00:00You write that CRE, commercial real estate, is the best place to find value in today's investment landscape.
00:06That feels like a pretty big statement. Walk us through the conviction.
00:10So the real estate recovery is real, and it's been six quarters.
00:14So across our $80 billion portfolio, we have seen real estate prices appreciate every quarter for six quarters in a row.
00:20Real estate's been unloved, but 2026 will be the year of real estate.
00:26And what we're finding all around the world, as I talk to investors, is that they have had such great gains in their liquid portfolios.
00:32Whether it be stocks at all-time highs or bonds that are having a great year, we're seeing people take gains and move them into real assets right now, just given the value.
00:42It's interesting. Real estate right now is still 20% below its peak, even though liquid markets are at all-time highs.
00:48Well, you mentioned unloved as a concept.
00:52And when it comes to CRE, for a while, the phrase was CREX office.
00:57Is that still the case?
00:59Office is changing.
01:00We have our headquarters on Park Avenue, which has been amazing for the city.
01:04They are beautiful.
01:05They're very nice headquarters.
01:06But we see office changing all around the world and in the United States.
01:10For example, in 2022, of the top 100 companies, 30 were fully work from home.
01:16Today, only 1% of those companies have remote workers.
01:22So people are coming back.
01:23We see it all the time.
01:25The top third of the best high-quality buildings have no vacancies, and they're actually setting all-time highs for rents.
01:32Is that only, though, in big cities like New York, or are you seeing that nationwide and even in secondary markets?
01:38It started in New York, but we're now seeing more leasing given the AI trade in San Francisco, which has been very interesting for us.
01:45That market's been on fire.
01:47We're seeing this around the world, and now we're seeing in the top 100 markets, 80% of them are seeing decreases in vacancy, and they're seeing more demand for office.
01:56So we are seeing it in a broad-based way.
01:57I have to ask you, though, about longer-term kind of structural and demographic shifts, particularly with AI and the potential productivity improvements and, in theory, the idea that you would need fewer workers to run your company.
02:09Is that something that you have your eye on longer-term as maybe having an impact on office real estate?
02:15We definitely look at that.
02:16But if you think about office, there hasn't been a lot of office built in this country before COVID or past COVID.
02:21And so we think the highest-quality office properties in the best locations around the United States will continue to be in demand.
02:28We also think AI will extend the reach of current employees, but it's not going to take the place of all office workers.
02:35And so we're talking about office.
02:36We're talking about, you know, where people work.
02:38Let's talk about where they live because, as you highlight in your notes, home affordability is one of the hottest topics.
02:44And we know that, basically, people, a lot of people are stuck in this situation where they just keep on renting.
02:50There isn't the supply there.
02:52And demand only continues to go up.
02:55How are you viewing that, you know, as an investor?
02:58I think the headline is the housing affordability crisis is here to stay.
03:03The average first-time home buyer is 40 years old.
03:06What does that mean?
03:07More renters for longer?
03:09And our investors are benefiting from that.
03:11We're one of the largest owners of rental housing around the United States.
03:14And we focused on affordable multifamily and single-family-for-rent assets that really are targeted to the middle class of the United States.
03:24What it means is higher rent growth.
03:26And what's exciting about this is we're able to use our data to understand migration trends around the country for consumers.
03:33Do you worry at all about some of the public policies, I'm talking more at the state and local level, that could undermine that?
03:40I mean, obviously, here in New York City, we have a new mayor coming in who plans to address housing affordability.
03:45You have other cities like Baltimore, D.C. and others that are also taking similar policies.
03:49Does that work against you?
03:50So we have focused on affordable, non-luxury housing for that very reason.
03:57We don't focus on luxury housing.
03:58We focus on places where people actually need to live near where they work.
04:03And that's been exciting for us.
04:04I think no one can argue that we need affordable housing around the United States.
04:08And as an investment thesis, we love it.
04:10The returns have been outstanding.
04:12But when it comes to geography, I mean, where are you seeing the biggest opportunity?
04:17So our Chase data is amazing because we have 17 million data points.
04:23And what we're seeing is people are going to the Sunbelt, Texas, the Carolinas, Florida.
04:27We're also seeing people head west.
04:29And so that's where we've really been buying and building our portfolios.
04:33I have to ask you just about kind of the increase or at least the push to increase manufacturing and industrial activity in this country.
04:41Obviously, data centers have been sort of a huge focal point of that.
04:44But there's a lot more going on outside of just data centers.
04:46How invested are you in that area?
04:49And do you see real opportunity going forward?
04:52One of the largest investment themes that we see today is manufacturing-oriented real estate.
04:57And if you just think about what's happening in this country, you've seen trillions of dollars, both public and private, go into manufacturing and supply chains.
05:05So we're seeing it in industrial outdoor storage, manufacturing, where we'll literally do a sale-leaseback with a manufacturing company.
05:12We'll buy their real estate to give them growth capital.
05:15And we also see it in advanced manufacturing with robotics.
05:18It's been huge.
05:19Over $5 trillion invested in that space over the next five to ten years.
05:24On data centers, it's a billion-dollar asset.
05:29And two-thirds of the data center is really driven by technology.
05:33So instead of taking the risk on technology, what we've done is we literally buy manufacturing facilities that supply the data center.
05:41Maybe they supply the wafers or the wiring.
05:44It's a smaller asset.
05:45It's more liquid.
05:46And it's higher returning for our investors.
05:48I'm curious, you know, how you're thinking about some of the concerns that have been vocal out there about the possibility that we're overbuilding when it comes to the AI infrastructure build-out,
05:59especially when it comes to data centers and just how much demand there is right now for physical space and that physical footprint.
06:06The demand for data centers is really the biggest question.
06:09So we've all seen the Mag-7.
06:10We know about hyperscalers.
06:11You hear about data centers a lot.
06:13I think we've been really focused on driving great returns and being able to buy good real estate at below replacement cost.
06:20We haven't focused on data centers for that very reason.
06:24It's just how big is too big?
06:25How many data centers are too many?
06:27It's really hard to gauge that.
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