00:00Let me ask first what kind of real estate you're talking about Al because we all know that demand for
00:05land on which to build data centers is huge but you've got to be in a specific place in order
00:11to make the math work there. I imagine you're talking more about like senior assisted living facilities or medical offices
00:20maybe student housing. What do you what are you looking at.
00:23That's right Matt. Thanks for having me. Great to see you again. We're looking at medical office seniors housing student
00:28housing light industrial and the dynamic here is that you have massive escalation in demand not just today tomorrow three
00:36years from now five years from now but really the next 20 years and the additional dynamic is that these
00:43are supply constrained markets partly because of interest rates tariff to concerns etc.
00:47but also a in a bigger way light industrial which you reference the portfolio that we just did. These are
00:55infill locations. So that means close to major population centers typically within five to 15 minutes.
01:01So you can't get zoning today. Most of that portfolio is actually 1980s vintage because you would you would require
01:10different dynamics in order to be able to get approvals today.
01:13And so what that all adds up to is you've got escalating demand combined with shrinking supply and any demand
01:21supply imbalance that exists today that is virtually a certainty to be exacerbated on a going forward basis.
01:28Just how competitive are some of these processes processes for these assets then Al like do you look at them
01:34and say yes it's attractive but you know you're not the only one who's seen interest in some of these
01:38does that make it particularly difficult to get valuations that you want considering there's a lot of money
01:44that needs to be put to work a lot of money that needs to be put to work a lot
01:46of demand for these assets and not a lot of supply of them.
01:49It's that's a great question that and that's actually the right question. One thing that I consistently say is that
01:54anybody with access to capital or significant capital can make a decision to invest in these asset classes today.
02:03What is difficult to do or virtually impossible to do is very quickly build a best in class operating platform
02:11and you know because I've been on the show many many times we've been building that for the last 20
02:16years and so those who actually have access to capital in this capital constrained environment both from a fundraising and
02:24debt perspective as well as those who have operator experience and knowledge like we do both in-house as well
02:32as with our partners.
02:33which in most cases are exclusive partners that is a very rare combination and so what we're seeing this was
02:40not a marketed deal the industrial deal that you referenced before why because you look at the landscape and say
02:45who can do a two billion dollar deal who's got the size scale certainty of close dynamics combined with the
02:52operating expertise to acquire this portfolio and so we've been disciplined in our approach we've waited for the right moments.
02:59I think the capital that I think the capital that is coming in and will continue to come in in
03:04these asset classes is not really competing with us directly for things that we want to acquire or build but
03:13really creating a broader deeper buyer base that capital much of it is looking to partner with us or buy
03:19from us.
03:20Much of it is actually creating a more efficient market for the assets that we already own which are very
03:26significant as we're the largest player in these alternative asset classes and so we've been socializing these verticals for 20
03:34years.
03:34We're very glad to be swimming downstream in terms of investors taking notice of a lack of volatility the dynamics
03:41that exist from an investment standpoint the beta outperformance of these verticals versus traditional real estate asset classes.
03:48But it's exactly the right question and it's really the right question and it's really the reason that we feel
03:52we've spent 20 years building the platform for exactly this inflection point today.
03:58I wonder when you're sitting on the back porch with a glass of wine kind of pondering the effects of
04:05AI in the future is it going to create more demand for industrial space and power infrastructure and logistics than
04:13it destroys through automation over the longer term?
04:17Yeah, one of the reasons I refer to these asset classes Matt as mission critical is you're not there's no
04:23obsolescence you're not obviating the need for the physical space.
04:28So medical office we all know you have a dramatically aging U.S. population 11,000 Americans a day turning
04:3365 every day for the next 20 years.
04:36They all need health care your greatest health care spend years are in are obviously as you get older same
04:41dynamic for seniors housing.
04:43You do not replace the need for high-end medical physical presence oncology neurology cardiology diagnostics etc.
04:54That is not obviated by AI it can be assisted by a but the physical space is actually still needed.
05:01So what we see is actually a combination of greater physical space needed and the reason that I refer to
05:10these as mission critical asset classes is because of that combined with greater efficiency through AI.
05:16So we should continue to improve our margins on a going forward basis because we are obviously adopting AI in
05:26every way shape and form that we can to become more efficient in our practices and procedures.
05:31But it in no way shape or form with respect to our verticals specifically in any way negates or obviates
05:40the need for the physical space.
05:42Yeah. How are you thinking about rates just to kind of hit on the last macro impact markets are now
05:47pricing in a hike for this year.
05:49We've removed any idea of a cut. How does that change your investment thesis if that's where we're headed to
05:54higher rates.
05:56Yeah. So I've said for quite a while that we were going to be higher for longer I didn't see
06:00a catalyst last year I don't see a catalyst this year for lower rates that said I also don't really
06:06see a catalyst for higher rates if you look at the jobs report 171,000 jobs added more than a
06:11third of those were from from from local government.
06:15So I think you get an initial reaction you get you get a view we're going from rate cutting to
06:23rate hiking where I think I think we're going to hang out here for quite a while which is perfectly
06:28fine by us.
06:29We are not anticipating a lower interest rate environment in the near term directionally.
06:36I do think that we're headed to a lower interest rate rate environment.
06:40That's not this quarter next quarter I'm not making a prediction in terms of specific time frame but I do
06:46think that you have some massively disinflationary dynamics in the economy principally in the form of AI and demographics and
06:55those are those are those are two huge dynamics that over time in my view will lead to will lead
07:03to lower rates over the next three to five years.
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