32,480 Speaker 1: work trying to cool the economy in a way that 1187 01:04:33,040 --> 01:04:37,000 Speaker 1: ideally doesn't you have a tough landing, but you know 1188 01:04:37,280 --> 01:04:40,160 Speaker 1: that certainly you're seeing some of that comes through to 1189 01:04:40,160 --> 01:04:43,720 Speaker 1: our market in the form of more uncertainty. Transaction activity 1190 01:04:43,760 --> 01:04:47,080 Speaker 1: slows down because people are unsure of your what how 1191 01:04:47,120 --> 01:04:49,720 Speaker 1: should I value it? How where can I borrow? Borrowing 1192 01:04:49,760 --> 01:04:52,440 Speaker 1: costs have gone up, and and that seems like kind 1193 01:04:52,440 --> 01:04:55,920 Speaker 1: of a natural outcome of of what's happening in this environment. 1194 01:04:56,480 --> 01:05:00,400 Speaker 1: So let me ask you, um the opposite question of 1195 01:05:00,480 --> 01:05:04,640 Speaker 1: investing during a rising rate environment, how would you respond 1196 01:05:04,880 --> 01:05:09,320 Speaker 1: to the criticism that some people have floated. Well, of course, 1197 01:05:09,360 --> 01:05:11,440 Speaker 1: black Stone real estate has done great over the past 1198 01:05:11,440 --> 01:05:14,400 Speaker 1: thirty years, rates have done nothing but go lower. Their 1199 01:05:14,440 --> 01:05:20,080 Speaker 1: cap structure has been super friendly. You're I'm assuming your 1200 01:05:20,080 --> 01:05:23,000 Speaker 1: pushback is doing well in a rising rate environment. Also, 1201 01:05:23,040 --> 01:05:27,400 Speaker 1: it's not just the cost of capital. Yeah, I would say, um, 1202 01:05:27,440 --> 01:05:30,640 Speaker 1: there's always something that people who you know seem to 1203 01:05:30,640 --> 01:05:33,000 Speaker 1: want to say, is like, you know why it's now 1204 01:05:33,040 --> 01:05:36,000 Speaker 1: not going to work anymore for us? Um And there's 1205 01:05:36,080 --> 01:05:38,240 Speaker 1: I've I've heard a lot of different versions of things, 1206 01:05:38,400 --> 01:05:40,760 Speaker 1: And I would say we have done this for thirty 1207 01:05:40,840 --> 01:05:42,680 Speaker 1: years in a lot of different parts of the world. 1208 01:05:42,720 --> 01:05:46,120 Speaker 1: We're not in every circumstance have we had ultra low 1209 01:05:46,160 --> 01:05:49,760 Speaker 1: interest rates. And I would say we've continued to generate 1210 01:05:49,800 --> 01:05:52,400 Speaker 1: great performance in all of those different types of environments 1211 01:05:52,400 --> 01:05:54,200 Speaker 1: and all of those different places. And I think it 1212 01:05:54,360 --> 01:05:59,040 Speaker 1: is by sticking to this thematic approach, a really discipline 1213 01:05:59,160 --> 01:06:01,200 Speaker 1: approach in terms of what we buy, and then how 1214 01:06:01,320 --> 01:06:05,040 Speaker 1: how do we capitalize it? And and then importantly how 1215 01:06:05,080 --> 01:06:08,240 Speaker 1: do we create value as we own it? I mean, interestingly, 1216 01:06:08,320 --> 01:06:11,800 Speaker 1: there's one of my favorite examples is Japan. So your 1217 01:06:11,840 --> 01:06:14,120 Speaker 1: Japan should have all the hallmarks of a tough place 1218 01:06:14,160 --> 01:06:17,640 Speaker 1: to make money in real estate. You have a shrinking population, 1219 01:06:18,200 --> 01:06:22,760 Speaker 1: you have very low cap rates, persistently very low borrowing costs, 1220 01:06:23,360 --> 01:06:26,760 Speaker 1: and very low growth, and yet it's been