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John Khoury

lines on the record: 75
first: 2025-12-01
most recent: 2025-12-01
sittings or episodes: 1
sources: podcast

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“Cheap. Cheap by old school standards, cheap to liquidation value, cheap to intrinsic value. What we also want to see is a path. Now this isn't a path this month, this quarter, or even this year sometimes. It's a reasonable mosaic, as we call it, where we've put together what we believe is the highest likely outcome of a series of facts that will play out for that disconnect to compress during our holding period or for us to realize our IRR. In the best instances, these are companies that are generating material amounts of free cash flow and shrinking the float so that as time passes, if the stocks flat, it's getting better and it's getting cheaper. Things we try and avoid are misaligned incentives management teams with poor track records. We're looking for cheap stocks today that are growing earnings with conservative balance sheets and a path over a two-year period.”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“It back at what we think is the appropriate discount rate. And that gives the long pond warranted value of that individual security today, which is often not where it trades in the market. We rank those companies in our asymmetry ranker by the Delta or the difference between stock price and what we deem to be the fair value. We don't plug that into some quantitative model and it trades securities. It's an idea generating tool. We use that to decide where we're going to allocate our firm resources and where we believe the best return on invested time will be. The things that ultimately are the great long pond stocks, things we really like. They're stocks that are disconnected from intrinsic value. There's something happening in the universe, in that individual company, in that sector that has led people to dislike this company or not like something material enough for this company to get.”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“We attempt to boil everything down to the best risk adjusted return, the best asymmetry. The first tool in that process is something that I've worked 15 years on honing, which we call the asymmetry ranker. So every analyst, whether we own a security that you cover or not, has an updated model on this company and an expected IRR. That expected IRR gets discounted at different rates depending on what the business model is. A leveraged hotel rate gets a much higher discount rate, not surprisingly, than an unlevered apartment rate. Then we have a qualitative overlay. How good is the management team? How is management incented? What is the history of this company's capital allocation? What the asymmetry ranker does is it takes those cash flows and models them out. We have a terminal value. We discount.”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“REITs are just under a trillion and a half and the non REIT side is actually larger than that. The companies are generally much bigger. In aggregate, we cover about 325 companies in our coverage model.”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“Rev par, you've got net unit growth. Then, with a little bit of operating and financial leverage and share repurchase, your growing earnings 15% a year compared to the hotel REITs basically growing, not at all, or in some cases shrinking pretty meaningfully.”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“Lot of leverage and a business model that forces you to invest your free cash flow while the cycle is getting hot and then ultimately the cycle stops and you're writing down book value and you're having problems, that's evolved to almost 100% asset light models in some cases no leverage, real free cash flow generation that's used to shrink the float. So these have become much better businesses. And when you look at the hotel business it's not dissimilar. There's been splits of the cash flows that come out of a hotel. There are hotel REITs, which in our opinion are not great businesses. They're generally price takers. And then there are hotel management and franchise businesses, which themselves are not REITs. Hilton Marriott, Hyatt, Accor, Wyndham, these are companies that are going to grow earnings from RevPar. They've also got a net unit growth story, which comes with basically no capital invested. These business models, you've got...”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“When people think about real estate, they naturally gravitate to Reits. And Reitz is not the only thing we do. There are a lot of companies that are not Reits that are 100% real estate companies. Hotel management companies, home builders, real estate service providers like CB Richard Ellis or Jones Lang LaSalle, I would define everything we do as full 100% real estate companies, just not solely REITs. Both spaces have evolved. REITs have grown a lot and they're more options on the menu to exploit a view, but there's been a lot of growth and evolution in the non-REIT side of the business too when you look at home builders or hotel companies, the way many of these business models have evolved, they're not acyclical businesses, but they become much less cyclical than they once were when you compare a home builder, pre-GFC with a lot of land on its balance sheet and a”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“So let's walk through the different aspects of how you go about doing that. We can just fast forward to today. How do you think about your investible universe, the different companies you're looking at to potentially invest in?”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“I wanted to create the best version of the firm I could create seeking to exploit asymmetry in publicly traded real estate securities. I felt like controlling a culture, an investment, an investment process, an investment philosophy would allow me to systematically look at this space, analyze this space, and exploit the asymmetry or that disconnect between stock price and intrinsic value that existed in the public markets.”