FOCUS 2026: Real estate 2026: Insights from public and private markets - Don Newman and Ben Brown

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Subtitles are AI Generated

 

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Very pleased to be joined by

 

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Don, welcome, and our

 

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special guest today, Ben

 

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Brown, from Brookfield.

 

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Ben, I think that you're the only

 

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non-Fidelity speaker so a very

 

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warm welcome and thanks so much for

 

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taking the time to be with us today.

 

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Great to see you both.

 

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I just wanted to take a minute to

 

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sort of give you a brief overview of

 

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the strategies that we're going to

 

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speak about today and then we're

 

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gonna get into the meat of the

 

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conversation.

 

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Back in 2022, Fidelity

 

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and Brookfield came together to

 

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form a strategic partnership,

 

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whereby Fidelity dedicated

 

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around a billion dollars to

 

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invest in a Canadian private real

 

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estate mandate which would be

 

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overseen by the team at Brookfield.

 

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Investors could gain access to this

 

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sleeve of private real estate

 

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through the Fidelity private pool,

 

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so certain private pools as well as

 

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our monthly income fund.

 

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Given the success of this we then

 

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decided to launch an OM product

 

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back in 2025.

 

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The Fidelity Alternative Real Estate

 

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Trust Fund was born.

 

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That fund, neutral

 

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mix is 70% the

 

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private real estate mandate

 

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that's run by Brookfield and then

 

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30% is run by

 

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our in-house portfolio manager,

 

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Don Newman, and that is public

 

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REIT exposure within North America.

 

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I wanted to give you the lay of the

 

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land. That's going to

 

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centre our conversation today.

 

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With that, Ben, I'd just love to

 

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start off with you. You're the

 

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co-president of Brookfield

 

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Real Estate, you're head of the

 

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Americas.

 

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Tell us a little bit more about all

 

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the things you do for Brookfield.

 

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Thank you all.

 

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Brookfield's real estate business,

 

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global real estate business, about

 

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$300 billion in real estate assets

 

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under management on a global basis.

 

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As you said, my day job is I look

 

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after our business in the Americas,

 

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which is Brazil, US and Canada.

 

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About two-thirds of that real estate

 

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exposure sits within those

 

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markets. I would say we're

 

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diversified across the risk

 

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spectrum really from sort of

 

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core plus real estate investing

 

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up through opportunistic strategies

 

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and really across every sector.

 

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We've got about 35,000 people

 

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in our real estate business globally

 

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wo we have a lot of boots on

 

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the ground.

 

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We are operators at heart, it's

 

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in our DNA.

 

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What goes into our

 

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business is seeing

 

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what's actually happening on a micro

 

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and local basis because real estate

 

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really is a local business, but

 

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stepping back across a global

 

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business that's not only a real

 

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estate business but a real assets

 

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business with infrastructure, power,

 

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energy, private equity, and be able

 

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to take all of those inputs that

 

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we're seeing really across all of

 

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our businesses on a global basis to

 

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inform the sort of investment

 

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decisions we're making.

 

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I like to say I'm a master of none.

 

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I have a lot of really, really smart

 

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people that are masters in their

 

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domain and my job is

 

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to provide a little bit of strategic

 

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direction on where we're investing,

 

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where we're deploying capital, where

 

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we're making strategic decisions.

 

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Tell us a little bit more about the

 

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partnership with Fidelity and really

 

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how that came to be and why this

 

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really works nicely together.

 

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To go back, those of you that

 

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don't know Brookfield that well

 

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our heritage is Canada.

 

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We're a Canadian business.

 

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We've been investing in

 

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Canadian real estate for the better

 

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part of four decades.

 

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We still view ourselves as

 

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local and really in touch with

 

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the Canadian markets.

 

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We saw an opportunity to

 

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provide an

 

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investment strategy that would

 

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give investors a diversified

 

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value-focused look at

 

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the Canadian real estate market on a

 

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private basis.

 

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It is a market that is very

 

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much ...

 

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it's a closed market, it's a small

 

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market, a lot

 

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of dollars in capital

 

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flows for many of

 

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the large pensions and large asset

 

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managers but it is market

 

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where you kind of got to know every

 

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block and you have to know every

 

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intermediary.

 

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We thought

 

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from a market environment

 

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perspective there was a lot of white

 

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space and there was lot of

 

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opportunity to buy things at very

 

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good value in an environment

 

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that sentiment was

 

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pretty negative,

 

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rates had changed quite

 

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dramatically.

 

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There was a little oversupply in

 

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some sectors and I think we

 

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stood back and said this is

 

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a generational opportunity

 

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to create a product and

 

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have a market leading position

 

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to take advantage of what we think

 

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this next cycle will bring.

 

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In Canada that typically is very

 

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hard to do.

 

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It's very transparent.

 

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It's very well-bid, it's very well

 

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capitalized.

 

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For a lot of the other

 

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non-real

 

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estate related factors,

 

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more macro and geopolitical factors

 

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it created a little bit of

 

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an opportunity for us.

 

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We set this product up and

 

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we're pretty excited about what we

 

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have in the ground, what we've

 

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invested into date but, frankly,

 

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what's ahead of us.

 

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Our head of product, Andrew Clee,

 

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told me that Canada is a club market

 

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and I said, what does that mean?

 

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What does that mean?

 

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How is it an advantage to us in

 

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this mandate?

 

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I think it's true.

 

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You sort of joke in Canada, you

 

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learn everything about the market

 

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at the pub or the Thursday night

 

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hockey game.

 

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It is a market where deals are

 

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sort of done on relationships.

 

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It's very integrity focused, which

 

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is a good thing.

 

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It's very relationship driven.

 

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I think that gives us a real

 

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competitive advantage because we've

 

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been there, we've been in those

 

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markets, we have those people,

 

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we operate in those markets and

 

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we've been investing with our

 

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own capital for the better part of

 

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four decades in those markets, gives

 

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us a little bit, to use a Canadian

 

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terminology, it lets us

 

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know a bit where the puck is heading

 

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and we like that.

 

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You've been in the real estate

 

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business for a very long time.

 

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You've lived through many different

 

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market cycles.

 

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Where do you see sort of some of the

 

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opportunities in the real estate

 

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market currently?

 

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I'm a little bit of an opportunist

 

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so a lot of what you'll hear from me

 

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is what I'm excited about.

 

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I'd step back and say in our real

 

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estate business this is,

 

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and this is true, not specific to

 

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Canada, I'd say just broad brush,

 

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this is probably the best investing

 

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environment we've seen since

 

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post-GFC.

 

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The difference though is typically

 

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when you're coming out

 

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of the depths of a

 

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downturn in real estate markets you

 

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typically have an

 

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overhang of supply, demand is

 

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pulled back, and it takes

 

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a while for markets to recover

 

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because landlords don't have pricing

 

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power, there's an overhang of

 

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vacancy, capital markets

 

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are disrupted.

 

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This time it's completely different.

 

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This was rate-driven

 

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and capital markets-driven as

 

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opposed to supply-driven.

 

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We're actually in a market where

 

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the rate shock is really what reset

 

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values. Demand

 

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has been pretty resilient.

 

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Even things that were really

 

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disrupted like office,

 

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occupancies have regained.

 

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You think about things like housing

 

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and logistics where there's

 

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structural demand drivers.

 

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Demand's been quite robust

 

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and supply is pretty

 

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much non-existent.