one of 1221 01:06:26,760 --> 01:06:29,560 Speaker 1: our most successful markets ever. And that's partly because of 1222 01:06:29,680 --> 01:06:32,840 Speaker 1: the nature of the transactions we buy. We can buy more, 1223 01:06:33,040 --> 01:06:36,520 Speaker 1: do more complicated investments that others maybe can't tackle, larger 1224 01:06:36,600 --> 01:06:39,400 Speaker 1: situations where we buy portfolios of real estate, not single assets, 1225 01:06:39,680 --> 01:06:41,439 Speaker 1: and then we manage the heck out of it. We 1226 01:06:41,560 --> 01:06:44,000 Speaker 1: do every last thing we can do to create value 1227 01:06:44,080 --> 01:06:46,840 Speaker 1: enhance those cash flows, and that's how we do well. 1228 01:06:46,920 --> 01:06:49,720 Speaker 1: And so again, all different kinds of environments can come 1229 01:06:49,720 --> 01:06:53,280 Speaker 1: our way, but I think the process is built to 1230 01:06:53,640 --> 01:06:57,120 Speaker 1: perform in any one of them. Quite fascinating. I know 1231 01:06:57,200 --> 01:06:59,320 Speaker 1: I only have you for a limited amount of time. 1232 01:07:00,200 --> 01:07:03,840 Speaker 1: Four I get to my favorite questions. I have to 1233 01:07:04,040 --> 01:07:08,880 Speaker 1: ask you about a curve bawl question. Coach Ella, you're 1234 01:07:08,960 --> 01:07:13,520 Speaker 1: you're like a regular Coachella like you don't like By 1235 01:07:13,560 --> 01:07:15,760 Speaker 1: the way, when I think of coach Ella, I think 1236 01:07:15,800 --> 01:07:20,200 Speaker 1: of burning Man and mud pitts Um Coachell is not 1237 01:07:20,280 --> 01:07:23,440 Speaker 1: quite that crazy. But how how often you go to 1238 01:07:23,520 --> 01:07:26,439 Speaker 1: this and what what is that experience? Like? Well, I've 1239 01:07:26,440 --> 01:07:30,880 Speaker 1: been fourteen times. Get out. Well, you're not old enough 1240 01:07:31,640 --> 01:07:34,120 Speaker 1: fourteen times. So you started going when you were twelve. 1241 01:07:34,160 --> 01:07:37,200 Speaker 1: You're very kind to say that. No. I started going 1242 01:07:37,280 --> 01:07:40,880 Speaker 1: because my then boyfriend now husband was at business school 1243 01:07:40,880 --> 01:07:43,440 Speaker 1: at U c. L A. He's super into music, and 1244 01:07:43,480 --> 01:07:49,920 Speaker 1: he drove down there in two thousand six, Um two 1245 01:07:50,080 --> 01:07:53,560 Speaker 1: five or six and he um and you went with him. 1246 01:07:53,640 --> 01:07:55,880 Speaker 1: I was not with him at the time, but at 1247 01:07:55,880 --> 01:07:57,680 Speaker 1: that festival and it was so different then you could 1248 01:07:57,720 --> 01:07:59,760 Speaker 1: buy single day tickets. It wasn't this whole thing it 1249 01:07:59,880 --> 01:08:02,600 Speaker 1: is out uh And I remember him calling me and saying, 1250 01:08:02,640 --> 01:08:04,800 Speaker 1: you have to come out next year for this. It's 1251 01:08:04,920 --> 01:08:08,520 Speaker 1: so amazing. And even at that first hotel, there were 1252 01:08:08,560 --> 01:08:11,200 Speaker 1: so many bands he got exposed to that have become 1253 01:08:11,240 --> 01:08:13,240 Speaker 1: some of our favorites and really just opened us up 1254 01:08:13,280 --> 01:08:15,800 Speaker 1: to listening to a lot of different kinds of music. Um. 1255 01:08:15,920 --> 01:08:19,320 Speaker 1: You the proverbial undercard. If you go all day, you 1256 01:08:19,320 --> 01:08:21,840 Speaker 1: you hear a lot of new and music is a 1257 01:08:21,840 --> 01:08:25,160 Speaker 1: lot of alt or Yeah, it's it hasn't. I'd say 1258 01:08:25,680 --> 01:08:28,280 Speaker 1: it grew up. I think it's a more alternative rock festival. 