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Kathleen McCarthy on Real Estate Investments · Masters in Business

0:02
Speaker 1: This is mesters in business with very results on Bloomberg Radio.
0:09
Speaker 1: Scrap yourself in for this one. It's absolutely fascinating. Kathleen
0:14
Speaker 1: McCarthy is the global co head of real Estate for
0:17
Speaker 1: private equity giant Blackstone. She and her team manages over
0:22
Speaker 1: five hundred and sixty five billion dollars in real estate assets.
0:27
Speaker 1: And if you are all interested in commercial real estate,
0:32
Speaker 1: residential real estate, logistics, warehouse, laboratory and medical facilities, multi
0:39
Speaker 1: family and apartments, offices, on and on in the US,
0:44
Speaker 1: in Western Europe, in Asia, India, Japan. UH, this is
0:50
Speaker 1: just a tour to force education on how to invest
0:54
Speaker 1: in global real estate. UH. Blackstone has been in this
0:58
Speaker 1: space for over thirty years. According to their ten K filings,
1:03
Speaker 1: their opportunistic fund is up sixteen percent a year over
1:08
Speaker 1: those thirty year periods. That that's really an astonishing return.
1:13
Speaker 1: Kathleen has been with Blackstone since and I just can't
1:18
Speaker 1: say enough as to how absolutely fascinating, um and knowledgeable
1:24
Speaker 1: and intriguing this conversation is. That you won't hear the
1:29
Speaker 1: gaps between her answers and my questions because we edit
1:34
Speaker 1: that out. But she answers a question. I'm just sitting
1:38
Speaker 1: there dumbfounded by how She's just like, oh my god,
1:42
Speaker 1: that's just an absolutely comprehensive explanation about something I had
1:47
Speaker 1: no idea about. And now I feel like I really know.
1:51
Speaker 1: I don't even know where to begin other than saying,
1:53
Speaker 1: strap yourself in. This is a Monster podcast. My conversation
1:59
Speaker 1: with Kathleen McCarthy, Global head of real Estate for Blackstone.
2:05
Speaker 1: Kathleen McCarthy, Welcome to Bloomberg. I am so excited to
2:09
Speaker 1: be here. Mary, So I'm excited to have you here
2:11
Speaker 1: because Wow, what perfect timing to talk about real estate.
2:16
Speaker 1: Just at the towards the end of the year. Rates
2:18
Speaker 1: are going higher, real estate prices are getting a little wobbly,
2:22
Speaker 1: and I have a million questions about all of that.
2:26
Speaker 1: But before we get to that, let's talk a little
2:28
Speaker 1: bit about you and your background. You started your career
2:32
Speaker 1: doing M and A at Goldman Sachs. Tell us a
2:34
Speaker 1: little bit about that experience. What was that Like, I
2:38
Speaker 1: back back up actually a little bit further and thinking
2:40
Speaker 1: about how did I get there, because I don't think
2:42
Speaker 1: it was very obvious actually that I would come out
2:45
Speaker 1: of Yale with an Ethics, Politics and Economics degree perfect
2:49
Speaker 1: and end up in M and A on Wall Street.
2:52
Speaker 1: But so much, of course for all of us probably
2:54
Speaker 1: comes back to those formative years with our families. And
2:57
Speaker 1: in my house, I was the oldest of three girls.
3:00
Speaker 1: My mom was a high school science teacher in our
3:02
Speaker 1: public high school, and my dad worked for a cosmetics company,
3:06
Speaker 1: Avon products, you know, like the Al Ladies. And so
3:09
Speaker 1: for most of my life, I mean really for all
3:11
Speaker 1: my life that I remember his company, and if I
3:14
Speaker 1: would go to visit, they have things on the wall
3:16
Speaker 1: that says the company for women. He routinely had women
3:19
Speaker 1: who were his managers, his bosses, and there was a
3:21
Speaker 1: female CEO for a really long period of time. And
3:23
Speaker 1: so as people were thinking about, Okay, what do you
3:26
Speaker 1: do after college? I was thinking any number of things,
3:29
Speaker 1: and mostly that I didn't really know what I wanted
3:31
Speaker 1: to be when I grew up. But I was not
3:33
Speaker 1: kind of at all informed by gender norms that people
3:37
Speaker 1: ask me a lot about now, in particular, how you
3:39
Speaker 1: know a woman? How did you think about ending up
3:41
Speaker 1: in this page? So how did that color what you
3:43
Speaker 1: focused on at college and how you molded your career? Well?
3:47
Speaker 1: I thought about when when I thought about college and
3:49
Speaker 1: what I did there and why I selected going to Yale.
3:52
Speaker 1: It was largely, I think the start of me recognizing
3:55
Speaker 1: that I'm a person who loves to learn and loves
3:58
Speaker 1: to just keep expanding skills. And so I in college
4:04
Speaker 1: did a lot of reading and writing and thinking, it's
4:06
Speaker 1: what you do, I guess, with a liberal arts degree.
4:09
Speaker 1: And then when I was going to Goldman, there were
4:12
Speaker 1: a couple of objectives. I guess. One was wanting to
4:14
Speaker 1: be able to pay for my life in New York
4:17
Speaker 1: and pay off student loans exactly, and then also build
4:21
Speaker 1: a set of skills that could be used anywhere. And
4:24
Speaker 1: I wasn't at that point sure if I would end
4:25
Speaker 1: up in a corporate role or I would end up
4:28
Speaker 1: in the Peace Corps or something like that. And so
4:31
Speaker 1: what investment banking I thought offered, and I'd say ultimately
4:34
Speaker 1: really delivered, was an experience where you could learn a
4:38
Speaker 1: ton of different analytical skills, writing skills for business contexts,
4:42
Speaker 1: persuasion skills, you know, the opportunity to be in a
4:44
Speaker 1: boardroom watching senior professionals, whether it was the chairman of
4:48
Speaker 1: the board or the CEO of the company, or the
4:50
Speaker 1: investment bank, or leading your deal, getting to ideas and
4:53
Speaker 1: outcomes that were influenced based on information. And so I
4:57
Speaker 1: felt that my experience do doing you know, M and
5:00
Speaker 1: A Goldman gave me this whole stable of skills that
5:04
Speaker 1: set me up for really just about anything. And how
5:08
Speaker 1: did you shift into real estate principal investment at at
5:12
Speaker 1: Coleman Sex. That seems like a big leap from traditional
5:15
Speaker 1: M and A. Well, I would say that probably the
5:18
Speaker 1: vast majority of folks who were in my analysts classic Goldman,
5:21
Speaker 1: particularly in the merger group, when they were looking for
5:24
Speaker 1: their next thing to do, we're looking more towards private equity,
5:28
Speaker 1: more traditional private equity, kind of like what my colleagues
5:30
Speaker 1: in there are BCP team do, which is investing in companies.
5:34
Speaker 1: Some people maybe we're going to hedge funds as well,
5:37
Speaker 1: but I'd say overall folks are more kind of corporate oriented,
5:41
Speaker 1: you know, investing in companies, and for me that was interesting.
5:45
Speaker 1: I definitely wanted to gain investing skills. I found one
5:48
Speaker 1: of the things that was a little unsatisfying as a
5:50
Speaker 1: merger bankers. You'd you'd work on a transaction, you'd help
5:53
Speaker 1: a company buy something or sell something, or merge with
5:55
Speaker 1: another business, but then you really never knew whether your
5:59
Speaker 1: model was at all close to accurate, how did it
6:01
Speaker 1: work out? Ultimately? All of the things you thought were
6:03
Speaker 1: going to happen, did it ultimately happen? And so I
6:05
Speaker 1: wanted to be part of that kind of follow through.
6:07
Speaker 1: And that's why moving to the investment side was interesting
6:10
Speaker 1: to me. But I would say when it when it
6:12
Speaker 1: came to kind of what part of investing, I think
6:17
Speaker 1: being a merger banker did inform what I wanted to
6:19
Speaker 1: do next, because when you're doing that every day, you're
6:23
Speaker 1: interacting with different clients and different industries and having to
6:26
Speaker 1: learn a whole new set of vocabulary, whole new business.
6:29
Speaker 1: And I thought, you know, if I want to start
6:31
Speaker 1: to be a great investor, and and in particular I
6:34
Speaker 1: didn't know this term at the time, but you know,
6:36
Speaker 1: Steve Schwartzman were first to as pattern recognition, great investors
6:39
Speaker 1: are really great at pattern recognition. You want to start
6:42
Speaker 1: building that building expertise. I felt I wanted to move
6:45
Speaker 1: into something that was still large and wasn't gonna piehole
6:48
Speaker 1: me or pigeonholed me at a very young age in
6:50
Speaker 1: my career um but where I could be working in
6:53
Speaker 1: and out of a common vovocabulary that could apply across
6:56
Speaker 1: all kinds of geographies and asset classes, and real estate
6:59
Speaker 1: offered that um. I'd also say, you know, interestingly, when
7:02
Speaker 1: I was going to interviews at different private equity firms
7:05
Speaker 1: or different real estate firms, it was noticeable that in
7:08
Speaker 1: the real estate brochures of those companies, there was a
7:12
Speaker 1: huge amount of diversity in the kinds of people that
7:15
Speaker 1: worked at these firms. And it was all sorts of
7:18
Speaker 1: dimensions of diversity, including kind of the nature of people's degrees.
7:21
Speaker 1: You had people who never had a college degree, folks
7:23
Speaker 1: who are architects, folks who are lawyers, folks who had
7:25
Speaker 1: a more traditional M b A. And And what I
7:28
Speaker 1: found was these were all people who were really interested
7:30
Speaker 1: in participating in in a people business ultimately, which is
7:35
Speaker 1: where do people live and work and shop, and how
7:38
Speaker 1: great cities come together and things like that. And I
7:41
Speaker 1: really wanted to be attached to those kinds of those people.
7:44
Speaker 1: And they're passionate about what they were doing, So so
7:46
Speaker 1: let me engage in a little bit of pattern recognition
7:49
Speaker 1: M and A. The success of a of a deal
7:52
Speaker 1: depends on that structure. The price paid how it is
7:56
Speaker 1: structured in terms of upfront costs, ongoing courts, what you getting,
8:00
Speaker 1: and real estate in many ways, especially commercial real estate,
8:05
Speaker 1: kind of parallels that thing. What are you paying, what's
8:07
Speaker 1: the structure of the deal, how is it financed? Am
8:09
Speaker 1: I oversimplifying or is that a fair comparison? Now? I
8:12
Speaker 1: mean again, there's so many things that carry over from
8:15
Speaker 1: one thing to another. Um and interestingly and happy to
8:19
Speaker 1: come back to these things I learned in helping companies
8:22
Speaker 1: through murders, particularly around things like communications and shareholder relations
8:26
Speaker 1: and and employee engagement that have now served me really
8:29
Speaker 1: well a couple of decades later in my career. But
8:31
Speaker 1: I'd say those are all similar things, whether you're talking
8:35
Speaker 1: about companies that make something or companies that own real
8:39
Speaker 1: estate or real estate assets. And I'd say, when when
8:42
Speaker 1: I think about Blackstone and how we work on our
8:44
Speaker 1: transactions and what has served us so well over time,
8:48
Speaker 1: it certainly has to do with buying great quality real
8:51
Speaker 1: estate and the price we pay for it. A big
8:52
Speaker 1: part of it, also, though, is the capital structure you
8:54
Speaker 1: set up and is it able to withstand anything that
8:57
Speaker 1: can come your way, including tough environments that you might
8:59
Speaker 1: not control. So I'm glad you mentioned that, because before
9:03
Speaker 1: we get to two thousand and ten and you moved
9:04
Speaker 1: to Blackstone, let's talk about a tough environment. You were
9:08
Speaker 1: at Goldman Sachs in the real estate division in the
9:12
Speaker 1: middle of two thousand and eight two tho nine, right
9:15
Speaker 1: through the worst of the financial crisis, so I have
9:18
Speaker 1: to ask, what the hell was that like, Well, it
9:22
Speaker 1: was definitely a difficult time. Um, I'm not laughing out
9:25
Speaker 1: of joy, but out of you know, kind of. It's
9:27
Speaker 1: always still a stunner. All of us who were in markets,
9:32
Speaker 1: in real estate and derivatives and trading in anything, who
9:34
Speaker 1: survived that baptism of fire. People have told me stories
9:39
Speaker 1: that they came through that, and that affects you the
9:44
Speaker 1: rest of your career. That colors It leaves a mark
9:47
Speaker 1: and colors you forever. Well, I would say, I feel
9:50
Speaker 1: like in the first decade of my career I actually
9:52
Speaker 1: had to somewhat similar experiences in that way, because I
9:56
Speaker 1: remember I came out of college three months after the
9:58
Speaker 1: dot com rubble burst. So I was sitting at graduation
10:01
Speaker 1: and classmates were getting emails saying their offers were rescinded
10:04
Speaker 1: because their company was going out of business, and I
10:07
Speaker 1: went from again this merger group at Goldman, which was
10:11
Speaker 1: focused only on the biggest possible deals, to working on
10:14
Speaker 1: what were relatively small transactions but for important clients. Uh.