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a classic example of I work for somebody who's a great person who gave me a ton of rope, got me to a position in my career where I felt comfortable running my own business. I reached a point in my career where I had a vision and a desire and a burning urge to run something in 100% my own vision. And that's when I decided to part ways and launch Long Pond in 2010.”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“Stock into the quarter. And I said, were shareholders along with you now? He giggled. I sold my stock today. The story's broke. He's good at what he does. I had scratched. Then I explained to him why we liked it. His response was, you only like it because of how cheap it is. I took it as a compliment when I hung up the phone. I only realized later that day that it was a dig. Valuation is not enough. For us, it still is enough. We want to make sure that we're seeing in the market over a reasonable period of time or over our holding period will lead to that asymmetry compressing or us reaching our IRR. Oftentimes it feels like we're one of the few players left who cares about the fact that stocks can get really cheap.”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“Investment horizon than others. If we back up and say, well, what's the output of all these players? If the output is that the average move on earnings is two times what it used to be, but the average change in earnings is the same, then what we're seeing is larger disconnects from intrinsic value that we can seek to exploit. Our coverage model and our process is designed to put ourselves in a position to play offense. There's more volatility. valuation doesn't matter. This is something that's taken us a while to really appreciate. We have a couple of analysts who work here who used to work at Pods. Then it blew up again on earnings. And by the way, blowing up for a read. I'm talking about missing earnings by 1 or 2%. But in each of these instances, the stock was down 8, 9, 10. We felt like the inflection for this company was much sooner. The stock had collapsed. We took advantage of it. We bought a large position. And I happened to connect with a friend of mine at a pod who owned this.”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“I want to be clear. I don't think there are mistakes. These guys run great businesses. The passives run $10 billion or whatever the largest number you could imagine is. And the pods have grown 4x since Long Pond has existed. They're doing something different. They're playing hockey. We're playing basketball. The fact that they've grown has outputs that benefit us. And that's where we're focused. We have one key thing we're looking to do. The way we've done it has changed over time and we've adapted in how we execute this, but we have a view that our job is to identify and exploit asymmetry within publicly traded real estate securities, asymmetry defined as a disconnect between intrinsic value and stock price. We have another view that volatility and asymmetry tend to hang out together. By points of volatility, there's probably more opportunity for firms like ours who can take a little bit of duration and be looking out through a long”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“Than it was then. And that's consistent throughout the top 10 movers are two times broader than what they were then, which creates an opportunity for us oftentimes”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“Incredibly successful model, but is a model that does something incredibly different from what we do in their hyper short-term focused, 80% of the returns of these pods are generated on quarterly earnings or the day after quarterly earnings, which means they are looking out for one quarter. Then at the bottom left over is us. There used to be few firms doing what we do. Now there are very few firms doing what we do. We take a different approach. We look at everything through a two-year IRR paradigm. Given the dynamics of this market, the majority of players effectively playing different game than we are, the output of that can create interesting opportunities. When we launch the fund, the first three years of the fund's existence versus the last three years of the fund's existence, the average move in the REIT space is literally 2x to 10.”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“Real estate is still dominated by the private market. 90% of real estate in this country is owned outside of the public market. So you've got 10% of the market that trades publicly. You've had two large movements of capital to market participants since I got in the business. The first is active to passive. And the second is the advent and success of the pod model. When you break down who's investing in real estate today, you still have active management on the mutual fund and long-only space. They're not trying to do much more than outperform an index by a very modest amount for them taking a bold stance as having an extra 100 basis points in Prologus versus the index. They're doing something very different than we are. Passive, by definition, cares about nothing other than recreating the passive index. There's not a lot of thought as capital moves around there. And then the pod model, which has been in...”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“Within that idea that there's secular risk that didn't perceptually exist 20 years ago that does now, what are some of the other changes in the nature of the real estate investment opportunity set in the public markets?”