1259 01:08:28,320 --> 01:08:30,400 Speaker 1: And it is really branch now. There's a lot of 1260 01:08:30,400 --> 01:08:32,760 Speaker 1: wrap and dance and E d M. We're still there 1261 01:08:32,800 --> 01:08:36,599 Speaker 1: mostly for the rock music, which is a diminishing part 1262 01:08:36,640 --> 01:08:41,160 Speaker 1: of the schedule. I'd say I'm probably, um, you've sort 1263 01:08:41,160 --> 01:08:44,080 Speaker 1: of identified it the dorky ist and maybe now getting 1264 01:08:44,120 --> 01:08:47,040 Speaker 1: to the oldest person with the most sun block on 1265 01:08:47,160 --> 01:08:50,160 Speaker 1: at the whole festival. My wife and I every time 1266 01:08:50,200 --> 01:08:52,519 Speaker 1: we go into a show, we have a fun little 1267 01:08:52,600 --> 01:08:55,640 Speaker 1: thing we do, which is what's the demographic of the 1268 01:08:55,680 --> 01:08:57,880 Speaker 1: crowd and are we at the bottom of the top 1269 01:08:58,240 --> 01:09:01,320 Speaker 1: of that age bread and right now? And then like 1270 01:09:01,360 --> 01:09:04,120 Speaker 1: well walk, So we sort of show. The other day 1271 01:09:04,439 --> 01:09:06,320 Speaker 1: there's a great band called the Fab Fox that the 1272 01:09:06,479 --> 01:09:12,040 Speaker 1: Beatles covers. It's all It's it's letterman, Um, Jimmy Fallon. 1273 01:09:12,680 --> 01:09:15,800 Speaker 1: Their band does this, and we were amazed that they 1274 01:09:15,800 --> 01:09:19,360 Speaker 1: were like teenagers and twenty somethings singing along, knowing every word. 1275 01:09:19,720 --> 01:09:22,479 Speaker 1: It's like, oh, some of the stuff is generational. But 1276 01:09:22,760 --> 01:09:27,240 Speaker 1: we're not talking boomeer rock or classic rock. You're talking um, 1277 01:09:27,400 --> 01:09:30,639 Speaker 1: something much more. Give us a few bands that you've 1278 01:09:30,680 --> 01:09:33,200 Speaker 1: seen that have stayed with you. What sort of alt 1279 01:09:33,400 --> 01:09:38,120 Speaker 1: music U do you like at Coachella? Well, um, probably 1280 01:09:38,160 --> 01:09:41,880 Speaker 1: one of the favorite you know, Coachella experience ever would 1281 01:09:41,880 --> 01:09:45,240 Speaker 1: be actually Roger Waters, who played Dark Side of the 1282 01:09:45,280 --> 01:09:48,639 Speaker 1: Moon in its entirety, and I was not a Roger 1283 01:09:48,720 --> 01:09:51,960 Speaker 1: Waters or Pink Floyd fan before seeing this, and I 1284 01:09:52,920 --> 01:09:56,560 Speaker 1: the show, including the pig flying and dropping the leaflets, 1285 01:09:56,640 --> 01:10:00,120 Speaker 1: was so amazing. Uh, it was just it was so 1286 01:10:00,240 --> 01:10:02,679 Speaker 1: memorable in part. And this is not the only example 1287 01:10:02,680 --> 01:10:05,839 Speaker 1: of this, but it was a band or a performer 1288 01:10:05,880 --> 01:10:08,200 Speaker 1: where I was kind of like, do I really want 1289 01:10:08,200 --> 01:10:10,719 Speaker 1: to stay up laid? My body's jet legged, I've been tired. 