 

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Supply's constrained, cost, hard

 

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cost, cost of labour,

 

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interest rates and the cost of debt

 

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to be able to make an

 

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economically feasible model to

 

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build a new product is pretty far

 

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out.

 

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You've got this

 

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environment ahead of you where rates

 

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are higher, values have

 

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reset to the current environment so

 

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you're buying at higher yields,

 

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you're buying, again, income

 

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producing assets, which is what we

 

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like in real estate, but with a

 

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real outlook to revenue

 

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growth. There's real pricing

 

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power now as a landlord and so you

 

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have this really interesting dynamic

 

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with demand being

 

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pretty robust and being pretty

 

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resilient, supply being constrained,

 

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values

 

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reset for the current environment,

 

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and an opportunity.

 

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That's rare

 

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but when you have it you got to take

 

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advantage of it.

 

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I'm pretty excited about all

 

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of the ingredients in that calculus.

 

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It does sound exciting.

 

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We're gonna get into some of those

 

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key themes in a minute but, Don, I

 

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wanted to turn it over to you.

 

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You've been with Fidelity since

 

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2003, research

 

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analyst, portfolio manager for

 

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a number of years.

 

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You hit 15 year anniversary on

 

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your dividend fund yesterday as

 

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well. Congratulations, wanted

 

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to highlight that too.

 

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I wanted ask you specifically about

 

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the public market sleeve of

 

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the fund. Public markets tend to

 

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react a lot quicker than private

 

08:53.599 --> 08:54.634

markets.

 

08:54.634 --> 08:55.902

What are you seeing playing out?

 

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Your mandate can go North America,

 

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it's not just Canada, right?

 

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It's actually been a

 

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really interesting year.

 

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I think Ben mentioned a little bit

 

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about it.

 

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The underlying real estate market

 

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and world ...

 

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most people are Canadian here so

 

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separate this a little bit from the

 

09:13.653 --> 09:15.187

Canadian housing market which isn't

 

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particularly strong right now.

 

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If you look at the commercial

 

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market, go back about five years,

 

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interest rates

 

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were zero.

 

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You could go and borrow.

 

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Supply was

 

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becoming relatively abundant.

 

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Then we had a change.

 

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Interest rates went from zero to 5%.

 

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We had COVID.

 

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Supply costs, the cost of labour,

 

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the costs of good, everything

 

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skyrocketed so replacement cost

 

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has been pushed a

 

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lot, lot higher.

 

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It's much harder to finance anything

 

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right now.

 

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Supply went from a period

 

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of five years ago,

 

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relatively easy to bring supply on

 

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to much, much

 

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more difficult to bring

 

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supply on. So.

 

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We actually started this year

 

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... you look at a lot of the

 

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commercial market and

 

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supply and demand was improving,

 

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getting better and getting tighter.

 

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You had markets, whether it be

 

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industrial, retail,

 

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anything to do with

 

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seniors care or

 

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healthcare, a

 

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lot of markets were actually

 

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tight and improving.

 

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Supply, as

 

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Ben mentioned, relatively

 

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non-existent.

 

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Demand, we've mentioned the economy

 

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is actually pretty good.

 

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You listened to Andrew Marchese this

 

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morning.

 

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We've got a pretty strong economy,

 

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limited supply and good demand.

 

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The fundamentals for the

 

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REIT market across a lot

 

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of the subsectors are actually

 

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really good and the market had been

 

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reflecting that.

 

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We've since had a pickup

 

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in interest rates

 

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which have brought, and they should,

 

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have brought valuations

 

10:54.253 --> 10:56.088

down a little bit.

 

10:56.088 --> 10:57.923

The underlying supply and demand

 

10:57.923 --> 10:59.425

fundamentals are actually pretty

 

10:59.425 --> 11:00.226

good.

 

11:00.226 --> 11:02.294

You can find companies that are

 

11:02.294 --> 11:03.629

growing well, tight supply

 

11:03.629 --> 11:05.998

fundamentals with good yield

 

11:05.998 --> 11:08.034

that should produce good returns

 

11:08.034 --> 11:09.468

over time.

 

11:09.468 --> 11:11.037

If you can pick them off when they

 

11:11.037 --> 11:12.905

come on sale it's actually a

 

11:12.905 --> 11:14.240

pretty interesting time to be

 

11:14.240 --> 11:15.641

invested in public rates.

 

11:16.709 --> 11:18.210

I'm hearing lots of optimism on both

 

11:18.210 --> 11:19.111

sides.

 

11:19.111 --> 11:21.047

We're pairing public and private

 

11:21.047 --> 11:22.915

exposure in the Fidelity Real

 

11:22.915 --> 11:24.550

Estate Alternative Trust Fund,

 

11:24.550 --> 11:27.153

Alternative Real Estate Trust Fund.

 

11:27.153 --> 11:29.488

Why do we decide to do that, Don?

 

11:29.488 --> 11:31.323

How does the management of this fund

 

11:31.323 --> 11:32.558

work in practice?

 

11:32.558 --> 11:34.326

What we were trying to put together

 

11:34.326 --> 11:36.228

here is something that's

 

11:36.228 --> 11:37.430

a little different from what other

 

11:37.430 --> 11:38.464

people have.

 

11:38.464 --> 11:40.733

What we wanted to do is

 

11:40.733 --> 11:43.135

kind of find the best of

 

11:43.169 --> 11:45.137

the private world and put it

 

11:45.137 --> 11:46.672

together with the best of

 

11:46.672 --> 11:48.841

fundamental investing with Fidelity.

 

11:48.841 --> 11:51.110

You get a fund that has

 

11:51.110 --> 11:52.945

a little bit lower

 

11:52.945 --> 11:55.081

volatility, some diversification

 

11:55.081 --> 11:57.216

and also some liquidity.

 

11:57.249 --> 11:58.451

That's sort of what I run which is

 

11:58.451 --> 12:00.086

the 30% buffer.

 

12:00.086 --> 12:02.188

We didn't want a fund that had

 

12:02.188 --> 12:04.123

100% in private because you

 

12:04.123 --> 12:06.459

didn't have the liquidity there.

 

12:06.459 --> 12:08.194

We went out and said, well, who's

 

12:08.194 --> 12:09.762

the best partner you could possibly

 

12:09.762 --> 12:11.330

have in Canada?

 

12:11.330 --> 12:13.299

Very clearly it is

 

12:13.299 --> 12:14.734

Brookfield.

 

12:14.734 --> 12:16.702

They do things that you,

 

12:16.702 --> 12:18.437

as an individual advisor, can't do.

 

12:18.437 --> 12:20.206

They do thing that we can't to at

 

12:20.206 --> 12:21.207

Fidelity.

 

12:21.707 --> 12:22.808

People may be aware ...

 

12:22.808 --> 12:27.480

I don't know if you've seen the

 

12:27.480 --> 12:28.314

two Davids, David Wolf and David

 

12:28.314 --> 12:29.315

Tulk from our CAA division, they've

 

12:33.786 --> 12:34.987

gone and snapped up a billion

 

12:34.987 --> 12:37.423

dollars' worth

 

12:37.423 --> 12:39.325

of sort of

 

12:39.325 --> 12:41.227

this mandate from

 

12:41.227 --> 12:42.294

Brookfield on the private side.

 

12:42.294 --> 12:43.295

We were behind on

 

12:46.699 --> 12:48.100

private investments in real estate.

 

12:48.100 --> 12:49.168

We think it's a really nice

 

12:49.168 --> 12:50.169

diversification

 

12:52.705 --> 12:53.506

for the firm.

