Do It Again: Real Estate’s Return to Old-School Value Creation

One of the things you just mentioned there I think is a really important thing that we should dig into a little bit deeper, which is the long-term nature of real estate capital.

A lot has evolved.

A lot has changed over the last 52 years.

I've been in the business 31 years.

A lot has changed in my 31 years.

In fact, 31 years ago when I got into the business, there was more long-term capital than there was 25 years ago, where a lot more institutions got involved, and it became not necessarily worse thinking, but shorter-term thinking.

Do you agree that the world has shifted materially from a long term to a short term mentality and, but maybe we're going back to a long-term mentality in a high interest rate environment?

So I think you're absolutely right.

Up until the early '90s, we had a very long-term mentality dominated by insurance companies, wealthy families, long-term perspective, and long-term holdings.

I think beginning with the crisis that we had in real estate in the early '90s, we had the first set of opportunity funds, and they had a typical life, uh, seven-year funds, uh, short-term focus, high IRR focus rather than long-term return of capital.

And that, uh, then switched to the public markets, the REITs who had to give quarterly reports, quarterly earnings.

And so we shifted from a, I think, a long-term environment to somewhat of a short-term environment where people were looking at IRRs, which I think is a very useful tool, but, uh, it made things too short term.

And that's been true for the last, uh, I'd say almost 35 years.

But we are moving in the other direction again.

I feel that already.

And, uh, the capital is the key.

But capital, as you know, tends to be very short-term focused.

That's why we have these big cycles in stock prices.

Real estate's a little bit out of sync in that environment because it is not a short-term asset, it's a long-term asset.