1290 01:10:10,800 --> 01:10:12,519 Speaker 1: My Matt makes me go at noon and see all 1291 01:10:12,520 --> 01:10:14,160 Speaker 1: the early bands and like do I really? One did 1292 01:10:14,280 --> 01:10:17,400 Speaker 1: and it was so interesting and amazing. Um. There was 1293 01:10:17,400 --> 01:10:20,559 Speaker 1: a similar experience also seeing The Cure for the first time. 1294 01:10:20,560 --> 01:10:22,400 Speaker 1: I had always loved the Cure, but it never got 1295 01:10:22,560 --> 01:10:26,559 Speaker 1: to show. Oh my gosh, they played so long that 1296 01:10:26,720 --> 01:10:29,040 Speaker 1: they were they basically pulled the plug on them and 1297 01:10:29,040 --> 01:10:31,800 Speaker 1: they kept playing off their amps. But you know, Chris, 1298 01:10:31,880 --> 01:10:34,320 Speaker 1: the city of Coachella will find them for this, and 1299 01:10:34,360 --> 01:10:36,240 Speaker 1: they just kept going. They finally had to, like, you know, 1300 01:10:36,439 --> 01:10:38,960 Speaker 1: move Robert Smith on the stage. But it was so amazing. 1301 01:10:38,960 --> 01:10:41,720 Speaker 1: And I've now seen The Cure many times, but I've 1302 01:10:41,800 --> 01:10:43,760 Speaker 1: never seen The Cure and I was a fan. I 1303 01:10:44,320 --> 01:10:47,120 Speaker 1: highly recommend so I'm gonna out myself. Here's how old 1304 01:10:47,120 --> 01:10:51,759 Speaker 1: I am. Freshman year in college, me and my buddy 1305 01:10:51,880 --> 01:10:56,400 Speaker 1: Joe go to Nashville Coliseum where we scalp a pair 1306 01:10:56,439 --> 01:11:00,160 Speaker 1: of tickets for a hundred and seventeen dollars for the 1307 01:11:00,240 --> 01:11:04,759 Speaker 1: pair for one of the seven original Pink Floyd the Wall. 1308 01:11:05,520 --> 01:11:08,400 Speaker 1: My gosh, they did three or four shows in Nassa 1309 01:11:08,479 --> 01:11:11,040 Speaker 1: Calosseum and three or four shows in the l A. 1310 01:11:11,800 --> 01:11:14,080 Speaker 1: I think it was the Forum of the Colosseum. And 1311 01:11:14,120 --> 01:11:16,400 Speaker 1: the only reason we paid that little for the tickets 1312 01:11:16,840 --> 01:11:19,200 Speaker 1: is the cops had come out on high stepping horses 1313 01:11:19,240 --> 01:11:21,920 Speaker 1: and we're clearing everybody out, and I remember saying to 1314 01:11:21,960 --> 01:11:24,599 Speaker 1: the guy, you got about thirty seconds before you're holding 1315 01:11:24,640 --> 01:11:27,400 Speaker 1: two worthless pieces of paper and we had cash. He 1316 01:11:27,560 --> 01:11:30,360 Speaker 1: literally snatched the cash from our hands, gave us tickets. 1317 01:11:30,600 --> 01:11:33,080 Speaker 1: The cops come to us and we're like, we got tickets, 1318 01:11:33,080 --> 01:11:35,760 Speaker 1: and we went running. Missed the first I don't know, 1319 01:11:35,880 --> 01:11:39,880 Speaker 1: three minutes of the show. Astounding, right, that's how old 1320 01:11:39,920 --> 01:11:42,120 Speaker 1: I am. Well, I would say one of the one, 1321 01:11:42,280 --> 01:11:45,439 Speaker 1: and you kind of mentioned it. It has been you 1322 01:11:45,560 --> 01:11:48,479 Speaker 1: find it interesting to see live music not only come 1323 01:11:48,520 --> 01:11:50,880 Speaker 1: back to post pandemic. But I think people take real 1324 01:11:51,000 --> 01:11:53,160 Speaker 1: interest in this. And Matt, my husband, I talked about 1325 01:11:53,160 --> 01:11:55,000 Speaker 1: this all the time. He tells it maybe a similar 1326 01:11:55,000 --> 01:11:57,680 Speaker 1: story where he I forget what year it was, but 1327 01:11:57,760 --> 01:12:01,639 Speaker 1: he saw Radiohead at Radio City Music Hall and he 1328 01:12:01,760 --> 01:12:04,000 Speaker 1: was offended that he had he scalped a ticket for 1329 01:12:04,040 --> 01:12:06,519 