Talk Your Book: State of The Real Estate Market
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Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnick and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.

Welcome to Animal Spirits with Michael and Ben. On today's show, we speak with Paul Biocchi. Paul is the Chief ETF Strategist. We also had on Nick Tenora. Nick is the Portfolio Manager and Chief Investment Officer at GSI Capital. We spoke about REITs and what a ticker, REIT. Can't believe it was available. They got it. Yeah, for some reason, I'm fascinated by the ticker things. I'm sure that there's a lot of planning that goes into it. The fact that it was open, it was great. Well, ticker squatting is a business now. Yes, people do that. It's like the new URL.

So I feel like REITs don't get a lot of shine in the markets. People pay a lot of attention to individual stocks, obviously. People pay attention to interest rates when they move and what the Fed does.

I feel like REITs, as far as the financial media goes, do not get a lot of publicity. Is that fair? Well, it is fair, but it's not without reason, Dave. It's been relative to the rest of the market. It's been a crappy place to be for the last couple of years for obvious reasons. Yes. And we talked on this episode, Paul told us that it's the worst performing sector over the last five years, which I didn't know. If you would have told me to guess, I would have said energy, I guess, but I didn't realize that real estate is the worst performer. It's also the smallest sector. Now, is it smaller than UTEs?

And materials? It's like 2%. Yes, it's small. It's one of the smallest. So yeah, because it was just spun out of financials. But like a lot of other places like fixed income, the rates rose and these stocks struggled. And now guess what? The rates are higher, right?

What rates are higher? The yields here for REITs. Like almost everything in fixed income, you live through pain to get here, but on the other side of it... But they stopped dying. Like there's... I mean, REITs... Saying like REITs as a category is like saying stocks, right? Like there's...

There's hotel and hospitality. There's office. There's industrial. There's multifamily. I mean, it's a wide category. But they have adjusted to higher rates. So yes, they adjusted the equities and the debt, adjusted sharply downwards. But there's been, and again, I'm using like painting with a broad brush here, REITs in general, a lot of real estate has recovered. Not all of it. But on this show, we speak about the state of the REIT market, some of the differences between private and public.

data centers is a hot area. So we don't need to step out too much on the trail. Let's get right to it. Here's our conversation with Paul Biocchi and Nick Tanura. Gentlemen, so the Fed funds rate has been above 4% since the winter of 2022. And that has not surprisingly wreaked havoc on residential real estate. It's been in a

a deep freeze for the better couple of years. How has interest rates impacted the broader real estate economy? So interest rates affect all asset classes, right? They affect the cost of capital. Real estate tends to be a little bit more sensitive to that because they tend to be income-oriented and perhaps some more leveraged than other types of sectors of the marketplace.

REITs themselves are diversified. So the sensitivity to interest rates depends on which property type and which subsector. But in general, REITs have been repriced, in our view, to the 4.5% to 5% 10-year interest rate environment.

So that's actually one of sort of the benefits of the asset class looking forward as we feel like it has been repriced to this current, call it four and a half to 5% 10 year rate environment and call it a two and a half to 3% CPI environment. So when you say repriced, do you mean that everyone in the industry is kind of, all right, we're getting used to these new rates or have cap rates changed? Like what does that repricing mean? Okay.

Cap rates have moved basically. So what's called an implied cap rate of the public market, an average implied cap rate of the public market is about 7%. Okay. And what was it when rates were lower? When rates were closer to zero-ish, if you will, they got down into the four, sub five range.

And the cap rate is calculated as how? Inverse of the PE. Think of it that way. It's NOI over value, but earnings yield. Yeah, exactly. Okay. So when you say it's been repriced, are you talking about... I mean, the equity got repriced really quickly. These stocks got destroyed, as did the debt. And so when Ben and I were talking about the slow motion crash in the office market specifically, I was shouting, and I guess the story is still unfolding, that like

Everyone knows, right? Like you could tell me what the bonds are trading at, but it's not like this was a surprise to anybody. Like these things got repriced so, so, so quickly. So I guess I'm just rambling, not really asking the question, but Paul, what are your thoughts? Yeah. So I think this gets back to the heart of the re-discussion of perception, right?

challenge that investors have with REITs where people think about REITs and they think about empty office buildings that you can look through. And the reality is, is that the public REIT footprint is very much in other categories, whether it's data centers, Nick can get into that, whether it's cell towers, whether it's healthcare. And so in some ways, when people think about office, they think about that old line from The Wire where it's like the office building is just sitting there like a bad pierogi on a plate.

