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00:00Let's first talk on this deal. It's very exciting and part of the excitement around it is just the sheer size of this thing.
00:06Four million square feet, your capital that you're helping put up for this, $27 billion.
00:12It's one of the largest, if not the largest, private capital deal on record.
00:18Was it difficult to get comfortable with just the sheer size of this thing?
00:22Well, it was difficult to, I'd say, innovate together with Meta.
00:26That is to say, it's new, it's groundbreaking, as you observe.
00:31It's a scale no one has dealt with.
00:33But Meta is an incredibly innovative company, right?
00:36So this is a beautiful marriage of a deeply innovative company meets this sort of need for innovative capital solutions,
00:45which certainly we think of as our calling card at Blue Owl.
00:49And so together, we're able to craft something really bespoke at a scale that nobody has seen before.
00:55And that is exciting.
00:57And, you know, they have a great team there.
00:59You know, the CFO, Susan Lee, and the team, Todd Hessey and Michael Hart.
01:05I mean, they're really good at what they do.
01:08And working together, we're able to do something that really worked for them and creates a great investment for us.
01:15There's a lot of excitement around AI.
01:17And I think a lot of players would also look at Meta as a counterparty and also be excited by that.
01:21How competitive was this deal?
01:23So I do think at the end of the day, partnerships will define this industry for the foreseeable future.
01:30And, you know, that's because it isn't just about capital.
01:33I mean, yes, capital is a necessary and important component and in quantums that people are not used to.
01:38But it isn't just capital.
01:40It's capital married with knowledge, capital married with skills to be able to craft a solution.
01:46It's not just a generic building.
01:48You have to picture the magnitude of what we're all talking about, right?
01:51This is a two gigawatt complex.
01:55So just to frame that, you know, that's more than a big city in America consumes in power in one site.
02:01This is the largest data center complex being built, as far as we know, in the world today.
02:07But remember, it's bigger than the one we announced three weeks ago, the BorderPlex project.
02:14That's $22 billion, which is bigger than the one we had before that, which is Abilene, Texas, which is $15 billion through phases one and two.
02:23All of those are Blue Owl solutions.
02:26All of them are different because in the case of, say, Abilene, you have Crusoe, who's a fantastic developer partner.
02:34So there we're partnered to a developer in putting together that massive and successful project for Oracle.
02:39In BorderPlex, we're building it internally.
02:42We have our own business called Stack, 1,000 People Captive, that does the developments of very complex projects.
02:49So Stack is developing, Blue Owl as a capital partner, the BorderPlex project.
02:54Here, Meta is going to build and going to operate the data centers themselves.
02:59So it's three different flavors.
03:00All of them require a different customized solution, all of which require really deep knowledge on the one hand and really deep access to capital.
03:09And we have uniquely brought those two together.
03:11And so I think people know if they come to us, we can deliver all the capital, one-stop shop, with the knowledge you need to do it right.
03:18So as the deals get bigger and bigger, again, this one, $27 billion, how do you make sure, just given the sheer size of it,
03:26that Blue Owl as a whole isn't overly dependent and exposed to be it just this individual deal or these AI deals you're making?
03:35Yeah, well, so people that, you know, here at Blue Owl, like our business is built on risk management, diversification.
03:41In fact, our whole business is about downside protection.
03:44So it actually becomes natural for us to be thinking about, you know, where are all the different pockets of risk and how do we manage them?
03:50Now, very importantly, in this space, different from most others,
03:53you've got to remember we're dealing with the companies that are the biggest companies in the world with the best credit ratings in the world.
04:00So there is a different question when it comes to concentration.
04:04You know, that is to say having a lot of exposure to Microsoft, a lot of exposure to Meta, a lot of exposure to Amazon.
04:11Those are pretty darn good exposures.
04:13It's hard to do better.
04:14I've always, my whole life has been in alternatives where I've always started out saying, listen, let's be clear.
04:20The things we do, these are risk-bearing assets.
04:22You know, this is not treasury securities.
04:24And then, you know, now for a moment I have to catch myself and, you know, look at something like a Microsoft or a Meta.
04:29I mean, they're almost treasury securities in terms of the nature of their credit risk.
04:33And what we do particularly, and this is our part of the ecosystem, is providing the picks and shovels, the infrastructure.
04:40So we only construct in bespoke partnership with these great companies assets under 15, 20-year leases.
04:47So really, they're who's paid us.
05:01There is just this concern, though, that AI, while it's gaining a lot of steam, has yet to go mainstream and the revenues aren't there.
05:08And then you're also working on a campus that needs to be built.
05:11There's the risks of, does it finish on time?
05:13And once it does finish, does it deliver what it's promised to?
05:17How do you think about some of those issues?
