Transcription
You acquired the Sheraton. You did a lot more. But you made a little sin. With the Westin. We can go on and on.
You were like the hotel guy for a long time, and I guess you still are. A real estate guy before I was a hotel guy. Okay. Alright. Now I'm back to being a real estate guy and a hotel guy. Alright. Anyway, I'll start hotels again.
So you're gonna start hotels again? But but you've broadened out. I mean, you I mean, I'm looking at some of your investments lately. You're doing a lot right now in the sort of AI data center infrastructure business. That's become a huge component of your business, isn't it?
It has. Yeah. Recently. I mean, for the last five years, we've been doing data centers. Yeah. And then we started really in the Dallas market, the largest data center market in the world. It's eight and a half gigawatts in place. And, it's the Dallas was the home of the Internet, and then so there's great connectivity, and it sort of like Park Avenue and 57th Street. Yeah. And then we brought it out to other markets. We did a deal with this Bitcoin miner. Yeah. And Whitmire Holdings. Right. Yeah. Holdings. And and and we're looking at others, and then we're expanding other states. And and we've with two platforms, we've launched into Europe and into Asia. Yeah.
Two both directly and indirectly. In Europe, we have the largest data center operator. We own the majority interest in largest data center operator in Ireland. Mhmm. Which has expanded in joint venture with the Spanish utility, Iberdrola. And then we've also got sites in Milan. And then in Asia, we bought together with Warburg controlling interest in ESR. Yeah. Which is Asia's largest real estate asset manager. We took it private last year, and they have a big data center business. And then on our own, we partner with them, with the ASR, but also have moved into Australia, and then we're looking at Japan and Korea also. And we've been in and out of Malaysia. We haven't bitten the dust yet, but I don't know if bit if I by the dust, I don't think it's the right word. Bitten the the bone? Bitten the bone?
Well, we'll talk about ESR because ESR is pretty expensive. I mean, that's that includes South Korea, Japan, India. I'm probably forgetting a couple nations in there. That gives you a pretty broad foot footprint there. Why did you lead that deal? We like their footprint in the within the new world. They they're leaders in logistics, the largest or second largest neck and neck on logistics with a huge footprint in Australia, which is a super healthy market. We did a large investment into Sydney and Melbourne in industrial a year and a half ago. And, also, we like Japan. You know, it it's it's it's done great with their abandonment of the end. Yeah. And the fact that they've become so competitive while letting the currency go. So ESR has had a really good footprint in in really the fast growing countries. And and we think, you know, Korea was distressed with coming out of that. And they had they do they're great developers. They they've done some great development deals all across Asia, including India. And they're about a 100 and they were a 150,000,000,000. We'll shrink them down to about a 120,000,000,000 of AUM assets under management. We're about a 130. Wow. And we're along, as a firm, more Europe and The US, and they're along Asia. So it was complimentary of what we were doing. Yeah. And and, you know, we're working with a group of investors. We took it private. It was a I think it was largest privatization in in Asia last year. It was. Yeah. It was.
I think Would would you have done that? I mean, you mentioned Japan and, obviously, the big changes that we've seen in the yen and fiscal policy over there. Would you have done a deal with that with such close ties to Japan, I don't know, five years ago, ten years ago like this? I think those two asset classes have caught the the, you know, favor with investors. And and a lot of their clients are sovereign wealth to invest with us. So we could do diligence of how they felt about the ASR as a manager. And ASR was a sort of a funny company. It was listed on the Hong Kong stock exchange, but didn't really pay a dividend. Most asset managers pay dividends, and they grew at hyper speed. And so the markets were they then they had a lot of exposure to China. We think we had that that market appropriately, but they're a big logistics player in China. It's one of the probably the weakest logistics market in the world that I'm aware of. And but I think we've added well below book, and we bought the company, I think, attractively. We put together a consortium that includes some of the original shareholders just rolled over into our privatization. Mhmm. And then we put, you know, a really good group, including some of those sovereign wealth funds joined us and then take private. So it's going really well. I actually I've I've rarely done a consortium deal. We usually we're doing deals by ourselves, maybe one partner, but there are five of us invested. But we've all agreed on the business plan upfront, and we're executing. Yeah. And the team's good and focused, and I hope we can grow it dramatically and then re IPO it.
What what about the Telstra deal in Australia? I I mean, how how important is that market for you right now? Australia is a good market. Yeah. There's a trunk lines from The US. So and there's no data sovereignty issues. I think both in Europe and Australia and to some extent all of Asia, we've seen the hyperscalers who are focused on The US. In the last six months, they seem to be really focused on moving out and not abandoning The US, but they're much more active in Europe. They're much more active in Asia. And we're working right now on a on a day our first real data center deal on our own in in Australia.
