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

“And a change also in how and where this research was being done. Like, if you think about when I was growing up, all of the big pharmaceutical companies had these corporate campuses that were highly securitized, deep in suburbs. And what started happening is all of those researchers said, we want to be in cities adjacent to some of the best research institutions in the world. And companies needed to be where their talent wanted to be. And so we, in 2016, took private a nearly $9 billion company called Biomed and really concentrated the business in those best markets.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Tenants that are great, the best tenants in the world. And so we started thinking okay if office is going to be under pressure, are there segments or subsegments of the office market that we think will do better? And what we started to realize is that there was all of this capital and really a changing tide in terms of the research demand and dollars being funded into it, everything from immunotherapies, which of course now we all know a lot about things, the pandemic, genomics, big data intersecting with personalized medicine.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Is emerging, but these are like we sometimes describe them as kind of the pulsing heart of research. And there is not enough space actually for all of the demand from biomedical tenants in these places. How did we even come upon this theory and why this versus traditional office? I mentioned 2016, 15, going back to that period of time when we started recognizing wow, you know, tastes and trends are changing a lot for more traditional office. And we were quite concerned actually to your question about if you have an older office building, it could be quite expensive to try to repurpose it, reconfigure it to really attract”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Much more substantial and actually, I think, is super interesting is that there are a few critical nodes in the world. Basically, our whole portfolio is concentrated really in five Cambridge US, Cambridge UK, South San Francisco, Seattle, San Diego, and actually now Boulder, Colorado.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say these traditional office assets have been a relatively small part of our portfolio for a while because going back to our thematic investing Our portfolio is 80% concentrated in warehouses, rental housing, lab office space, and hospitality assets.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Those assets attract much more demand at higher prices. And so we think those are going to come out as more winners in this kind of flexible space.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“So, and only about 7% of the office stock in New York is less than 10 years old. And listen, there's, you don't have to be less than 10 years old to get the demand. But I would say we're seeing.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think it goes beyond amenities. It's also the ability to create flexible space and create open spaces that you can move and change as your company's needs change Gathering places. And so I think that is a real challenge for older office buildings. In New York, the average age of an office building is 67. Really?”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I would say for office specifically, or what is known as traditional office, We're seeing a real bifurcation in demand with really the greatest demand going to the highest quality, newest, best amenitized, most sustainable office buildings. And New York is a perfect example, I think, of what is happening. The office stock in New York is very old compared to another stock.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“It's super important. And again, that feeds our theory that the office is definitely going to continue to be a part of culture and building culture and creating more from the team you have.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“It's unbelievable. All these things to really attract people into the office and to create a sense of community while they're here.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I think in many ways, and in different sectors for real estate, it feels like whether it's like three years of acceleration or 10, it's definitely that pull forward. And what I'd say for office buildings, if we had met in 2016, let's say. One of the things I would have probably called to your attention is the fact that so many office buildings, particularly whether you think at the lobbies or the amenity floors for tenants, it started to feel more like a hotel. I mean, look at this beautiful Bloomberg building with the food. It really is. First of all, it's a beautiful building. And then you have food and amenities. And I don't know if you have a fitness center, but so many buildings now do.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“The same thing in a workplace. We're all there learning and then doing better. And so I think being together is so important. Now, as I would love to convince everyone in the world that being back in five days is really the right thing to do for the whole ecosystem, the economy around where you work and your own professional development and your customers' experience. I firmly believe it. But I would say as we think about what is happening in the broader world and how that's impacting office demand, I think we're in an era of experimentation. We believe that the office in some format and for some periods of time in a week will continue to be a really critically important part of culture for organizations and corporations. And what we're seeing happening is really actually, I'd say, an acceleration of a trend that was started pre-pandemic. I mean, it's so interesting. COVID really did accelerate so many trends in so many ways.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Huge responsibility. And I would say I also personally think we have a huge responsibility to our own team to training and learning. I mean, I learning and training all the time. And I think about it a lot, like all the research on children and school, right? The learning loss from children not to be in school.