YouSaid · the spoken record

Kathleen McCarthy

lines on the record: 120
first: 2022-12-09
most recent: 2022-12-09
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“I think at the time I wish I knew just how interesting this work would stay for so long and how many amazing people I would get to work with, certainly at Blackstone, but when I think about the people who lead our companies or folks in the industry I now know opportunities like this to talk to you. I think I spent a lot of the early days of my career worrying about how long will I do this or should I be doing this a lot longer? And if I had just kind of thrown myself into like, wow, let's just enjoy every moment with all of these people who are intellectually curious and smart and hardworking. And I've had the good fortune of always being with teams that were super collaborative and supportive. I wish I had known that because I think I would have had a lot more confidence of just every day enjoying the moment.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say to have a long and gray career, focus on your writing skills. And that Sometimes I think it's a little counterintuitive for a job that's more considered mathy and analytical. And of course, those are basic fundamental skills you absolutely need to have. But I think when I think about my career or what has created the best opportunities for me, it often comes about because we need to communicate something, either to our investment committee or to our investors or increasingly to a much broader group of stakeholders that include elected officials and tenants and community members and activists, all of who are touching our business in some way. And I think that ability to take ideas that can be rather complicated or sometimes seem a bit foreign to others and really put them into terms that are clear and compelling and understandable is super important.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I did. I had post deep pandemic. Now that I've gotten back to traveling, I binge watch the crown. I binge watch Marvelous Mrs. Mazel. I love that too.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“It's possible. I am so behind on movies and TV shows. Well, my husband tells me that during the pandemic, when everyone else was making their way through the full Netflix catalog, I didn't watch a single show. So now I got to try to catch up.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh my god So they're so versed in all of it that I was not able to keep up with dinner table conversations. So I'm now listening to them again because otherwise I'm not going to be able to keep up. And then for myself, it's funny, I love reading novels, but I really enjoyed in the past couple of years reading Patrick Redding Keefe's books. He wrote a book called Say Nothing, which was about the troubles in Northern Ireland. Oh, I've heard of that. And now I'm reading something called Empire Pain, which is about basically the opioid crisis and how that came about. And it can be a little heavy, but it's so interesting, but it's written really well in such a compelling way.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Totally. My 10 year old, I think, has read all the Harry Potters like four times at this point. I'm listening to them on audio book now.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Kids love that. The kids love it. No. We've been reading the Roald Dahl books, which somehow, even though I grew up in a family of reading books, I never read those, right? Yeah. Oh, yeah. And I somehow miss those as a child. So I really enjoyed reading Charlie and the Chocolate Factory and Matilda and the Witches and all of those fun things. How old are you, kids? I have a seven-year-old and a 10-year-old. So they're right in the sweets. They're right in the sweet spot. We have a lot of Harry Potter happening in our house too. I'm actually.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I love to read. I would break what I'm reading into two categories. What I'm reading to my children and then what I'm reading myself. So what I'm reading to my children is we've been working our way through.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think, interestingly, maybe not surprisingly, it turns out he's close friends with John Gray, who's been an incredible mentor and sponsor to me. And every single day challenges me to be better and work harder and think more carefully. John Grey at the bottom.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I think mentorship is like a constellation of people that. In my case, so many different people at any different time. Oh, two names, sorry, two of my incredible mentors, actually themselves are friends. So I worked when I was at Goldman very closely with Bram Kramer, who taught me a lot about just not only being a great investor, but I'd say also a great manager of people.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“That's how old I am. Well, I would say, and you kind of mentioned it, it has been finding interesting to see live music not only come back post-pandemic, but I think people take real interest in this. And Matt, my husband and I talk about this all the time. He tells maybe a similar. I forget what year it was, but he saw Radiohead at Radio City Music Hall and he was offended that he had, he scalped a ticket for like $35 or something like this. We don't really understand how, you know, how does a Pearl Jam concert at MSG work where the whole thing sells out at a certain price? Because it's all bots buying. Why isn't Pearl Jam just selling the tickets for a lot more? It's sort of an interesting question.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“They played so long that they basically pulled the plug on them and they kept playing off their amps. But of course, the city of Coachella will find them for this. And they just kept going. They finally had to move Robert Smith off the stage. But it was so amazing. And I've now seen the cure many times.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, probably one of the favorite Coachella experience ever would be actually Roger Waters, who played Dark Side of the Moon in its entirety. And I am not a Roger Waters or Pink Floyd fan before seeing this. The show, including the pig flying and dropping the leaflets, was so amazing. It was just, it was so memorable in part. And this is not the only example of this, but it was a band or a performer where I was kind of like, eh, do I really want to stay up late? My body's jet lagged. I've been tired. Matt makes me go at noon and see all the early bands. Like, do I really want to do this? And it was so interesting and amazing. There was a similar experience also seeing the cure for the first time. I'd always loved the cure, but it never got to this stuff. Oh my gosh.