Transcript: Cathy Marcus, PGIM Real Estate



The transcript from this week’s, MiB: Cathy Marcus, co-CEO, global COO of PGIM Real Estate, is below.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, SpotifyYouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.



This is Masters in business with Barry Ritholtz on Bloomberg Radio.

00:00:09 [Barry Ritholtz] This week on the podcast I have an extra special guest. Cathy Marcus is co CEO
and global COO of p GM Real Estate, a $208 billion investor in real estate, part of the giant real estate
investment firm, PIM. She has had a number of different positions within PIM, including managing their
flagship core real estate fund. Before she moved into management, she has been on all of the big lists.
Barron’s 100 most influential women in US finance, lots and lots of others. There are few people in the
world better situated to discuss commercial real estate investing from every perspective. They do debt,
they do equity, they invest in public real estate, they invest in private. She has lived and invested
through not just the great financial crisis, but the SNL crisis and a number of other fascinating
experiences in real estate. If you’re at all interested in learning how a large investor in global real estate
operates, then you’re gonna really enjoy this conversation. With no further ado my discussion with P

Cathy Marcus: 00:01:29 [Cathy Marcus] Thank you. It’s good to be here

Barry Ritholtz: 00:01:31 Good to have you here. So, so let’s dive into your background. Starting with
your undergraduate work. You, you study real estate, finance and entrepreneurial management at
Wharton. As an undergraduate, you go to NYU to get a master’s in real estate investment and
development. So you knew from when you were essentially a teenager, you wanted to be working in
real estate.

Cathy Marcus: 00:01:56 [Cathy Marcus] And I’m very fortunate that it worked out because there’s no plan B there.
You can see I did not study anything else. So people often ask me how at the age, literally of 17, I knew
that I wanted to be in real estate. And I, I think that I kind of triangulated on it. I have no family history. I
have no, I, you know, knew a real estate developer I thought was really great. I knew I wanted to do
something in business. I was always good at math, but I really, I just didn’t relate to things that were
more esoteric bonds options. It just wasn’t doing it for me. And I always really loved the built
environment. I like architecture. I like as a real estate person, you walk through your assets, you can
touch and feel things. I love to see things, things developed. I like the idea of kind of urban planning. I
always say if I hadn’t been a real estate investor, I would’ve loved to have studied more about urban
planning. I like placemaking. So really, if you combine wanting to be an investor with liking architecture,
design, placemaking, it really leads you to real estate.

Barry Ritholtz: 00:03:01 [Speaker Changed] You, you anticipated one of my questions, which was, was anyone in the
family in real estate? My mom was a real estate agent, like home. Everything from home designs and
renovation to pricing and financing was dinner table conversation in my house. Nothing like that from
you. This just wholly sprung up out of nowhere

Cathy Marcus: 00:03:23 [Speaker Changed] Pretty much. I mean, my dad was a, a small entrepreneur and did invest in
some commercial real estate, but really not in a primary way. And my mom’s a speech pathologist, so
our dinner table conversation definitely had a business orientation, especially a small business owner.
And so I definitely learned a lot there. And I think it also, my dad’s business was global and so it peaked
an interest in me in working internationally, but the real estate thing was kind of out of the blue.

Barry Ritholtz: 00:03:54 [Speaker Changed] So, so you graduate both undergrad and graduate with just real estate
related training. What were your first few jobs after school like?

Cathy Marcus: 00:04:04 [Speaker Changed] I had a very traditional start. I started off as an analyst and I worked,
initially, my first two jobs were with syndicators, essentially in a, in a business that doesn’t exist
anymore. As it did, I worked for a very large syndicator right out of school, which was right around the
time the tax laws changed. And so that whole business was upended.

Barry Ritholtz:: 00:04:25 [Speaker Changed] Before you go further, define what a syndicator is for people who may not
remember that.

Cathy Marcus: 00:04:30 [Speaker Changed] Sure. Essentially you buy assets. It could be all kinds of assets. The company
that I worked for was called Integrated Resources and we did a lot of real estate, but also things like
airplane leasing and movies. In fact, dirty Dancing was one of the big movies that we financed while I
was there. And so they needed people to help acquire the real estate. And then also one of my primary
jobs was to help capitalize it and find financing for it. Because the idea of syndication is that you make a
giant purchase and then you sell it off in smaller units to really more of a retail investor. And in those
days, it could be as small as like a 25 to $50,000 unit that would be sold through a broker dealer, a
Shearon Lehman, lots of people who are no longer in the game. And, and it was a way for individual
investors to a own assets in a small slice, they could never access themselves. But in those days, there
were very tax driven investment.

Barry Ritholtz: 00:05:26 [Speaker Changed] Very favorable treatment of, of those purchases. Yes. Not like regular
stocks and bonds. Exactly. And all that went away with a couple of tax changes first Reagan. Yes. And
then I think it was Clinton did some changes as well. Exactly.

Cathy Marcus: 00:05:38 [Speaker Changed] As did integrated resources.

Barry Ritholtz: 00:05:40 [Speaker Changed] So went away

Cathy Marcus: 00:05:40 [Speaker Changed] Away. Yeah, exactly. Oh, that’s very funny

Barry Ritholtz:  00:05:42 [Speaker Changed] Very funny. So, so you end up at, at PGM eventually, and you start out at,
did you start out at the flagship core equity real estate fund? Or did you work your way towards that?
’cause eventually you were running that for a few

Cathy Marcus: 00:05:56 [Speaker Changed] Years. I did, I worked my way toward that. I had two stops before then. I
worked in sort of a quasi portfolio management role for like a single client account type business. And
then I went to be the chief underwriter for the US investments and really got to underwrite all new
investments in the US all across the country, all asset classes. It was a tremendous experience for me.
Something that we often have had as a rotational position. So I did it for three years and it was a, a
really great growth

00:06:25 [Speaker Changed] Experience. Now when you say all asset classes,

00:06:27 [Speaker Changed] Sorry, all sectors of real estate. Oh,

00:06:29 [Speaker Changed] Okay. So not, ’cause at one point in time you were doing something with
equity, is that right? Head of US equity,

00:06:36 [Speaker Changed] Head of US equity at p real estate meeting equity versus debt. Not equities.

00:06:40 [Speaker Changed] Equities. Got it, got it. All right. I want to make, so it’s been real estate all
the way down. That’s, that’s all.

00:06:45 [Speaker Changed] It’s real estate through and through equity debt, private, public, but always
real estate.

00:06:50 [Speaker Changed] So tell us a little bit about the experience of running the core flagship real
estate fund. What was that like? You, you did that for like eight years, is that right?

