00:00I think the last time we spoke to you towards the end of last year you were talking about an
00:03inflection point for commercial real estate and the idea that 2026 really did have the potential
00:08to be better than 2025. We should point out 2025 is not a bad year. Give me a sense though as to
00:13what you think is going to drive the performance here. Yeah well we're nearly four years into this
00:18real estate correction sort of two years of price declines and then almost two years of bouncing
00:23line on the bottom. And I look ahead and we see prices down new construction down and cost of capital
00:30down. Those are all three cyclical drivers of price increase. You couple that with some sellers who have
00:37been hanging on for a long time now. They are motivated. They have liquidity needs. They have
00:43debt maturities etc. And we're seeing some really compelling opportunities in the market. We'll talk
00:49about those opportunities particularly from the perspective of the kind of the risk reward because
00:53I know not all opportunities are treated the same. Yeah no it's interesting when you talk about risk
00:57reward probably our highest conviction strategy is net lease. It is what is net lease. It's long
01:03duration leases in a structure where the tenant pays the rent and all the expenses. So it's the type of
01:09real estate where as the owner you have the most predictability of cash flow and the greatest protection
01:16from macro uncertainty. So if I asked you Romain what what do you want in an investment whether
01:21real estate or otherwise my guess is you'd say something like I want cash flow. I want inflation
01:26protection. I want downside protection in these volatile times but don't give up my upside optionality
01:33and net lease offers all of that. But importantly you and I have talked a lot about the mega trends
01:39we invest behind net lease gives you a way to play those as well. So we've talked about aging
01:45demographics. Net lease gives you medical office. With regards to those folks that are in those net
01:50lease agreements. So I assume the fact that you see opportunity there means that maybe this is a
01:55little bit more of a market that I guess favors the actual owner rather than the lessee. And I would
02:01assume that's a shift from maybe what we saw a couple of years ago. Yeah well look net lease can be
02:06created by a sale lease back. So it can be an off balance sheet financing for companies or an alternative
02:12source of financing. And look when when debt was you know plentiful and free sale lease backs didn't
02:19make as much sense. I think today we're seeing companies look to diversify how they finance
02:23themselves and seeing particularly for manufacturing oriented companies that have such high capex needs
02:29sale lease backs as a way to finance some of those. Are you seeing that particularly with the
02:34manufacturing build out the data center build out etc. Are you seeing primarily net lease agreements in
02:39that space. I'd say primarily not entirely but primarily and it's a really good structure because
02:45it enables the tenant the company to have de facto control over their space. But from our standpoint you
02:52get the inflation hedge of real estate ownership but you're not exposed to inflation of expenses so
02:58that you know the tenants paying all the real estate taxes the insurance premiums all of the things
03:03we've been talking about in real estate as you know threats to the owner. I have to ask you about the
03:08interest rate environment how much that matters to you. I know a 25 basis point drop in interest rates
03:15is relatively incremental given the time horizon that you operated in. But if we are at the precipice
03:19of let's just say a more accommodative Fed for a wide variety of reasons. Does that help you.
03:25Of course lower interest rates are positive for real estate no question about it. With that said we look at
03:32the long end and we say you know we expect rates to stay relatively range bound at today's elevated
03:38level. So what that means to us is unlike past cycles where real estate investors did really well
03:44betting on multiple expansion or cap rate compression we think this time around it's a lot about cash flow
03:50growth. So being in those sectors that have the greatest structural tailwinds. So when we talk about some of
03:56those sectors I mean you already mentioned longevity aging as obviously being a big factor. We talked
04:01last year all about data centers and AI. Are those kind of the two primary areas of growth that you see.
04:07So we see we see industrial as you know a big driver. So that's manufacturing on shoring as well as
04:14distribution. It's distribution for shifting supply chains. It's distribution relating to e-commerce
04:20penetration still increasing today. So that's a big area of growth. We see we've talked about
04:26senior housing. We see that as one of the fastest growing from an income standpoint. Real estate
04:31sectors again playing on aging demographics. There's a you know a lot of population growth and a lot of
04:37wealth concentrated in that cohort. That is leading to real demand for senior housing coupled with very
04:42little new supply. What's your take right now on the affordable housing situation? Are you meaningfully
04:48invested in that space and where do you see government policy potentially reshaping the structure of any of
04:54those investments? Yeah. So look I'd say there are a lot of proposals and there's no question there's a housing
05:00affordability crisis. And so absolutely it is the right diagnosis. The question is is it's the right
05:05prescription. And I think since the beginning of economics what have we known price goes down when supply goes up.
05:12And that is you know supply is the problem. Fixing supply is the solution. Admittedly it's not so simple because
05:19affordability may be a national issue. It needs to be solved at the local level. And that's what makes
05:25I think some of these policy proposals. It does get to this idea. And particularly now I mean given the team
05:30you lead and your expanded role this year. I know you're way more long term in terms of what you have
05:36to do. But I'm sure you have to also be focused on some of the short term noise coming out of Washington
05:41and whether that affects some of these long term structural things. Do you worry at all about some of the
05:47policy making on Washington and that it could sort of upend some of those themes. Well I think I wouldn't
05:52say upending the themes because if you think about deglobalization and supply chain realignment of
05:57course that's affected by tariffs among other policy things. But these are things that long predated these
06:03shifts. Right. Where I'd see we're seeing it most significantly is in tenant behavior. So look at you
06:10know last year for industrial we saw a lot of tenants pause. What do you do when you're faced with major
06:16uncertainty about what your supply chain looks like. You're not signing up for a long term lease
06:21obligation quite as readily. So we're seeing it on the on the ground. With regards to geography and
06:28the potential and the differences in return potentials here. Are there certain areas that you
06:33think sort of stand out. Yeah. So we've been most active here in the U.S. and in Japan for two very
06:39different reasons. So you know U.S. is a story of growth among other things. I'd say Japan that's a
06:46market we've been investing in for 30 years. Great stories around it today. You've talked on this show
06:51about corporate governance reforms and positive effects of healthy inflation. I think though what
06:57we're seeing is that with the increased interest in Japan it feels like everyone we know is going to
07:02Japan for the holidays. With the increase in tourism you're also seeing an increase in the tourist investor
07:08to Japan. And what we know is like every global market in which we invest to do well you need to be
07:14super local. You need to know the nuances be able to create value at the asset level. And so for that we
07:22feel very privileged to have the team we have on the ground there.
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