00:00Let's talk about that maturity wall. It's significant. It is very significant.
00:04And no one quite knows where interest rates are going to be when some of these start coming due.
00:07Maybe they'll be lower, depending on if you believe what the Fed and Fed, Kevin Warsh, might do.
00:11But I think what everyone knows is they're not going to be sub 1%.
00:14Right. How are you leaning into that, if at all?
00:17So we look at the maturity wall as an opportunity, candidly.
00:20We think the maturity wall in the U.S. is about $4.5 trillion.
00:25There's another maturity wall that's occurring in Europe that's roughly a billion dollars.
00:31It's a slightly smaller market.
00:33And the opportunities that we're seeing is to providing credit for good customers
00:38with a financial institution that doesn't want to grow their portfolio.
00:44And so we're stepping in and providing loans that otherwise banks might make
00:49on a very attractive, risk-adjusted basis.
00:52Or there are more opportunistic situations in which we're buying those notes from banks.
00:58We're providing financing to refinance those borrowers.
01:02Or when the notes are for sale or the properties are for sale,
01:06we'll go ahead and buy those in our opportunistic strategy.
01:09And we think this is going to last for a while.
01:11Yeah. Oh, so this is just getting started right now.
01:13Yeah, 100%.
01:14Well, I am curious about that, too.
01:15Because, I mean, the timing, I would think, almost kind of works out somewhat
01:19to the favor of the industry.
01:21Because I felt like if we were having this conversation a couple years ago,
01:24when you look at the state of commercial real estate, particularly in offices,
01:26it was a much more dour conversation.
01:29Now it seems like some of that worst-case scenario with regards to tenancy, occupancy, if you will,
01:35that's improved, in your view?
01:36Well, it depends on the market.
01:38I mean, the office market is very complicated.
01:40Think of the office market almost the way you'd think about the U.S. economy,
01:44as people describe it, as K-shaped.
01:46So you've got, and look here in Los Angeles, you've got Century City, which we're adjacent to,
01:52which is building a new office building, absolutely very well leased.
01:57Values are down, for sure, for their peak.
02:00But it's doing fine.
02:00There's a big tenant over there, by the way.
02:01And then you go ten miles to the east, to the traditional kind of downtown core of Los Angeles,
02:07where buildings are trading at 2,005 and 6 and 7 values.
02:11So sub-markets really matter.
02:14We've been very active in office.
02:17And for the right investor, you can be very successful.
02:21On that point of the disparity, just using Century City and downtown Los Angeles as an example,
02:26is that a function of the neighborhood, or is that a function of the type of buildings that were already
02:31there?
02:31Well, I think it's a function of location.
02:33I know that sounds kind of silly, but it's hard to get around in Los Angeles.
02:38Yes, I know.
02:39So if you live on the west side, there's this line of demarcation of the 405 freeway.
02:45You'd rather work on the west side.
02:46And it's a longer drive.
02:48It can be an hour, hour and a half downtown.
02:50So that's a driver.
02:51I also think that, you know, just when you look at the types of tenants that like to be together,
02:59there's more of a concentration in Century City than there used to be downtown.
03:03And you have older buildings.
03:05So it's a function of a lot of different things.
03:09And that's the same situation, for example, in New York.
03:12When you're around the transportation hubs of Grand Central Station or Penn Station,
03:17those properties are actually performing quite well.
03:20But when you get away from that, it's more complicated.
03:23In fact, I think the stat that you hear every once in a while about New York is that 75
03:29%
03:29of the vacancy is in 25% of the buildings.
03:32And that's where you get the bottom of that K.
03:34I would certainly believe that.
03:36So you're leaning into offices.
03:38I do want to talk a little bit about, you know, what you're seeing on the residential side,
03:42because we hear a lot about multifamily, for example.
03:46And I would love to hear your outlook on that sort of space.
03:48So, again, it's market-specific.
03:51Top three multifamily markets in the U.S. are New York, San Francisco, and Chicago.
03:58And the primary reasons for that is there hasn't been a significant amount of overbuilding.
04:03The markets that are suffering at the present, even though the underlying economies are very strong,
04:09are in the South and the Southeast.
04:11That will fix itself, meaning because there's not as much new supply going on.
04:16But we're very active in multifamily.
04:18We like to lend on multifamily in New York, and we're buying a lot of multifamily properties in San Francisco.
04:24What happened with that deal at Pacific Park Atlantic Yards deal out in Brooklyn, New York?
04:29We structured it.
04:30Because you lend and you foreclosed, right?
04:32We lend on that, and with our partner, we foreclosed.
04:35We brought in a new investor, and we're in the midst of developing that.
04:38I think it will be very positive for the city.
04:40Well, something that I'm wondering, you know, again, it feels like multifamily, it's hot,
04:45especially when you think about some of the markets you mentioned.
04:47How competitive is it right now?
04:49How does that compare to the last several years?
04:51Well, I think from a lending standpoint, I would not describe it.
04:55It's competitive.
04:56It's probably the most competitive property type.
04:59In one of our strategies, 64% of the loans that we're making are in multifamily.
05:05And so it's competitive, but you can still get a good spread.
05:08I think on the equity side, with the exception of the really, really hot markets,
05:14particularly New York and San Francisco, we're nowhere close to where we were when,
05:19Romain, as you were saying, when values were higher and rates were a lot lower.
05:24I am curious just about the investability in this for individual investors.
05:28And we were speaking a little bit earlier with the head of the company a couple days ago
05:32about the launch of the Fortress Real Estate Exchange,
05:35which I assume is more directed towards that wealth channel there.
05:38And we're talking about residential housing, senior housing, things like that.
05:44What we're focused on there, this is our Delaware statutory trust product.
05:49And so what's happening, and it's been happening for the last few years,
05:52but it's accelerating, is you have baby boomers who've invested in real estate,
05:56sometimes second homes, investment properties.
05:59They want to sell those properties.
06:01And they're going to have a gain, which is great for them,
06:04but they don't want to pay tax on the gain.
06:06So the Delaware statutory trust product allows an investor to shelter that gain
06:13in a new real estate asset.
06:15But they're not required, like in a 1031 exchange, to manage the asset.
06:21And then they get a current return of, say, 5%, 6%.
06:24And then it allows them to defer the basis until they pass away,
06:28and they pass it on to their heirs.
06:31And speaking of baby boomers, let's talk a little bit, too, about senior housing,
06:35because that's another big topic.
06:36When you talk about residential, usually what we hear is multifamily,
06:40and we hear senior housing as well.
06:43How market-specific is that, or does that more extend broad brush across the country?
06:48So we've been very active in senior housing.
06:50In fact, we've been one of the largest purchasers of senior housing projects
06:54outside of the two large public companies in the U.S. over the last few years.
06:59When you sit back, the seniors' housing market has always been kind of that next great investment,
07:05not always, maybe for the last 20 years.
07:08But people got the timing wrong, meaning that the baby boomers,
07:12the thought was when they got to be 80 years old or 75 years old,
07:15they'd just go ahead and move.
07:16But they didn't want to do that.
07:18They were healthier.
07:19People were living longer.
07:20So what happened was there was a lot of carnage in the industry over 5, 10 years ago.
07:25That's changed because there's not a lot of new supply.
07:28And there's much more demand.
07:31So we're focused primarily in the south, southeast, in private pay-type situations.
07:38The returns that we're getting are very attractive.
Comments