00:06:59 [Speaker Changed] I did it for longer. It was over 10. Wow. And it was a tremendous
experience. And actually you had asked, you know, whether that was my first stop at PGM real Estate,
formerly Prudential real estate investors. And it wasn’t, but it was the job that I wanted When I, when I
took the job, my first job at PGM, essentially the person who was running the core fund at the time was
someone who I sought out as a mentor because I knew that that was the job that I wanted. And I, I
worked toward that. So I was on that fund team for over 10 years spanning kind of the run up to the
GFC. So lots of good times for only about two to three years of my first couple years there. And then I
worked on it throughout the GFC and then became the senior portfolio manager during the recovery

00:07:47 It was quite a time to be running that kind of a fund or even just working on that kind of a
fund. It was a, you know, I had seen other crises. I mean, the SNL crisis in the real estate business was
something that was a, a very pivotal learning experience for me. And I came into the GFC with some of
those skills from working through the SNL crisis. But every crisis is different. And you know, when I was
working through the SNL crisis, I was much more junior. So someone else, you know, was worried about
what would happen. They just told me what to do, and now this time I had to worry about what would
happen. And it was, it was a great experience.

00:08:27 [Speaker Changed] So when I hear GFC and SNL crisis, I think workouts, reorgs and distressed
investing, did you do all of that? What, what did you actually do in the oh 8, 0 9 era, maybe even a little
before when things had rolled over? Well,

00:08:43 [Speaker Changed] In the SS NL crisis, I was doing primarily workouts, both debt and equity
workouts. And I learned so much doing that and was also in a big dispositions role in terms of real estate
owned that have been foreclosed upon, but also performing and unperforming loans, commercial
mortgage securitization, and even residential mortgage securitization. So I was very, very distressed
oriented during the SNL crisis. And I would recommend to anyone who wants to learn about a business
work through a major crisis, and you’re gonna get 15 years of experience in three years. That, that was
my experience

00:09:22 [Speaker Changed] To, to be fair, the SNL crisis, I, I don’t want to downplay it too much, but it
almost seems quaint Yes. Compared to the GFC. It, it, was, it, you didn’t get that sense of free fall. No, it
was clearly a mess. But it was like, all right, we’ll figure this out. The GFC in real time was like, holy cow,
this thing is, we’re off the rails here. Exactly. Very different, right? Yeah.

00:09:46 [Speaker Changed] And in particular in real estate, because the SNL crisis, you could certainly
make an argument that we shot ourselves in the foot in, in the s and l crisis.

00:09:53 [Speaker Changed] Yeah. But that was really all the banks that were doing it,

00:09:56 [Speaker Changed] Not it was the banks, but there were a lot of empty buildings. I mean, we
were building and building and building

00:10:00 [Speaker Changed] Texas notorious for See-through buildings Yep. see-through

00:10:03 [Speaker Changed] Buildings. Exactly. So, so that was very different. And, and you’re right, it
felt like real estate wasn’t free fall. And clearly the banking system wasn’t free fall, but the government
was there with, you know, the big RTC bailout and it didn’t feel like the world was falling apart. Right.
The GFC felt like the world was falling apart. Right. And it was very difficult to understand. I think that
the SNL crisis, you could understand that the banks were just lending, lending, lending and building
building, and we had empty buildings. Any, even if you’re not in real estate, you understood what that
was about. The GFC was really a lot of esoteric financial products that, you know, the average person
didn’t understand. It actually ended up that a lot of financial professionals didn’t understand them
either. We didn’t know that at the time, but it really felt so much more systemic, and it felt like this, you
know, giant thing that was almost not understandable to many people had gone awry

00:10:55 [Speaker Changed] Good, good times. You know, those of us who were working in the world of
finance, then, if you were not on the wrong side of what was going on, it was endlessly fascinating and
just, you know, a graduate degree. Right. And if you were in charge of assets that were collapsing, it had
to be just nightmarish every, every day. It was relentless and just never seemed to to end. So that was,
you know, all the people I know who started working in the industry after that, it’s like, oh, you guys
missed the big party. Right. It was amazing.

00:11:27 [Speaker Changed] Exactly. Well, you, you see that now you can tell who missed the party
because it took a lot of people who had, you know, 10 or 12 exper years of experience in our business. It
took them way too long to figure out that, that the world had changed because they hadn’t experienced
the world changing. And you know, those of you, those of us who’ve been through it a few times, you
start to get that spidey sense that things are not as they should be. And you kind of go right into that
mode of like, okay, stop spending money, shut down all the deals. And and that’s much more difficult for
someone who hasn’t experienced it before.

00:12:01 [Speaker Changed] Immediate survival instincts. Exactly. Kick in. And, and you know, the ironic
thing is there’s a generation who only last year discovered, Hey, you know, the rates can go up also.
Right? That was like an a, a a, you know, an epiphany for a subgroup of people who it’s like, oh, I didn’t
know they could raise rates. I thought they can only cut ’em. So, so now you’re really in a management
position. What was that transition like from being a real estate investor to managing a very large real
estate group of professionals?

00:12:35 [Speaker Changed] It was a much more complicated transition than I had expected it to be. You
know, it’s an interesting story that I tell, which is that our CEO at the time came to me, this is when I was
running our largest fund. I had only been an investor in my entire career, and he said, I’d really like for
you to be my chief operating officer. And I actually said, which is, you know, embarrassing. But it is
unfortunately something that women especially of my age do. I said, oh, actually I’m not qualified for
that job. I only took, you know, three accounting classes and I’m, you know, I, I don’t think I’m your
person. And he said, if I wanted an accountant, I wouldn’t have come to you. I’m looking for a partner.
I’m looking for someone who wants to learn how to run a global business.

00:13:17 And I said, well, you know, I feel like I kind of know how to run a business. I’m running the
largest fund. You know, there’s lots of people working on this fund, huge revenues. I I I, I know what I’m
doing. And he said, you know what? I try it for three years and I I bet you’re gonna learn a lot. And he
was a hundred percent right. You know, learning how to keep the trains on the tracks when you’re an
investment professional. And I was the worst. I was a massive prima donna. I had no appreciation for
went on behind the scenes. If there was an error in a report or a number, I went ballistic. I had no
understanding of what it takes to deliver operationally. And I learned quite a bit about that, and it’s
really been terrific. And I, I recommend it to all investors who want to ultimately run a business, take on
an operational role, because you will be shocked by how much you learn.