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“They had no choice. I feel like, how can we say, okay, you all need to be at work every day, protecting us, teaching our children, but we're going to be hybrid and not necessarily deliver the best we possibly can. Nobody wants.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes. Do it. I mean, and so many of our customers as well, I would say, our frontline workers and emergency workers and teachers and firefighters. And so.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“We come at it, I think, as part of a mission orientation, which is we have this incredible responsibility from our investors to do the absolute best job we possibly can with their capital. That's such a smart.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And that's ongoing. And that is ongoing. And both of these phenomena are global. One of the most interesting things is this are often global stories, these themes. The megatrends are rarely isolated to just one economy. And so when you think about the performance of our warehouse portfolio in this year, it's been some of the strongest fundamentals that we've seen. And things are softening in certain pockets, but it's still really benefiting from that lower new supply environment.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Cranes, there has been new supply, but it really has not kept up with the explosive growth and demand for warehouse space, particularly in urban areas. So what we call sometimes last mile logistics. So where are the warehouses closest to the densest population centers? Those assets are in demand because of e-commerce, retailers wanting to get things to people in the same day or within a few hours even. We're also seeing really the impact of reshoring and realignment of supply chains.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“GDP points to one. And then what you saw is with e-commerce demand and the shift moving of goods online, it just changed. It just totally changed. What is it now? Is it one to two to three?”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“With that giant. Yeah, we are high conviction investors and we pick themes that we think are really benefiting from the way people Are living and working and shopping and just mega trends. And so starting actually in 2010, we started buying warehouses, not, I think, at first even recognizing what was happening with e-commerce, but like I mentioned. We pay really careful attention to what's happening in our portfolio, and we started to realize what e-commerce was doing to drive to demand for warehouse space and how there was a fundamental shift that started happening. Historically, warehouse performance just tracked GDP performance. It was basically a one-to-one correlation. Warehouse.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Not every project that was ready to go was put into production in the summer of 2020, for example. And so what we're seeing on the ground now is that fundamentals, particularly in our preferred sectors, which are our biggest sectors are warehouses, that's 40% of our portfolio globally and rental housing.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Think what feels very different about this moment is that we really never got back to those more heady levels of lending and more significant amounts of new construction prior to, for example, the Fed responding to inflation and interest rates. And so we're heading into whatever we're heading into with record low levels of vacancy, relatively, I'd say, disciplined capital structures. That's not to say people won't be under pressure from either debt service coverage challenges or loan-to-value challenges. The combination of, as you talked about, some of the learnings from the global financial crisis, some of the restrictions on banks, I think also we can't underestimate how COVID did create an interruption to what was a very healthy market and probably changed things in terms of”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think where that quote came from is just the concept that most real estate down cycles, so periods of time where real estate is under more pressure from a performance perspective, come about because there's been a lot of new capital, often lent to people who then go build speculative real estate, meaning speculative meaning. They're building an office building without a tenant in mind. And oftentimes what you've seen in prior cycles is that Market gets really nice and healthy. People are really happy with performance. Lenders get more comfortable. They lend. Folks provide equity to new projects. You end up with a lot of construction and something happens. Either there's been too much construction or the economy softens. And then real estate is under pressure because there's been too much capital and too many cranes.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. And more than anything, you don't want to be ever in a situation where you're either a force buyer or a force seller. And we set up all of our structures to make sure that we're able to generate continued great performance. By deploying capital to great opportunities when we find them, and then also selling when we think the opportunity is right, not because we're forced to do so.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“This is part of the trust, right? Is the structure the investors give you in terms of the flexibility of when you draw their capital to deploynt opportunities and what those look like? We have a lot of flexibility in our capital to move across sectors, to move across geographies, to wait to deploy the capital that they've committed until we find great opportunities. That's all a relationship built on trust. But it also means that we can be patient.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“That's how we feel about it. I mean, the real estate market is so widely held. It's in so many places. There are so many different opportunities. And interestingly, we should come back to this, but the opportunities change, right? And based on kind of how people are using assets. And so we feel like there are plenty of opportunities that we can create. And I'd say, again, our capital also is structured in a way that we're never under pressure to deploy capital.