 

12:53.506 --> 12:54.507

Ben

 

12:55.341 --> 12:57.510

can talk to this, it's their ability

 

12:57.510 --> 12:59.411

to source, ability to find deals.

 

12:59.411 --> 13:00.312

They're gonna be one of the first

 

13:00.312 --> 13:01.313

calls in Canada.

 

13:02.414 --> 13:03.916

As a private investor you're not

 

13:03.916 --> 13:05.251

gonna be able to take down a $200

 

13:05.251 --> 13:06.519

million logistics facility.

 

13:07.686 --> 13:09.421

They've got the sourcing, they've

 

13:09.421 --> 13:11.257

got the ability to lease it, they've

 

13:11.257 --> 13:13.125

the capital market's expertise

 

13:13.125 --> 13:14.927

that, frankly, we

 

13:14.927 --> 13:17.630

didn't have in Fidelity.

 

13:17.630 --> 13:19.632

We can then combine that with sort

 

13:19.632 --> 13:21.133

of the flexibility

 

13:22.301 --> 13:24.303

and more tactical portion of

 

13:24.303 --> 13:26.605

the public side where

 

13:26.605 --> 13:28.240

I can talk to Ben and say, you know,

 

13:28.240 --> 13:29.875

what are you seeing in the private

 

13:29.875 --> 13:32.311

side and say geez, the

 

13:32.311 --> 13:34.280

private side isn't reflecting this

 

13:34.280 --> 13:35.748

kind of discount and I can go out

 

13:35.748 --> 13:37.917

and buy things in the public side.

 

13:37.917 --> 13:39.685

The same time if he's seeing things

 

13:39.685 --> 13:41.887

that are really interesting in

 

13:41.887 --> 13:44.156

deals, one-off deals that they think

 

13:44.156 --> 13:45.324

when there's a little bit of stress

 

13:45.324 --> 13:47.226

in the market they can go and do,

 

13:47.226 --> 13:48.961

he can put a lot of money to market

 

13:48.961 --> 13:50.563

in the private side.

 

13:50.563 --> 13:52.264

We think of it as the best of public

 

13:52.264 --> 13:53.999

and the best of private put together

 

13:53.999 --> 13:56.101

in a really good combination with

 

13:56.101 --> 13:57.770

two terrific firms.

 

13:57.770 --> 13:59.238

Ben, Don said something very

 

13:59.238 --> 14:00.573

interesting there and that was your

 

14:00.573 --> 14:02.241

ability to source deals.

 

14:02.241 --> 14:03.475

Can you talk just a little bit more

 

14:03.475 --> 14:05.377

about how you source

 

14:05.377 --> 14:07.580

deals at Brookfield and perhaps

 

14:07.580 --> 14:09.548

why is your approach so unique

 

14:09.548 --> 14:10.683

or so advantageous?

 

14:11.917 --> 14:13.652

I'd say it's a couple of things.

 

14:13.652 --> 14:15.487

One is, as I said, we're

 

14:15.487 --> 14:17.323

large and our scale really

 

14:17.323 --> 14:18.757

gives us a competitive advantage

 

14:18.757 --> 14:19.558

there.

 

14:19.558 --> 14:20.759

The second is really

 

14:23.829 --> 14:25.865

our ethos that we are in every

 

14:25.865 --> 14:28.133

market and we operate in what we do.

 

14:28.133 --> 14:30.002

What that means, and to Don's

 

14:30.002 --> 14:31.704

earlier point of finding

 

14:31.704 --> 14:33.739

dislocation, it's not just

 

14:33.739 --> 14:35.040

in pricing when we're buying but

 

14:35.040 --> 14:36.742

it's also in when we're operating

 

14:36.742 --> 14:37.810

assets.

 

14:37.810 --> 14:40.045

If we own logistics assets

 

14:40.045 --> 14:41.981

in a market pretty

 

14:41.981 --> 14:44.316

much on a month to month basis

 

14:44.316 --> 14:45.951

I've got an asset manager that my

 

14:45.951 --> 14:47.419

investment team can call and say,

 

14:47.419 --> 14:48.921

what's the last lease you did, what

 

14:48.921 --> 14:50.522

was the lease uplift, are you

 

14:52.191 --> 14:53.826

sitting on vacancy, what's happening

 

14:53.826 --> 14:56.161

in that housing asset, what's

 

14:56.161 --> 14:57.062

happening in that student asset,

 

14:57.062 --> 14:58.998

who's the operator in that

 

14:58.998 --> 15:00.966

senior asset that's a competitive

 

15:00.966 --> 15:03.235

of ours? What it really is, and what

 

15:03.235 --> 15:04.737

Don was really saying, it's

 

15:04.737 --> 15:06.305

information asymmetry.

 

15:06.305 --> 15:08.240

I think that's what really gives

 

15:08.240 --> 15:10.075

us a tremendous amount

 

15:10.109 --> 15:12.177

of differentiation and

 

15:12.177 --> 15:13.779

ability to source.

 

15:13.779 --> 15:15.681

Sourcing isn't just, hey, I gotta

 

15:15.681 --> 15:17.116

know the right people to find the

 

15:17.149 --> 15:17.950

right building.

 

15:17.950 --> 15:19.418

It's how do I take the information

 

15:19.418 --> 15:21.287

that I have at my disposal, how do

 

15:21.287 --> 15:23.188

I come up with

 

15:23.188 --> 15:25.057

the thesis that we want

 

15:25.057 --> 15:26.825

to go invest behind?

 

15:26.825 --> 15:28.227

Then we got to find those pockets

 

15:28.227 --> 15:30.062

where there is some dislocation or

 

15:30.062 --> 15:31.530

mispricing.

 

15:31.530 --> 15:33.032

Then how do we create value once we

 

15:33.032 --> 15:34.366

make that investment? It's not just

 

15:34.366 --> 15:35.968

we buy it really well, it's we buy

 

15:35.968 --> 15:37.536

it well and then what are the levers

 

15:37.536 --> 15:39.705

that we can pull along

 

15:39.705 --> 15:41.607

the way? I would say,

 

15:41.607 --> 15:43.342

specifically in this fund, we have

 

15:43.342 --> 15:45.144

an example, we did a billion dollar

 

15:46.312 --> 15:48.080

logistics portfolio acquisition

 

15:48.080 --> 15:49.715

where we acquired about a 50%

 

15:49.715 --> 15:52.151

interest from an existing manager.

 

15:52.151 --> 15:54.253

That had everything to do with the

 

15:54.253 --> 15:55.788

relationship that we had already had

 

15:55.788 --> 15:56.588

with them.

 

15:56.588 --> 15:58.424

We had talked to them previously

 

15:58.424 --> 16:00.693

about financing their portfolio.

 

16:00.693 --> 16:02.594

They had a little bit of

 

16:02.594 --> 16:03.362

liquidity squeeze.

 

16:03.362 --> 16:04.730

We approached them on something a

 

16:04.730 --> 16:05.664

little bit more strategic

 

16:05.664 --> 16:06.899

structured.

 

16:06.899 --> 16:08.968

What, ultimately, over, effectively,

 

16:08.968 --> 16:11.303

six months led us to

 

16:11.303 --> 16:13.605

an acquisition in a joint venture

 

16:13.639 --> 16:15.040

where we can be very flexible and we

 

16:15.040 --> 16:16.175

just view ourselves as

 

16:17.209 --> 16:18.243

solutions providers.