00:14:11 [Speaker Changed] So, so there’s so much stuff to unpack there. I have to work my way back to
your initial response when offered the operating position. It’s kind of funny because you’re pointing out
like this inherent difference between men and women. Men are just clueless as to our own lack of skills,
but oh, sure. What the hell, how hard can it be? Let’s rush in. Whereas, and I don’t wanna mansplain
sexism to you, but it seems that women are more thoughtful in saying, Hey, I don’t know if I’m qualified
for this. Whereas a dude is just like, sure, well, I’ll give that a wait, fight a bear with my bear. Okay,
where do I go? Men, men are just the sort of self-confidence unjustified. I wonder how much that
explains what we’ve seen, especially in finance, in, in the gender gap at, at senior levels, which is
certainly getting better. It is point, point at at present, but I’m just curious if that philosophical
difference I is why men rush in and women sort of think about it and say, well, let’s really weigh the pros
and cons

00:15:24 [Speaker Changed] A hundred percent. And, and you know, interestingly, you would certainly
not be the first man to mansplain sexism to me. Right? It happens all the time, which just kind of goes
back to the self-awareness. Right? It’s hilarious. It happens constantly. But I will say things have gotten a
lot better, but you know, somewhere in the middle is probably, you know, a much better place to be.
Because I will say that, you know, women have a tendency, if there are a hundred things that you need
to have for a job, if they have 99, they think they’re not qualified. Right. Myself included. Right. I think
I’ve gotten better, but, you know, if there are a hundred things and a man might say, you know what? I
could do 60 or 70% of that, that’s probably good enough. Right? I think

00:16:02 [Speaker Changed] You’re being generous. I think like a, you know, a I know a dude who’s in
that space. I, I could do what he does. I think it’s like that sort of, you know, not to overstate male
arrogance and recklessness, but there is certainly a degree of, Hey, worst comes to worst. I land on my
face. And, and I think to some degree that’s positive, but often leads to the Peter principle. So

00:16:26 [Speaker Changed] Exactly. And I do hope that, you know, younger women in business broadly
and in finance, you know, can, can learn from those lessons. That’s why I as embarrassing of a story as it
is, I always tell it, especially to, to younger women, because I don’t want them to make that same
mistake. I was very fortunate that, you know, I had a boss who really pushed me because that I, I
wouldn’t have taken it necessarily of my own volition.

00:16:51 [Speaker Changed] Huh. Really, really interesting. So, so let’s talk a little bit about that giant
portfolio of investments. What type of real estate does PG IMM invest in? Do you have specific
geography, size types? What, what do you think of?

00:17:07 [Speaker Changed] We have a very, very broad investing mandate. We invest in, in the US in
Latin America, which is really primarily Mexico at this point across Europe, the uk, and across Asia. So we
really hit all the major markets and all the major geographies. And also we invest in pretty much all the
major food groups and even some of the alternative food groups in real estate. So everything from very
traditional office, which I’m sure we’ll talk more about. All kinds of residential, retail data centers,
industrial manufactured housing, seniors, housing, you name it. And we probably have a bucket of
capital for it.
00:17:46 [Speaker Changed] So. So let’s dive into those sectors. I didn’t hear you mention laboratory or
medical, which I know is an up and coming area. Yep. Is that a space you guys are in as well?
Warehouses is another definitely fast growing space. Definitely. So let’s, let’s break those down. Sure.
Let’s start with office. What, what’s going on in the world of office investing? Are there certain things
you guys like to invest office wide? Are there areas you stay away from? What’s happening in that

00:18:14 [Speaker Changed] So right now I’m gonna talk about traditional office, not about medical
office or or lab science, but in the traditional office space, we’re not investing in a tremendous amount
of office right now. Like everyone else. We’re in a little bit of a wait and see. We have an existing office
portfolio that we’re dealing with. And you know, I’m sitting here in your Bloomberg office and it’s a
buzzing hive of lots of people, right? There are many office buildings you could walk into in any city
around the world where that would not be the case.

00:18:43 [Speaker Changed] So this is clearly a class A building. And when we look at other class A
buildings on Park Avenue, they seem to be fairly, you know, 75, 80% buzzing. I don’t even wanna say
occupied. Right. But once you drop to the class B buildings, it’s a whole different story. How do you think
about the different quality of real estate investing and is that reflected in their prices yet?

00:19:08 [Speaker Changed] So in particular, in office, you know, there are gonna be winners and losers
and the winners are gonna be, I wouldn’t even say just a, not all the, A inventory is really gonna be a
winner. You have to be, oh really? Kind of a high a high A, you have to be an A that isn’t just an A
because of its location, it’s an A because it also has ESG attributes, it has wellness attributes, it has
things that draw employees back to the office and make them want to be there. And it, you have to, in
these days when when I was young, the office was shelter and a place where people could make sure
you worked all day. Now the office is, it has to be better than your home or people are not gonna come.
So here in your office, there’s lots of free food and free snacks and it’s nice and bright and there’s lots of
vibrant and smart people walking around. That’s a draw. But if you are in an old office building without
great light, you have low ceilings, you have no amenities, you don’t have a lot of wellness attributes to
your building, you’re not in your public transportation. You’re gonna have a hard time attracting people
to come to your office, particularly younger people. And if you don’t have the ESG qualifications, it’s
even worse.

00:20:18 [Speaker Changed] So we’ll talk more about ESG later. Tell us about wellness. How does a
building contribute to overall wellness?

00:20:26 [Speaker Changed] Many ways, but I would say that the primary way that really has been
underscored even more so since COD is in air quality. And air quality is huge. And, and there is a lot of
data around employees feeling better, not getting sick as often, having more energy, not being
exhausted. That’s around air quality. And fresh air in particular is very, very important.

00:20:51 [Speaker Changed] And, and that’s not a expensive or difficult retrofit, is it? That’s something
that can be done fairly easily if I, I think it was 60 minutes or somebody talked about that not too long

00:21:00 [Speaker Changed] That assumes you have modern systems. So that, that’s a big assumption.
Not all buildings have the systems that would make that an easy conversion, but there’s lots of other
things you could do. You could have a gym, you could, you know, encourage your employees to get
outside, you know, not in the city as much, but other places. And increasingly in Manhattan, people
have outdoor spaces for their employees so they can get out and get some fresh air, get some sunshine,
you know, instead of drinking coffee in a cold, dark room, you could sit on a patio. It’s those types of
things that are good for your physical health and your mental health.

00:21:35 [Speaker Changed] Huh. Really interesting. Let, let’s talk about some other sectors. You
mentioned medical office and lab space. Yes. What’s going on in there? Is that still a growth area?

00:21:45 [Speaker Changed] It’s still a growth area. I would say that some of the hype, particularly of the
lab space, has been taken out. And I think that’s a good thing. For a while, people were buying, what I
would say would be subpar office buildings and turning them into lab buildings. And lab buildings are
best purpose built, right? There’s a lot of extra bells and whistles that you need for a lab building. If you
think of like the absolute perfect lab building, it’s gonna have, you know, a lot more load bearing. ’cause
you’re gonna have really heavy machinery. It’s gonna have higher ceilings, it’s gonna have a lot of
natural light, it’s gonna have extra water, it’s gonna have redundant electricity. There are experiments
being run in these spaces that if, you know you have a power outage, you could lose 15 years worth of
work and data.