10:17
Speaker 1: And by the way, for me again with a learning agenda,
10:19
Speaker 1: there's learning and all of that, but environments change quickly,
10:23
Speaker 1: and whether it's the investment you make or you personally,
10:26
Speaker 1: it's your ability to kind of keep putting one foot
10:28
Speaker 1: in front of the other and move through that. Two
10:32
Speaker 1: and ten was a particularly tough and very formative experience,
10:36
Speaker 1: and I would say there are so many important lessons
10:40
Speaker 1: learned for me. One is an investor, the importance of
10:43
Speaker 1: buying super high quality assets, putting resilient capital structures in place,
10:48
Speaker 1: having access to reserves so that in a moment where
10:52
Speaker 1: you need to invest more capital in your transaction or
10:54
Speaker 1: where you need to or you have an opportunity I
10:57
Speaker 1: should say, to buy back debt at a discount, being
10:59
Speaker 1: able to capitalize on those kinds of opportunities is so important.
11:02
Speaker 1: And frankly, we didn't have all those opportunities, and we
11:05
Speaker 1: hadn't set ourselves up as well. I really Blackstone meanwhile,
11:10
Speaker 1: and we'll get to that had, and that's a big
11:12
Speaker 1: part of how Blackstone has been set up for so
11:14
Speaker 1: much success in the decades that followed. But let me
11:16
Speaker 1: let me interrupt you one second. So everything you described
11:19
Speaker 1: are the sorts of things that you would imagine everybody
11:24
Speaker 1: should be prepared for. It does, and I'm kind of
11:28
Speaker 1: surprised to hear that one of the largest and savvayest
11:33
Speaker 1: shops on the street kind of wasn't prepared for it.
11:37
Speaker 1: Is that the sort of thing that the lesson we
11:41
Speaker 1: learned from it is that the takeaway Obviously, Goldman has
11:44
Speaker 1: so many different moving parts, and the derivatives group on
11:48
Speaker 1: that side might be working at cross purposes with long
11:51
Speaker 1: term real estate investment on this side. So so hold
11:53
Speaker 1: that aside. But is the takeaway from the financial crisis
11:57
Speaker 1: that you have to be resilient. You have to reserves,
12:00
Speaker 1: You have to purchase assets that are robust enough that
12:04
Speaker 1: they could withstand a beating, and you have to have
12:07
Speaker 1: enough dry powder that when these opportunities come along to
12:10
Speaker 1: buy high quality assets at the stress prices, you have
12:13
Speaker 1: to be ready to jump. I think you pretty much
12:16
Speaker 1: have it, Barry. I mean, I think about for example,
12:19
Speaker 1: Blackstones track record. We've been investing in real estate for
12:22
Speaker 1: over thirty years and in our opportunistic funds. So these
12:24
Speaker 1: are the funds where we're trying to generate higher returns
12:29
Speaker 1: for customers in a relatively shorthold period for the assets
12:31
Speaker 1: we buy for them. We've had sixteen percent net returns
12:35
Speaker 1: on all of the capital we've invested over thirty years
12:40
Speaker 1: net net of feedes. Are we gonna get a red
12:43
Speaker 1: flag from a compliance or is that an official It's
12:45
Speaker 1: in our public statements. So it's our opportunistic real estate strategy.
12:50
Speaker 1: Six per a net of fees thirty years. That's an
12:55
Speaker 1: amazing it's an amazing return. And when you look across
12:59
Speaker 1: that and what you what I always think about is
13:03
Speaker 1: there were a lot of different kinds of environments. We
13:06
Speaker 1: were investing in things that felt great, things that felt
13:08
Speaker 1: really terrible, things that felt good when we bought real
13:10
Speaker 1: estate and didn't feel so good a couple of years
13:11
Speaker 1: later perhaps. But what you just touched on is what
13:14
Speaker 1: I think is most important. You can't control the environment
13:17
Speaker 1: you're in, but you can control the decisions you make
13:19
Speaker 1: leading up to that and through it, and the things
13:22
Speaker 1: that I think really distinguished what we were able to
13:25
Speaker 1: do at Blackstone and what got us to the other
13:27
Speaker 1: side of the financial crisis in a way most real
13:29
Speaker 1: estate investors did not. Were these things good assets, resilient
13:33
Speaker 1: capital structures, access to reserves, access to new capital to
13:36
Speaker 1: go on the offensive and and take advantage of moments
13:39
Speaker 1: where there's there's distress pricing. So Gullman and you're looking
13:42
Speaker 1: around at the end of the financial crisis and you're
13:45
Speaker 1: aware of, hey, we missed opportunities here. This could have
13:49
Speaker 1: been a little tighter, this could have been and you
13:51
Speaker 1: run into Blackstone and it's like, Wow, these guys, I
13:54
Speaker 1: wish we had that way we were. How do I
13:57
Speaker 1: get involved with that? It's it's interesting, it was it
13:59
Speaker 1: was a little they came out I think a little
14:01
Speaker 1: differently than that. What I would say is I had
14:03
Speaker 1: an amazing experience at Goldman, including i'd say the learnings
14:06
Speaker 1: that I had an opportunity to access through the financial crisis,
14:10
Speaker 1: um particularly getting those up learnings that are relatively early
14:14
Speaker 1: part of my career. I think it is so important.
14:17
Speaker 1: What really got me thinking about doing something different was
14:21
Speaker 1: was just you was I continuing to learn? Was there
14:25
Speaker 1: a will to keep investing in real estate? Having had
14:28
Speaker 1: some of those traumatic experiences as a firm, and I
14:31
Speaker 1: felt like I wanted to make sure I was in
14:33
Speaker 1: a place where I personally was not treading water and
14:36
Speaker 1: I had an opportunity to keep learning. And I knew
14:39
Speaker 1: that I wanted to continue to be in real estate.
14:41
Speaker 1: I was not sure exactly in what aspect. And I
14:46
Speaker 1: was actually quite surprised when Blackstone reached out to me
14:49
Speaker 1: about a role to work with institutional clients do capital
14:52
Speaker 1: raising and investor engagement. And I was surprised mostly because
14:56
Speaker 1: I had no experience with that at all. I had
14:58
Speaker 1: come at Goldman almost all of our capital had come
15:01
Speaker 1: from high net worth clients. Also, I had done acquisitions.
15:05
Speaker 1: I didn't have investor experience really, UM and what Blackstone
15:10
Speaker 1: was just kind of I think looking at it a
15:12
Speaker 1: little differently and saying, if there's a person who understands
15:15
Speaker 1: real estate and can understand markets, but also can can
15:19
Speaker 1: help our clients understand better, what are we doing with
15:21
Speaker 1: their capital? Or if they're not yet a client, why
15:25
Speaker 1: but we're offering compelling um there could be an interesting
15:29
Speaker 1: match there. And I think just generally a feeling like
15:32
Speaker 1: wet Blackstone. Our performance was strong through the financial crisis.
15:35
Speaker 1: We were able to open doors and keep open doors
15:38
Speaker 1: with clients, but it was all about stewarding those relationships
15:42
Speaker 1: and how do we do that better? And so what
15:44
Speaker 1: what got me ultimately really excited about the Blackstone opportunity
15:48
Speaker 1: was not so much that I had any confidence that
15:50
Speaker 1: I want to do investor relations or that you know,
15:52
Speaker 1: that was going to be my my long term career destiny.
15:54
Speaker 1: Was that I wanted to work with these people who
15:57
Speaker 1: were really focused on doing a great job, not only
16:01
Speaker 1: through the investments they made, but through the interactions they
16:03
Speaker 1: created with their clients. And I felt like that move
16:06
Speaker 1: would allow me to continue to learn and grow and
16:09
Speaker 1: frankly diversify my skill sets, so I'd be better set
16:11
Speaker 1: up to be a leader in in a bunch of
16:13
Speaker 1: different capacities in the future. So let me ask you
16:15
Speaker 1: a very obvious question. You shift from high net worth individuals,
16:21
Speaker 1: and no matter how high net worth they are, their individuals,
16:25
Speaker 1: they react to markets. They can be emotional. The So
16:29
Speaker 1: I remember, I have a vivid recollection. In the midst
16:32
Speaker 1: of the financial crisis, the news flow was just re
16:37
Speaker 1: and we were on the right side of it, but
16:39
Speaker 1: it was so relentlessly negative even people making money in
16:43
Speaker 1: the downturn were unhappy. Um. And then you shift to
16:48
Speaker 1: institutions that have a much longer time horizon and a
16:52
Speaker 1: very different headspace. Even though there are individuals at those
16:57
Speaker 1: various endowments, institutions, what have you. How does the energy
17:02
Speaker 1: and the vibe and the conversations change. Is it's still
17:05
Speaker 1: people or people and they're freaking out, or hey, we
17:08
Speaker 1: have a perpetual lifespan and so we don't care about
17:12
Speaker 1: next quarter, we care about the next century. Am I
17:15
Speaker 1: exaggerating or well? I would say I think for all
17:18
Speaker 1: investors of any type, whether it's size or whether you're
17:22
Speaker 1: an individual investor or institutional investor, really what matters most
17:26
Speaker 1: is performance in the end especially we as a manager,
17:30
Speaker 1: if we can show up and say we continue to
17:32
Speaker 1: generate great performance on your investments. It could be any
17:36
Speaker 1: kind of client on the other side of the table
17:38
Speaker 1: that is the most important, That the most important. I
17:41
Speaker 1: think that from my perspective, the biggest difference and this
17:45
Speaker 1: may evolve over time, but the biggest difference between an
17:48
Speaker 1: institutional client, so that state pension plan or charitable foundation
17:52
Speaker 1: or university and down in versus an individual investor. I think,
17:55
Speaker 1: for the most part, institutional investors have decided that they
17:59
Speaker 1: want a knee real estate to be a core position
18:01
Speaker 1: in their portfolio in and out of cycles. And that's
18:06
Speaker 1: because real estate in strong economies can generate basically very
18:10
Speaker 1: strong alpha. In weaker times or in an inflationary environment
18:14
Speaker 1: we're in right now, for example, as a real asset
18:17
Speaker 1: a hard asset, it preserves value as cost to replace
18:21
Speaker 1: those assets go up. It's a cash flowing asset where
18:23
Speaker 1: you can remark your rents to market in a in
18:26
Speaker 1: a rising cost environment, and so um I think those
18:31
Speaker 1: institutional investors are really committed to real estate. Individual investors,
18:35
Speaker 1: for the most part, have not yet determined that real
18:39
Speaker 1: estate is something they want and need to leave as
18:42
Speaker 1: core to their portfolio in and out of cycles. I
18:44
Speaker 1: think that is changing, and I think in particular, when
18:47
Speaker 1: you look back to environments similar to what we're in now,
18:50
Speaker 1: where you see rising interest rates persistent inflation, you think
18:54
Speaker 1: about how well real estate has performed in those moments.
18:57
Speaker 1: I think individual investors are starting to appreciate how attractive
19:01
Speaker 1: this is as a part of their portfolio. But that
19:03
Speaker 1: is a different kind of approach to portfolio construction and
19:06
Speaker 1: for individual investors. I always run into the when we
19:09
Speaker 1: discuss real estate. I find I have to say, stop
19:13
Speaker 1: focusing on individual homes. That's just one tiny aspect of
19:17
Speaker 1: real estate. You have to think in broader, longer terms
19:20
Speaker 1: and commercial sides, not your neighbor's household for thirty less
19:24
Speaker 1: than the expected. Let's talk about warehouses, Let's talk about farmland.
19:29
Speaker 1: Let's talk about things that it doesn't matter necessarily what
19:32
Speaker 1: the economy is doing. People got to eat, goods are
19:34
Speaker 1: still being moved around the country. I mean, I think
19:39
Speaker 1: separating the for sale residential market from for rent commercial
19:43
Speaker 1: real estate, including rental apartments, is so important. These are
19:48
Speaker 1: different things, and I think you can't just mark what's
19:50
Speaker 1: going on in the single family for sale housing environment
19:54
Speaker 1: with what might be happening in warehouses or rental apartment
19:58
Speaker 1: complexes or office buildings. Quite quite fascinating. So let's talk
20:03
Speaker 1: a little bit about your team that you run. How
20:06
Speaker 1: large is the real estate team in Blackstone? The real
20:09
Speaker 1: estate team at black Stones about nine people globally. That's
20:13
Speaker 1: a big chunk of the phone. It's a big chunk
20:15
Speaker 1: of the firm. And I think what what actually that
20:17
Speaker 1: under states is the impact we have through all the
20:20
Speaker 1: portfolio companies we we own in our funds, So we
20:23
Speaker 1: own fifty five portfolio companies, and that really forms a
20:27
Speaker 1: huge extension of what we're able to do and then
20:30
Speaker 1: also see in terms of people on the ground across
20:32
Speaker 1: the world operating in specific real estate sectors and then
20:35
Speaker 1: sending back the information they're working with every day. So
20:38
Speaker 1: when you say portfolio companies, I immediately think of like
20:42
Speaker 1: Bornado or are you talking about specific privately held companies
20:46
Speaker 1: who themselves own lots of various commercial real estates. So
20:49
Speaker 1: these are specific privately held companies by our funds. So
20:53
Speaker 1: and these are companies that for the most part, we
20:55
Speaker 1: own and control a hundred percent of the company. And
20:59
Speaker 1: sometimes we buy companies and then continue to help grow
21:02
Speaker 1: them by new asset acquisitions or just growth in their
21:05
Speaker 1: cash flows. In other circumstances, we will build up companies
21:09
Speaker 1: through a series of smaller acquisitions. So an example would
21:12
Speaker 1: be in the US, were one of the largest owners
21:15
Speaker 1: of warehouse properties. We have a company called link Logistics.