Speaker 1: like thirty five dollars or something like this. We don't 1330 01:12:06,520 --> 01:12:08,800 Speaker 1: really understand how, you know, how does like a Pearl 1331 01:12:08,880 --> 01:12:11,280 Speaker 1: Jam concert and MSG work where the whole thing sells 1332 01:12:11,320 --> 01:12:14,920 Speaker 1: out at a certain price. Why isn't put Why isn't 1333 01:12:14,920 --> 01:12:16,439 Speaker 1: Pearl Jam just selling the tickets for a lot more. 1334 01:12:16,680 --> 01:12:19,040 Speaker 1: It's sort of an interesting question, But there's a monopoly 1335 01:12:19,360 --> 01:12:24,080 Speaker 1: and be all the secondary sellers have the firepower to that. 1336 01:12:24,200 --> 01:12:26,320 Speaker 1: It's like in the markets, Hey, do you want to 1337 01:12:26,320 --> 01:12:29,080 Speaker 1: go up against Goldman Sachs trading desk as a day trader? 1338 01:12:29,520 --> 01:12:33,400 Speaker 1: If you're stupid, you do. But ordinary people can't compete, 1339 01:12:33,680 --> 01:12:36,200 Speaker 1: and ordinary people can't buy tickets because all the bots 1340 01:12:36,240 --> 01:12:39,040 Speaker 1: are doing their things. I could. I could whine about 1341 01:12:39,080 --> 01:12:41,639 Speaker 1: this for hours. Sounds like we need another podcast, Yeah 1342 01:12:41,720 --> 01:12:44,520 Speaker 1: I won't. Instead, I'm going to jump to our favorite questions. 1343 01:12:45,080 --> 01:12:47,760 Speaker 1: So normally I would ask what are you streaming? But 1344 01:12:47,880 --> 01:12:50,320 Speaker 1: I think we're past streaming. Let's talk about what are 1345 01:12:50,320 --> 01:12:54,200 Speaker 1: you listening to today? So I have Phoebe Bridgers on repeat, 1346 01:12:54,600 --> 01:12:57,439 Speaker 1: listening to her constantly. I will check that out. Tell 1347 01:12:57,520 --> 01:12:59,479 Speaker 1: us about some of your mentors who helped to shape 1348 01:12:59,520 --> 01:13:03,040 Speaker 1: your career. I think mentorship is like a constellation of 1349 01:13:03,080 --> 01:13:06,800 Speaker 1: people that, in my case, so many different people at 1350 01:13:06,800 --> 01:13:10,160 Speaker 1: any different times. Sorry, um, you know two of my 1351 01:13:10,240 --> 01:13:14,519 Speaker 1: incredible mentors actually themselves are friends. So I worked when 1352 01:13:14,520 --> 01:13:17,479 Speaker 1: I was like Goldman, very closely with Bram Kramer, who 1353 01:13:17,520 --> 01:13:20,080 Speaker 1: taught me a lot about, you know, just not only 1354 01:13:20,120 --> 01:13:22,080 Speaker 1: being a great investor, but i'd say also a great 1355 01:13:22,080 --> 01:13:26,240 Speaker 1: manager of people. And I think interestingly, maybe not surprisingly, 1356 01:13:26,240 --> 01:13:28,120 Speaker 1: it turns out he's close friends with John Gray, who 1357 01:13:28,120 --> 01:13:31,160 Speaker 1: has been an incredible mentor and sponsor to me and 1358 01:13:31,360 --> 01:13:34,920 Speaker 1: every single day challenges me to be better and work 1359 01:13:34,960 --> 01:13:39,639 Speaker 1: harder and think more carefully at black Stone. Um, let's 1360 01:13:39,640 --> 01:13:41,400 Speaker 1: talk about books. What are some of your favorites and 1361 01:13:41,400 --> 01:13:44,000 Speaker 1: what are you reading right now? I love to read. 1362 01:13:44,200 --> 01:13:46,600 Speaker 1: I would break what I'm reading into two categories, what 1363 01:13:46,640 --> 01:13:49,160 Speaker 1: I'm reading to my children and then what I'm reading myself. 