00:22:30 Wow. So you really have to have a lot of redundancies in your systems. It’s very expensive to
build, but the good thing is that it’s very reusable. If you have one tenant and, and they leave, you can
pretty much have a plug and play with the next tenant. So I think it’s great that there’s less of this kind of
conversion into lab space than there had been. But the reality is that a lot of things that are really
demographic trends, an aging population, people living longer, you know, advances in healthcare,
needing to have green energy sources, needing to be able to create, you know, clean water. A lot of this
experimentation and a lot of the venture capital funding is all occurring in these lab buildings.
00:23:15 [Speaker Changed] Hmm. Really interesting. You mentioned converting offices to lab buildings.
There’s been a lot of chatter about converting all of the excess office space to residential. Some people
say that’s much harder than it appears, especially with some of the bigger citywide block buildings that
are from the sixties and seventies. They don’t have the light, right? They don’t have the access to
windows. What, what’s the prospect for those sort of conversions? And, and let me just throw in, I
remember post nine 11, the whole lower Manhattan or a ton of those offices got converted to
residential very, very successfully. Yes. What are the odds of that happening in other city centers?
00:23:56 [Speaker Changed] So we did some of those projects in lower Manhattan and lower
Manhattan. The floor plates tend to be smaller. The buildings are small, they’re, they’re thinner and
they’re, they’re taller, right?
00:24:06 [Speaker Changed] So you’re never too far from a window.
00:24:08 [Speaker Changed] Never too far from a window. So it, it is a little bit easier, especially some of
the historic buildings downtown. One of the ones that we converted into high-end condos, you know,
had been an old JP Morgan building. It was where his office was. So those buildings were just smaller by
definition, smaller floor plates, more windows. There’s a lot of capital being raised to convert office to
residential. And it’s a really kind of a romantic notion that we have too much office and we have a
structural shortage of housing. Wouldn’t it be like the nicest thing in the world, if you could take all of
this, you know, in bad office if you will, and convert it into affordable housing, wouldn’t that be
fantastic? First of all, the numbers don’t work, right? The, the physical structures don’t lend themselves
that well, there’s probably, you know, under 5% of the office stock. Wow. That would lend itself to that.
And it’s very expensive in a way. You would have to be able to get the land for free and, and someone
would have to pay to demolish the existing office building. So it’s, it’s really very, very
00:25:16 [Speaker Changed] Difficult. So I’m talking about converting, you’re talking about knocking
down a functional, but unattractive building and putting up a brand new high rise.
00:25:23 [Speaker Changed] In many ways that would be actually the cheaper route to go. Wow.
Because you might say a functional building, it’s not functional for residential. It doesn’t have the
windows, it doesn’t have the plumbing. It, you know, you have to break things into units. You don’t want
units that look like bowling alleys. You need more elevators. I mean, there’s just lots of stuff that you
need. So there will be some of that done. And some of it’s happening, some of it’s happening right now
in lower Manhattan and other cities and in DC in particular. But it’s not, it’s not gonna be a wholesale
00:25:53 [Speaker Changed] So, so you mentioned ESG earlier. How, how do you, how does PGIM
integrate ESG factors into their investment process? What does that mean for real estate investing?
00:26:05 [Speaker Changed] We integrate ESG into everything that we do from the very beginning of
identifying a potential investment through acquisition, through operations and through disposition. And,
you know, there is a lot of, you know, political consternation, a lot of a divide, particularly in the United
States around ESG, where there are, there’s a politicization of ESG in real estate. We’re actually very
fortunate because there’s really no conflict with, you know, ESG, especially the e in, in real estate
investing. If you have a more sustainable building, you’re using less energy, you’re using less water, you
have more efficient systems, you are near public transportation, you have an ESG certification, you’re
gonna have higher income, therefore a higher value of your asset, you’re gonna be able to track the best
tenants. The best tenants are not going into a building that does not have an ESG certification. And if
you’re near public transportation, you know, every tenant is looking for that. So I really feel that ESG is
just, it’s just table stakes in real estate investing. So we’re fortunate that we don’t have the controversy.
00:27:14 [Speaker Changed] It it’s not just higher income, you’re describing much lower costs as well.
Exactly. So the building is more profitable unit versus a comparable non ESG compliant type of building.
Is that, that
00:27:26 [Speaker Changed] Thinking? Exactly. And you know, it’s a way, if you reduce your operating
expenses, you’re just increasing your bottom line. And if you take an older building that is just like, you
know, it’s, it’s leaking energy all over the place and you upgrade it to have the systems, you have just
completely improved the value of your asset because we value real estate based on the net operating
income. And, and that is the key to being able to increase value.
00:27:53 [Speaker Changed] Kind of hard to politicize improving your bottom line, isn’t it? Exactly. So, so
let’s talk about the target net zero emissions from real estate projects by 2050. What does net zero
mean and how does one get there?
00:28:10 [Speaker Changed] So there’s lots of ways to get there. And, and net zero, you know, can mean
there, there are various ways in real estate pathways to get to net zero. There are already several
buildings, office buildings around the country that are net zero. And that was accomplished through a
variety of things. One, using, you know, different building techniques, different building materials. You
can use green concrete, you can have less embedded carbon for the institutional real estate industry.
Embedded carbon is a huge issue because you buy an asset and there’s already this giant carbon
footprint that you had no control over and maybe it was created 50 years ago. So that, that’s a whole
other issue. But things like green concrete things, like different sensors that, that you can use that help
you build more efficiently. And, and if you look at, you know, ESG in its entirety, which is also a lot about
safety and, and keeping people safe and healthy, that there are lots of new construction techniques that
it’s just safer construction where you might have robots doing things that were very unsafe. You might
have drones, you know, photographing buildings instead of having people having to go up on
scaffolding. So we, we have a lot of opportunity in the built environment to mitigate embedded carbon,
but also to reduce our use of carbon. Huh.
00:29:37 [Speaker Changed] Really, really interesting. So let’s talk a little bit about what’s been going on
the past couple of years and what, what it looks like over the next few years. You are not taking out a
mortgage to buy a single family home. You’re doing these big projects. How does the dislocation of
volatility of the enormous rate increases we’ve seen in 21 and 22 affect the projects you look at?
00:30:06 [Speaker Changed] It actually affects, you know, commercial real estate investors in much the
same way as it would a, a residential investor. Just
00:30:12 [Speaker Changed] The cost of carry, the
00:30:13 [Speaker Changed] Cost of carry and, you know, a, a lack of liquidity, which is much worse in
the commercial markets than it is in the residential markets.