21:18
Speaker 1: It owns about four hundred million square feet of warehouses.
21:22
Speaker 1: That is a company that we have built through a
21:23
Speaker 1: series of acquisitions. We identified a world class management team,
21:27
Speaker 1: and we said we want to build a great company,
21:30
Speaker 1: but we're not doing it through just one acquisition of
21:32
Speaker 1: one company. We're going to build it up through a
21:34
Speaker 1: series of transactions and the ideas. As the things grow,
21:36
Speaker 1: there's massive economies of scale and expertise, and what might
21:41
Speaker 1: have been a reasonable investment at one X, when it
21:45
Speaker 1: becomes a hundred X, it becomes a very very different experience.
21:48
Speaker 1: I would say yes, And I think one of the
21:50
Speaker 1: things that's so important about the scale of these businesses
21:53
Speaker 1: and the scale of our business together across all of
21:56
Speaker 1: these companies and our funds, is that we have a
21:59
Speaker 1: huge information advantage. We get data, real time, proprietary to
22:04
Speaker 1: us constantly coming off these businesses, and it really helps
22:08
Speaker 1: us make better decisions and you otherwise would be able
22:11
Speaker 1: to do if you didn't have access to this. And
22:13
Speaker 1: so rather than wait for a research report to tell
22:16
Speaker 1: us what's really happening in apartment rent growth or in
22:20
Speaker 1: new leases for warehouses in Northern Europe, we're getting those
22:23
Speaker 1: data points real time and that can help us inform
22:26
Speaker 1: on whether we're going to buy more of something I
22:28
Speaker 1: want to sell something, pivot, how we're managing assets and
22:32
Speaker 1: those are all just important decision making tools for us.
22:36
Speaker 1: You know, so much of what our work is is
22:38
Speaker 1: not just buying the real estate, but it's all about
22:41
Speaker 1: what is the value we can create? How can we
22:42
Speaker 1: grow cash flows? That's that's most most of the time,
22:45
Speaker 1: how you make money in real estate is growing the
22:46
Speaker 1: cash flow and those those data points coming from all
22:49
Speaker 1: across the world, and what's really happening in these assets,
22:52
Speaker 1: how our tenants making decisions help inform those strategies. I
22:56
Speaker 1: have heard from a variety of different companies that they're
22:59
Speaker 1: in internal data creation and analytics is just a huge thing.
23:06
Speaker 1: Used to take like a year or two. You get
23:08
Speaker 1: reports out back from the field, what's selling, what's not selling,
23:12
Speaker 1: what's rising. Now it's almost real time, it's almost instant. Yeah,
23:17
Speaker 1: we we definitely benefit from that, and I think we
23:19
Speaker 1: have the good fortune that there's there's been a heritage
23:22
Speaker 1: kind of from day one of using insights that we
23:26
Speaker 1: uniquely have access to, and the technology infrastructure around that
23:30
Speaker 1: has definitely improved. It's needed to improve at our scale
23:33
Speaker 1: for us to really be able to use all that information.
23:35
Speaker 1: But I think even just twelve or so years ago
23:38
Speaker 1: when I joined the firm, you'd have senior professionals with
23:41
Speaker 1: legal pads taking notes and meeting sal who what what
23:44
Speaker 1: did we what do we what do we just learn
23:46
Speaker 1: from that sale? Or how many people are in our process?
23:48
Speaker 1: What do they want to pay? You know? And and
23:50
Speaker 1: using those notes to kind of inform the thinking around
23:52
Speaker 1: next investment choices. Not exactly cutting edge, not exactly cutting edge,
23:56
Speaker 1: but I think this is one of the things that
23:58
Speaker 1: is so special about not just the real safe business
24:01
Speaker 1: of Black So, but really about our whole firm is
24:03
Speaker 1: the way we not only use data provided to us
24:07
Speaker 1: through tools, but also we're in constant conversation. I mean,
24:10
Speaker 1: we are a meeting heavy culture. We are a conversation
24:13
Speaker 1: heavy culture, and so much of that is about harnessing
24:17
Speaker 1: information and insights people have that can help make those decisions.
24:21
Speaker 1: And it's how we've built our investment committee process one
24:24
Speaker 1: global investment committee, or you're drawing in insights and expertise
24:27
Speaker 1: from around the world. It's just trying to say, Okay,
24:30
Speaker 1: we have access to advantages through information that others may not,
24:35
Speaker 1: and let's use that rather than kind of risk that
24:37
Speaker 1: that just stays on the sideline. That's really interesting. So
24:40
Speaker 1: SO let's talk about market timing. You're a fantastic market
24:44
Speaker 1: time and what I mean by that is you joined
24:47
Speaker 1: Blackstone right at the tail end of the financial crisis
24:51
Speaker 1: when real estate was the worst that's been in decades,
24:55
Speaker 1: and from there you've had the wind at you're back
24:58
Speaker 1: for a dozen years. I have to ask a silly question,
25:02
Speaker 1: how much of what's happened the past twelve years has
25:05
Speaker 1: just been spectacular timing and how much of it is
25:09
Speaker 1: just recognizing, Hey, things are very cheap, financing isn't expensive.
25:15
Speaker 1: Now is the time to get aggressive? Well, I would
25:17
Speaker 1: say timing can matter, and we're definitely in a moment
25:21
Speaker 1: where we think dislocation in the market is going to
25:23
Speaker 1: create interesting buying opportunities at values that are going to
25:27
Speaker 1: feel like very attractive basis. But in the future or
25:30
Speaker 1: are we there yet? We're not there yet. We're getting there,
25:33
Speaker 1: but not quite there yet. I'd say, seventh inning, I
25:36
Speaker 1: don't know, I'm really bad. I want you to tell
25:38
Speaker 1: me Tuesday at the truck If I knew that, I
25:43
Speaker 1: would turn that with you, Barry Um. But you know,
25:45
Speaker 1: I would say, on the on the general idea of
25:47
Speaker 1: like market timing, it can be helpful, of course, to
25:50
Speaker 1: pick a really interesting moment to enter a market by
25:53
Speaker 1: a company by bineid. I would say, though, if you
25:55
Speaker 1: look at the history of Blacks on real estate, some
25:57
Speaker 1: of our best investments were made at the worst post,
26:00
Speaker 1: of course. I mean Hilton Hotels is always the example
26:02
Speaker 1: we give. You could argue buying that in two thousand
26:05
Speaker 1: seven was the worst possible time. But going back to
26:07
Speaker 1: what we were talking about earlier, we bought a great company. No, no,
26:12
Speaker 1: we would, we took we took the company private. It
26:15
Speaker 1: was definitely not a distressed company. But what we were
26:17
Speaker 1: excited about was the ability to grow the company and
26:20
Speaker 1: really capitalize on its ability to to grow in a
26:24
Speaker 1: capital light way, and by bringing in an incredible management
26:27
Speaker 1: team led by Christmas Setta, we were able to help
26:30
Speaker 1: propel the growth and we were excited about that from
26:31
Speaker 1: day one. Probably the time. Well, we then hit the
26:35
Speaker 1: financial crisis and there were a lot of really dark
26:37
Speaker 1: days and I think if we we did probably an
26:40
Speaker 1: article search right now, you have found a lot of
26:42
Speaker 1: prognosticators in two thousand eight nine in ten saying this
26:46
Speaker 1: was this was going to be a you know, a
26:48
Speaker 1: terrible black spot for us, and goes back to exactly
26:51
Speaker 1: what you said by robust properties and a good structure
26:55
Speaker 1: that can tolerate and if it survived that hurricane, right
26:59
Speaker 1: and if in the most profitable private equity investment ever made.
27:03
Speaker 1: And so that's why again buying in in more distressed
27:08
Speaker 1: environments definitely helpful, but it's not really the only way
27:10
Speaker 1: to find success, I think, in anything. And to your
27:13
Speaker 1: question about when I joined Blackstone and what's what's been happening,
27:17
Speaker 1: the way I think about the last twelve years for
27:19
Speaker 1: me and for our business, it's really that story of
27:22
Speaker 1: what happened coming out of the financial crisis and the
27:25
Speaker 1: fact that during that period of time, most real estate
27:28
Speaker 1: companies struggled to return capital to their investors, let alone
27:32
Speaker 1: generate a profit, and black Stones funds to that period
27:35
Speaker 1: generated substantial profits because we had made those good choices
27:38
Speaker 1: not just about the investments, but the capital structures, about
27:41
Speaker 1: the reserves, about having dry powder. And when we got
27:44
Speaker 1: to the other side of the financial crisis, our clients
27:47
Speaker 1: really trusted us to start doing more for them than
27:50
Speaker 1: just those opportunistic funds I was talking about, and that
27:52
Speaker 1: has given us an opportunity to serve more clients and
27:56
Speaker 1: with more products that acts as more parts of the
27:59
Speaker 1: real estate market it than just those opportunistic strategies I
28:02
Speaker 1: talked about. I have used the phrase financial crisis PTSD
28:05
Speaker 1: and in no way being disrespectful to people who actually
28:09
Speaker 1: suffer PTSD in combat or whatever. But everybody who came
28:14
Speaker 1: through that felt felt the use the phrase trauma. But
28:20
Speaker 1: you're now saying something even more interesting, which is when
28:24
Speaker 1: you come through that intact and demonstrating an ability to
28:28
Speaker 1: navigate that environment for your clients. At that point, hey,
28:33
Speaker 1: we want to go pedal to the metal. They open
28:35
Speaker 1: up the floodgates and say, if you survive that craziness
28:39
Speaker 1: in a normal economy, whatever you say, go with it.
28:42
Speaker 1: How does the trust that's built up over that time
28:45
Speaker 1: get get put to use following a crisis like the GFC. Well,
28:51
Speaker 1: I'd say, um, you're really in two ways. One is
28:55
Speaker 1: that our clients have given us more capital. And I
28:57
Speaker 1: think many clients came through the GFC deciding rather than
29:00
Speaker 1: sprinkle their investments around with a lot of managers, they
29:02
Speaker 1: want to do more with their more successful managers, and
29:05
Speaker 1: we've definitely been a beneficiary of that. I think that
29:08
Speaker 1: trust has also allowed us, like I said, to expand
29:11
Speaker 1: into different types of real estates. So really, so much
29:13
Speaker 1: of our focus today is on growing and expanding our
29:17
Speaker 1: core plus business. This is real estate that has a
29:19
Speaker 1: very stable cash flow profile where we're able to generate
29:24
Speaker 1: compounding returns over time by adding value in assets that
29:30
Speaker 1: we want to own for a long periods of time
29:31
Speaker 1: and structures that allow us to do that. And we've
29:34
Speaker 1: done that more and more for institutional clients. We've expanded
29:37
Speaker 1: to doing that also for individual clients. And it's really
29:40
Speaker 1: that trust from the good performance in tougher environments and
29:43
Speaker 1: really any environment that allows us to do that. So
29:48
Speaker 1: I want to put a little context around the five
29:52
Speaker 1: sixty five billion in commercial real estate assets that you
29:56
Speaker 1: guys own globally. What is the real estate market? Some
30:00
Speaker 1: thing like it's like three times at It's like yeah.
30:04
Speaker 1: And that's because where I was leading to is, hey,
30:07
Speaker 1: at what point does this get too big? At what
30:09
Speaker 1: points are you picking b deals or sea deals? Three
30:13
Speaker 1: hundred trillion versus half a trillion, I'm assuming that means
30:17
Speaker 1: you have a ton of head room to just keep
30:19
Speaker 1: growing this. That's how we feel about it. I mean,
30:22
Speaker 1: the real estate market is so widely held, it's in
30:26
Speaker 1: so many places, there's so many different opportunities and interestingly,
30:30
Speaker 1: we should come back to this, but the opportunities change,
30:32
Speaker 1: right and based on kind of how people are using assets,
30:36
Speaker 1: and so we feel like there are plenty of opportunities
30:39
Speaker 1: that we can create. And I'd say again, our capital
30:42
Speaker 1: also is structured in a way that we're never under
30:45
Speaker 1: pressure to deploy capital and then sit in cash and
30:48
Speaker 1: nobody complains. And this is this is part of the trust,
30:51
Speaker 1: right is the is the structure the investors give you
30:53
Speaker 1: in terms of the flexibility of when you draw their
30:56
Speaker 1: capital to deploy into opportunities and what those look like.