Are the economics and the valuations a little more attractive there relative to say what we're seeing here in The US? No. No? The same. Oh, wow. Pretty much the same. Yeah. A little Is there more upside maybe? I mean, why chase that? Why not just continue, you know, roaming around The US and China? You can get power anywhere in the world. You have something you can talk to to a hyperscaler about. So we're just agnostic. Yeah. You know, the the interest rates are about the same. Australia they are here. Yeah. And and the yields on cost for us developing are about the same. And the equipment cost the same thing, and we have equipment problems everywhere. It's not just The US. You gotta order your turbines and your chillers your other equipment, and the labor seems to be okay. It's not it's really Melbourne and Sydney pretty much. It's not it's not across the country, and our partnership with investors are a great help, and they they've got sites, we're working on one of them. Hopefully, we'll get it done very shortly.
What what about your footprint in Europe? Because that's been expanding too. In fact, it seems like you're putting a little bit more emphasis on that than some of the other businesses. Guys like us, we like we like to invest when with positive leverage, when the yields on property are higher than the cost of debt, and that turned true in Europe a lot faster than The United States. So we we just took private well, we we bought a Swedish homebuilder. We thought that market was interesting. It's undersupplied. We've we're we have a huge owner of industrial in Northern Italy, which is like that's a good part of Italy from an investment standpoint, and the South is not so hot. But that enjoys, a 2% vacancy rate. We're seeing growing rents, and we're getting inbound interest to buy the stuff. We've been very constructive on take privates of small public companies in Europe. There are a lot of small REITs in Europe that can't get to scale. Mhmm. And they were quicker to actually, let's say, clean the books or shareholders got stuck and wanted to sell a company. So we continue to comb through the public markets looking for things to take private. There's a couple companies working out right now. And and I think, really more on the continent than The UK because rates in the economy rates are higher and the economy stayed stubbornly weak. I'm not really worried about European economy going into a deep recession. It's essentially, we have a footprint in Germany with a very large developer. And everything they they touch, everything they open for a lease, immediately preleases. Yeah. So we just achieved the highest rents, I think, ever in Berlin on a on an office that we're building. So it's a you know, I think those are those are markets are inherently better than the markets in The United States in the in the sense that the the vacancy rates are much lower.
Have you given up on The United States? Not at all. No? Not at all. We're just waiting for Kevin Walsh to bring rates down for us.
You think Kevin Walsh is gonna do that? You don't? Well, let me rephrase that. You think he's gonna have a reason to lower rates? Well, I'd argue if oil spikes, he should lower rates because oil That seems counterintuitive. Because interest rates aren't gonna affect oil prices. Right? But on the other hand, oil prices attacks on The US and the global economy, weakening the economy. Mhmm. So he should lower rates Mhmm. And help the interest rate sensitive parts of the economy like housing to balance the economy and keep it going.
How much room do you does he even have to do that? I mean, a quarter point is about to do anything for anybody. I think the short end could be three. You know? Oh, yeah. Wow. Okay. Was three before the war. I mean, the forward curve was. It was one at one point. It was one point. No. I mean, like, six months ago, was in in in the fall. It was three, the forward curve. And Mhmm. I think The US economy is sort of a weird economy. It's we talk about this GDP growth and exceptionalism that's true from the AI's perspective, from the consumer's perspective. He's not doing so great. Half of this country is sort of not doing so great, and they're facing higher everything prices, particularly gas now. Mhmm. And so if The US is a consumption economy, you would expect consumption to get weaker. Yeah. And we'll see if it happens. You're already seeing changes in travel patterns. Americans aren't going to this summer. Yeah. Travel to Europe sound like 10% from The United States. Though? I mean, that that some of these changes aren't just temporary, that they could be long term structural issues.
I don't Yeah. I I what worries me is, yes, the the the disparity of wealth in The United States and the fact that half the country isn't doing so great, that worries me. That because it will impact politics. And if it attacks politics, it'll impact real estate. It'll impact taxes. Mhmm. It'll impact a lot of things. Yeah. So I I think as investors, you know, we've shied away from blue states lately lately because of their propensity to tax businesses and individuals, and and that's showing up in higher growth rates in the in the Sunbelt states, which are oversupplied in United States Yeah. But that's where the job growth is. And, eventually, they will grow into their supply. There's not a lot of new supply where some of the blue states Yeah. You know, are losing jobs, and and they don't have a lot of supply, but they won't five years to ten years from now, they won't Yeah. Be outperforming the Nash Villes, the Dallases, the Atlanta's, Raleigh's, the pretty much the entire state of Florida.