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd say I'm probably you've sort of identified it the dorkiest and maybe now getting to be oldest person with the most sunblock.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it grew up, I think, as a more alternative rock festival, and it has really branched now. There's a lot of rap and dance and EDM. We're still there mostly for the rock music, which is a diminishing part of the schedule.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I was not with him at the time, but at that festival, and it was so different then. You could buy single day tickets. It wasn't this whole thing it is now. And I remember him calling me and saying, You have to come out next year for this. It's so amazing. And even at that first coachela, there were so many bands he got exposed to that have become some of our favorites and really just opened us up to listening to a lot of different kinds of music, the proverbial undercard, if you go all day You hear a lot of new and interesting. So,”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“You're very kind to say that. No, I started going because my then boyfriend now husband was at business school at UCLA. He's super into music and he drove down there in 2 2005. Yeah, 2005 or 6. And he”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And very low growth. And yet it's been one of our most successful markets ever. And that's partly because of the nature of the transactions we buy. We can do more complicated investments that others maybe can't tackle, larger situations where we buy portfolios of real estate, not single assets. And then we manage the heck out of it. We do every last thing we can do to create value, enhance those cash flows. And that's how we do well. And so again, all different kinds of environments can come our way, but I think the process is built to perform in any one of them.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And I would say we've continued to generate great performance in all of those different types of environments and all of those different places. And I think it is by sticking to this thematic approach, a really disciplined approach in terms of what we buy and then how do we capitalize it. And then importantly, how do we create value as we own it? I mean, interestingly, one of my favorite examples is Japan. So Japan should have all the hallmarks of a tough place to make money in real estate, of a shrinking population. You have very low cap rates persistently, very low borrowing costs.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I would say there's always something that people seem to want to say is like, Why it's now not going to work anymore for us. I've heard a lot of different versions of things. And I would say we have done this for 30 years in a lot of different parts of the world. We're not in every circumstance have we had ultra low interest rates.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Real estate returns something like 16% in an environment with you very, very substantial inflation. And so again, we wanted to position our portfolios for this environment. And so what we see happening now is the Fed is hard at work, trying to cool the economy in a way that ideally doesn't have a tough landing. Certainly you're seeing some of that come through to our market in the form of more uncertainties, transaction activity slows down because people are unsure of how should I value it, how where can I borrow borrowing costs have gone up and that seems like kind of a natural outcome of what's happening.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“If you look back to, I think it's 1978 to 82, the last time they were in a significant rate hiking cycle. You saw that rental growth in apartments kept up with inflation, even though actually interestingly, supply was 2x what it is right now. This is part of why we have confidence, yes. You could also look in UK, I think it was between 1970 and 1980.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Like shorter duration bonds, exactly. Also, the vast majority of those assets, as I mentioned, have relatively low input costs, so you're not as exposed to higher input cost pressure in an inflationary environment. And again, you may have headwinds in terms of what's happening with rates or what's then happening with cap rates, but you can still perform well because of the cash flow growth you're able to generate. And there's, you know, we're not just, I'd say, making this up. There's precedent for it. If you look at.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Different perspective. Just flip it around. And so we think about is that if you have an environment like the one we're in where there's upward pressure on interest rates, therefore upward pressure on cap rates or said like another way, downward pressure on multiples, the way to mitigate that is through cash flow growth. So you want to be in assets where you can grow cash flows, both because as a matter of what's happening in the economy, the wind might be at your back and also because of what we can do with our interventions for value creation. And that is a big part of how we ended up with this very concentrated portfolio in warehouses and rental housing and lab office and hotels where you have short-duration leases. So as rents are going up, you can capture that higher rent rate.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Scenarios. Just different scenarios. And when you think about at the most simplistic level, The way you value real estate, the way you make money in real estate is it's a combination of your cash flow and the multiple you can put on that cash flow. In real estate parlance, it's the inverse of a multiple cap rate, a yield. People think about it in yields. By the way, when I switched from MA to real estate, I spent basically 18 months in my mind just converting. Yields into multiples because relearning the lingos of valuation.