30:59
Speaker 1: We have a lot of flexibility in our capital to
31:02
Speaker 1: move across sectors, to move across geographies, to wait to
31:06
Speaker 1: deploy the capital that they've committed until we find great opportunities.
31:10
Speaker 1: That's that's all a relationship built on trust. But it
31:13
Speaker 1: also means that we can be patient. So do you do, Hey,
31:16
Speaker 1: someone says I'm gonna give you a billion dollars, here's
31:19
Speaker 1: a hundred million, and you do a capital core and
31:21
Speaker 1: the balance as deals come up, or do they shovel
31:24
Speaker 1: all the money to you and you have to find
31:25
Speaker 1: a home for it until the correct opportunity comes along.
31:29
Speaker 1: I would say the vast majority of our capital, it's
31:32
Speaker 1: the former where use a capital calls a capital call
31:35
Speaker 1: as needed exactly, and that's got to help our o I.
31:38
Speaker 1: It's got to make numbers look really good because you're
31:40
Speaker 1: not forced to make a decision because you don't want
31:43
Speaker 1: to sit there earning half a percent, absolutely and more
31:47
Speaker 1: than anything, you don't want to be ever in a
31:49
Speaker 1: situation where you're either a force buyer or a force seller.
31:52
Speaker 1: And we set up all of our structures to make
31:53
Speaker 1: sure that we're we're able to generate continued great performance
31:57
Speaker 1: by deploying capital too great opportunities when we find them,
32:00
Speaker 1: and then also selling when we think the opportunities right now,
32:02
Speaker 1: because we're forced to do so. What's the great war
32:04
Speaker 1: on Buffett quote? The difference between baseball and investing is
32:08
Speaker 1: there no cold strikes? You could just sit there with
32:09
Speaker 1: the bat on your shoulder and wait for the pitch
32:12
Speaker 1: you like, and there's no there's no they're calling strikes
32:17
Speaker 1: on you. You can really be patient, and it has
32:19
Speaker 1: to make a huge difference. Patience matters a lot to say,
32:22
Speaker 1: To say, the least. I'm very re helts. You're listening
32:25
Speaker 1: to Masters and Business on Bloomberg Radio. My extra special
32:28
Speaker 1: guest today is Kathleen McCarthy. She is the global co
32:31
Speaker 1: head of real Estate at black Stone. They manage over
32:34
Speaker 1: five hundred and sixty five billion dollars in real estate
32:37
Speaker 1: investments around the world. So let's talk a little bit
32:40
Speaker 1: what's going on today. There's a quote of yours that
32:43
Speaker 1: I found really fascinating. We are entering this tougher economic
32:48
Speaker 1: moment with capital and with cranes more in check than
32:52
Speaker 1: they have been in prior cycles, and I think that
32:55
Speaker 1: positions are real estate assets to do quite well. So
32:59
Speaker 1: I love the idea of capital and cranes and check.
33:03
Speaker 1: That's a great phrase. You're referring to people waiting to
33:06
Speaker 1: invest and people waiting to build well. I think where
33:11
Speaker 1: that quoe came from. It's just the concept that most
33:14
Speaker 1: real estate down cycle, so periods of time where real
33:18
Speaker 1: estate is under more pressure from a performance perspective, come
33:22
Speaker 1: about because there's been a lot of new capital, often
33:27
Speaker 1: lent to people who then go build speculative real estate
33:30
Speaker 1: meaning and speculative meaning that they're building and office building
33:33
Speaker 1: without a tenant in mind um and oftentimes what what
33:38
Speaker 1: you've seen in prior cycles is that the market gets
33:42
Speaker 1: really nice and healthy, people are really happy with performance,
33:45
Speaker 1: Lenders get more comfortable, they lend folks provide equity to
33:49
Speaker 1: new projects. You end up with a lot of construction,
33:52
Speaker 1: and something happens, either there's been too much construction or
33:54
Speaker 1: the economy softens, and then real estate is in real
33:58
Speaker 1: estate is that under pressure because there's been too much
34:00
Speaker 1: capital and too many cranes. And I think what feels
34:03
Speaker 1: very different about this moment is that we really never
34:07
Speaker 1: got back to those more heady levels of lending and
34:11
Speaker 1: more significant amounts of new construction prior to for example,
34:16
Speaker 1: the FED responding to inflation and interest rates, and so
34:20
Speaker 1: we're heading into whatever we're heading into with record low
34:25
Speaker 1: levels of vacancy relatively, i'd say disciplined capital structures. That's
34:31
Speaker 1: not to say people won't be under pressure from either
34:34
Speaker 1: debt service coverage challenges or loan to value challenges. But
34:38
Speaker 1: I think the combination of as you talked about, some
34:40
Speaker 1: of the learnings from the global financial crisis, some of
34:43
Speaker 1: the restrictions on banks. I think also we can't underestimate
34:47
Speaker 1: how COVID did create an interruption to what was a
34:51
Speaker 1: very healthy market and probably change things in terms of
34:55
Speaker 1: not every project that was ready to go was put
34:57
Speaker 1: into production in the summer of for example. And so
35:00
Speaker 1: what we're seeing on the ground now is that fundamentals
35:05
Speaker 1: when particularly in our preferred sectors, which are our biggest
35:08
Speaker 1: sectors are warehouses. That's our portfolio globally rental housing. UM
35:14
Speaker 1: I had no idea logistics and warehouse yeah. They We
35:18
Speaker 1: are high conviction investors and we pick themes that we
35:21
Speaker 1: think are really benefiting from the way people are living
35:25
Speaker 1: and working and shopping and just mega trends. And so
35:29
Speaker 1: starting actually in two thousand and ten, we started buying warehouses,
35:32
Speaker 1: not I think at first even recognizing what was happening
35:35
Speaker 1: with the e commerce, but like I mentioned, we pay
35:37
Speaker 1: really careful attention to what's happening in our portfolio, and
35:40
Speaker 1: we started to realize what e commerce was doing to
35:43
Speaker 1: drive demand for warehouse space and how there was a
35:47
Speaker 1: fundamental shift that started happening. Historically, warehouse performance just tracked
35:51
Speaker 1: GDP performance. It was basically a one to one correlation,
35:54
Speaker 1: and the house performance tracks g and then what you
35:58
Speaker 1: saw is with e commerce demand and the shift moving
36:01
Speaker 1: off goods online. It just changed. It just it just
36:04
Speaker 1: totally changed, you know, I don't I don't know, but
36:09
Speaker 1: it's definitely more than one to one. And I would
36:11
Speaker 1: say again, like going back to the point of cranes
36:14
Speaker 1: the news, there has been new supply, but it really
36:16
Speaker 1: has not kept up with the explosive growth in demand
36:19
Speaker 1: for a warehouse space, particularly in urban areas, so what
36:22
Speaker 1: we call sometimes last mile logistics, so where the warehouses
36:25
Speaker 1: closest to the densest population centers. Those assets are in
36:29
Speaker 1: demand because of e commerce retailers wanting to get things
36:33
Speaker 1: to people in the same day or within a few hours.
36:35
Speaker 1: Even we're also seeing really the impact of restoring and
36:39
Speaker 1: realignment of supply chains, and that is ongoing, and that
36:43
Speaker 1: is both of these phenomenal are global. One of the
36:45
Speaker 1: most interesting things is that these are often global stories.
36:48
Speaker 1: These these themes um the mega trends are rarely isolated
36:52
Speaker 1: to just one economy and so U when when you
36:55
Speaker 1: think about the performance of our warehouse portfolio in this year,
37:00
Speaker 1: in you it's been some of the strongest fundamentals that
37:03
Speaker 1: we've we've seen and and you know, things are softening
37:06
Speaker 1: in certain pockets, but it's it's still really benefiting from
37:10
Speaker 1: that that lower new supply environment. You mentioned the pandemic
37:14
Speaker 1: first Blackstone and you guys hybrid Are you in the
37:17
Speaker 1: office at what what is your We're fully in We're
37:20
Speaker 1: in really in five days. So that's really interesting because
37:23
Speaker 1: I wanted to ask the question Bloomberg. This is a
37:26
Speaker 1: big building, it's hybrid, but they're encouraging people to be
37:29
Speaker 1: in more often. My my own office, we're kind of
37:33
Speaker 1: always been virtual and we tell people we do a
37:36
Speaker 1: Monday morning meeting which you can call in on, but
37:39
Speaker 1: we asked people come in the office one of two
37:41
Speaker 1: days a week. I'm hearing more and more offices are
37:45
Speaker 1: moving to a hybrid with an anchor day. So all
37:49
Speaker 1: of this back and forth is really what will cities
37:53
Speaker 1: look like post pandemic. Is there going to be a
37:57
Speaker 1: huge piece of the commercial office space that's going to
38:01
Speaker 1: suffer from some form of a hybrid workforce? Because it
38:06
Speaker 1: doesn't feel like we're ever going back to every office
38:09
Speaker 1: in every city five days a week. That you guys
38:13
Speaker 1: are an exception. Most companies are not full five. It's
38:17
Speaker 1: three and two or four and one or two and three,
38:20
Speaker 1: like five days a week is kind of a rarity.
38:22
Speaker 1: I know Jamie Diamond wants everybody back in Chase five
38:26
Speaker 1: days a week, but it ain't happening. We come at it,
38:29
Speaker 1: I think as part of a mission orientation, which is
38:31
Speaker 1: we have this incredible responsibility from our investors to do
38:35
Speaker 1: the absolute best job we possibly can with their capital.
38:37
Speaker 1: That's such a smart thing to say, can I tell you?
38:40
Speaker 1: Because as much as the younger generation loves the hybrid workforce, hey,
38:44
Speaker 1: we're stewards of capital, and our clients expect to expect
38:48
Speaker 1: us to be here every day. Yes do it? I mean,
38:51
Speaker 1: and and so many of our customers as well, I
38:53
Speaker 1: would say, our frontline workers and emergency workers and teachers
38:58
Speaker 1: and firefighters. And so I feel like, how can we say, Okay,
39:02
Speaker 1: you you all need to be at work every day.
39:04
Speaker 1: You're protecting us, teaching our children. But we're gonna We're
39:06
Speaker 1: gonna be hybrid and not necessarily delivered the best we
39:08
Speaker 1: possibly Nobody wants their money manager and their pajamas with
39:11
Speaker 1: their in their fuzzy slippers when they're responsible for billions
39:15
Speaker 1: of dollars a huge responsibility. And I would say I
39:18
Speaker 1: also personally think we have a huge responsibility to our
39:21
Speaker 1: own team to training and learning. I mean, I'm learning
39:24
Speaker 1: and training all the time, and I think about it
39:26
Speaker 1: a lot. Like all the research on children in school, right,
39:30
Speaker 1: the learning loss from children not in school, It's the
39:34
Speaker 1: same thing in a workplace where all they're learning and
39:36
Speaker 1: then doing better. And so I think being together is
39:39
Speaker 1: so important now, as you know, I would love to
39:42
Speaker 1: convince everyone in the world that you know, being back
39:45
Speaker 1: in five days is really, you know, the right thing
39:48
Speaker 1: to do for for the whole ecosystem, the economy around
39:51
Speaker 1: where you work, and your own professional development and your
39:54
Speaker 1: customers experience. I firmly believe it. But I would say,
39:57
Speaker 1: as we think about what is happening in the broader
39:59
Speaker 1: world and how that's impacting office demand, I think we're
40:02
Speaker 1: in an era of experimentation. We believe that the office,
40:07
Speaker 1: in some format and for some periods of time in
40:10
Speaker 1: a week, will continue to be a really critically important
40:13
Speaker 1: part of culture for for organizations and corporations. And what
40:18
Speaker 1: we're seeing happening is really actually, i'd say, an acceleration
40:22
Speaker 1: of a trend that was started pre pandemic. I mean,
40:24
Speaker 1: it's so interesting. COVID really did accelerate so many trends
40:27
Speaker 1: in so many ways remote work cloud that It's funny
40:32
Speaker 1: because when we launched a firm, we had a national footprint,
40:35
Speaker 1: but we were New York based, So all the things
40:38
Speaker 1: that we've been doing during COVID, we started in and
40:43
Speaker 1: I was shocked in like people discovered FaceTime. It's like,
40:47
Speaker 1: you know that this technology is came out in two
40:50
Speaker 1: thousand eight. This is not a but it was a
40:54
Speaker 1: massive I feels like the pandemic brought forward a decade.