1364 01:13:49,160 --> 01:13:51,680 Speaker 1: So what I reading my children is. Um, we've been 1365 01:13:51,680 --> 01:13:56,559 Speaker 1: working our way to the kids love it. No, we've 1366 01:13:56,560 --> 01:13:59,680 Speaker 1: been reading the Royal Doll books, which somehow, even though 1367 01:13:59,720 --> 01:14:01,439 Speaker 1: I grew in a family of reading, which I never 1368 01:14:01,479 --> 01:14:04,080 Speaker 1: read this yeah, oh yeah, and I somehow missed those 1369 01:14:04,120 --> 01:14:06,839 Speaker 1: as a child. So I really enjoyed reading Charlie Chocolate Factory, 1370 01:14:06,920 --> 01:14:11,719 Speaker 1: and Matilda and the Witches and all of those fun things. 1371 01:14:11,800 --> 01:14:13,920 Speaker 1: I have a seven year old and a ten year old. 1372 01:14:15,840 --> 01:14:17,280 Speaker 1: We have a lot of Harry Potter happening in our 1373 01:14:17,280 --> 01:14:22,120 Speaker 1: house too. I'm actually movies books um I read when 1374 01:14:22,160 --> 01:14:24,960 Speaker 1: the kids were growing up. You can watch the movies, 1375 01:14:25,160 --> 01:14:27,040 Speaker 1: but only after you read the books. So all the 1376 01:14:27,080 --> 01:14:28,960 Speaker 1: kids had to read the book and then go watch 1377 01:14:29,479 --> 01:14:31,519 Speaker 1: My Tenerald I think has read all the Harry Potter's 1378 01:14:31,520 --> 01:14:33,559 Speaker 1: like four times at this point, I'm listening to them 1379 01:14:33,560 --> 01:14:37,560 Speaker 1: on audiobook now their endless. It seems like there's a 1380 01:14:37,600 --> 01:14:41,360 Speaker 1: different one every other year. So they they they're so 1381 01:14:41,560 --> 01:14:43,200 Speaker 1: versed in all of it that I was not able 1382 01:14:43,200 --> 01:14:45,439 Speaker 1: to keep up with dinner table conversations. So now listening 1383 01:14:45,439 --> 01:14:47,280 Speaker 1: to them again because otherwise I'm not gonna be able 1384 01:14:47,320 --> 01:14:49,519 Speaker 1: to keep up. And then for myself, it's funny. I 1385 01:14:49,520 --> 01:14:53,400 Speaker 1: love reading novels. But I really enjoyed in the past 1386 01:14:53,439 --> 01:14:56,720 Speaker 1: couple of years reading Patrick read and Keith's books. He 1387 01:14:56,760 --> 01:14:59,080 Speaker 1: wrote a book called Say Nothing, which was about the 1388 01:14:59,120 --> 01:15:03,240 Speaker 1: troubles in Northern Ireland. UM. And now I'm reading something 1389 01:15:03,240 --> 01:15:06,959 Speaker 1: called Empire Pain, which is about, um, basically the opioid 1390 01:15:06,960 --> 01:15:09,400 Speaker 1: crisis and how that came about. And it can be 1391 01:15:09,400 --> 01:15:11,679 Speaker 1: a little heavy, but it's so interesting. But it's written 1392 01:15:11,960 --> 01:15:15,040 Speaker 1: really well in such a compelling way. The one they 1393 01:15:15,160 --> 01:15:19,920 Speaker 1: ended up making the film about. It's possible. I am 1394 01:15:20,000 --> 01:15:24,280 Speaker 1: so behind on movies and TV shows. Well, my husband 1395 01:15:24,320 --> 01:15:26,600 Speaker 1: tells me that during the pandemic, when everyone else was 1396 01:15:26,640 --> 01:15:29,479 Speaker 1: making their way through the full Netflix catalog, I didn't 1397 01:15:29,479 --> 01:15:32,120 Speaker 1: watch a single show, So I gotta come on, you 1398 01:15:32,120 --> 01:15:35,320 Speaker 1: didn't watch The Crown. I did. I had post like 1399 01:15:35,360 --> 01:15:37,679 Speaker 1: post deep pandemic. I