00:30:23 [Speaker Changed] You can’t just have an open house and sell a 50 story building over the
weekend. That doesn’t happen.
00:30:27 [Speaker Changed] Exactly. No. That, that doesn’t work. So, so the, the lack of liquidity is, you
know, is often at the heart of every real estate crisis that we have. And, and that’s really driving, you
know, a lot of what’s going on, which is of course all driven by the changes in the real, in the interest
rates. And, you know, we’re coming upon six quarters, you know, into this new interest rate
environment. And we had, you know, a nice long free money party that was really good for real estate.
It was fantastic 20 years for real estate, right?
00:31:00 [Speaker Changed] What could
00:31:01 [Speaker Changed] Be that? It was great. And, and so of course, you know, as works in real
estate that your interest rates come down and the yields on the investments come down and everyone’s
expectations are, you know, not too far off from where, you know, treasuries used to be. Right. And, and
that is, you know, the treasuries were so low that you could be, have a 4%, 5% yield, even 3% on a real
estate investment and still have a nice cushion over treasuries. So it was a very, very accommodative
environment for real estate. And now that has all changed. And you know, in private markets the
repricing always takes a lot longer than public markets. And you even see that within real estate.
Looking at the real estate private markets and the real estate public markets, there’s a huge
00:31:48 [Speaker Changed] Divide. Divide. You guys invest in both, right? We do, we do both private
and public investing.
00:31:52 [Speaker Changed] Yes,
00:31:52 [Speaker Changed] We do. So, so if, tell us a little bit about how, how they’ve responded. I’m
gonna assume private markets react a little more slowly than public markets do. Tell us about that
00:32:05 [Speaker Changed] The, the private markets react much more slowly and in a much more
measured way and without the same sort of, you know, level of very, very quick reaction and maybe
even overreaction. You hardly ever see that in the private markets. And, and the, the reason is you are
in, in the real estate public markets, the market, meaning the stock market is determining value and,
and there’s a lot more at play there than just the value of the real estate assets. Whereas in the private
markets, it’s appraisal based. And so it takes a long time for appraisals to really reflect market value. And
part of that is the methodology which has been around forever, which really relies very heavily on
comparable transactions and comparable transactions in a period of, you know, little to no liquidity.
They’re just not happening. And so appraisers need a data set and a set of facts to create a record in
order to substantiate lowering values and increasing yields.
00:33:14 And they just haven’t really had that. Now that’s starting to happen and we are seeing a
repricing, but it’s very, very slow. It will ultimately probably be a much slower repricing than we had in
the GFC. Huh? The GFC took eight quarters in private real estate to completely adjust, but the vast
majority was a shock in the first two quarters. And then it just kind of, you know, eed out over several
more quarters. We have something totally different here where the first couple quarters after the, after
the interest rate increases, it was almost like people were in denial and nobody really knew what to do
because we had very little price adjustment. And now that, you know, some people have a gun to their
head, there are some transactions that are happening. We’re starting to see, you know, a trail, if you
will, of evidence of where values should be. But you know, most of these assets are, are priced
quarterly, very different than the daily pricing in the stock market. And if it takes, you know, if it used to
take, you know, call it 45 to 60 days to complete a transaction from beginning to end, it’s now double or
triple that. So it’s just taking much longer to get the evidence.
00:34:26 [Speaker Changed] So, so the October data for single family homes, October, 2023 record, low
number of transactions. Are you suggesting that in the private commercial real estate, you are also
seeing much slower transactions and that’s what’s causing this lag for a repricing? Yes. How do you work
around that?
00:34:49 [Speaker Changed] Yes, much, much, much lower transaction activity. And it’s interesting
because, you know, for a, a large owner like us these days when we’re talking about transactions, we’re
mostly talking about dispositions. In a normal business cycle, we would, when we say transactions, we’re
mostly talking about acquisitions. So it’s very, very different. And that impacts both the debt and equity
sides of the business. So on the equity side, we would like to sell some assets and improve our liquidity.
And there’s not a lot of buyers there. The buyers that are there are generally buying without any debt.
So if you think about the fact that we’re also a lender that really impacts our lending business. Our
lending business has much lower production values across all asset types than it’s had historically. And
again, it’s because of the lack of transaction activity.
00:35:40 [Speaker Changed] So I’m assuming you are both buying and selling within the same quarter,
within the same month. What’s the thought process like about what properties you wanna sell and what
similarly, how do you think about what you wanna buy at the same time you’re really reconfiguring Yes.
Your holdings.
00:35:59 [Speaker Changed] Yes. I’d say there’s two categories of, of the types of assets we wanna sell
right now. One is, you know, kind of just bottom line, those that will sell. So if we need to raise some
capital, if we have some debt that we wanna pay off, if you wanna redeploy some capital, you can sell
multifamily in the southeast, this is in the US and you can sell industrial. Those are the two things that,
that sell right now. And even then, you are probably going to take a lot longer selling those assets. And
very interestingly, you might not recognize one name on the list of bidders. Oh really? It’s not the big
institutional names, it’s not the people like us, it’s people who are buying unlevered, people with friends
and family, family offices really more in, in your space than in mine. And very interestingly, we often
have never heard of the
00:36:51 [Speaker Changed] People and they want a hard asset as opposed to a, a cash flow based on,
alright, it’ll cost us this much to borrow and here’s what we’ll see in income and that’s what’ll be, be
your revenue. This is something totally different. They want to have a hard asset and actually own it.
00:37:06 [Speaker Changed] And they might wanna own it for a very, very long time. Huh. Especially,
you know, those kind of owners. And right now it’s an advantage to be an all cash buyer and during this
cycle of very low interest rates, it was not an advantage to be Right. An all cash buyer
00:37:21 [Speaker Changed] When when cash is free. Exactly.
00:37:23 [Speaker Changed] There’s
00:37:24 [Speaker Changed] There that, you know, who doesn’t make any difference, which kind of, you
are sort of describing like the edges of a distressed market, but I don’t get the sense that the market is
fully, the real estate market is fully distressed. How, how do you identify, hey, we can pick up stuff really
inexpensively. Flip side of this is, hey, maybe we’re not gonna get what we want for, right. Our holdings.
How, how do you balance that?
00:37:51 [Speaker Changed] Well, it, it, it is a balance and you know, it is true to say that right now the
distress is in the capital markets. It’s in the ability to get debt and the ability to find equity. If you wanna
do a development, forget about construction loans, which are almost impossible to get right now. But
from, from a fundamentals perspective, with the exception of office and in particular traditional office,
most property types are doing quite well in industrial warehouses. As you mentioned, rents are still