40:59
Speaker 1: I think in many ways and in different different sectors.
41:02
Speaker 1: For real state, it feels like whether it's like three
41:04
Speaker 1: years of an acceleration or ten, it's definitely that that
41:07
Speaker 1: pull forward. And what I'd say for office buildings, if
41:11
Speaker 1: we had met in two thousand sixteen, let's say, one
41:15
Speaker 1: of the things I would have probably called to your
41:18
Speaker 1: attention is the fact that so many office buildings, particularly
41:21
Speaker 1: whether you think at the lobbies or them the amenity
41:24
Speaker 1: floors for tenants, it started to feel more like a hotel.
41:28
Speaker 1: I mean, look at this beautiful Bloomberg building with the food.
41:33
Speaker 1: It's first all, it's a beautiful building, and then you
41:34
Speaker 1: have your food and amenities, and I don't know if
41:36
Speaker 1: you have a fitness center, but so many buildings now
41:38
Speaker 1: do all of these up on the roof. It's unbelievable,
41:41
Speaker 1: all these things to really attract people into the office
41:44
Speaker 1: and to create a sense of community while they're here.
41:48
Speaker 1: Cultural community, cultry and collaboration. That's really the fascinating thing
41:53
Speaker 1: about this building is kind of designed the way the
41:56
Speaker 1: original Pixar building was designed and ultimately the Apple space ship,
42:00
Speaker 1: which is everybody comes in the elevators through the sixth floor,
42:04
Speaker 1: no matter where you work, because it just creates these
42:07
Speaker 1: random interactions and you'd be amazed how often things spiral
42:11
Speaker 1: from that. That collaborative force, collaboration. It's really a very
42:17
Speaker 1: impressive thing when when as it works, it's super important.
42:19
Speaker 1: And again that goes that feeds our theory that the
42:21
Speaker 1: office and is definitely going to continue to be a
42:24
Speaker 1: part of culture and building culture and creating more from
42:29
Speaker 1: the team you have. So wait, let me interrupt you again.
42:31
Speaker 1: So the consensus seems to be, Hey, I want to
42:36
Speaker 1: invest in real estate, but not offices. They're distressed. Offices
42:41
Speaker 1: are going away. Put me into hospitality or farmland, but
42:45
Speaker 1: no office space. You guys aren't buying into that. Well,
42:49
Speaker 1: I would say for office specifically, or what is known
42:52
Speaker 1: as traditional office, we're seeing a real bifurcation in demand
42:57
Speaker 1: between with really the greatest man going to the highest quality, newest,
43:02
Speaker 1: best amenetize, most sustainable office buildings. And New York is
43:07
Speaker 1: a is a you know, a perfect example. I think
43:10
Speaker 1: of what is happening. The office stock in New York
43:12
Speaker 1: is very old compared to the giant I don't know,
43:15
Speaker 1: I was New York Times, a Wall Street Journal article.
43:17
Speaker 1: I think it was the Times about all of this
43:19
Speaker 1: real estate along Park Avenue that we're built in the fifties, sixties,
43:23
Speaker 1: seventies and have none of the amenities that my modern
43:28
Speaker 1: clients want today. And I think it's it goes beyond amenities.
43:30
Speaker 1: It's also the ability to create flexible space and create
43:34
Speaker 1: open spaces that you can move and change as your
43:36
Speaker 1: company's needs change, gathering places, and so I think that
43:41
Speaker 1: is real, real challenge for older office buildings in New York.
43:43
Speaker 1: The average age of an office building is sixty seven
43:47
Speaker 1: so and only about seven percent of the office stock
43:50
Speaker 1: in New York is less than ten years old. And listen,
43:52
Speaker 1: there's you don't have to be less than ten years
43:55
Speaker 1: old to get the demand. But I would say we're
43:56
Speaker 1: seeing those assets attract much more to and at higher prices,
44:01
Speaker 1: and so, uh, we think those are going to come
44:04
Speaker 1: out as more winners in this kind of this. So
44:10
Speaker 1: you want little to do with the older spaces. At
44:13
Speaker 1: what point do you take a sixty or seventy year
44:16
Speaker 1: old building and say knock it down put up a
44:18
Speaker 1: new one. Well, I would say these traditional office assets
44:22
Speaker 1: have been a relatively small part of our portfolio for
44:25
Speaker 1: a while because going back to our thematic investing, our
44:28
Speaker 1: portfolio is eighty percent concentrated in warehouses, rental housing, lab
44:32
Speaker 1: office space, and hospitality assets. So we'll get to biomedical
44:37
Speaker 1: research happening. Is that substantial enough that it's an asset
44:41
Speaker 1: class in your because I would imagine there's a lab here,
44:43
Speaker 1: there's lab there. You're saying this is much more substantial,
44:47
Speaker 1: much more substantial. And actually, was I think is super
44:50
Speaker 1: interesting is that there are a few critical nodes in
44:54
Speaker 1: the world. There's basically our whole portfolio is concentrated really
44:57
Speaker 1: in five Cambridge, US, Cambridge, UK, South San Francisco, Seattle,
45:02
Speaker 1: San Diego, and actually now Boulder, Colorado is emerging but
45:05
Speaker 1: these are like we sometimes describe as kind of the
45:08
Speaker 1: pulsing heart of research, and there is not enough space
45:14
Speaker 1: actually for all of the demand from biomedical tenants in
45:17
Speaker 1: these places, and going like, how how did we even
45:20
Speaker 1: come upon this theory and why this versus traditional office
45:24
Speaker 1: going I mentioned two thousand six fifteen, going back to
45:27
Speaker 1: that period of time when we started recognizing, wow, tastes
45:30
Speaker 1: and trends are changing a lot for more traditional office assets,
45:34
Speaker 1: and we were quite concerned actually to your question about
45:37
Speaker 1: if you have an older office building, it could be
45:40
Speaker 1: quite expensive to try to repurpose it, reconfigure it to
45:45
Speaker 1: really attract tenants that are are great, the best tenants
45:49
Speaker 1: in the world. And so we started thinking, Okay, if
45:51
Speaker 1: if office is going to be under pressure, are there
45:54
Speaker 1: segments or sub segments of the office market that we
45:56
Speaker 1: think will do better. And what we started to realize
46:00
Speaker 1: is that there was all of this capital and and
46:03
Speaker 1: and really a changing tide in terms of the research
46:07
Speaker 1: demand and dollars being funded into it. Everything from immunotherapies,
46:12
Speaker 1: which of course now we all know a lot about
46:13
Speaker 1: things in the pandemic, genomics, big data intersecting with personalized medicine,
46:19
Speaker 1: and and UH and a change also and how and
46:22
Speaker 1: where this research was being done. Like if you think
46:24
Speaker 1: about when I was growing up, all of the big
46:27
Speaker 1: pharmaceutical companies had these corporate campuses that were highly securitized
46:32
Speaker 1: deep in suburbs. And what started happening is all of
46:35
Speaker 1: those researchers and we want to be in cities adjacent
46:38
Speaker 1: to some of the best research institutions in the world,
46:41
Speaker 1: and and companies needed to be where they're their talent
46:44
Speaker 1: wanted to be. And so we UH in two thousand
46:48
Speaker 1: sixteen took private a nearly nine billion dollar company called
46:51
Speaker 1: BioMed and really concentrated the business in those best markets
46:56
Speaker 1: and then helped it grow. One of the great things
46:58
Speaker 1: about having the capital we have access to is that
47:00
Speaker 1: we were able to help continue to grow their footprint
47:03
Speaker 1: in those different cities and then therefore serve the tenants
47:07
Speaker 1: that we think are the most attractive in that space.
47:09
Speaker 1: And so that is an example of why you can't
47:12
Speaker 1: just pay the whole office market with a broadbrush. Lab
47:14
Speaker 1: office was was never a darling of real estate investors
47:19
Speaker 1: until the world changed and and the nature of the
47:21
Speaker 1: research happening, the volume of it and where it was
47:24
Speaker 1: getting done changed, and we I think we're at the
47:27
Speaker 1: forefront of really participating in that for our investors because
47:30
Speaker 1: we were looking for, okay, what does a megatrend and
47:33
Speaker 1: what's changing in the world. That's totally fascinating. The lab
47:36
Speaker 1: stuff is really I had no idea it was that huge.
47:40
Speaker 1: You can see obviously labs are large and important. I
47:43
Speaker 1: just didn't know it was large enough to be a
47:46
Speaker 1: substantial asset class. The other area you have been very
47:50
Speaker 1: enthusiastic about is hospitality sector. You guys are super bullish
47:54
Speaker 1: on that. We have been long believers in hospitality, and
47:58
Speaker 1: part of this is just a very long term growing
48:01
Speaker 1: demand trend for hospitality, for experiences, for travel and tourism.
48:05
Speaker 1: If you look at just about any graph of demand
48:08
Speaker 1: for air travel, demand for hotel room nights, whether it
48:11
Speaker 1: be leisure or business, you've seen a long term trend
48:13
Speaker 1: up into the right and pretty much only interrupted in
48:16
Speaker 1: a meaningful way by COVID and the great news I
48:19
Speaker 1: think if you're a hospitality owner is that you've seen
48:21
Speaker 1: a very strong balance back uh. In fact, I think
48:24
Speaker 1: demand for our hospitality assets is well exceeding what we
48:28
Speaker 1: saw in so we we remain very enthusiastic about it. Now,
48:32
Speaker 1: Hospitality assets are, you know, a more operational asset class.
48:37
Speaker 1: When you think about if you have a warehouse or
48:38
Speaker 1: rental apartment, you have very limited exposure to labor costs,
48:42
Speaker 1: very limited exposure to capital costs, and so in uh
48:46
Speaker 1: inflationary environment, your cash flow growth is can be more
48:51
Speaker 1: robust in those asset classes because you can really you
48:54
Speaker 1: see top line rent growth pushing through to the bottom
48:57
Speaker 1: line cash flow. In a hospitality asset, it can be
48:59
Speaker 1: more challenge lenged. But I think the good news is
49:02
Speaker 1: that is something that we have a lot of experience
49:04
Speaker 1: with and and we have the opportunity as a private
49:06
Speaker 1: investor to to work into our underwriting as we're thinking
49:09
Speaker 1: about buying assets, recognizing the environment you're in, recognizing higher costs,
49:14
Speaker 1: and so we we remain really attracted to attaching ourselves
49:18
Speaker 1: to the growth in demand for that asset class. So
49:20
Speaker 1: let's talk a little bit about the structure for hospitality,
49:22
Speaker 1: because I suspect a lot of people may not understand
49:26
Speaker 1: when they look at a hotel, any of the big
49:29
Speaker 1: brands with Hilton, whatever, very often individual hotels are owned
49:33
Speaker 1: by separate people, but the management company comes in and
49:38
Speaker 1: it's of the same management company, but every hotel might
49:42
Speaker 1: be distinctly owned by a separate investment group, individual owner,
49:46
Speaker 1: family owner. How does that challenge your investment process? We were,
49:52
Speaker 1: first of all, very accustomed to operating in a world
49:55
Speaker 1: where we may own, like we did with Hilton, both
49:57
Speaker 1: the real estate and the brand on it. We've actually
50:00
Speaker 1: seen a lot of opportunities in something like that to
50:02
Speaker 1: basically grow the brand and those franchises even onto real
50:06
Speaker 1: estate that the company may not own. Um And then
50:08
Speaker 1: there's other circumstances where we just own the asset and
50:11
Speaker 1: we work in partnership with a brand to help us
50:14
Speaker 1: operate in branded and I would say there's great power
50:16
Speaker 1: in great brands in real estate, like you know, just
50:19
Speaker 1: like any other segment of the economy. One of our
50:23
Speaker 1: our hotel companies that we own today is something called
50:25
Speaker 1: Great Wolf Lodges. Many of your listeners may have been there.
50:29
Speaker 1: It's it's water parks with hotels, and these assets are
50:35
Speaker 1: located within a couple hours driving distance of something like
50:38
Speaker 1: of the U S population, and it's a very affordable,
50:41
Speaker 1: attractive drive to destination vacation for families. And so that's
50:45
Speaker 1: an example where we've invested in a company that has
50:47
Speaker 1: a brand, and we're really trying to propel both the
50:50
Speaker 1: real estate strategy and the brand strategy to help it
50:53
Speaker 1: be a growing and faster growing company. As we're speaking
50:57
Speaker 1: on looking up the name of the tell in the
51:01
Speaker 1: Grand Caymans that I remember collapsing early in the financial
51:08
Speaker 1: crisis because because the underlying owner just kept leveraging and
51:15
Speaker 1: leveraging and leveraging, and somebody very smart in private equity
51:19
Speaker 1: went out and brought up the debt for pennies on
51:23
Speaker 1: the dollar, and the next time they went to refindance,
51:25
Speaker 1: they said, nope, pay, Oh you can't pay. Thanks, we'll
51:29
Speaker 1: take that billion dollar hotel. That story is just fascinating.
