00:00When it comes to the data center build out, I mean, what we've been hearing for going on years now
00:05is just that the demand is insatiable, that there's a whole lot of runway left.
00:09And I wonder, you know, from where you're sitting, whether or not that's still the story or whether you tweak
00:15it a little bit.
00:16I would say that's still the story overall. There's still way more demand than we have supply.
00:21And if you think about even in your own life, you're probably using technology and things like LLMs much more
00:27every day.
00:28And so we're expecting that the demand is going to continue.
00:31It's interesting, though, that you showed that map because there are definite concentrations.
00:36And some of those concentrations have to do with the cost of power, the availability of power.
00:41They might have to do with the availability of water. But it can also be you mentioned Virginia.
00:48So Virginia is what we call a low latency market. And that means that you can essentially do anything.
00:55You can back up the Pentagon. You can back up Wall Street. Very low latency.
01:00And then some of the areas you mentioned in the middle of the country, one of the problems with some
01:04areas is that there's a lot of latency.
01:06And so what can you do there? You can train AI all day long.
01:09But that's where, if I were to tweak the story a little bit for us, we're not necessarily investing in
01:15those data centers that are really only fit for purpose for AI training.
01:20We really focus on the low latency markets. They just have much more of a reuse story.
01:26So low latency markets, that includes Virginia. But I wonder how you approach the conversations around sort of the NIMBYism.
01:34You know, not in my backyard. You see a lot of folks who live in those areas getting very fed
01:39up with the data center build out.
01:41And with, in a lot of cases, their electricity bills going higher. So, again, from the investor perspective, I mean,
01:47how do you think about that sort of risk?
01:50Truly, just as an investor, NIMBYism and look at housing, that causes a lack of supply.
01:56And so as an investor, you might look at NIMBYism and say, OK, it's going to keep supply and check,
02:02which means that you're going to be able to continue to have higher rents.
02:05And, you know, NIMBYism, it's really a perfect example because you see it now in data centers.
02:12It used to be that really the availability of electricity was really the thing that was kind of the gating
02:18issue.
02:18And now it's the NIMBYism. And if you think about housing in this country, we have a serious issue with
02:24housing and not having enough supply.
02:26And one can draw a straight line in some markets to NIMBYism there as well.
02:30Well, let's talk about housing a little bit. You've invested a lot in senior housing.
02:35And I am curious about I understand the demographic needs in the moment here.
02:40But when you look at the longer term demand and the sustainability of that, kind of put that into perspective
02:45for me.
02:46Sure. I mean, so the baby boomers are now starting to enter seniors housing.
02:50And, you know, people are entering seniors housing now, call it around 82, 83 years old, which is a little
02:55bit older than when they used to come in.
02:58But their demands are very different.
03:00It used to be that seniors housing was a little bit more about a safe place for grandma.
03:05And now grandma wants to go to happy hour every day.
03:08And grandma wants a really nice gym in the building and, you know, lots more social amenities.
03:13So my point is that the older product is really no longer fit for purpose and it's not going to
03:19lease that well.
03:20What are the options, though, in terms of building and building at a fast enough pace to meet that demand,
03:25particularly in light of some of the supply chain issues that we've been dealing with, really going all the way
03:29back to the pandemic?
03:30Obviously, what's going on in the Middle East now, which is disrupting supplies as well.
03:34And then the interest rate situation.
03:36Sure.
03:36And I'm not sure how you if you guys have a house view on that.
03:38Are you expecting to get maybe a little bit of relief in that space?
03:41Maybe a little.
03:42But honestly, we're not underwriting for that at this point.
03:45We're underwriting kind of a static situation.
03:47But, you know, your point around supply chain construction costs, labor costs in many ways, just making construction that much
03:55more expensive.
03:56And so back to areas like housing and data centers where you really do need supply.
04:01It's very, very expensive to build right now.
04:04And, you know, when you have supply chain disruptions, it just makes the costs less predictable.
04:09And I want to go to some of the notes you sent over to our producers, because, you know, you
04:14mentioned that you're seeing some tactical opportunities here.
04:18And we talk about tactical opportunities when it comes to trading public equities all the time.
04:23Not necessarily something I think about when I think about real estate.
04:26So where exactly are you seeing, you know, an opportunity to be sort of tactical here?
04:32Sure. So tactical in real estate is just it just takes longer to be tactical.
04:36Right. We can't do it intraday.
04:38But I'll give you a great example.
04:40So, Romain, I remember visiting with you a while ago and talking about office.
04:44Right. I mean, I didn't even want to talk about it.
04:46The outlook was so bleak.
04:47And now if you look at certain markets, New York being a great example, San Francisco another, where leasing has
04:53really picked up.
04:54And so a good tactical play is office in a market where there's, you know, been a tremendous uptick in
05:00leasing and where rents are going up.
05:02And that surprised some people.
05:04And something else that actually surprised me that sort of popped up on our show over the last few months
05:09is the resiliency that we've seen in retail and physical retail.
05:14Yes.
05:14A big recovery going there.
05:15And I know that you have some investments in the in-store retail space here.
05:21How much?
05:22We have a fair amount.
05:23And I would say the format that is most popular in our portfolios around the world is really what we
05:28call necessity retail.
05:30So things like grocery anchored.
05:31You might go to the pharmacy.
05:33You might go to get your hair cut.
05:35All things you can't really do online all the time.
05:37And we do see that, you know, grocery in particular has been incredibly resilient because there are online options.
05:46People can get their groceries delivered.
05:48But mostly the fulfillment of those online grocery deliveries are coming from the actual grocery store.
05:55So it's there's a lot of resilience there.
05:57It's great long term cash flow for investors.
06:00And before I let you go, Kathy, I do want to talk about, you know, where you're seeing the conversation
06:05around conversions.
06:06Because when you think about the housing shortage that you mentioned, the question that always comes up is,
06:11why can't we convert some of those office buildings or just those big buildings into apartments?
06:16And, you know, I wonder if something that you see as feasible.
06:20And if so, are you putting money behind it?
06:22It would be amazing if every obsolete office building could be turned into housing.
06:26But it's really it's just not possible for all of them.
06:29There's a small subset that has kind of the physical attributes that enable it to be made into housing.
06:35housing and you are seeing it and we are actually doing some of that around the world.
06:40You've seen some in New York, which is terrific, and we're doing some in Europe in particular.
06:44So you really just need to make sure you have the right kind of floor plate that you can get
06:49enough light.
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