00:00Joining us now for a look into real estate is Julie Solomon, partner and head of real estate
00:04at Aries Management. Julie, fresh off the panel, thank you so much for joining us.
00:07Great to be here, Dani.
00:08There's this big question in markets happening now. What does the rate path look like? Because
00:13of an outbreak of war, of higher energy costs, that's really getting questioned to the amount
00:18that we'll have. How does that impact your outlook for the sector in 2026 if we don't get
00:22as many rate cuts as we expected?
00:25It's helpful to first contextualize the impact of recent rate movements on real estate and
00:30on the market real more broadly, because what I would say is it's actually created quite
00:34a bit of discipline within the real estate market specifically. And so if you look at what
00:39happened in a higher rate environment, asset values have reset, construction deliveries
00:44have declined, and the capital markets are now fairly constructive for real estate. So
00:49what happened as the Fed has normalized rates, we are in a period of time where transaction
00:54volume picked up. But what it does mean, Dani, is that this next chapter is going to be about
01:00driving cash flow, improving operating performance to drive returns as opposed to a lower rate
01:05environment. But we think it's created a lot of discipline for us.
01:08Well, what does it do about all of the loans coming due over the next 12 to 24 months? There's
01:14already been this idea of can kicking. Can we keep kicking the can? What happens when that
01:19comes home to roost?
01:20Well, the capital markets have been available for quality cash flowing assets. So we have
01:26seen a favorable market, particularly for builders, buyers like Aries Management, where we've been
01:34actively participating in the market for a long time now, where there will be challenges
01:39on assets that are in second tier markets, lower quality segments of the office market
01:45that we talked about earlier. But what we see more broadly is that the lending markets
01:50will be friendly.
01:52We talked about this during the commercial break, because you're actually not invested
01:57in very much office. Before we go any further, tell us about your portfolio specifically, because
02:02you've avoided that pitfall and you have other unique holdings.
02:05We sure do. We manage about $120 billion of assets under management. And about 85% of
02:11that, if not more, is in logistics and living sectors that have really strong, durable, long
02:17term demand drivers. There's a lot of resiliency. The balance is in assets that are adjacent to
02:22those like self storage, student housing, data centers is a big part of our business, too.
02:27And so as you think about that broadly, we feel that the current environment sets us up for
02:32a real position of growth.
02:33So tell us a little bit more about data centers, because it's obviously a hot topic right now.
02:38And, you know, from the from the private credit perspective, there's a question about how much
02:44they're financing. But from a compute perspective, we can't get enough over the next few years,
02:49right?
02:50You're right, Matt, we can't get enough. I mean, when you think about it, the demands for
02:54infrastructure to support this industry is enormous. And that's why groups like ARIES have really been
03:01able to step in in a meaningful way. As lenders, as developers, we have a very large data center
03:08development capability that we brought on board with the acquisition of GCP that closed just a year
03:14ago now. And the growth in data centers plays right into what we've been talking about new economy
03:20investing, right, which is the property types that are all supporting the way we live, the way we work,
03:26the way we're consuming. And so we feel there's very much interconnectedness between data centers
03:31and how we're investing in real estate.
03:33How competitive are these deals? Because this is a sector many have identified. Is it really
03:38competitive because everyone loves it or less because you need the size of an ARIES, for example,
03:42to actually participate in it?
03:45Like any market where there's a lot of attention, you wind up seeing participants coming in with a
03:50varied set of capabilities. And so there is competition out there. But what we've been
03:54able to see, and we just talked about this on the panel earlier, is that groups that have
03:59multiple capabilities across infrastructure, across the capital structure, energy, which is such a large
04:05part of this story, too, we're able to provide competitive advantages that give us an edge in the
04:11marketplace.
04:12By the way, Matt kind of hinted at your office holdings, which is notably absent from your
04:16top calls.
04:17What would it take to get back in office? How are you just viewing that sector as a whole?
04:21You want to buy low.
04:23We've been underway in office for probably 15, almost 20 years now. There are a lot of attributes
04:29that are interesting from the super class A end of the market, but it's incredibly bifurcated.
04:34And what we found was that there were a lot of other sectors that could provide us with much
04:40more predictable, much more durable returns. And while values have come down considerably,
04:46it's not just about entry point. It's about how do you then drive cash flow from there.
04:50You must still think about it a lot, Julia. Are we ever getting back to 95% occupancy or no?
04:58Well, as a resident of New York City and certainly in a company where we very much believe in the
05:05work from office mentality, really do believe in the market. However, as investors, we think there
05:10are better opportunities out there.
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