51:33
Speaker 1: How often do you see sort of unusual crazy investment
51:38
Speaker 1: themes blowing up like that? Well, or is that just
51:42
Speaker 1: leverage and don't Yeah, I would think too much that
51:45
Speaker 1: that's that. I think, you know it sounds I I'm
51:48
Speaker 1: a little bit familiar with that story. I'm definitely familiar
51:50
Speaker 1: with that hotel. I think it's a U. It's just
51:53
Speaker 1: an example of a capital structure that didn't work and
51:55
Speaker 1: wasn't prepared to withstand capital structure, and and and that's
52:01
Speaker 1: something in the hospitality space. Certainly, you can have cash
52:04
Speaker 1: flows that dip in a in a tougher environment UM
52:08
Speaker 1: or if you're not managing it well and you need
52:10
Speaker 1: a capital structure really built to withstand it. You mentioned
52:13
Speaker 1: that earlier, But every time I think about um a
52:17
Speaker 1: hotel that changes hands sort of in a very rapid
52:20
Speaker 1: period of time, it always feels like somebody took on
52:24
Speaker 1: too much, that bad capital structure, not building enough resiliency
52:29
Speaker 1: to withstand any sort of change in conditions. Yeah, definitely,
52:33
Speaker 1: I mean in a positive way, and an inflationary environment,
52:37
Speaker 1: hotel has the ultimate short duration least. So so we
52:40
Speaker 1: we talked ab Yeah, average rely sturation one night in
52:45
Speaker 1: the hospitality world. And you know, if you're managing it well,
52:48
Speaker 1: if you want a great outset, if you have a
52:49
Speaker 1: great capital structure, that can be a really good thing.
52:51
Speaker 1: And when rates are rising, um. But certainly if if
52:54
Speaker 1: you're not operating it well or if those rates come
52:56
Speaker 1: under pressure, it can be really tough of you. So
52:58
Speaker 1: let's talk about a related hospit fatality issue casinos. The
53:02
Speaker 1: Supreme Court decision said, sorry, Nevada, you don't get to
53:05
Speaker 1: be the only state that has gambling. How has this
53:09
Speaker 1: changed the landscape for investing? Is this a growth area
53:12
Speaker 1: or are we pretty well casino up in the United
53:15
Speaker 1: States or or around the world. Well, our focus in
53:19
Speaker 1: hotels that have casinos as part of their offering is
53:22
Speaker 1: really trying to find world class destination resorts that have
53:27
Speaker 1: demand drivers beyond just what's going on in that casino.
53:29
Speaker 1: And and actually our most profitable single asset investment ever
53:33
Speaker 1: was the Cosmopolitan Hotel in Las Vegas, which was an
53:36
Speaker 1: investment that we purchased from a bank that had had
53:40
Speaker 1: to foreclose in complete construction on the project. And we
53:43
Speaker 1: saw it not just as an opportunity to kind of
53:45
Speaker 1: reset and reset operations versus how a bank was handling it,
53:48
Speaker 1: but we tried, we thought really creatively about how could
53:51
Speaker 1: we turn this whole opportunity on its head make it
53:53
Speaker 1: the coolest place as a destination in Las Vegas. And
53:57
Speaker 1: we renovated every into the property five million dollars of
54:00
Speaker 1: capital invested to not only offer better guest rooms, but
54:04
Speaker 1: also you know, an amazing set of food choices and
54:07
Speaker 1: shows and entertainment. And when we sold it also we
54:11
Speaker 1: had a very creative exit that that found the right
54:13
Speaker 1: capital for the property itself and a right and the
54:15
Speaker 1: right capital for the operations. And what I think is,
54:19
Speaker 1: you know that that's just emblematic of buying an asset
54:21
Speaker 1: that is somebody might have just said, oh, that's a
54:24
Speaker 1: casino or casino hotel. We saw this as an entertainment
54:27
Speaker 1: destination and a strategy that we can then apply in
54:30
Speaker 1: other places as well. We recently took private company in
54:33
Speaker 1: Australia called Crown Resorts and it's really taking that same
54:36
Speaker 1: playbook of how do we how do we transform these
54:39
Speaker 1: assets operations in that case as well, you know, really
54:42
Speaker 1: help support a very carefully constructed compliance and legal structure
54:46
Speaker 1: around it as well. Um, but I think you know
54:49
Speaker 1: it's it's it's for us beyond just a casino. It's
54:52
Speaker 1: about that whole entertainment and tourism experience we can deliver.
54:56
Speaker 1: So let's look a little bit about multifamily and apartments.
54:58
Speaker 1: It feels like the financial crisis we have wildly unto
55:03
Speaker 1: builds single family homes, multi family homes, large apartment buildings.
55:08
Speaker 1: It seems like the demand for rentals is a key
55:11
Speaker 1: driver of inflation because they're just ain't enough apartments. What
55:16
Speaker 1: does that space look like, yeah, I think you you
55:19
Speaker 1: nailed it. We as a country, we have not built
55:22
Speaker 1: enough housing of all forms since the financial crisis. Depending
55:25
Speaker 1: on how you're calculating, it's something like we're short forward
55:27
Speaker 1: to six million units. Unbelievable, and it's really like a
55:31
Speaker 1: growth opportunity, really really tough to dig out. And I
55:34
Speaker 1: would say the environment we're in is actually making that
55:36
Speaker 1: affordability question more challenging because you've seen homebuilders pull back
55:39
Speaker 1: from new construction. It's harder for people to afford to
55:42
Speaker 1: buy a home today. The monthly cost of owning a
55:45
Speaker 1: home is I think something like nationwide one and a
55:48
Speaker 1: half times the rent monthly cost to rent a home,
55:51
Speaker 1: and so that is driving demand for rental housing, and
55:54
Speaker 1: so that is a big part of why we've continued
55:57
Speaker 1: to see rental housing be so resilient and and it's
56:00
Speaker 1: already I would say if you look back to prior
56:02
Speaker 1: tough periods, two thousand two ten is not an exception either.
56:05
Speaker 1: I'd say rental housing tends to perform quite well in
56:09
Speaker 1: in tougher economic environments. It does really well in inflationary
56:12
Speaker 1: environments as well. I mentioned the shorter duration lease at
56:14
Speaker 1: the average lease of a rental house rental apartments about
56:17
Speaker 1: a year um. And so these are assets that are
56:22
Speaker 1: in great demand today and I think you're poised to
56:25
Speaker 1: perform well in the environment ahead as well. Lest anybody
56:28
Speaker 1: accused me of suffering from home country bias, which it
56:31
Speaker 1: certainly sounds like I have been, let's talk about around
56:34
Speaker 1: the world. Where else does Blackstone see real estate opportunities
56:39
Speaker 1: outside of the United States. So in our business we
56:41
Speaker 1: invest not only US Canada, but also Western Europe and
56:45
Speaker 1: then across both developed and developing markets. In Asia, it's
56:49
Speaker 1: developed meaning Japan, Korea, Australia, and then more developing would
56:54
Speaker 1: be India is one of our our biggest markets globally
56:57
Speaker 1: and in particular in Asia as well and uh so.
57:00
Speaker 1: And in terms of what we what we like outside
57:02
Speaker 1: of the U S, there's a lot of consistency in
57:04
Speaker 1: the themes I would say, in terms of logistics, rental housing, hospitality, assets,
57:10
Speaker 1: lab office, every ex Yeah, there's of course nuances in
57:17
Speaker 1: different markets and and in particular rental housing is not
57:20
Speaker 1: something that exists in the same way and a lot
57:22
Speaker 1: of markets around the world, So for example, Australia has
57:24
Speaker 1: hardly any official rental housing market the way we would
57:28
Speaker 1: have it here. It's just just beginning. There's lots of
57:30
Speaker 1: people that own a condo and rented out. There's not
57:32
Speaker 1: a lot of owners who own a couple of hundred
57:35
Speaker 1: units and professionally managed it and rent it out and
57:37
Speaker 1: and so. But that's just beginning. But that's you know,
57:39
Speaker 1: that's an example of where things are a little different
57:41
Speaker 1: in different parts of the world. But I do think
57:43
Speaker 1: for us, one of the advantages we have of being
57:46
Speaker 1: so connected globally is this, as we talked about kind
57:49
Speaker 1: of the powdern recognition of saying, okay, we had a
57:52
Speaker 1: theme in warehouses that was working really well in the US.
57:55
Speaker 1: Where else in the world do we see that and
57:57
Speaker 1: maybe other people don't, And for us that was the
58:00
Speaker 1: UK and Western Europe because the UK is having a
58:04
Speaker 1: real hard time. The UK is having a hard time,
58:06
Speaker 1: but I would say we um the UK though. For
58:09
Speaker 1: the assets where we focus on, which our main focus
58:12
Speaker 1: is in the UK, have been warehouses, also really affordable housing,
58:17
Speaker 1: providing an affordable housing capital um that those have been
58:20
Speaker 1: are the biggest parts of our investment activity in the
58:22
Speaker 1: performance has continued to be very strong there. Let me
58:25
Speaker 1: ask you a challenging question. So you talk about Steve
58:29
Speaker 1: Schwartzman says, is a pattern recognition. One of the things
58:32
Speaker 1: we preach to investors all the time is don't fool
58:36
Speaker 1: yourself with pattern recognition, meaning don't think that every setup
58:40
Speaker 1: is the same and oh, this is a great opportunity
58:43
Speaker 1: where really only looks a little bit like a previous
58:47
Speaker 1: great opportunity. How do you protect yourself against being fooled
58:52
Speaker 1: by what looks like, oh I see this pattern when
58:55
Speaker 1: it's not really what what we all think it is.
58:58
Speaker 1: I do think one of the really I mean, I
59:01
Speaker 1: guess you could say challenging but really fun things about
59:03
Speaker 1: investing is that the environment does change constantly. So something
59:07
Speaker 1: that worked yesterday or transaction you were able to create usterday,
59:09
Speaker 1: you can't create again today, or you shouldn't maybe. And
59:12
Speaker 1: I would say one of the ways we protect ourselves
59:15
Speaker 1: goes back to this process where it is highly collaborative
59:19
Speaker 1: process and we're bringing together insights from all around our business.
59:23
Speaker 1: And I would say we we force a lot of
59:25
Speaker 1: connectivity and collaboration between our investment team and our asset
59:29
Speaker 1: management team, who is with our portfolio companies every day
59:32
Speaker 1: creating value. And so What that allows us to do
59:35
Speaker 1: is I think spot as early as we probably possibly
59:38
Speaker 1: can where things might be changing, where those conditions are changing,
59:42
Speaker 1: and it's not always that something has turned negative, it
59:45
Speaker 1: just maybe less positive. So an example of this would
59:49
Speaker 1: be just to keep drawing back to the warehouse example.
59:53
Speaker 1: The e commerce revolution and reassoring and supply chain realignment
59:58
Speaker 1: has really propelled demand for all types of warehouse space,
1:00:03
Speaker 1: but where it has driven the most rent and cash
1:00:05
Speaker 1: flow growth is in these more urban areas that are
1:00:08
Speaker 1: more supply constrained almost by nature, less land available, and
1:00:12
Speaker 1: more demand because tenants really need to be there both
1:00:15
Speaker 1: to access their customers and to reduce the cost of
1:00:18
Speaker 1: transportation and labor to move goods around. And so we
1:00:21
Speaker 1: pivoted our portfolio to focus on those markets and assets
1:00:25
Speaker 1: in those markets, away from other elements of the markets
1:00:29
Speaker 1: that are again doing well, doing fine, but just not
1:00:31
Speaker 1: growing as quickly. Our job, we feel, is to end
1:00:33
Speaker 1: up in the assets with the best possible performance, and
1:00:36
Speaker 1: I think that leads to shifts that might feel, you know,
1:00:39
Speaker 1: a little nuanced or a little minor at the time,
1:00:41
Speaker 1: but ultimately lead to much better outcomes. I feel like
1:00:45
Speaker 1: I am getting on real estate education like no other.
1:00:48
Speaker 1: If we're talking about real estate of all sorts and
1:00:52
Speaker 1: capital structure, we obviously have to talk about the cost
1:00:56
Speaker 1: of capital and interest rates. Where you, guys, the Federal
1:01:00
Speaker 1: Reserve is obviously really important, Jerome Palace, in the midst
1:01:04
Speaker 1: of a unprecedented rate hiking regime, how do you look
1:01:09
Speaker 1: at what's going on with the Fed? Well, I would
1:01:12
Speaker 1: say this is an environment that we feel like we've
1:01:15
Speaker 1: been preparing for for a long time. For forty years,
1:01:17
Speaker 1: we haven't seen anything like this since eighty one. Yeah,
1:01:21
Speaker 1: And I would say going back seven or eight years,
1:01:25
Speaker 1: maybe a little more, we were spending a lot of
1:01:27
Speaker 1: time thinking about, Okay, how do we get in ourselves
1:01:30
Speaker 1: invested in assets that are going to perform well? Should
1:01:33
Speaker 1: we be in a higher inflation, higher interest rate environment.