 

16:18.243 --> 16:20.079

I think that is really our

 

16:20.079 --> 16:22.748

sourcing angle as opposed to

 

16:22.748 --> 16:24.416

just saying, well, let's wait for

 

16:24.416 --> 16:26.352

this thing to come to market and

 

16:26.352 --> 16:28.287

hopefully we can buy it at the

 

16:28.287 --> 16:29.121

best price.

 

16:29.121 --> 16:30.823

Let's create those opportunities of

 

16:30.823 --> 16:31.824

entry points.

 

16:32.891 --> 16:33.959

I think what's really interesting

 

16:33.959 --> 16:36.095

about the private real estate

 

16:36.095 --> 16:38.130

sleeve is the

 

16:38.130 --> 16:40.599

partnership started in 2022, this

 

16:40.599 --> 16:42.267

is a fresh pool of capital so

 

16:42.267 --> 16:44.069

there's no legacy assets coming in.

 

16:44.069 --> 16:46.338

It was a really tough market.

 

16:46.338 --> 16:47.606

The first acquisition, I believe,

 

16:47.606 --> 16:49.508

was 2024.

 

16:49.508 --> 16:53.112

Just talk to us about how

 

16:53.112 --> 16:55.014

advantageous that was,

 

16:55.014 --> 16:56.248

how the timing was actually amazing

 

16:56.248 --> 16:58.183

even though at the time it was such

 

16:58.183 --> 16:59.485

a tough market but now upon

 

16:59.485 --> 17:01.320

reflection we were

 

17:01.320 --> 17:02.721

really able to capitalize on some

 

17:02.721 --> 17:04.123

great opportunities.

 

17:04.123 --> 17:05.257

Can you take us through maybe the

 

17:05.257 --> 17:06.759

timeline a little bit and maybe you

 

17:06.759 --> 17:08.394

can allude to some of the underlying

 

17:08.394 --> 17:10.029

holdings that we've acquired as

 

17:10.029 --> 17:11.030

well.

 

17:11.697 --> 17:12.598

You're right.

 

17:12.598 --> 17:14.233

The Davids have been super

 

17:14.233 --> 17:16.168

supportive of the

 

17:16.168 --> 17:17.469

platform. We knew we had

 

17:18.504 --> 17:20.406

a bucket of capital there to take

 

17:20.439 --> 17:22.474

advantage of the opportunities

 

17:22.474 --> 17:23.275

that we saw.

 

17:23.275 --> 17:25.077

To your point, 2022 was

 

17:25.077 --> 17:26.945

still a pretty testy

 

17:26.979 --> 17:27.946

time.

 

17:29.314 --> 17:30.249

There was a lot of stuff we looked

 

17:30.249 --> 17:32.151

at. The discipline

 

17:32.151 --> 17:33.886

around having capital sitting there

 

17:33.886 --> 17:35.954

and investment opportunities

 

17:35.954 --> 17:37.689

and making sure that you're waiting

 

17:37.689 --> 17:39.591

for the right ones is sometimes a

 

17:39.591 --> 17:40.692

hard one.

 

17:40.692 --> 17:43.028

I'd say we

 

17:43.028 --> 17:44.430

had lots of calls with the Fidelity

 

17:44.430 --> 17:45.764

team saying, you know, we're

 

17:45.764 --> 17:46.765

waiting, we're waiting.

 

17:47.599 --> 17:49.802

We waited to a point where we

 

17:49.802 --> 17:51.837

felt like we had seen either enough

 

17:51.837 --> 17:54.106

transaction volume or enough

 

17:54.106 --> 17:56.442

concrete information

 

17:56.442 --> 17:58.377

on the operating side that we were

 

17:58.377 --> 18:00.212

very confident in our underwriting,

 

18:00.212 --> 18:01.580

very confident in our projections

 

18:01.580 --> 18:03.482

and confident in our entry points

 

18:03.482 --> 18:05.350

and the composition of the portfolio

 

18:05.350 --> 18:07.453

that we wanted to create here.

 

18:07.453 --> 18:08.387

That took us some time.

 

18:08.387 --> 18:10.389

We deployed the capital

 

18:10.389 --> 18:12.224

out of the gate a little

 

18:12.224 --> 18:13.959

bit slower. I would say if you look

 

18:13.959 --> 18:15.828

at what we've done we've

 

18:15.828 --> 18:17.362

ramped acquisitions quite

 

18:17.362 --> 18:18.964

meaningfully over the last 18 months

 

18:18.964 --> 18:20.899

where I think we've

 

18:20.899 --> 18:22.868

deployed roughly just under

 

18:22.868 --> 18:23.869

a billion dollars, or at least

 

18:23.869 --> 18:25.604

committed about a billion dollars.

 

18:25.604 --> 18:27.039

About half of that was done in the

 

18:27.039 --> 18:28.107

last 12 months.

 

18:28.107 --> 18:30.709

That was, I'd

 

18:30.709 --> 18:33.145

say, exercising some discipline

 

18:33.145 --> 18:34.613

but waiting for the right

 

18:34.613 --> 18:35.814

opportunities and letting many

 

18:35.814 --> 18:36.982

others pass.

 

18:36.982 --> 18:38.584

To give you a sense of what we have

 

18:38.584 --> 18:41.353

invested in to date I'd

 

18:41.353 --> 18:43.288

say, one, a real focus on

 

18:43.288 --> 18:45.424

diversity and a real focus on very

 

18:45.424 --> 18:46.725

high quality assets.

 

18:46.725 --> 18:48.527

If anything we've learned as

 

18:48.527 --> 18:49.862

private real estate investors over

 

18:49.862 --> 18:51.864

the past five years is if you

 

18:51.864 --> 18:53.665

own the best assets in the best

 

18:53.665 --> 18:55.400

markets you will be rewarded.

 

18:55.400 --> 18:57.002

It is no longer a game of buying

 

18:57.002 --> 18:59.037

something very, very cheap and

 

18:59.037 --> 19:00.405

hoping to make it slightly better

 

19:00.405 --> 19:01.840

and slightly less cheap and having

 

19:01.840 --> 19:03.709

the next person buy it at value.

 

19:03.709 --> 19:05.644

It's really about owning the best

 

19:05.644 --> 19:07.646

assets. The demand

 

19:07.646 --> 19:09.348

side, whether it's an office tenant,

 

19:09.348 --> 19:11.783

it's a logistics tenant,

 

19:11.783 --> 19:13.719

it's a renter, they

 

19:14.987 --> 19:16.722

want the best experience for their

 

19:16.722 --> 19:18.624

specific use or price point.

 

19:18.624 --> 19:20.692

We've invested in traditional

 

19:20.692 --> 19:22.227

rental apartments, we've invested in

 

19:22.227 --> 19:24.163

student housing, we've invested in

 

19:24.163 --> 19:25.764

senior housing, we've invested in

 

19:25.764 --> 19:27.266

logistics.

 

19:27.266 --> 19:29.468

It's a pretty good pie of diversity

 

19:29.468 --> 19:31.603

across sector and markets.

 

19:31.603 --> 19:33.972

I think we'll continue to build on

 

19:33.972 --> 19:35.841

that but most of

 

19:35.841 --> 19:37.976

what we have done has

 

19:37.976 --> 19:39.778

been focused on sectors where

 

19:39.778 --> 19:42.381

there's structural demand drivers.

 

19:42.381 --> 19:43.315

In the real estate world ...