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that trust has also allowed us, like I said, to expand into different types of real estate. So really, so much of our focus today is on growing and expanding our core plus business. This is real estate that has a very stable cash flow profile where we're able to generate compounding returns over time by adding value in assets that we want to own for long periods of time and structures that allow us to do that. And we've done that more and more for institutional clients. We've expanded to doing that also for individual clients. And it's really that trust from the good performance in tougher environments and really any environment that allow us to do that.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd say really in two ways. One is that our clients have given us more capital, and I think many clients came through the GFC deciding rather than sprinkle their investments around with a lot of managers. They want to do more with their more successful managers. And we've definitely been a beneficiary of that.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And when we got to the other side of the financial crisis, our clients really trusted us to start doing more for them than just those opportunistic funds I was talking about. And that has given us an opportunity to serve more clients. And with more products that access more parts of the real estate market than just those opportunistic strategies I talked about before”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“So that's why, again, buying in more distressed environments is definitely helpful. But it's not really the only way to find success, I think, in anything. To your question about when I joined Blackstone and what's been happening, the way I think about the last 12 years for me and for our business, it's really that story of what happened coming out of the financial crisis and the fact that during that period of time most real estate companies struggled to return capital to their investors, let alone generate a profit. And Blackstone's funds through that period generated substantial profits because we had made those good choices not just about the investments, but the capital structures, about the reserves, about having dry powder.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, we then hit the financial crisis, and there were a lot of really dark days. And I think if we did probably an article search right now, you'd have found a lot of prognosticators in 2008, 9, and 10 saying this was going to be a terrible black spot for us. And it ended up. All this goes back.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“No, no, when we took the company private, it was definitely not a distressed company, but what we were excited about was the ability to grow the company and really capitalize on its ability to grow in a capital light way. And by bringing in an incredible management team led by Chris Nacetta, we were able to help propel the growth. And we were excited about that from day one.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say though, if you look at the history of Blackstone Real Estate, some of our best investments were made at the worst possible time. Of course. I mean, Hilton Hotels is always the example we give. You could argue buying that in 2007 was the worst possible time. But going back to what we were talking about earlier.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Back up the truck. I went. If I knew that, I would share that with you, Barry. But I would say on the general idea of market timing, it can be helpful, of course, to pick a really interesting moment to enter a market, buy a company, buy an asset.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say timing can matter, and we're definitely in a moment where we think dislocation in the market is going to create interesting buying opportunities at values that are going to feel like very attractive bases.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Not exactly cutting edge, but I think this is one of the things that is so special about not just the real state business at Black So, but really about our whole firm, is the way we not only use data provided to us through tools, but also we're in constant conversation. I mean, we are a meeting heavy culture. We are a conversation heavy culture. And so much of that is about harnessing information and insights people have that can help make those decisions. And it's how we've built our investment committee process, one global investment committee where you're drawing in insights and expertise from around the world. It's just trying to say, okay, we have access to advantages through information that others may not. And let's use that rather than kind of risk that that just stays on the sideline.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, we definitely benefit from that. And I think we have the good fortune that there's been a heritage kind of from day one of using insights that we uniquely have access to. And the technology infrastructure around that has definitely improved. It's needed to improve at our scale for us to really be able to use all that information. But I think even just 12 or so years ago when I joined the firm, you'd have senior professionals with legal pads taking notes and meeting saying, okay, what did we just learn from that sale or how many people are in our process? What do they want to pay? And using those notes to kind of inform the thinking around next investment choices.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Coming off these businesses, and it really helps us make better decisions, and you otherwise would be able to do if you didn't have access to this. And so rather than wait for a research report to tell us what's really happening in apartment rent growth or in new leases for warehouses in Northern Europe, we're getting those data points real time, and that can help us inform on whether we're going to buy more of something, want to sell something, pivot how we're managing assets. And those are all just important decision-making tools for us. So much of what our work is is not just buying the real estate, but it's all about what is the value we can create, how can we grow cash flows? That's most of the time how you make money in real estate is growing the cash flow. And those data points coming from all across the world on what's really happening in these assets, how are our tenants making decisions help inform those strategies as well?”