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And again, it wasn't that we called this environment, it was more just a recognition that we had been in a very persistently, very low interest rate, very low inflation environment. And we started talking with our investors and amongst ourselves about, okay, what happens in a world with higher rates, higher inflation, maybe sustained geopolitical uncertainty feels like. So you just more gain.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and I would say going back Seven or eight years, maybe a little more. We were spending a lot of time thinking about okay, how do we get ourselves invested in assets that are going to perform well? Should we be in a higher inflation, higher interest rate environment?”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“More demand because tenants really need to be there both to access their customers and to reduce the cost of transportation and labor to move goods around. And so we pivoted our portfolio to focus on those markets and assets in those markets away from other elements of the markets that are, again, doing well, doing fine, but just not growing as quickly. Our job, we feel, is to end up in the assets with the best possible performance. And I think that leads to shifts that might feel a little nuanced or a little minor at the time, but ultimately lead to much better outcomes.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Keep drawing back to the warehouse example The e commerce revolution and reshoring and supply chain realignment has really propelled demand for all types of warehouse space. But where it has driven the most rent and cash flow growth is in these more urban areas that are more supply constrained almost by nature, less land available.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I do think one of the really, I mean, I guess you could say challenging, but really fun things about investing is that the environment does change constantly. So something that worked yesterday or transaction you were able to create yesterday, you can't create again today or you shouldn't, maybe. And I would say one of the ways we protect ourselves goes back to this process where it is highly collaborative process and we're bringing together insights from all around our business. And I would say we force a lot of connectivity and collaboration between our investment team and our asset management team who is with our portfolio companies every day creating value. And so what that allows us to do is I think spot as early as we probably possibly can where things might be changing, where those conditions are changing. And it's not always that something has turned negative. It just may be less positive. So an example of this would be just.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“The UK's having a hard time, but I would say we, the UK, though, for the assets where we focus on, which our main focus is in the UK have been warehouses also really affordable housing, providing affordable housing capital. Those have been the biggest parts of our investment activity and the performance has continued to be very strong there.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“We had a theme in warehouses that was working really well in the US. Where else in the world do we see that? And maybe other people don't. And for us, that was the UK and Western Europe, Canada. Post-Brexit on the U.S. Because the UK is...”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Not just you There's, of course, nuances in different markets. And in particular, rental housing is not something that exists in the same way in a lot of markets around the world. So, for example, Australia has hardly any. Official rental housing market, the way we would have it here. It's just beginning. There's lots of people that own a condo and rent it out. There's not a lot of. Owners who own a couple of hundred units and professionally manage it and rent it out. And so, but that's just beginning. But that's an example of where things are a little different in different parts of the world. But I do think for us, one of the advantages we have of being so connected globally is this, as we talked about kind of the pattern recognition of saying, okay,”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And so, and in terms of what we like outside of the US, there's a lot of consistency in the themes, I would say, in terms of logistics, rental housing, hospitality assets, lab office.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Japan, Korea, Australia, and then more developing would be India is one of our biggest markets globally and in particular in Asia as well.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“So, in our business, we invest not only U.S. Canada, but also Western Europe, and then across both developed and developing markets in Asia.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And so that is a big part of why we've continued to see rental housing be so resilient. And it's already, I would say, if you look back to prior tough periods, 2008 to 2010 is not an exception either. I'd say rental housing tends to perform quite well in tough economic environments. It does really well in inflationary environments as well. I mentioned the shorter duration lease, the average lease of a rental house, rental apartment's about a year. And so these are assets that are in great demand today. And I think we're poised to perform well in the environment ahead as well.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Really, really tough to dig out. And I would say the environment we're in is actually making that affordability question more challenging because you've seen home builders pull back from new construction. It's harder for people to afford to buy a home. Today, The monthly cost of owning a home is, I think, something like nationwide one and a half times the rent monthly cost to rent a home. And so that is driving demand for rental housing.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think you nailed it. As a country, we have not built enough housing of all forms since the financial crisis. Depending on how you're calculating, it's something like we're short four to six million units of housing. That's unbelievable. That's unbelievable. And it's a really hard thing.