And now that I've been gotten 1400 01:15:37,720 --> 01:15:41,320 Speaker 1: back to traveling, I binge watched The Crown. Um, I've 1401 01:15:41,600 --> 01:15:44,600 Speaker 1: watched Marvelous Mrs Maysl. I love that so so good. Ye, 1402 01:15:44,680 --> 01:15:48,280 Speaker 1: so you you caught the Highlight so I know somebody 1403 01:15:48,600 --> 01:15:53,640 Speaker 1: who is involved and no spoilers. UM, but one of 1404 01:15:53,680 --> 01:15:56,559 Speaker 1: the things I'm like halfway through the most recent season 1405 01:15:57,080 --> 01:15:59,920 Speaker 1: and I'm like, oh, so, I guess she's gonna die soon, 1406 01:16:00,000 --> 01:16:02,439 Speaker 1: and it's like, no, no, that's next season. We have 1407 01:16:02,640 --> 01:16:05,639 Speaker 1: the last season. She's still around a lot of material. Yeah, 1408 01:16:05,640 --> 01:16:08,479 Speaker 1: they have endless material. Although there's some complaints this season 1409 01:16:08,560 --> 01:16:12,400 Speaker 1: is inaccurate, I don't care. It's just the most gorgeous, 1410 01:16:12,520 --> 01:16:17,000 Speaker 1: beautifully told stories, and even if you're not an anglophile, 1411 01:16:17,640 --> 01:16:22,080 Speaker 1: it's just fascinating. So digression side, let's get to our 1412 01:16:22,160 --> 01:16:25,519 Speaker 1: last two questions. What sort of advice would you give 1413 01:16:25,560 --> 01:16:27,840 Speaker 1: to a recent college grad who was interested in a 1414 01:16:27,920 --> 01:16:31,479 Speaker 1: career neither real estate investing or finance or m and 1415 01:16:31,520 --> 01:16:34,240 Speaker 1: A or any of the things that you have done 1416 01:16:34,240 --> 01:16:39,120 Speaker 1: so successfully. I would say to have a long and 1417 01:16:39,720 --> 01:16:44,120 Speaker 1: great career focus on your writing skills, and that sometimes 1418 01:16:44,160 --> 01:16:46,400 Speaker 1: I think is a counterintuitive for a job that's more 1419 01:16:46,880 --> 01:16:50,479 Speaker 1: considered matthew and analytical, And of course those are basic 1420 01:16:50,560 --> 01:16:53,200 Speaker 1: fundamental skills you absolutely need to have. But I think 1421 01:16:53,240 --> 01:16:56,040 Speaker 1: when I when I think about my career or what 1422 01:16:56,160 --> 01:16:58,400 Speaker 1: has created the best opportunities for me, it often comes 1423 01:16:58,439 --> 01:17:01,479 Speaker 1: about because it's we need to come communicate something either 1424 01:17:01,520 --> 01:17:05,080 Speaker 1: to our investment committee or to our investors, or increasingly 1425 01:17:05,120 --> 01:17:07,559 Speaker 1: to a much broader group of stakeholders that include elected 1426 01:17:07,560 --> 01:17:11,240 Speaker 1: officials and tenants and community members and activists, all of 1427 01:17:11,240 --> 01:17:13,760 Speaker 1: whom you are are touching our business in some way. 1428 01:17:13,840 --> 01:17:16,040 Speaker 1: And I think that ability to take ideas that can 1429 01:17:16,080 --> 01:17:19,720 Speaker 1: be rather complicated or sometimes seem a bit foreign to 1430 01:17:19,760 --> 01:17:22,519 Speaker 1: others and really put them into terms that are clear 1431 01:17:22,600 --> 01:17:27,040 Speaker 1: and compelling and understandable is super important. That that's really interesting. 