going up in, in most markets and are expected to continue in, in multi-family rentals. We’re seeing a
little bit of softness in some markets where there was a lot of supply. But long-term we’re not
concerned because we know we have a structural lack of housing. So there’s retail, believe it or not,
retail who was, you know, not everyone’s favorite a couple years ago. Even retail assets are doing pretty
well right now.
00:38:44 [Speaker Changed] So the publicly traded real estate investment trust did pretty poorly in 22
and 23. Was this a rate story or is this just a question of too much of, of one type of product? Not
enough of, of another.
00:38:59 [Speaker Changed] The, the interest rate story definitely played into it, but if you think about,
you know, REITs and who invest in REITs, there are definitely pure play real estate investors who invest
in REITs like us and some of our competitors. But there’s also lots of individual investors who are
investing in REITs. There’s lot of, lots of big index funds that are investing in REITs. So it’s not always a,
you know, a real estate decision maker who is influencing the, the cost of some of these stocks. But
overall, I would say that if you were to take something away from the difference between the public
markets and the private markets, the public markets react very quickly and often overreact. And, and we
do think that there has been an overreaction here, however, the themes are fairly similar. If you look at
some of the office REITs, they’ve been clobbered and that’s a reflection of course, of people’s concerns
around the office market.
00:39:54 But what’s interesting in the public space is that the best office REITs, meaning the office REITs
that have the highest quality assets, the, the kind that I I mentioned before, ESG qualifications, modern,
new, near public transportation, those have taken about the same hit as ones with class B assets. So, so
that doesn’t really make sense. There’s, there is some kind of a play there. Also, if you look at
alternatives, right, some of the self storage data centers, some of the alternative sectors within real
estate in the public markets have reacted quite differently than you might expect and from one another.
So, you know, right now most REITs are still selling at a pretty significant discount to net asset value,
which net asset value would be a good, which proxy for real estate value for the actual asset value. So
that, that’s an opportunity, you know, for us we see that as an opportunity and, and our takeaway is
that the public markets have overreacted and overshot and the private markets have underacted and
somewhere in the middle is the right value.
00:41:00 [Speaker Changed] Huh, that’s really, that’s really interesting. So with the caveat that Wall
Street has been wrong about this for, you know, two or three years, wall Street is now anticipating at
least two rate cuts in 2024. Should real estate investors be thinking about this, if that happens, what,
what would the impact be and do you think that’s a realistic outcome?
00:41:26 [Speaker Changed] Well, first of all, I think we should all be praying for that because that would
be very, very good for real estate overall. You know, from a a realistic perspective, I don’t anticipate any
of that happening in the first half of the year. I anticipate, and I I say this extremely sadly, I think the first
half of the year is gonna be, you know, more of the same of what we’ve seen. And it’s gonna be a very
interesting 2024 all around the world. You have, you know, lots of things going on around interest rates
and, you know, stock markets and business. But underlying all of that are a lot of very high profile
elections around the world, not just the US and you have, you know, a geopolitical tinderbox in, in many
places. So it, it is gonna be very, very interesting if you look at, you know, what is happening with
inflation, what is happening, you know, if you really interrogate some of the jobs numbers and you know
where the consumer seems to be going, it would lead you to believe, I think that, you know, we’re not
gonna see any more hikes and that sometime next year we’re gonna start to see, you know, some
decreases whether we get to two I I certainly hope so.
00:42:37 And you know, it, it really, I think, I don’t think anyone has the expectation that we’re gonna go
back to zero interest rates, but if we could just get down to like two or three instead of four or five, that
would be pretty amazing
00:42:51 [Speaker Changed] At this point I would take, you know, low fours Yeah. Would be a huge,
huge change. But you mentioned something that I have to ask about. We have all these elections both
here and abroad. How do geopolitics and elections affect commercial real estate?
00:43:09 [Speaker Changed] Well, I’m gonna come off as very cynical, but you know, we keep talking
about this recession and when a recession is gonna come and I just have a hard time believing that
we’re gonna be in a recessionary environment facing a presidential election in this country. I, I think that
everyone is gonna do everything in their power for that not to happen.
00:43:28 [Speaker Changed] Meaning across, across, pulling all the levers from the federal government
to the Federal Reserve. Everybody’s looking to avoid a recession, especially if real, if inflation keeps
falling the way it has been over the past year and a half. I mean, you could easily look at CPI and say, real
estate peaked in June, 2022, it’s been straight down for the next 18 months. Right,
00:43:51 [Speaker Changed] Right, right. Exactly. Huh.
00:43:52 [Speaker Changed] Quite, quite fascinating. So your global COO let, let’s talk a little bit about
the global strategy. How does PGIM, which I really think of as a US New Jersey based real estate
investing company, how do you think about the global investing opportunities that are out there?
00:44:13 [Speaker Changed] Well, it’s very interesting that as much as PG IMM is a global brand, it, it
does always come down to Prudential being in New Jersey and it, it gets discussed all the time. But we
are within PGM real estate in particular a very, very global company. We operate in 14 different
countries and we have been investing in Europe and Asia for, you know, 20 to 25 years. We’ve been at
this for a very long time now. Our US businesses are larger and more mature and it’s really just because
we have a long headstart in the US over our international businesses. But, you know, today’s investor,
especially the most sophisticated investors, they’re investing globally and they’re allocating globally. And
it used to be, especially from the perspective of an American investor in real estate, that in order to
leave the home country in order to invest in Europe, in order to invest in Asia, there had to be a huge
return premium that it was, it was the way of compensating for the country risk, maybe some currency
risk and just the general, you know, lack of certainty around investing in a market that maybe you don’t
know that much about.
00:45:23 And that has completely changed in that the driving factor behind people being global
investors is really around diversification. It’s far less around yield premium. Now you can certainly chase
yield premiums in developing markets, but if you’re investing in in, in non developing markets outside of
your home country and their mature markets, you should not expect much of a risk premium. At the
end of the day, it’s about diversification. Because if you think about it, think about the world right now,
right now in the US as much as we may complain about what’s going on here, most global investors
would tell you that the greatest prospect for income growth and for economic growth is in the US. And
you would want to be, if you’re an Asian investor, there’s certainly a lot of growth that can go on in Asia,
but it’s a bit more volatile. You might wanna have some eggs in the US basket, you might wanna have
some eggs in the European basket. So global investing is just, you know, here to stay. In my view, it’s