 

19:43.315 --> 19:45.117

it's an overused term but we sort of

 

19:45.117 --> 19:46.785

say sheds and beds.

 

19:46.818 --> 19:48.253

If you think living in logistics are

 

19:48.253 --> 19:50.189

two things that just

 

19:50.189 --> 19:51.857

with behavioural changes around

 

19:51.857 --> 19:54.259

consumption, the

 

19:54.259 --> 19:56.128

natural thing to

 

19:56.128 --> 19:57.796

take your phone out and, at least in

 

19:57.796 --> 19:59.631

the US context, order something

 

19:59.631 --> 20:01.700

from Amazon and get it next day,

 

20:01.700 --> 20:03.202

that's structurally changed and

 

20:03.202 --> 20:05.304

that's changed the demand drivers

 

20:05.304 --> 20:06.305

for supply chain

 

20:07.239 --> 20:08.707

for movement of goods and services,

 

20:08.707 --> 20:10.642

obviously, the buildout of the

 

20:10.642 --> 20:11.643

logistics framework.

 

20:12.544 --> 20:13.712

On the housing side,

 

20:14.713 --> 20:16.548

true in US, true in Canada, North

 

20:16.548 --> 20:18.817

America has a structural undersupply

 

20:18.817 --> 20:19.618

of housing.

 

20:19.618 --> 20:21.153

Housing affordability is at its

 

20:21.153 --> 20:22.988

lowest levels that it's ever been so

 

20:22.988 --> 20:24.923

rental housing is really attractive

 

20:24.923 --> 20:26.825

but it's about being diversified in

 

20:26.825 --> 20:28.527

our exposure to rental housing.

 

20:28.527 --> 20:30.395

We want to own the demand

 

20:30.429 --> 20:32.264

curve from a renter from the

 

20:32.264 --> 20:33.665

time they go to college until the

 

20:33.665 --> 20:35.200

time they're in senior housing and

 

20:35.200 --> 20:37.302

on that whole demographic story

 

20:37.302 --> 20:39.438

and trend along the way.

 

20:39.438 --> 20:41.306

It will take decades

 

20:41.306 --> 20:43.242

for us to solve our housing

 

20:43.242 --> 20:45.310

crisis and we think this is an

 

20:45.310 --> 20:47.346

interesting opportunity which is

 

20:47.346 --> 20:49.348

also a bit of

 

20:49.348 --> 20:50.882

an inflation hedge in a higher rate

 

20:50.882 --> 20:51.917

and higher inflation environment.

 

20:53.485 --> 20:54.386

Don, on your sleeve of the

 

20:54.386 --> 20:56.121

portfolio, if we look under the hood

 

20:56.121 --> 20:57.656

what are some of the key themes that

 

20:57.656 --> 20:59.324

you're really excited about right

 

20:59.324 --> 21:00.325

now?

 

21:00.859 --> 21:02.828

I think a number of them ...

 

21:02.828 --> 21:04.229

I've met with a whole bunch of

 

21:04.229 --> 21:05.264

companies over the last little

 

21:05.264 --> 21:06.265

while, one

 

21:07.366 --> 21:08.834

people don't think of is just

 

21:08.834 --> 21:09.835

retail.

 

21:10.435 --> 21:11.670

Things are really tight.

 

21:13.038 --> 21:14.473

Go back about 10 years, we were

 

21:14.473 --> 21:16.375

having a retail apocalypse.

 

21:16.375 --> 21:17.643

As Ben mentioned, everyone was going

 

21:17.643 --> 21:18.977

to order online, no one is ever

 

21:18.977 --> 21:21.079

going to go to a store again.

 

21:21.079 --> 21:23.115

Guess what? No one built any

 

21:23.115 --> 21:25.217

retail. There's been almost no

 

21:25.217 --> 21:27.085

real sizable retail built in

 

21:27.119 --> 21:28.086

10 years. We had that and then

 

21:30.689 --> 21:31.890

people figured, oh, maybe people

 

21:31.890 --> 21:32.691

will go back to stores and this

 

21:32.691 --> 21:33.692

omnichannel,

 

21:34.693 --> 21:36.261

it's actually more efficient for

 

21:36.261 --> 21:37.829

people to return things to stores.

 

21:37.829 --> 21:39.131

People actually like looking at

 

21:39.131 --> 21:40.299

things. And then COVID hit

 

21:41.466 --> 21:43.201

and retail got wiped down again for

 

21:43.201 --> 21:44.836

a couple years. There's another five

 

21:44.836 --> 21:46.004

years no one built retail.

 

21:46.004 --> 21:47.939

So we've got a decade now where

 

21:47.939 --> 21:48.807

no one has built retail.

 

21:48.807 --> 21:50.676

I asked

 

21:50.676 --> 21:52.411

a CFO who was in to see us the other

 

21:52.411 --> 21:54.513

day, how's demand?

 

21:54.513 --> 21:56.448

He's like, it's great, we

 

21:56.448 --> 21:58.317

can't fill all the demand we've

 

21:58.317 --> 21:59.318

got.

 

21:59.584 --> 22:01.987

People want flagship stores.

 

22:03.255 --> 22:04.823

They realize people like to come in

 

22:04.823 --> 22:05.857

and see things.

 

22:10.128 --> 22:11.730

Guess what? We don't have the

 

22:11.730 --> 22:12.698

supply.

 

22:12.698 --> 22:14.533

I was like, well, what if you were

 

22:14.533 --> 22:15.500

to build more?

 

22:15.500 --> 22:17.369

He's like, where am I going to get

 

22:17.369 --> 22:18.270

the space?

 

22:18.270 --> 22:20.238

All the good space is taken and

 

22:20.238 --> 22:21.873

its first use wouldn't be retail

 

22:21.873 --> 22:23.008

because there's things that would

 

22:23.008 --> 22:24.910

give you higher returns

 

22:24.910 --> 22:25.911

so we can't build.

 

22:25.911 --> 22:27.446

Even if I wanted to build it I need

 

22:27.479 --> 22:30.148

20% to 30% higher rents

 

22:30.148 --> 22:31.683

for it to justify me actually

 

22:31.683 --> 22:32.718

building.

 

22:32.718 --> 22:34.419

The supply and demand picture looks

 

22:34.419 --> 22:36.188

really, really good in retail and

 

22:36.188 --> 22:37.189

it's something you wouldn't think

 

22:37.189 --> 22:38.457

of, because, oh, everyone's just

 

22:38.457 --> 22:39.458

going to order online.

 

22:41.626 --> 22:44.129

If you go to seniors housing,

 

22:44.129 --> 22:46.098

anything healthcare related,

 

22:46.098 --> 22:47.099

once again, COVID hit.

 

22:47.099 --> 22:48.367

No one would put their parents in a

 

22:48.367 --> 22:49.534

seniors housing facility.

 

22:50.569 --> 22:51.603

Nothing got built.

 

22:51.603 --> 22:52.637

But guess what?

 

22:52.637 --> 22:54.439

The baby

 

22:54.439 --> 22:56.174

boomer age wave is now going and

 

22:56.174 --> 22:57.709

sort of hitting 80 years old where

 

22:57.709 --> 22:59.578

everybody needs this and there's

 

22:59.578 --> 23:00.612

been no supply forever.

 

23:00.612 --> 23:02.447

Supply is going

 

23:02.447 --> 23:04.349

to take ages and ages to catch up,

 

23:04.349 --> 23:05.751

and it's also expensive to build.