Everyone's looking at it, but nobody's doing anything with it. That's how the office space has evolved over the course of this interest rate cycle and really coming out of COVID. And the reality is, is when you're talking about a public REIT portfolio, whether it's VNQ, whether it's XLR-E, or whether it's the portfolio that Nick manages, the reality is, is that the footprint of REITs is very different now in public markets than it was, say, 10, 15, 20 years ago. And so

Those are all true facts about how these office categories and the debt associated with it was repriced and then the knock-on effect for regional banks, which have a lot of CRE exposure. In the public market, the REIT portfolios that investors own, that they allocate to with an asset allocation, that's a very distinct segment of the real estate market that has very different dynamics driving supply and demand and ultimately pricing.

Well, and it's a small percentage. So it's about 5% of the REIT market. So not very much. So that's one thing to say. The other thing is if you drill down into the office market in major cities in particular, so think downtown Chicago, midtown New York, places like that. In general, the office market, the top 20%, 25% of the market is doing just fine. Actually, rents are going up, buildings are leased, there's demand.

The bottom 20%, 25% is probably worthless, quite frankly, land value. And the stuff in the middle is all messy, probably going to go sideways. The REITs own the stuff at the top. And so what happened, so the office REITs got crushed, as you said. So in generic levels, let's just say they were at $100 a share pre-COVID. Some of them went down to call it $20.

And over the last year, some of them went from that 20 up to 40. So some of the office REITs are up 100%, believe it or not. And because when they go down to that 20, they have sort of option risk and characteristics. And so that's kind of where we sit right now in the office market. But it's still messy, but the REITs don't own there. The balance sheets are in decent shape. And

It's a 5% of the market. So it gets more publicity than it should for the asset class. I think it's interesting you talking about the perception of REITs. And you guys would know better than me, but what is the perception of them as an asset class as a whole? Do some people look at them as, well, it's kind of like dividend stocks, or it's got a piece of fixed income and a piece of equity. How do investors view this asset class? Well, they used to be financials. And then they got, I don't know, maybe yours in 2016, whatever, they got spun out.

Yeah, so I do think within the context of advisors in the RA segment or even the wire segment,

They use REITs as an alternative asset class, so an income-producing asset class within an income sleeve. I doubt most advisors think about it as real estate, as a sector of the S&P 500. Most people don't even realize necessarily that they have REIT exposure within their S&P 500 index fund or something comparable to that. In some ways, I think it's a mix between advisors who are looking to generate extra income and

from their asset allocation, specifically within the equity sleeve. I also think that in many ways, it's a play on the level of interest rate or the outlook for interest rates. Because historically, when you want to own interest rates, it's at the beginning

of an easing cycle or the end of a hiking cycle. That's when REITs have provided strong relative performance. But of course, given the nature of the real estate market and that sort of perception question, I think there has been a drag on REITs. If you go back over five years, real estate as a sector of the S&P 500 is by far the worst performing sector and the S&P 500 up 5% over the course of the past five years versus 80 plus percent for the S&P 500. So

It is a segment of the market that has been a sore thumb in investor asset allocations, but it's often used as a proxy for the level of interest rates. Meaning, if interest rates are expected to go down, we're in an easing cycle, and the expectation is that rates, especially on the long end, are going to come down, they might use rates or REITs, I should say, as a supplement or a complement for what they're not getting from the fixed income sleeve of their portfolio.

Nick, you mentioned earlier data centers. And I read recently that Blackstone owns something like or investors in. It was a big number. I can't remember if it was 10% or even larger, whatever. Are investors able to get exposure to the data centers via the public REITs? Yes. So there are two very large cap companies that are probably the two best and most dominant companies.

owners and operators of data centers. There used to be more. Blackstone took a couple of them private. So we had some of that.