05:19Well, the latter brings us back to the point of skills, which is why I don't think hyperscalers are going to look to many partners, because it isn't generic.
05:28It is a highly skilled undertaking.
05:30And, again, it can be done in a variety of ways.
05:32But we're one of the few people that both knows how to do it and has proven we know how to do it.
05:37And that matters a lot.
05:39These projects, because we've done them, listen, we've done over 100 data centers.
05:45We've done or have under construction 10 gigawatts.
05:48We are the leader in this business.
05:50I don't say that with any arrogance, but we have the intellectual capital and the access to capital.
05:55And to your point, we know how to make it happen.
05:57And that matters most importantly because people want their data center on time, on budget, and functioning because this is happening fast.
06:06Now, to your earlier point about kind of the, I don't know, maybe the AI mania, I think what's important to distinguish is between the, let's call it the meta trend,
06:15this question of 10 years from now, will AI have transformed the economy, the world?
06:20I think that's indisputably true.
06:23Now, who exactly will make money doing that?
06:25Well, there's different ways to come at that question.
06:28The approach we're taking is let's make sure we make money by being the infrastructure layer and having these triple net lease,
06:35these ironclad agreements with world-class companies.
06:38So for we and our investors, we make it really, really predictable, best risk return I've seen in maybe my career.
06:47And so that's really appealing.
06:49The really high-octane stuff, the application layer, maybe there is some mania there.
06:54Is every new idea worth $10 billion?
06:57I don't know.
06:58Maybe it is.
06:59Maybe it's not.
07:00That's not the business we're in.
07:02So I think you have to distinguish what I would call kind of the mania that might reflect itself in valuations that do seem rather robust
07:09from the question of is this a transformative change in the world?
07:13It is decidedly a transformative change.
07:16But again, you're taking a lot of meta risk.
07:17And I know you said it's incredibly attractive to take that risk right now, considering it's trading better than public debt.
07:22But again, what happens if something changes with meta?
07:26If shareholders stop rewarding their capital expenditures, are you comfortable with just the meta exposure you have,
07:33just the bet you have on one singular company and their success?
07:36Well, we're fortunately partnered with all the hyperscalers.
07:41So we're talking about, you know, there's five big ones in the world operating.
07:45And we're working with the neoclouds, too.
07:47I mean, we have a stake that we took in Nscale, and, you know, they're working for it.
07:52We do work with CoreWeave.
07:54So there's a lot of participants.
07:55The key for us, again, is this.
07:57We're not taking a view, a risk, on how economic those outcomes will be.
08:03We are taking a view, and with high confidence, that those companies, those multi-trillion dollar enterprises,
08:09are going to be with us for a long time to come.
08:12And that's all that matters for our getting paid.
08:14Now, to be clear, meta is a brilliant company.
08:17So if you're going to take a view, I would take theirs.
08:20That is to say, I wouldn't, we talk a lot on Wall Street.
08:23We talk a lot, you know, away from Silicon Valley about AI.
08:27I tend to look at people who have built the biggest companies in technology, biggest companies in world history,
08:33which all these companies are talking about, right?
08:35The NVIDIAs and the Microsofts, the Googles, the Metas, the Oracles, the Amazons.
08:41I mean, you know, I'd take their view and take it pretty seriously.
08:44And I believe, at least for us, we're just counting on them being in business, which, of course, is a near statement of the obvious.
08:52Mark, just before we wrap up, and I know we'll speak more about this next week during your earnings,
08:56too, with the overall pictures of this market, but I'd be remiss if I didn't ask you about our conversation last week
09:01about where the cockroaches are and you saying, look, it's not in private credit.
09:04Are you surprised with just how much feedback and how that really caught the attention of so many people, your comments last week?
09:12So moving away from the colorful language for a moment, you know, here's the thing, taking a step back.
09:19Everyone, and I understand, is looking for the canaries in the coal mines in any marketplace.
09:26And the thing I know by looking at our portfolio, and I can be very specific in that case, our portfolio is in great shape.
09:35And at the end of the day, of course, our job is to manage our portfolio.
09:38But by the way, it's true of our peers as well.
09:42And I think it's true, to be clear, across generally the credit marketplace.
09:47And so the real question at this heart is, is there some sort of forthcoming challenge?
09:55None that we can see.
09:56Are there indicators of a challenge?
09:59None that we can see.
10:00And do remember, none of us live in a vacuum.
10:03So we're talking about incredibly healthy equity markets, incredibly healthy bond markets.
10:09We're not living in isolation.
10:11We're part of that same ecosystem.
10:13And it is an ecosystem, right?
10:14What the banks do, what we do, we're all part of an ecosystem.
10:17Thankfully for all of us, it's an incredibly healthy ecosystem today.
10:22And from where I sit, I think it's going to continue to be healthy for the foreseeable future.
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