 

23:05.751 --> 23:08.286

Demand is really good, supply

 

23:08.286 --> 23:09.287

isn't there.

 

23:09.287 --> 23:11.890

Ben talked about logistics.

 

23:11.890 --> 23:13.492

Brookfield's brought some terrific

 

23:13.492 --> 23:16.027

logistics facilities

 

23:16.027 --> 23:16.962

in I think really good prices.

 

23:16.962 --> 23:18.897

The economy is

 

23:18.897 --> 23:19.898

strong.

 

23:20.232 --> 23:23.468

Distribution is good, key locations

 

23:23.468 --> 23:25.370

aregreat. We're hearing

 

23:25.370 --> 23:27.072

rents are starting to pick up again.

 

23:27.072 --> 23:28.273

It's an area that's going to be

 

23:28.273 --> 23:30.108

strength. Certainly, for me who

 

23:30.108 --> 23:32.010

can invest in the US there's the

 

23:32.010 --> 23:33.879

whole onshoring thing,

 

23:33.879 --> 23:35.347

bringing things back to America.

 

23:35.347 --> 23:36.782

Okay, you need more distribution

 

23:36.782 --> 23:37.682

there.

 

23:37.682 --> 23:39.785

There are a lot of examples of

 

23:39.785 --> 23:40.719

fundamentals that are actually

 

23:40.719 --> 23:41.853

really strong.

 

23:44.523 --> 23:45.357

It is not like you're sitting in

 

23:45.357 --> 23:46.658

your house in a Canadian housing

 

23:46.658 --> 23:47.926

market necessarily.

 

23:47.959 --> 23:49.728

There are some really good supply

 

23:49.728 --> 23:52.197

and demand models where

 

23:52.197 --> 23:53.865

supply hasn't grown for a decade,

 

23:53.865 --> 23:55.500

demand is really good and

 

23:57.402 --> 23:59.538

that should push up rents

 

23:59.538 --> 24:01.306

and push up values over time if you

 

24:01.339 --> 24:03.575

buy the right assets.

 

24:03.575 --> 24:05.243

That's our job, both at Brookfield

 

24:05.243 --> 24:06.578

and Fidelity, to get the right

 

24:06.578 --> 24:08.280

assets in the portfolio.

 

24:08.280 --> 24:09.714

As someone that loves to shop in

 

24:09.714 --> 24:11.416

person I'm very excited that brick

 

24:11.416 --> 24:12.784

and mortar retail is coming back.

 

24:12.784 --> 24:14.019

That's great news.

 

24:14.019 --> 24:15.787

It's also an experience I think

 

24:15.787 --> 24:16.788

people have lost. An

 

24:19.825 --> 24:21.293

experience is I'm going on a trip,

 

24:21.293 --> 24:22.294

I'm

 

24:24.896 --> 24:25.897

going to a concert

 

24:27.132 --> 24:29.100

that maybe cost $500 now

 

24:29.100 --> 24:31.303

now. I'm reading on Bloomberg

 

24:31.303 --> 24:33.238

kids, the experience is I'm going

 

24:33.238 --> 24:34.406

back to the mall.

 

24:34.406 --> 24:35.507

I haven't heard that in decades.

 

24:35.507 --> 24:37.409

It's like I'm going to the

 

24:37.409 --> 24:38.343

movies, I'm going to the mall.

 

24:38.343 --> 24:39.878

It's a lower cost experience for

 

24:39.878 --> 24:41.379

people to get out and see people.

 

24:41.379 --> 24:42.948

I think enough people are tired of

 

24:42.948 --> 24:44.783

just I'm going to be alone and type

 

24:44.783 --> 24:46.251

things in. I might want to go and

 

24:46.251 --> 24:48.386

see people, go and try something on,

 

24:48.386 --> 24:49.988

actually go out with my friends and

 

24:49.988 --> 24:52.657

do things and be social again.

 

24:52.657 --> 24:54.726

You're finding there's actual

 

24:54.726 --> 24:56.628

real demand for people coming back

 

24:56.628 --> 24:58.830

for a low cost experience

 

24:58.830 --> 24:59.898

which may be going to a mall.

 

24:59.898 --> 25:01.433

Yeah, that's fascinating.

 

25:01.433 --> 25:02.901

Just on that point because I think

 

25:02.901 --> 25:04.936

maybe it's just not

 

25:04.936 --> 25:06.104

quite understood on retail,

 

25:07.439 --> 25:09.241

we've been calling retail dead for

 

25:09.241 --> 25:10.742

almost 10 years now.

 

25:10.742 --> 25:12.577

We own one of the largest

 

25:12.577 --> 25:14.479

shopping mall companies in the

 

25:14.479 --> 25:17.048

US, second largest shopping company.

 

25:17.048 --> 25:18.884

What I would tell you is the

 

25:18.884 --> 25:20.252

one thing that's really changed,

 

25:22.187 --> 25:24.089

and COVID was clearly an accelerant

 

25:24.089 --> 25:25.991

to this, a lot of

 

25:25.991 --> 25:27.859

the older retail models that

 

25:27.859 --> 25:30.295

were just dead are dead.

 

25:30.295 --> 25:32.163

The newer retail models, whether

 

25:32.163 --> 25:35.133

that is fashion,

 

25:35.133 --> 25:36.835

certain kinds of apparel or

 

25:36.835 --> 25:39.037

services, et cetera, are really

 

25:39.037 --> 25:39.938

now ...

 

25:39.938 --> 25:42.107

and some are omnichannel,

 

25:42.107 --> 25:43.775

was built as direct-to-consumer, now

 

25:43.775 --> 25:45.544

with brick and mortar stores, are

 

25:45.544 --> 25:46.745

much better businesses.

 

25:46.745 --> 25:47.846

They're much better businesses. They

 

25:47.846 --> 25:49.381

understand their customer's better.

 

25:49.381 --> 25:50.515

They understand their inventory

 

25:50.515 --> 25:52.417

better. The department store of

 

25:52.417 --> 25:54.619

yesteryear is no longer

 

25:54.619 --> 25:56.454

the experience someone gets by going

 

25:56.454 --> 25:57.355

to a shopping mall.

 

25:57.355 --> 25:59.357

There are brands

 

25:59.357 --> 26:01.526

now, and I have young kids and

 

26:01.526 --> 26:03.595

I see this happen,

 

26:03.595 --> 26:05.664

that are capturing their

 

26:05.664 --> 26:07.999

customers on social media and

 

26:07.999 --> 26:09.801

they drive them to the mall.

 

26:09.801 --> 26:12.003

We have certain retailers,

 

26:12.003 --> 26:14.172

if you have a tween-aged

 

26:14.172 --> 26:16.408

child, that have

 

26:16.408 --> 26:18.376

lines up outside of their store to

 

26:18.376 --> 26:19.477

get in because these things have

 

26:19.477 --> 26:21.346

become viral on social media.

 

26:21.346 --> 26:23.248

The whole customer acquisition

 

26:23.248 --> 26:25.283

experience-driven

 

26:25.283 --> 26:27.385

and business model has changed.

 

26:27.385 --> 26:29.287

I think that also means that

 

26:29.287 --> 26:30.488

retail going forward does mean

 

26:30.488 --> 26:31.323

something different.

 

26:31.323 --> 26:32.924

So I go to the mall for something.

 

26:32.924 --> 26:34.459

I go for a food and beverage

 

26:34.459 --> 26:35.460

experience.

 

26:36.161 --> 26:37.062

People going back to the movies.