1:01:35
Speaker 1: The last interest rate spike we saw was mid two
1:01:39
Speaker 1: thousands leading up to the financial crisis, but that was
1:01:43
Speaker 1: nothing like one and twenty two. No, and again, it
1:01:46
Speaker 1: wasn't that we called this environment. It was more just
1:01:49
Speaker 1: a recognition that we had been in a very persistently,
1:01:52
Speaker 1: very low interest rate, very low inflation environment, and we
1:01:57
Speaker 1: started talking with our investors and amongst ourselves a about Okay,
1:02:00
Speaker 1: you know what happens in the world with higher rates,
1:02:02
Speaker 1: higher inflation, maybe sustained geopolitical uncertainty, feels like a lot
1:02:07
Speaker 1: more gaming difference, just different scenarios. And when you think
1:02:11
Speaker 1: about at the at the most simplistic level, the way
1:02:14
Speaker 1: you value real estate, the way you make money in
1:02:17
Speaker 1: real estate is it's a combination of your cash flow
1:02:20
Speaker 1: and the multiple you can put on that cash flow.
1:02:23
Speaker 1: In real estate parlance, it's the inverse of a multiple
1:02:26
Speaker 1: cap rate to yield. People think about in yields. By
1:02:28
Speaker 1: the way, when I switched from M and A to
1:02:30
Speaker 1: real estate, I spent basically eighteen months in my mind
1:02:32
Speaker 1: just converting yields into multiples, because you know, learning relearning
1:02:36
Speaker 1: the lingos of valuation. It's the same thing, you're just
1:02:38
Speaker 1: looking at it from different different perspective, just just flip
1:02:41
Speaker 1: it around. And so, you know, what we think about
1:02:45
Speaker 1: is that if you have an environment like the one
1:02:47
Speaker 1: we're in where there's upward pressure on interest rates, therefore
1:02:51
Speaker 1: upward pressure on cap rates or said like another way,
1:02:54
Speaker 1: downward pressure on multiples. The way to mitigate that is
1:02:58
Speaker 1: through cash flow growth. So you want to be in
1:03:00
Speaker 1: assets where you can grow cash flows both because as
1:03:04
Speaker 1: a matter of what's happening in the economy, the wind
1:03:06
Speaker 1: might be at your back, and also because of what
1:03:08
Speaker 1: we can do with our interventions for value creation. And
1:03:11
Speaker 1: that is a big part of how we ended up
1:03:12
Speaker 1: with this very concentrated portfolio and warehouses and rental housing
1:03:15
Speaker 1: and lab office and hotels where you have short duration leases,
1:03:19
Speaker 1: so as rents are going up, you can capture that
1:03:21
Speaker 1: higher rent like short duration bonds, like short duration bonds exactly. Also,
1:03:26
Speaker 1: the vast majority of those assets, as I mentioned, have
1:03:28
Speaker 1: relatively low input costs, so you're not as exposed to
1:03:32
Speaker 1: higher input cost pressure in an inflationary environment. And again
1:03:36
Speaker 1: you may have headwinds in terms of what's happening with
1:03:38
Speaker 1: rates or what's then happening with cap rates, but you
1:03:41
Speaker 1: can still perform well because of the cash flow growth
1:03:44
Speaker 1: we're able to generate. And and and there's you know, we're
1:03:46
Speaker 1: not just it's making this up. There's precedent for it
1:03:48
Speaker 1: if you look at if you look back to too,
1:03:51
Speaker 1: I think it's nine eighty two, the last time we
1:03:53
Speaker 1: were in a you know, a significant rate hiking cycle.
1:03:56
Speaker 1: You saw that rental growth in apartments opped up with
1:04:01
Speaker 1: inflation even though actually interestingly, supply was two x what
1:04:04
Speaker 1: it is right now. This this is part of why
1:04:06
Speaker 1: we have confidence. Yes, you could also look in the
1:04:08
Speaker 1: in UK because I think it was between nineteen seventy
1:04:11
Speaker 1: and nineteen eighty. UM real estate returns something like sixteen
1:04:15
Speaker 1: percent in an environment with you very very substantial inflation,
1:04:19
Speaker 1: and so we know again we we wanted to position
1:04:22
Speaker 1: our portfolios for this environment. And so you know what
1:04:25
Speaker 1: we see happening now is the FED is hard at
1:04:28
Speaker 1: work trying to cool the economy in a way that
1:04:33
Speaker 1: ideally doesn't you have a tough landing, but you know
1:04:37
Speaker 1: that certainly you're seeing some of that comes through to
1:04:40
Speaker 1: our market in the form of more uncertainty. Transaction activity
1:04:43
Speaker 1: slows down because people are unsure of your what how
1:04:47
Speaker 1: should I value it? How where can I borrow? Borrowing
1:04:49
Speaker 1: costs have gone up, and and that seems like kind
1:04:52
Speaker 1: of a natural outcome of of what's happening in this environment.
1:04:56
Speaker 1: So let me ask you, um the opposite question of
1:05:00
Speaker 1: investing during a rising rate environment, how would you respond
1:05:04
Speaker 1: to the criticism that some people have floated. Well, of course,
1:05:09
Speaker 1: black Stone real estate has done great over the past
1:05:11
Speaker 1: thirty years, rates have done nothing but go lower. Their
1:05:14
Speaker 1: cap structure has been super friendly. You're I'm assuming your
1:05:20
Speaker 1: pushback is doing well in a rising rate environment. Also,
1:05:23
Speaker 1: it's not just the cost of capital. Yeah, I would say, um,
1:05:27
Speaker 1: there's always something that people who you know seem to
1:05:30
Speaker 1: want to say, is like, you know why it's now
1:05:33
Speaker 1: not going to work anymore for us? Um And there's
1:05:36
Speaker 1: I've I've heard a lot of different versions of things,
1:05:38
Speaker 1: And I would say we have done this for thirty
1:05:40
Speaker 1: years in a lot of different parts of the world.
1:05:42
Speaker 1: We're not in every circumstance have we had ultra low
1:05:46
Speaker 1: interest rates. And I would say we've continued to generate
1:05:49
Speaker 1: great performance in all of those different types of environments
1:05:52
Speaker 1: and all of those different places. And I think it
1:05:54
Speaker 1: is by sticking to this thematic approach, a really discipline
1:05:59
Speaker 1: approach in terms of what we buy, and then how
1:06:01
Speaker 1: how do we capitalize it? And and then importantly how
1:06:05
Speaker 1: do we create value as we own it? I mean, interestingly,
1:06:08
Speaker 1: there's one of my favorite examples is Japan. So your
1:06:11
Speaker 1: Japan should have all the hallmarks of a tough place
1:06:14
Speaker 1: to make money in real estate. You have a shrinking population,
1:06:18
Speaker 1: you have very low cap rates, persistently very low borrowing costs,
1:06:23
Speaker 1: and very low growth, and yet it's been one of
1:06:26
Speaker 1: our most successful markets ever. And that's partly because of
1:06:29
Speaker 1: the nature of the transactions we buy. We can buy more,
1:06:33
Speaker 1: do more complicated investments that others maybe can't tackle, larger
1:06:36
Speaker 1: situations where we buy portfolios of real estate, not single assets,
1:06:39
Speaker 1: and then we manage the heck out of it. We
1:06:41
Speaker 1: do every last thing we can do to create value
1:06:44
Speaker 1: enhance those cash flows, and that's how we do well.
1:06:46
Speaker 1: And so again, all different kinds of environments can come
1:06:49
Speaker 1: our way, but I think the process is built to
1:06:53
Speaker 1: perform in any one of them. Quite fascinating. I know
1:06:57
Speaker 1: I only have you for a limited amount of time.
1:07:00
Speaker 1: Four I get to my favorite questions. I have to
1:07:04
Speaker 1: ask you about a curve bawl question. Coach Ella, you're
1:07:08
Speaker 1: you're like a regular Coachella like you don't like By
1:07:13
Speaker 1: the way, when I think of coach Ella, I think
1:07:15
Speaker 1: of burning Man and mud pitts Um Coachell is not
1:07:20
Speaker 1: quite that crazy. But how how often you go to
1:07:23
Speaker 1: this and what what is that experience? Like? Well, I've
1:07:26
Speaker 1: been fourteen times. Get out. Well, you're not old enough
1:07:31
Speaker 1: fourteen times. So you started going when you were twelve.
1:07:34
Speaker 1: You're very kind to say that. No. I started going
1:07:37
Speaker 1: because my then boyfriend now husband was at business school
1:07:40
Speaker 1: at U c. L A. He's super into music, and
1:07:43
Speaker 1: he drove down there in two thousand six, Um two
1:07:50
Speaker 1: five or six and he um and you went with him.
1:07:53
Speaker 1: I was not with him at the time, but at
1:07:55
Speaker 1: that festival and it was so different then you could
1:07:57
Speaker 1: buy single day tickets. It wasn't this whole thing it
1:07:59
Speaker 1: is out uh And I remember him calling me and saying,
1:08:02
Speaker 1: you have to come out next year for this. It's
1:08:04
Speaker 1: so amazing. And even at that first hotel, there were
1:08:08
Speaker 1: so many bands he got exposed to that have become
1:08:11
Speaker 1: some of our favorites and really just opened us up
1:08:13
Speaker 1: to listening to a lot of different kinds of music. Um.
1:08:15
Speaker 1: You the proverbial undercard. If you go all day, you
1:08:19
Speaker 1: you hear a lot of new and music is a
1:08:21
Speaker 1: lot of alt or Yeah, it's it hasn't. I'd say
1:08:25
Speaker 1: it grew up. I think it's a more alternative rock festival.
1:08:28
Speaker 1: And it is really branch now. There's a lot of
1:08:30
Speaker 1: wrap and dance and E d M. We're still there
1:08:32
Speaker 1: mostly for the rock music, which is a diminishing part
1:08:36
Speaker 1: of the schedule. I'd say I'm probably, um, you've sort
1:08:41
Speaker 1: of identified it the dorky ist and maybe now getting
1:08:44
Speaker 1: to the oldest person with the most sun block on
1:08:47
Speaker 1: at the whole festival. My wife and I every time
1:08:50
Speaker 1: we go into a show, we have a fun little
1:08:52
Speaker 1: thing we do, which is what's the demographic of the
1:08:55
Speaker 1: crowd and are we at the bottom of the top
1:08:58
Speaker 1: of that age bread and right now? And then like
1:09:01
Speaker 1: well walk, So we sort of show. The other day
1:09:04
Speaker 1: there's a great band called the Fab Fox that the
1:09:06
Speaker 1: Beatles covers. It's all It's it's letterman, Um, Jimmy Fallon.
1:09:12
Speaker 1: Their band does this, and we were amazed that they
1:09:15
Speaker 1: were like teenagers and twenty somethings singing along, knowing every word.
1:09:19
Speaker 1: It's like, oh, some of the stuff is generational. But
1:09:22
Speaker 1: we're not talking boomeer rock or classic rock. You're talking um,
1:09:27
Speaker 1: something much more. Give us a few bands that you've
1:09:30
Speaker 1: seen that have stayed with you. What sort of alt
1:09:33
Speaker 1: music U do you like at Coachella? Well, um, probably
1:09:38
Speaker 1: one of the favorite you know, Coachella experience ever would
1:09:41
Speaker 1: be actually Roger Waters, who played Dark Side of the
1:09:45
Speaker 1: Moon in its entirety, and I was not a Roger
1:09:48
Speaker 1: Waters or Pink Floyd fan before seeing this, and I
1:09:52
Speaker 1: the show, including the pig flying and dropping the leaflets,
1:09:56
Speaker 1: was so amazing. Uh, it was just it was so
1:10:00
Speaker 1: memorable in part. And this is not the only example
1:10:02
Speaker 1: of this, but it was a band or a performer
1:10:05
Speaker 1: where I was kind of like, do I really want
1:10:08
Speaker 1: to stay up laid? My body's jet legged, I've been tired.
1:10:10
Speaker 1: My Matt makes me go at noon and see all
1:10:12
Speaker 1: the early bands and like do I really? One did
1:10:14
Speaker 1: and it was so interesting and amazing. Um. There was
1:10:17
Speaker 1: a similar experience also seeing The Cure for the first time.
1:10:20
Speaker 1: I had always loved the Cure, but it never got
1:10:22
Speaker 1: to show. Oh my gosh, they played so long that
1:10:26
Speaker 1: they were they basically pulled the plug on them and
1:10:29
Speaker 1: they kept playing off their amps. But you know, Chris,
1:10:31
Speaker 1: the city of Coachella will find them for this, and
1:10:34
Speaker 1: they just kept going. They finally had to, like, you know,
1:10:36
Speaker 1: move Robert Smith on the stage. But it was so amazing.