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“State went down. You could buy it and just wait, and generally it would come back over time, and that's certainly not true anymore. The second thing that's happened is as the public market has proven to be an efficient place to own and hold assets, more and more subsectors have come to the public markets, data centers, towers, cold storage reeds, single family for rent reeds, gaming reits. That's led to more dispersion within the space. In short, the absolute space has grown. The correlation is less, and the menu of options to express a view is higher.”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was about $300 billion, so it wasn't huge. It was much more concentrated by subsector. They used to call it the four major food groups, office, industrial, retail, and residential. And those companies accounted for over two-thirds of the entire read index. The entire space was more correlated. Real estate really moved together. Certainly some subsector had more supply than another and you had to normalize for that. And if you were an analyst covering apartments, you could pretty easily cover the office base as well. From then till now, you've had two things happen. You've had the introduction of secular risk in real estate. We learned that with office and COVID, we learned that positively for industrial, negatively for malls, with e-commerce, I'm sure that's not the last of it. We'll see more of that in real estate. That's been a big factor in the old days.”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“Private equity business be the one guy who's doing something, use the same analytical capabilities, but express your view in public markets, public markets are going to grow if you believe Sam Zell, and I come from the Zell Lurry Center. His point was this space is going to grow. I'm going to be an early person doing it. I literally don't have an employee. You can get on the ground if you want to do something entrepreneurial. This is for you. It really resonated for all those reasons. got off that private equity path and went to a building right across the street from this one, went to work with him at the beginning of 02.”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“I wish I could give a really thoughtful answer here. The truth is it all happened by happenstance. I was working at DLJ. I was enjoying it. I liked it. I was on this path. I had this thought in my head from my Lazard days of the interesting nature of public versus private markets. But there was no one in my cohort from Morton who was entering the public business. One of my mentors early on was Keith Barquette at Angelo Gordon. He had been instrumental in starting their real estate business. My brother worked there and Keith invited me to his 40th birthday party. I met this guy named Art Rubel, who had quarters prior, less than a year before, launched what was then one of the first hedge funds focused on real estate securities. I spent the entire party talking to art and what he was doing. And I found it really interesting. He reached out to me afterwards and said, why don't you come over to the office and we'll have lunch? He laid a path for me, which was all your friends were Morton are in the...”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“Had offers from both Lazard and DLJ. Investment banking was training for private equity, and private equity was going to be the career. I went to Lazard. I had summered there while I was there, an associate that I work closely with went to the same group that I didn't take an offer from at DLJ. And he was there for a week and called me. He's like, you know everything you're going to learn in banking. You should come over now. I went to re-interview with them. I really liked them. It was a great group of people. I wanted to do private equity and I moved over.”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“I joined that group in 1999, REACH were the antithesis of what anybody wanted to own. So the most impactful thing that I learned at Lazard having been the grunt guy running all the models in advance of the CEOs coming in to complain to my managing director why their stocks all traded at 70 and 80 cents on the dollar was saying here you are it's not complicated you have $100 of apartments trading for 80 cents you have $100 of industrial real estate trading for $75 At that point, I thought I was going to use real estate investment banking as a stepping stone to real estate private equity, which I ultimately did. That was the first moment I said this seems like an interesting way to exploit valuation differentials between the public and private.”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“I grew up in eastern Canada in Fredericton, New Brunswick, in a real estate family. My father was a Lebanese immigrant who came to Canada in the 50s with no money and a lot of siblings, 10 brothers and sisters. He was a typical immigrant story. He put himself through school, bought the house he was renting, rented out a room. Next thing you know, he owned a couple of apartment buildings in town. His immigrant ethos is the way our household ran. When we were young, we were working. When it snowed, we were shoveling snow outside those apartments. We were mowing lawns. And then when he got older, you got to lease apartments. It was always in my blood to be a real estate investor. Ultimately, I ended up going to Wharton, where I studied the Zell Lurry Center. My first job was in the real estate investment banking group at Lazard.”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source
“Real estate is cheap and it's great risk, but if not loved, the only gicx sector in the SP that's still materially down since 2022. The GIC and REITs is down almost 20%, while the S&P is up 40%. What do I look forward to in the next two years? Not swimming against a current. I'm excited to stop talking about it and watching it.”
2025-12-01 · Capital Allocators · John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474) · IDENTIFIED FROM THE TRANSCRIPT · source