much more of a trend. And if you wanna be a big global player in any particular asset class or asset type,
you have to be a global provider.
00:46:31 [Speaker Changed] So, so let’s look around the world and, and get an assessment of what’s
going on. When I look at Europe, I see a, not only a very mature area, but I also see an economy that
hasn’t really recovered fully from the pandemic or arguably from the great financial crisis. And is seems
to be rolling from one country’s recession to the next. Now Germany is looking really soft. What do you
see in terms of opportunities in Europe?
00:47:00 [Speaker Changed] We definitely still see opportunity in Europe, but in terms of, you know, the
economies and you mentioned Germany. Germany definitely is, you know, is a concern for us, right? We
invest quite a bit in Germany. The uk Brexit has not been kind to real estate values in in the uk, but
there’s still opportunities. And it’s a lot of the same themes, which, you know, for us, we really think of
them around demographics, around digitalization and around decarbonization. And if you really think
about demographics, there’s a lot of the same story, which, you know, als often leads you to the living
sectors. We think about for young people needing affordable first time apartments for families, maybe
with interest rates where they are. And with housing costs where they are not being able to afford that
to buy a single family home. Maybe they wanna rent a single family home. Young professionals may be
remaining renters for much longer than they used to because the barriers to home ownership are so
much higher. We have an aging population, we need seniors, housing. There’s so many different aspects
of housing that we just don’t have enough of, particularly at the affordable end of the spectrum.
Affordable housing is a crisis almost everywhere in the world. And in particular, affordable seniors.
Housing is really in crisis.
00:48:23 [Speaker Changed] Huh. I’m really, really interesting. So, so let’s, let’s address Brexit, which
hasn’t come up recently. I was genuinely shocked it even happened ’cause it was so obvious, the
negative economic ramifications that would lead from it. How are things in the uk have they recovered
from that? Is this still a persistent drag on, on their economy and what does that mean to their real
00:48:48 [Speaker Changed] I think it, it is still a persistent drag. I think that you see evidence of
businesses that were from, from a regulatory perspective in London and now maybe they’re in Ireland.
Maybe they’re in the Netherlands. You definitely have seen a bit of a drain from London. There are
pockets of the London office market that are not doing that well. The good news is that London does
have a little bit more of a modern stock than a lot of other cities from an office perspective. But
definitely, I mean, inflation has really taken a toll on the uk. And while it’s certainly getting better, if you
think about kind of just, you know, constant dominoes falling a Brexit and then the pandemic and the
war in Ukraine and inflation and the high energy costs and the high food costs. It’s, it’s really noticeable.
I I can tell you I traveled to London quite a bit and even just as a visitor, I notice how much more
expensive everything is. Huh.
00:49:46 [Speaker Changed] And, and that traces back to Brexit, not just the recent bout of inflation
00:49:51 [Speaker Changed] Law. I think it’s a combination of things, but I think Brexit was the first
domino of all. Huh.
00:49:54 [Speaker Changed] And, and you mentioned demographics. We know you’re an investor in
Asia. Are you an investor in Japan? We are. And, and what, what’s going on there? Their demographics
are uniquely challenging.
00:50:08 [Speaker Changed] Yes. Uniquely challenging. And you know, if you, the, the one very positive
thing is that interest rates are still relatively low in Japan, still not as low as they had been, but they’re,
they’re still low and still
00:50:20 [Speaker Changed] They’re not negative anymore. Right?
00:50:22 [Speaker Changed] Right, exactly. They’re still very accommodative of real estate. But you
know, the demographic story in Japan is very difficult with just an, you know, really, really a
preponderance of the population is aging. And that just keeps, you know, increasing, you know, not a
whole lot of immigration into Japan. So definitely a problem. And I, you know, there was a lot of hype
around the Olympics and what that might mean for Japan. And I think a lot of that ultimately, you know,
didn’t come to fruition from a tourism perspective. Now, you know, it’s sad to say for my Japanese
colleagues, but you know, the yen is quite weak. And so I think that there has been an increase in
tourism. I was recently in Japan and I saw a lot of American families traveling there. It used to be cost
prohibitive to bring a family to Tokyo. And, and now it’s not. So hopefully there’s some kind of a
jumpstart there. But, but definitely the aging population in Japan is, is tough in the fact that there’s been
very, very little real wage growth there.
00:51:19 [Speaker Changed] Huh. Really, really interesting. Let me throw you a, a curve ball. Tell us
about real asset X. What, what’s going on there? This is almost like a Skunk Works project. You guys
00:51:31 [Speaker Changed] Real Asset X is our innovation lab that we recently launched. And the
purpose of it is really to help to advance technology and innovation, particularly around ESG in the real
estate industry, not just for our portfolio, but for the industry more broadly. And, you know, we’re really
looking at kind of two different sides of our lab. One is a bit more operational, where we’re thinking of
ways to more efficiently run our own business more efficiently, run our own properties to use our data
in ways that help us to run the business, help us to serve our clients better. On the other side of the lab
is a bit more aspirational of what could we do with all that data? What better investment outcomes
could we have by leveraging our data? You know, I mentioned that our US businesses are very mature.
We launched our core open-end fund that I used to manage.
00:52:28 We launched that in 1970. We have data going back that far and, and we have 50 years, lots of
data. And, and in our, our lending business, we’ve been lending for way longer than that. So we have
lots of data that we can leverage. And so we’re very excited about that. We have several university
partnerships where we are working on certain problem statements and we have them all around the
world. So that’s very, very exciting. And you know, it’s a, it’s a journey, right? I’ll tell you that our, our
first problem statement that we worked on with one of our university partners here in the United States
was really around trying to predict multifamily rents and, you know, using artificial intelligence, using
some machine learning, using our own data, but other data as well. And at the end of the day, you
know, we didn’t come up with a, a great answer, but now we have, you know, a lot of new information
that we’re gonna ask the question differently as we continue to pursue this. So it is definitely a trial and
error. And I think that when people give the impression that they kind of plugged in the AI machine and
all of a sudden they have, you know, really, really great answers that that’s not how it works. It, it, it
takes a lot of work and I think our launching of our lab and our outreach to our university partners is our
way of acknowledging that this is a process and it’s a learning process and it takes more than, than just a
real estate investment manager to make progress there.
00:53:56 [Speaker Changed] Sounds really exciting. All right. I only have you for a few more moments, so
let me jump to our favorite questions that we ask all of our guests, starting with what have you been
streaming lately to give us your favorite Netflix or Amazon or podcast, whatever, whatever’s keeping
you entertained.