 

26:37.062 --> 26:38.063

Or I

 

26:38.897 --> 26:40.799

just go to buy things but

 

26:40.799 --> 26:42.167

that buying thing is a different

 

26:42.167 --> 26:43.401

emotional connection with those

 

26:43.401 --> 26:45.036

retailers. I think that's one thing

 

26:45.036 --> 26:46.671

that's important that should drive

 

26:46.671 --> 26:48.039

retail demand going forward.

 

26:49.140 --> 26:50.942

We go shopping to buy

 

26:50.942 --> 26:52.477

clothing and then you end up also in

 

26:52.477 --> 26:54.446

the store buying a $10 matcha

 

26:54.446 --> 26:55.447

drink as well.

 

26:57.048 --> 26:58.316

It's all about the experience

 

26:58.316 --> 27:00.185

economy. I wanted to talk about

 

27:00.185 --> 27:01.186

office space.

 

27:01.186 --> 27:04.055

That's obviously a very topical one.

 

27:04.055 --> 27:06.091

Return to work is coming back

 

27:06.091 --> 27:07.359

into the news a lot more.

 

27:07.359 --> 27:08.593

What's Brookfield's view on this

 

27:08.593 --> 27:10.161

right now and any maybe

 

27:10.161 --> 27:11.563

misconceptions that you're seeing in

 

27:11.563 --> 27:12.564

the marketplace?

 

27:13.064 --> 27:14.933

Really interesting because I would

 

27:14.933 --> 27:16.968

say, especially as someone that

 

27:16.968 --> 27:19.437

sort of sits in New York every day,

 

27:19.437 --> 27:21.606

we haven't really talked about

 

27:21.606 --> 27:23.241

return to work for two years.

 

27:23.241 --> 27:24.743

I'm always surprised when I travel

 

27:24.743 --> 27:25.977

around the world and then they're

like,

 

27:25.977 --> 27:27.212

oh, well, people are coming back to

 

27:27.212 --> 27:28.947

the office. I'm like, that's still a

 

27:28.947 --> 27:31.182

thing. I was in Brazil meeting with

 

27:31.182 --> 27:32.617

our team a couple months ago and

 

27:32.617 --> 27:34.386

they had one of our tenants who is

 

27:34.386 --> 27:36.821

now taking 2X

 

27:36.821 --> 27:37.922

the amount of space that they had in

 

27:37.922 --> 27:39.791

the building. I said, that is

 

27:39.791 --> 27:40.825

amazing but how are they growing?

 

27:40.825 --> 27:42.761

They sent

 

27:42.761 --> 27:44.129

everyone home at COVID.

 

27:44.129 --> 27:45.730

They had a three day a week work

 

27:45.730 --> 27:46.798

week and now they're pulling

 

27:46.798 --> 27:47.866

everyone back and they don't have

 

27:47.899 --> 27:49.501

desks for everyone because over five

 

27:49.501 --> 27:50.602

or seven years you have head count

 

27:50.602 --> 27:51.736

growth, especially in an emerging

 

27:51.736 --> 27:52.537

market.

 

27:52.537 --> 27:53.838

I said, wow, people still haven't

 

27:53.838 --> 27:55.874

come back. I'd say part of it is

 

27:55.874 --> 27:58.176

very geographical and

 

27:58.176 --> 28:00.145

cultural on what

 

28:00.145 --> 28:01.946

return to work means but I would say

 

28:01.946 --> 28:04.215

there's a couple fundamental things

 

28:04.215 --> 28:05.917

that we've seen across our business

 

28:05.917 --> 28:06.918

globally. We

 

28:08.186 --> 28:10.488

have seen the highest rents

 

28:10.488 --> 28:12.457

in every city we operate

 

28:12.457 --> 28:14.659

in over the last two years.

 

28:14.659 --> 28:16.594

In Toronto, in New York,

 

28:16.594 --> 28:18.897

in London, in Sydney,

 

28:18.897 --> 28:20.765

and in Delhi in India.

 

28:20.765 --> 28:22.000

The highest rents we've ever

 

28:22.000 --> 28:23.935

achieved in office which is sort of

 

28:23.935 --> 28:25.036

a surprise to most people when you

 

28:25.036 --> 28:26.171

think about office space.

 

28:26.171 --> 28:28.006

It's kind of the retail story

 

28:28.006 --> 28:29.774

we were talking about just prior to,

 

28:29.774 --> 28:30.842

who's going back to the office.

 

28:33.778 --> 28:34.979

When you peel back the onion he

 

28:34.979 --> 28:35.980

details in that are

 

28:37.382 --> 28:38.216

... we've talked about this

 

28:38.249 --> 28:40.085

bifurcation, I think it's even wider

 

28:40.085 --> 28:42.020

and more acute

 

28:42.020 --> 28:44.322

than we had originally anticipated,

 

28:44.322 --> 28:45.924

which is the best buildings are

 

28:45.924 --> 28:47.492

doing better than they ever have.

 

28:47.492 --> 28:48.560

You can't build a new office

 

28:48.560 --> 28:50.662

building because the cost

 

28:50.662 --> 28:52.397

structure doesn't make sense but

 

28:52.397 --> 28:54.432

rents are moving tremendously.

 

28:54.432 --> 28:56.501

That is probably on

 

28:56.501 --> 28:58.503

5, 10, maybe 15%

 

28:58.503 --> 28:59.704

of the market depending on which

 

28:59.704 --> 29:00.638

market you're in.

 

29:00.638 --> 29:02.674

There's still a tremendous amount

 

29:02.674 --> 29:04.709

of overhang

 

29:04.709 --> 29:06.745

of vacancy in the office market.

 

29:06.745 --> 29:08.680

It's not a broad brush there's an

 

29:08.680 --> 29:09.647

office recovery.

 

29:09.647 --> 29:10.915

I think there's an office recovery

 

29:10.949 --> 29:13.251

for some components of the market.

 

29:13.251 --> 29:15.220

When we're seeing performance that

 

29:15.220 --> 29:16.721

performance is driving pretty

 

29:16.721 --> 29:17.789

materially.

 

29:17.789 --> 29:19.657

I try to always create

 

29:19.657 --> 29:21.826

a bit of an example of what's

 

29:21.826 --> 29:23.428

happening in the office market.

 

29:23.428 --> 29:25.196

To sort of bring it to home here, if

 

29:25.196 --> 29:26.865

you thought about Nashville, there's

 

29:26.865 --> 29:28.867

about 250

 

29:28.867 --> 29:31.169

hotels in the Nashville market.

 

29:31.169 --> 29:33.071

If you thought about what are

 

29:33.071 --> 29:35.006

the luxury

 

29:35.006 --> 29:37.108

hotels in the market, including

 

29:37.108 --> 29:38.576

where we're sitting today at a JW

 

29:38.576 --> 29:39.911

Marriott, there's about 15.

 

29:39.911 --> 29:40.912

Less than

 

29:42.180 --> 29:44.916

10% of the total Nashville stock

 

29:44.916 --> 29:46.718

is getting the highest rates every

 

29:46.718 --> 29:48.686

night, getting the large groups and

 

29:48.686 --> 29:49.988

pushing revenue meaningfully

 

29:49.988 --> 29:50.922

different than the rest of the

 

29:50.922 --> 29:53.258

world. That is how the hotel

 

29:53.258 --> 29:55.326

environment's been forever.