1432 01:17:27,120 --> 01:17:29,760 Speaker 1: Final question, what do you know about the world of 1433 01:17:29,800 --> 01:17:33,639 Speaker 1: investing today that you wish you knew twenty plus years 1434 01:17:33,720 --> 01:17:36,240 Speaker 1: or so ago when you were first getting started. I 1435 01:17:36,240 --> 01:17:38,120 Speaker 1: think I think at the time, I wish I knew 1436 01:17:38,479 --> 01:17:43,559 Speaker 1: just how interesting this work would stay for so long 1437 01:17:43,600 --> 01:17:47,160 Speaker 1: and how many amazing people I would get to work with, 1438 01:17:47,800 --> 01:17:49,840 Speaker 1: certainly a blackstone. But when I think about the people 1439 01:17:49,840 --> 01:17:53,400 Speaker 1: who lead our companies or folks in the industry, I 1440 01:17:53,479 --> 01:17:57,120 Speaker 1: now know opportunities like this to talk to you like they. 1441 01:17:57,479 --> 01:17:59,320 Speaker 1: I think I spent a lot of the early days 1442 01:17:59,320 --> 01:18:02,040 Speaker 1: of my career worrying about how long will I do this? 1443 01:18:02,160 --> 01:18:05,080 Speaker 1: Or should I be doing this a lot longer? And 1444 01:18:05,439 --> 01:18:07,439 Speaker 1: if I had just kind of thrown myself into like, wow, 1445 01:18:07,520 --> 01:18:09,799 Speaker 1: let's just enjoy every moment with all of these people 1446 01:18:09,840 --> 01:18:14,160 Speaker 1: who are intellectually curious and smart and hard working, and 1447 01:18:14,200 --> 01:18:16,840 Speaker 1: I've had the good fortune of always being with teams 1448 01:18:16,840 --> 01:18:20,240 Speaker 1: that were super collaborative and supportive. I wish I had 1449 01:18:20,320 --> 01:18:22,600 Speaker 1: known that, because I think I would have had a 1450 01:18:22,640 --> 01:18:25,639 Speaker 1: lot more confidence of just every day enjoying the moment 1451 01:18:25,840 --> 01:18:28,519 Speaker 1: that was really fascinating. Thank you, Kathleen for being so 1452 01:18:28,600 --> 01:18:33,519 Speaker 1: generous with your time. We have been speaking with Kathleen McCarthy. 1453 01:18:33,560 --> 01:18:36,760 Speaker 1: She is the global co head of real estate Investing 1454 01:18:37,280 --> 01:18:43,000 Speaker 1: for Blackstone, running it's nearly uh six hundred billion dollars 1455 01:18:43,040 --> 01:18:47,320 Speaker 1: in real estate investments. If you enjoy this conversation, well, 1456 01:18:47,439 --> 01:18:50,320 Speaker 1: please check out any of the previous four hundred and 1457 01:18:50,360 --> 01:18:54,840 Speaker 1: fifty interviews we've done over the past uh eight years. 1458 01:18:55,360 --> 01:18:59,840 Speaker 1: You can find those at iTunes, Spotify, YouTube, wherever you 1459 01:19:00,040 --> 01:19:03,800 Speaker 1: find your favorite podcasts. UH. Follow me on Twitter at 1460 01:19:03,880 --> 01:19:07,479 Speaker 1: rid Halts. Check out all of the Bloomberg podcasts at 1461 01:19:07,600 --> 01:19:12,000 Speaker 1: podcast uh. You can sign up for my daily reading 1462 01:19:12,040 --> 01:19:15,360 Speaker 1: list at Rid Halts dot com. I would be remiss 1463 01:19:15,400 --> 01:19:17,559 Speaker 1: if I did not thank the cract team who helps 1464 01:19:17,640 --> 01:19:23,040 Speaker 1: put these conversations together each week. Justin Milner is my 1465 01:19:23,160 --> 01:19:27,280 Speaker 1: audio engineer. Uh Atico val Bron is our project manager. 1466 01:19:27,600 --> 01:19:31,000 Speaker 1: Sean Russo is my head of research. Paris Wold is 1467 01:19:31,040 --> 01:19:35,280 Speaker 1: my producer. I'm Barry Dhults. You have been listening to 1468 01:19:35,520 --> 01:19:38,160 Speaker 1: Masters and Business on Bloomberg Radio.