00:54:13 [Speaker Changed] Sure. I I recently finished Daisy Jones on the sixth, which was recommended
to me by another woman in the business. And I am, I’m gonna be 58 next week for someone of my age.
It just brings you back to kind of your middle school and high school years with the music. It’s fantastic.
It’s a little bit of the story of Fleetwood Mac, not loose
00:54:36 [Speaker Changed] Based, loosely based on Right.
00:54:37 [Speaker Changed] Fantastic. Yeah.
00:54:38 [Speaker Changed] The woman who played Daisy Jones, I was, I don’t know, a third way
through it when my wife says, you know, that’s Elvis Presley’s daughter. I was like, what? Had idea? Idea,
right. There you go. She, she was fantastic.
00:54:49 [Speaker Changed] Fantastic. So I, I really loved that. And in terms of a movie or a documentary
also perfect for a woman of my age is called being Mary Tyler Moore. Really? And it’s about Mary Tyler
Moore and, you know, she was such a icon for young girls in the seventies of, she lived on her own, she
had this cool job. She was intentionally single. She had this social life she was dating. It was really very
formative. And they, and they speak to a lot of women, mostly famous women, who were so influenced
by watching that show. And, and I definitely was. And she was really, you know, very much of a
trailblazer and a remarkable woman. So I’d recommend that.
00:55:35 [Speaker Changed] Huh. I’m gonna put that on my list. And when you were talking earlier, I was
thinking of two things. I don’t know if you spend much time on YouTube, but there are some amazing
channels. One is Architectural Digest does this, so there’s lots of house listings and just stupid, you
know, spec $20 million mansions in LA’s. But the thing they do that’s so interesting, you, you kind of
reference this, is they’ll sit down with an architect and he will describe a particular type of architecture
that’s endemic to a specific city, or they’ll describe a very specific, so one guy who does New York hears
the history of New York residential apartment buildings and how they’ve progressed over the years. And
the one I just, I didn’t see it yet, but it just dropped, was New York Museums and the architecture of
Guggenheim MoMA, the Met and Whitney. And just like, if you like, architecture, it’s kind of fascinating.
00:56:41 The other thing you mentioned that really made me think of a different channel was about the
ESG and the location close to mass transit. There is this, he’s kind of crazy Canadian expat who relocated
to the Netherlands with his family. And his channel is called Not Just Bikes, and it’s all about how to
build a city. Mm. That is not only net zero, but just built around mass transit, not cars. And it’s ab again,
if you are interested in Yes. Urban, urban planning. Right. City design and architecture, endlessly
fascinating. That sounds great. That’s a rabbit hole you can fall around to. And so, so you mentioned one
of your mentors early. Yes. Tell us about who your mentors were and, and who helped shape your
00:57:32 [Speaker Changed] The person who was most influential in my career from a young age is a
woman named Yvonne Capello, who I worked for when I was in my late twenties and early thirties. And
she taught me everything I know about real estate, but also taught me a lot about being a woman in this
business. She taught me how to be a very tough negotiator. She taught me how to kind of manage
working in a man’s world. And she always expected a lot of me, but also always supported me. And I’ve
tried to emulate some of the way that she managed me and the way she managed and led others. It
really was very influential. Huh,
00:58:14 [Speaker Changed] Very interesting. Let’s talk about books. What are some of your favorites?
What are you reading right now?
00:58:19 [Speaker Changed] Right now I’m reading a book called Eligible by Curtis Sittenfeld, who, she
writes a lot of, you know, more pop culture, I guess, type books. But this happens to be a modern take
on Pride and Prejudice. So Pride and Prejudice obviously was very tongue in cheek itself. And this is a, a
modern tongue in cheek version of that, of, you know, an overbearing mother trying to marry off her
daughters, et cetera. But I’m really enjoying that. I tend to read to Escape. And I also just finished a book
by Daniel Silva, who has written like 32 books, and I think I’ve read every single one of them really. And
you know, it’s a, a series of spy novels. And instead of the CIA, it’s the Mossad and the protagonist is, in
addition to being an amazing Mossad agent, he’s an art historian and art an artist and art restorer. So it
kind of combines things I’m very interested in. When I was young, I wanted to be a spy and I love art. So
for me, those are great books.
00:59:18 [Speaker Changed] Huh. Really? What’s the name of the Silva book?
00:59:21 [Speaker Changed] This one I think is called The Collector.
00:59:24 [Speaker Changed] Huh, really interesting. And we’re down to our final two questions. What
sort of advice would you give a recent college grad interested in a career in real estate investing?
00:59:36 [Speaker Changed] My greatest advice that I give to everyone is try to do a little bit of
everything. If you ultimately wanna specialize, if you ultimately wanna only do equity acquisitions, that’s
great. Don’t make that decision when you’re 22 or 23 years old. Do a little bit of debt, do a little bit of
equity, do acquisitions, do asset management, do dispositions, do portfolio management. I think that,
especially when you hit a crisis, the most, well-rounded real estate people are the ones who’ve done a
lot and they’re the most successful in a down environment. If you think about it, when you, you might
not, you might be an asset manager, but if you’ve never worked in debt, how are you gonna know how
to do a workout of your loan that now is in default? So it, I just think do a little bit of everything. And the
one regret that I have is that so far I’ve only worked in the US in terms of living and and working. And I
wish I had had an excellent adventure, you know, three years in London, three years in Paris, something
like that. And I would recommend that to all young people.
01:00:37 [Speaker Changed] Huh. Very interesting. And our final question, what do you know about the
world of real estate investing today? You wish you knew 25 or so years ago when you were first getting
01:00:49 [Speaker Changed] I wish I knew that it would evolve in the way that it has. I think that when I
got into the business, which is 35 years ago, it was far more opaque and less institutional. And I guess
that for some people that made it feel like, you know, it was, there were higher barriers to entry to
being in the business, but I actually really appreciate how much more transparent the business is and
how much more institutional it is, and the fact that it’s more accessible to more people. It used to just
be only the wealthiest people in the world could invest in institutional real estate. I know anybody can,
and I think that’s terrific, huh.
01:01:31 [Speaker Changed] Very, very interesting. Thank you, Kathy, for being so generous with your
time. We have been speaking with Kathy Marcus. She’s Co CEO, and Global Chief Operating Officer at
PGM Real Estate. If you enjoyed this conversation, check out any of the previous 500 or so we’ve done
over the past nine years. You can find those at Apple Podcasts, Spotify, YouTube, wherever you find your
favorite podcasts. Sign up for my daily reading Follow me for however much longer it
continues to circle the drain at ritholtz on Twitter. Follow all of the Bloomberg family of podcasts on
Twitter at podcast. I would be remiss if I did not thank the correct team that helps put these
conversations together each week. My audio engineer is Rich Samani Atika. Val Brown is my project
manager. Sean Russo is my researcher. Anna Luck is my producer. I’m Barry Ritholtz. You’ve been
listening to Masters of Business on Bloomberg Radio.



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