 

29:55.326 --> 29:57.195

You can invest in limited service

 

29:57.195 --> 29:58.830

hotels, luxury hotels and that's a

 

29:58.830 --> 30:00.165

functioning market.

 

30:00.165 --> 30:01.299

I sort of think that's the office

 

30:01.299 --> 30:02.300

market of today.

 

30:02.300 --> 30:04.202

There's the Four Seasons and the

 

30:04.202 --> 30:05.904

Ritz Carltons and the JW Marriotts

 

30:05.904 --> 30:08.907

in the office world and then there's

 

30:08.907 --> 30:10.875

the traditional aspirational

 

30:10.875 --> 30:12.510

brands and then the commodity

 

30:12.510 --> 30:14.112

limited service.

 

30:14.112 --> 30:15.380

I think that's what the office

 

30:15.380 --> 30:16.514

market will shake out to be.

 

30:16.514 --> 30:18.550

I would say it's an investable asset

 

30:18.550 --> 30:21.085

class but now I think, for us,

 

30:21.119 --> 30:22.854

the investable universe is much

 

30:22.854 --> 30:24.656

narrower but the performance we're

 

30:24.656 --> 30:26.157

seeing is pretty interesting.

 

30:26.157 --> 30:27.725

It's starting to be a place that

 

30:27.725 --> 30:28.793

we're spending a lot more time.

 

30:28.793 --> 30:30.695

We haven't deployed a lot of capital

 

30:30.695 --> 30:33.531

partially because the

 

30:33.531 --> 30:34.799

investment opportunities we've been

 

30:34.799 --> 30:36.334

seeing in other asset classes are

 

30:36.334 --> 30:38.336

just that much more attractive,

 

30:38.336 --> 30:40.705

but that tide is turning a bit.

 

30:40.705 --> 30:42.373

That's a really helpful analogy.

 

30:42.373 --> 30:43.641

Don, just in the last few minutes I

 

30:43.641 --> 30:44.676

wanna talk about the interest rate

 

30:44.676 --> 30:45.844

environment. Obviously, we're in a

 

30:45.844 --> 30:47.078

hiking cycle in the US.

 

30:47.078 --> 30:48.880

We'll see where we go in Canada.

 

30:48.880 --> 30:50.548

How is that impacting valuations in

 

30:50.548 --> 30:51.549

the marketplace?

 

30:53.151 --> 30:54.986

I think for one thing it

 

30:55.019 --> 30:57.288

creates opportunity for

 

30:57.288 --> 30:58.289

people like Ben and myself.

 

30:59.257 --> 31:01.726

People see interest rates going up

 

31:01.759 --> 31:03.228

and, frankly, if cap rates go up a

 

31:03.228 --> 31:05.063

little bit and

 

31:05.063 --> 31:06.731

the cost effect goes up a little bit

 

31:06.731 --> 31:08.566

you should have some compression

 

31:08.566 --> 31:10.301

in some values.

 

31:10.301 --> 31:12.070

What's interesting as sort of an

 

31:12.070 --> 31:13.838

active manager is often, at least in

 

31:13.838 --> 31:14.839

the REIT market,

 

31:15.707 --> 31:17.642

things are sold, the index

 

31:17.642 --> 31:19.611

is sold and you've got really

 

31:19.611 --> 31:21.346

good, high quality companies that

 

31:21.346 --> 31:23.648

will go down the same as

 

31:23.648 --> 31:25.516

companies that are lower quality.

 

31:26.885 --> 31:29.120

There's a big differentiation in

 

31:29.120 --> 31:31.322

the long term growth rates of a

 

31:31.322 --> 31:33.424

good quality asset in

 

31:33.424 --> 31:35.526

good locations that's going to grow

 

31:35.526 --> 31:37.929

for the next 10 or 20 years.

 

31:37.929 --> 31:39.898

They're coming off

 

31:39.898 --> 31:41.900

the same amount of really poor

 

31:41.900 --> 31:43.401

assets that, frankly, you don't

 

31:43.401 --> 31:44.602

really need in your portfolio.

 

31:46.104 --> 31:47.739

For me, over the last sort of a

 

31:47.739 --> 31:49.274

month or two it's been starting to

 

31:49.274 --> 31:51.075

look at a couple things.

 

31:51.075 --> 31:52.076

I

 

31:53.444 --> 31:54.712

have my analysts go around, who has

 

31:54.712 --> 31:56.080

a lot of debt due next year and what

 

31:56.080 --> 31:57.882

interest rates are they coming due

 

31:57.882 --> 31:59.784

at, who's going

 

31:59.784 --> 32:01.653

to have

 

32:01.653 --> 32:03.755

FFO, funds from operations, or

 

32:03.755 --> 32:05.123

cash flow growth compressed a little

 

32:05.123 --> 32:07.258

bit? Okay, do we need

 

32:07.258 --> 32:08.660

to make any adjustments there?

 

32:08.660 --> 32:10.495

Two, what really high

 

32:10.495 --> 32:12.397

quality assets are coming on sale

 

32:12.397 --> 32:14.599

that I can now

 

32:14.599 --> 32:15.466

buy that I couldn't buy a month or

two

 

32:15.466 --> 32:16.301

ago?

 

32:16.301 --> 32:17.835

Then I can put it in the portfolio

 

32:17.835 --> 32:19.304

and say, okay, this is going to be a

 

32:19.304 --> 32:21.139

great asset at a good

 

32:21.139 --> 32:22.206

reasonable price.

 

32:22.206 --> 32:24.142

In my diversified hat I always

 

32:24.142 --> 32:25.944

say I love buying good companies at

 

32:25.944 --> 32:27.378

reasonable prices that can maintain

 

32:27.378 --> 32:29.714

and grow dividends over time.

 

32:29.714 --> 32:31.683

Can I do that in the REIT world

 

32:31.683 --> 32:33.818

and upgrade the

 

32:33.818 --> 32:35.787

quality of the portfolio at

 

32:35.787 --> 32:37.622

a price I usually can't get

 

32:37.622 --> 32:39.424

on really quality assets?

 

32:40.725 --> 32:42.427

There should be some natural ...

 

32:42.427 --> 32:43.928

if rates stay this high you get a

 

32:43.928 --> 32:45.596

little bit of cape rate compression,

 

32:45.596 --> 32:47.498

things come down. My job is to

 

32:47.498 --> 32:49.033

be able to differentiate and find

 

32:49.033 --> 32:51.336

assets that we can put in there that

 

32:51.336 --> 32:52.937

are gonna grow faster than other

 

32:52.937 --> 32:54.939

companies over time and

 

32:54.939 --> 32:56.374

compound better for our

 

32:56.374 --> 32:57.175

shareholders.

 

32:57.175 --> 32:58.876

That's what I'm looking to do based

 

32:58.876 --> 33:00.979

on this increase in rates.

 

33:00.979 --> 33:02.146

We are at time.

 

33:02.146 --> 33:03.348

I just want to say this has been a

 

33:03.348 --> 33:04.615

really interesting and insightful

 

33:04.615 --> 33:04.649

Thanks for watching or listening to

 

33:04.649 --> 33:05.416

conversation.

 

33:05.416 --> 33:06.651

Thank you both. Ben, thank you

 

33:06.651 --> 33:07.986

especially for taking the time to

 

33:07.986 --> 33:10.021

join us in Nashville.

 

33:10.021 --> 33:11.656

That was Ben and Don, everyone.

 

33:11.656 --> 33:13.524

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33:40.318 --> 33:41.919

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34:15.386 --> 34:16.354

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