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Of exit that found the right capital for the property itself and a right and the right capital for the operations. And what I think is that's just emblematic of buying an asset that is somebody might have just said, oh, that's a casino or a casino hotel. We saw this as an entertainment destination and a strategy that we can then apply in other places as well. We recently took private accompanying in Australia called Crown Resorts, and it's really taking that same playbook of how do we transform these assets operations in that case as well really help support a very carefully constructed compliance and legal structure around it as well. But I think it's for us beyond just a casino. It's about that whole entertainment and tourism experience we can deliver.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, our focus in hotels that have casinos as part of their offering is really trying to find world-class destination resorts that have demand drivers beyond just what's going on in that casino. And actually our most profitable single asset investment ever was the cosmopolitan hotel in Las Vegas, which was an investment that we purchased from a bank that had had to foreclose and complete construction on the project. And we saw it not just as an opportunity to kind of reset and reset operations versus how a bank was handling it, but we tried, we thought really creatively about how could we turn this whole opportunity on its head, make it the coolest place as a destination in Las Vegas. And we renovated every inch of the property $500 million of capital invested to not only offer better guest rooms, but also an amazing set of food choices and shows and entertainment. And when we sold it also, we had a very creative”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“But certainly if you're not operating it well or if those rates come under pressure, it can be really tough if you have to capitalize on it.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, definitely. I mean, in a positive way, in an inflationary environment, a hotel has the ultimate short duration lease. We talk a lot about short duration. It should be overnight. Yeah. Average lease duration one night in the hospitality world. And, you know, if you're managing it well, if you own a great asset, if you have a great capital structure, that can be a really good thing when rates are rising.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And that's something in the hospitality space, certainly. You can have cash flows that dip in a tougher environment or if you're not managing it well. And you need a capital structure really built to withstand it.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I would say too much. I think it sounds a little bit familiar with that story. I'm definitely familiar with that hotel. I think it's just an example of a capital structure that didn't work and wasn't prepared to withstand. They had capital.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“We've invested in a company that has a brand and we're really trying to propel both the real estate strategy and the brand strategy to help it be a growing and faster growing company.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“We were, first of all, very accustomed to operating in a world where we may own, like we did with Hilton, both the real estate and the brand on it. We've actually seen a lot of opportunities in something like that to basically grow the brand and those franchises, even onto real estate that the company may not own. And then there's other circumstances where we just own the asset and we work in partnership with a brand to help us operate and brand it. And I would say there's great power in great brands in real estate, like just like any other segment of the economy. One of our hotel companies that we own today is something called Great Wolf Lodges. Many of your listeners may have been there. It's water parks with hotels. And these assets are located within a couple hours driving distance of something like 90% of the US population. And it's a very affordable, attractive drive-to-destination vacation for families. And so that's an example where”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And so in an inflationary environment, your cash flow growth can be more robust in those asset classes because you can really see top line rent growth pushing through to the bottom line cash flow. In a hospitality asset, it can be more challenged. But I think the good news is that is something that we have a lot of experience with and we have the opportunity as a private investor to work into our underwriting as we're thinking about buying assets, recognizing the environment you're in, recognizing higher costs. And so we remain really attracted to attaching ourselves to the growth and demand for that asset class.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“We have been long believers in hospitality. And part of this is just a very long term growing demand trend for hospitality, for experiences, for travel and tourism. If you look at just about any graph of demand for air travel, demand for hotel room nights, whether it be leisure or business, you've seen a long-term trend up into the right and pretty much only interrupted in a meaningful way by COVID. And the great news, I think, if you're a hospitality owner is that you've seen a very strong bounce back. In fact, I think demand for our hospitality assets is well exceeding what we saw in 2019. So we remain very enthusiastic about it. Now, hospitality assets are a more operational asset class. When you think about if you have a warehouse or a rental apartment, you have very limited exposure to labor costs, very limited exposure to capital costs.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And then help to grow. One of the great things about having the capital we have access to is that we were able to help continue to grow their footprint in those different cities and then therefore serve the tenants that we think are the most attractive in that space. And so that is an example of why you can't just paint the whole office market with a broad brush. Lab office was never a darling of real estate investors. Until the world changed and the nature of the research happening, the volume of it, and where it was getting done changed. And we, I think, were at the forefront of really participating in that for our investors because we were looking for, okay, what is a megatrend and what's changing in the world?”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source