Synergies Between Real Estate and Private Equity with Paul

The following is an computer-generated summary of the video transcript.

Real estate uh, is uh, an enormous asset class, I think within private equity. Um and in fact, I think a lot of the real estate funds as far as I understand and really had their founding actually in private equity like structures. Um you know, if you look back at a lot of the guys that actually, well today, I've considered real estate investment trust, so you know, reads on the stock exchange, my understanding is a lot of those actually evolved out of um, you know, private capital structures where a bunch of investors would come together, they would pull, you know, their capital and then they would effectively, you know, purchase real estate assets and I think, you know, to a large part that is continuing. Um and I think very successfully, like if you look at Blackstone, I think, you know, the guy that currently run the Black Stone, I think his name is john Gray, um you know, he, uh, he came through the private, he came through the real estate space within within Blackstone and really those were funds that were specifically set up private equity funds, it was specifically set up, uh huh, bob real estate efforts. So I think it's certainly a very big focus in private equity. Look, I tend to think that private equity is evolving much like many industries, um and it used to be a space where it was quite informal, it was quite uh, generalist. So you would have a small team of maybe, you know, 5 to 10 guys and they would do everything across many, many different industries or sectors or types of businesses and it's becoming more and more specialists. Um And through that you would see that you would have dedicated real estate funds. You probably have guys that are actually even focusing further where they may even be things like, you know, health care, real estate or like education, real estate. We don't necessarily get involved in real estate. Um We tend to focus on companies operating, trading companies, companies where are uh skill set in terms of turning around and restructuring businesses can make quite a significant difference to the operations of the business. We find that in the case of real estate, we find that particularly the banks of quite comfortable uh to just refinance real estate. They believe that real estate holdings value very well relative to maybe some of the other operating or or trading assets. We invested in the business quite recently, um that does logistics. Uh So if you can imagine something like Fedex or ups, Um this is a business that unfortunately was just mismanaged over 11 over leveraged. Um and really a didn't necessarily have any real estate on its books other than it actually had quite a big leasing portfolio, but this was a situation where we could get very active and operational, uh you know, change uh some of the culture within the business, bringing new management, cancel certain contracts, that which is too onerous, really drive quite hard in terms of a turnaround. That was a situation where the banks actually had very little option. Um But to actually finance or to find a way with us, so essentially it means that we can buy the debt at quite a distressed value. Whereas from a real estate perspective, my understanding is that a lot of the banks will be quite uh obviously provide uh Pretty good leverage against against real estate assets, but the real estate asset will not necessarily deteriorate to the extent. You know, it won't lose 90% of its value is my experience, you know, whereas I think a business particularly operating or trading business, I mean, especially during Covid, we've seen a lot of businesses actually deteriorated quite significantly.