1:10:38
Speaker 1: And I've now seen The Cure many times, but I've
1:10:41
Speaker 1: never seen The Cure and I was a fan. I
1:10:44
Speaker 1: highly recommend so I'm gonna out myself. Here's how old
1:10:47
Speaker 1: I am. Freshman year in college, me and my buddy
1:10:51
Speaker 1: Joe go to Nashville Coliseum where we scalp a pair
1:10:56
Speaker 1: of tickets for a hundred and seventeen dollars for the
1:11:00
Speaker 1: pair for one of the seven original Pink Floyd the Wall.
1:11:05
Speaker 1: My gosh, they did three or four shows in Nassa
1:11:08
Speaker 1: Calosseum and three or four shows in the l A.
1:11:11
Speaker 1: I think it was the Forum of the Colosseum. And
1:11:14
Speaker 1: the only reason we paid that little for the tickets
1:11:16
Speaker 1: is the cops had come out on high stepping horses
1:11:19
Speaker 1: and we're clearing everybody out, and I remember saying to
1:11:21
Speaker 1: the guy, you got about thirty seconds before you're holding
1:11:24
Speaker 1: two worthless pieces of paper and we had cash. He
1:11:27
Speaker 1: literally snatched the cash from our hands, gave us tickets.
1:11:30
Speaker 1: The cops come to us and we're like, we got tickets,
1:11:33
Speaker 1: and we went running. Missed the first I don't know,
1:11:35
Speaker 1: three minutes of the show. Astounding, right, that's how old
1:11:39
Speaker 1: I am. Well, I would say one of the one,
1:11:42
Speaker 1: and you kind of mentioned it. It has been you
1:11:45
Speaker 1: find it interesting to see live music not only come
1:11:48
Speaker 1: back to post pandemic. But I think people take real
1:11:51
Speaker 1: interest in this. And Matt, my husband, I talked about
1:11:53
Speaker 1: this all the time. He tells it maybe a similar
1:11:55
Speaker 1: story where he I forget what year it was, but
1:11:57
Speaker 1: he saw Radiohead at Radio City Music Hall and he
1:12:01
Speaker 1: was offended that he had he scalped a ticket for
1:12:04
Speaker 1: like thirty five dollars or something like this. We don't
1:12:06
Speaker 1: really understand how, you know, how does like a Pearl
1:12:08
Speaker 1: Jam concert and MSG work where the whole thing sells
1:12:11
Speaker 1: out at a certain price. Why isn't put Why isn't
1:12:14
Speaker 1: Pearl Jam just selling the tickets for a lot more.
1:12:16
Speaker 1: It's sort of an interesting question, But there's a monopoly
1:12:19
Speaker 1: and be all the secondary sellers have the firepower to that.
1:12:24
Speaker 1: It's like in the markets, Hey, do you want to
1:12:26
Speaker 1: go up against Goldman Sachs trading desk as a day trader?
1:12:29
Speaker 1: If you're stupid, you do. But ordinary people can't compete,
1:12:33
Speaker 1: and ordinary people can't buy tickets because all the bots
1:12:36
Speaker 1: are doing their things. I could. I could whine about
1:12:39
Speaker 1: this for hours. Sounds like we need another podcast, Yeah
1:12:41
Speaker 1: I won't. Instead, I'm going to jump to our favorite questions.
1:12:45
Speaker 1: So normally I would ask what are you streaming? But
1:12:47
Speaker 1: I think we're past streaming. Let's talk about what are
1:12:50
Speaker 1: you listening to today? So I have Phoebe Bridgers on repeat,
1:12:54
Speaker 1: listening to her constantly. I will check that out. Tell
1:12:57
Speaker 1: us about some of your mentors who helped to shape
1:12:59
Speaker 1: your career. I think mentorship is like a constellation of
1:13:03
Speaker 1: people that, in my case, so many different people at
1:13:06
Speaker 1: any different times. Sorry, um, you know two of my
1:13:10
Speaker 1: incredible mentors actually themselves are friends. So I worked when
1:13:14
Speaker 1: I was like Goldman, very closely with Bram Kramer, who
1:13:17
Speaker 1: taught me a lot about, you know, just not only
1:13:20
Speaker 1: being a great investor, but i'd say also a great
1:13:22
Speaker 1: manager of people. And I think interestingly, maybe not surprisingly,
1:13:26
Speaker 1: it turns out he's close friends with John Gray, who
1:13:28
Speaker 1: has been an incredible mentor and sponsor to me and
1:13:31
Speaker 1: every single day challenges me to be better and work
1:13:34
Speaker 1: harder and think more carefully at black Stone. Um, let's
1:13:39
Speaker 1: talk about books. What are some of your favorites and
1:13:41
Speaker 1: what are you reading right now? I love to read.
1:13:44
Speaker 1: I would break what I'm reading into two categories, what
1:13:46
Speaker 1: I'm reading to my children and then what I'm reading myself.
1:13:49
Speaker 1: So what I reading my children is. Um, we've been
1:13:51
Speaker 1: working our way to the kids love it. No, we've
1:13:56
Speaker 1: been reading the Royal Doll books, which somehow, even though
1:13:59
Speaker 1: I grew in a family of reading, which I never
1:14:01
Speaker 1: read this yeah, oh yeah, and I somehow missed those
1:14:04
Speaker 1: as a child. So I really enjoyed reading Charlie Chocolate Factory,
1:14:06
Speaker 1: and Matilda and the Witches and all of those fun things.
1:14:11
Speaker 1: I have a seven year old and a ten year old.
1:14:15
Speaker 1: We have a lot of Harry Potter happening in our
1:14:17
Speaker 1: house too. I'm actually movies books um I read when
1:14:22
Speaker 1: the kids were growing up. You can watch the movies,
1:14:25
Speaker 1: but only after you read the books. So all the
1:14:27
Speaker 1: kids had to read the book and then go watch
1:14:29
Speaker 1: My Tenerald I think has read all the Harry Potter's
1:14:31
Speaker 1: like four times at this point, I'm listening to them
1:14:33
Speaker 1: on audiobook now their endless. It seems like there's a
1:14:37
Speaker 1: different one every other year. So they they they're so
1:14:41
Speaker 1: versed in all of it that I was not able
1:14:43
Speaker 1: to keep up with dinner table conversations. So now listening
1:14:45
Speaker 1: to them again because otherwise I'm not gonna be able
1:14:47
Speaker 1: to keep up. And then for myself, it's funny. I
1:14:49
Speaker 1: love reading novels. But I really enjoyed in the past
1:14:53
Speaker 1: couple of years reading Patrick read and Keith's books. He
1:14:56
Speaker 1: wrote a book called Say Nothing, which was about the
1:14:59
Speaker 1: troubles in Northern Ireland. UM. And now I'm reading something
1:15:03
Speaker 1: called Empire Pain, which is about, um, basically the opioid
1:15:06
Speaker 1: crisis and how that came about. And it can be
1:15:09
Speaker 1: a little heavy, but it's so interesting. But it's written
1:15:11
Speaker 1: really well in such a compelling way. The one they
1:15:15
Speaker 1: ended up making the film about. It's possible. I am
1:15:20
Speaker 1: so behind on movies and TV shows. Well, my husband
1:15:24
Speaker 1: tells me that during the pandemic, when everyone else was
1:15:26
Speaker 1: making their way through the full Netflix catalog, I didn't
1:15:29
Speaker 1: watch a single show, So I gotta come on, you
1:15:32
Speaker 1: didn't watch The Crown. I did. I had post like
1:15:35
Speaker 1: post deep pandemic. I And now that I've been gotten
1:15:37
Speaker 1: back to traveling, I binge watched The Crown. Um, I've
1:15:41
Speaker 1: watched Marvelous Mrs Maysl. I love that so so good. Ye,
1:15:44
Speaker 1: so you you caught the Highlight so I know somebody
1:15:48
Speaker 1: who is involved and no spoilers. UM, but one of
1:15:53
Speaker 1: the things I'm like halfway through the most recent season
1:15:57
Speaker 1: and I'm like, oh, so, I guess she's gonna die soon,
1:16:00
Speaker 1: and it's like, no, no, that's next season. We have
1:16:02
Speaker 1: the last season. She's still around a lot of material. Yeah,
1:16:05
Speaker 1: they have endless material. Although there's some complaints this season
1:16:08
Speaker 1: is inaccurate, I don't care. It's just the most gorgeous,
1:16:12
Speaker 1: beautifully told stories, and even if you're not an anglophile,
1:16:17
Speaker 1: it's just fascinating. So digression side, let's get to our
1:16:22
Speaker 1: last two questions. What sort of advice would you give
1:16:25
Speaker 1: to a recent college grad who was interested in a
1:16:27
Speaker 1: career neither real estate investing or finance or m and
1:16:31
Speaker 1: A or any of the things that you have done
1:16:34
Speaker 1: so successfully. I would say to have a long and
1:16:39
Speaker 1: great career focus on your writing skills, and that sometimes
1:16:44
Speaker 1: I think is a counterintuitive for a job that's more
1:16:46
Speaker 1: considered matthew and analytical, And of course those are basic
1:16:50
Speaker 1: fundamental skills you absolutely need to have. But I think
1:16:53
Speaker 1: when I when I think about my career or what
1:16:56
Speaker 1: has created the best opportunities for me, it often comes
1:16:58
Speaker 1: about because it's we need to come communicate something either
1:17:01
Speaker 1: to our investment committee or to our investors, or increasingly
1:17:05
Speaker 1: to a much broader group of stakeholders that include elected
1:17:07
Speaker 1: officials and tenants and community members and activists, all of
1:17:11
Speaker 1: whom you are are touching our business in some way.
1:17:13
Speaker 1: And I think that ability to take ideas that can
1:17:16
Speaker 1: be rather complicated or sometimes seem a bit foreign to
1:17:19
Speaker 1: others and really put them into terms that are clear
1:17:22
Speaker 1: and compelling and understandable is super important. That that's really interesting.
1:17:27
Speaker 1: Final question, what do you know about the world of
1:17:29
Speaker 1: investing today that you wish you knew twenty plus years
1:17:33
Speaker 1: or so ago when you were first getting started. I
1:17:36
Speaker 1: think I think at the time, I wish I knew
1:17:38
Speaker 1: just how interesting this work would stay for so long
1:17:43
Speaker 1: and how many amazing people I would get to work with,
1:17:47
Speaker 1: certainly a blackstone. But when I think about the people
1:17:49
Speaker 1: who lead our companies or folks in the industry, I
1:17:53
Speaker 1: now know opportunities like this to talk to you like they.
1:17:57
Speaker 1: I think I spent a lot of the early days
1:17:59
Speaker 1: of my career worrying about how long will I do this?
1:18:02
Speaker 1: Or should I be doing this a lot longer? And
1:18:05
Speaker 1: if I had just kind of thrown myself into like, wow,
1:18:07
Speaker 1: let's just enjoy every moment with all of these people
1:18:09
Speaker 1: who are intellectually curious and smart and hard working, and
1:18:14
Speaker 1: I've had the good fortune of always being with teams
1:18:16
Speaker 1: that were super collaborative and supportive. I wish I had
1:18:20
Speaker 1: known that, because I think I would have had a
1:18:22
Speaker 1: lot more confidence of just every day enjoying the moment
1:18:25
Speaker 1: that was really fascinating. Thank you, Kathleen for being so
1:18:28
Speaker 1: generous with your time. We have been speaking with Kathleen McCarthy.
1:18:33
Speaker 1: She is the global co head of real estate Investing
1:18:37
Speaker 1: for Blackstone, running it's nearly uh six hundred billion dollars
1:18:43
Speaker 1: in real estate investments. If you enjoy this conversation, well,
1:18:47
Speaker 1: please check out any of the previous four hundred and
1:18:50
Speaker 1: fifty interviews we've done over the past uh eight years.
1:18:55
Speaker 1: You can find those at iTunes, Spotify, YouTube, wherever you
1:19:00
Speaker 1: find your favorite podcasts. UH. Follow me on Twitter at
1:19:03
Speaker 1: rid Halts. Check out all of the Bloomberg podcasts at
1:19:07
Speaker 1: podcast uh. You can sign up for my daily reading
1:19:12
Speaker 1: list at Rid Halts dot com. I would be remiss
1:19:15
Speaker 1: if I did not thank the cract team who helps
1:19:17
Speaker 1: put these conversations together each week. Justin Milner is my
1:19:23
Speaker 1: audio engineer. Uh Atico val Bron is our project manager.
1:19:27
Speaker 1: Sean Russo is my head of research. Paris Wold is
1:19:31
Speaker 1: my producer. I'm Barry Dhults. You have been listening to
1:19:35
Speaker 1: Masters and Business on Bloomberg Radio.