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say yes. And I think one of the things that's so important about the scale of these businesses and the scale of our business together across all of these companies and our funds is that we have a huge information advantage. We get data real-time proprietary to us constantly.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“That is a company that we have built through a series of acquisitions. We identified a world class management team and we said we want to build a great company, but we're not doing it through just kind of one acquisition of one company. We're going to build it up through a series of transactions.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“So, these are specific privately held companies by our funds. So, and these are companies that for the most part we own and control 100% of the company. And sometimes we buy companies and then continue to help grow them by new asset acquisitions or just growth in their cash flows. In other circumstances, we will build up companies through a series of smaller acquisitions. So an example would be in the US, where one of the largest owners of warehouse properties, we have a company called Link Logistics. It owns about 400 million square feet of warehouses.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a big chunk of the firm. And I think what actually understates is the impact we have through all of the portfolio companies we own in our funds. So we own 55 portfolio companies. And that really forms a huge extension of what we're able to do and then also see in terms of people on the ground across the world operating in specific real estate sectors and then sending back the information they're working with every day.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“100%. I mean, I think separating the for sale residential market from four rent commercial real estate, including rental apartments, is so important. These are different things. And I think you can't just mark what's going on in the single family for sale housing environment with what might be happening in warehouses or rental apartment complexes or office buildings.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Persistent inflation, you think about how well real estate has performed in those moments individual investors are starting to appreciate how attractive this is as a part of their portfolio. But that is a different kind of approach to portfolio construction.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And that's because real estate in strong economies can generate basically very strong alpha in weaker times or in an inflationary environment we're in right now, for example, as a real asset, a hard asset, it preserves value as cost to replace those assets go up. It's a cash flowing asset where you can remark your rents to market in a rising cost environment. And so I think those institutional investors are really committed to real estate. Individual investors for the most part have not yet determined that real estate is something they want and need to leave as core to their portfolio in and out of cycles. I think that is changing and I think in particular when you look back to environments similar to what we're in now where you see rising interest rates.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And this may evolve over time, but the biggest difference between an institutional client, so that state pension plan or charitable foundation or university endowment versus an individual investor, I think for the most part, institutional investors have decided that they want and need real estate to be a core position in their portfolio in and out of cycles. Right.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I would say, I think for all investors of any type, whether it's size or whether you're an individual investor or an institutional investor, really what matters most is performance. In the end, and especially we as a manager, if we can show up and say we continue to generate great performance on your investments, it could be any kind of client on the other side of the table. That is what's most important. That is what's most important. I think from my perspective, the biggest...”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“There could be an interesting match there. And I think just generally a feeling like we at Blackstone, our performance was strong through the financial crisis. We were able to open doors and keep open doors with clients, but it was all about stewarding those relationships and how do we do that better. And so what got me ultimately really excited about the Blackstone opportunity was not so much that I had any confidence that I want to do investor relations or that that was going to be my long-term career destiny. It was that I wanted to work with these people who were really focused on doing a great job, not only through the investments they made, but through the interactions they created with their clients. And I felt like that move would allow me to continue to learn and grow. And frankly, diversify my skill set so I'd be better set up to be a leader in a bunch of different capacities in the future.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Mostly because I had no experience with that at all. I had come at Goleman, almost all of our capital had come from high net worth clients. Also, I had done acquisitions. I didn't have investor experience really. And what Blackstone was just kind of, I think, looking at it a little differently and saying if there's a person who understands real estate and can understand markets, but also can help our clients understand better what are we doing with their capital or if they're not yet a client. Is what we're offering compelling.”
2022-12-09 · Masters in Business · Kathleen McCarthy on Real Estate Investments · IDENTIFIED FROM THE TRANSCRIPT · source