So there aren't a lot of companies, but it's a decent percentage of the REIT market. I want to say data centers are 11%, something like that, on the marketplace. So for your fund, the Alps Active REIT ETF, which ticker is REIT, was that really hard to get for you guys? How did you guys get that? Yeah, it's pretty remarkable. I love tickers. I'm kind of an ETF nerd in that way. And right before we launched, that ticker became available. So it was going to be a different ticker, and then it was somehow available. So you didn't have to pay for it?

and snap up someone else. That's impressive.

So I'm curious, what is the universe that you're looking to buy all these? So it's effectively, you're an ETF and you're buying all these other publicly traded REITs. What is your universe of investable assets? So there's about 140 companies. We run a concentrated fundamental bottom-up strategy. So our portfolio tends to have 25 to 30 names. But the universe itself of strict REITs is 140. And we could stray from that. We haven't.

yet because we wanted to run a strategy which was tightly defined as real estate because we think

It offers diversification benefits and better correlation benefits to equities, as an example, than running a wider, more diversified strategy. I'm curious, is that universe of REITs, the 140 companies or whatever, is there a wide range of market caps? Does it tend to look like the S&P where there's a high concentration at the top or are things more evenly distributed there?

Well, we used to be evenly distributed. And as the market has evolved, we're getting some larger cap names. So we've got Prologis is the largest company in the universe. And I want to say they're, call it 9% or 10% of the market. And there's a data center company and a healthcare company that are a storage company that are in the 6% range. So the top 10 names of the benchmark are probably Prologis.

40% to 50% of the universe. So it's reasonably concentrated. So it is pretty similar to the S&P in that way. Yeah, I would say. How is the mall sector looking? There's been, for years and years, malls are dead and...

Not necessarily an untrue statement, but I'm sure it's more complicated than that. Michael still shops at malls. I don't know why he does it, but he still goes to the malls all the time. Well, no, no, no. Once or twice a year, I say, okay, I need some clothes. For example, I'm going to Florida next week. I don't really have anything that's not a t-shirt to wear. I got to up my game. So once in a while, and I feel very out of place in the mall. I don't know what to do there. So Nick, how's the mall scene looking? So...

Better than people think, and you are not the only one shopping at malls, can I just say. So if we go back, well, let me just give a broader view of it because I get this S-line. Nick, why do you like malls? They're terrible. Everyone's going to go online. We get that a lot. Well, similar to office, what's going on in the mall and shopping center category is malls in particular, the Class A malls are doing great. The Class C malls are great.

I got to get converted to land use development, warehouse space, something else. So you could argue that's even stronger for like the A malls because on Long Island, for example, Roosevelt Field is still thriving and the Broadway mall or whatever, all the other malls, they're gone. They don't exist. Correct. And so it's one of the examples I use about, I don't know, a couple of years ago, I want to say that malls were very out of favor and really cheap.

And we were very overweight, the mall sector, and they've had just a terrific run. And we've lightened up into some of that success, but we still are overweight malls and we still like them. And if you look at the A malls, traffic is up, sales are up.

Leasing is up. New tenants are up. Rates are up. It's, I mean, not a lot, but the fundamentals are very solid for AMALs. So Paul, I'm curious, what is your process when building this portfolio? Are you, do you have certain...

rules that you have to follow as far as the index goes. You said you're a more concentrated portfolio, but what exactly are you trying to do here? Yeah, I'm going to defer to Nick on that, but I think it's probably worth just giving a little background on Nick's firm, GSI, because most people go to Green Street for their public and private real estate research. That's sort of the gold standard for real estate research on the street. And Nick's team spun out of Green Street. And so GSI was created effectively to take Nick's

expertise, his experience, his process, and then port it over into an investment management philosophy and in partnership with Alps, an active ETF that then allows investors to get access to Nick's experience and Nick's team. And so when I think about

The value proposition for an active REIT ETF, you guys see it, right? Every portfolio that allocates to REITs typically allocates to either the Schwab product or the Vanguard product or the selector spider product just as a passive default cheap way to access the category.

Anytime you're doing active in a category, you want SPIVA to be on your side. That's why so many active fixed income ETFs, for example, have gained so much popularity because that is a segment where you can, and it's been proven that active managers can generate value above and beyond. I think we're making the case with REIT that the index that most people use to

to access this market in a passive way is inherently flawed. You've got a tremendous amount of exposure to sell towers. You've got an inflexibility in the portfolio construction process. With Nick's team, and I'll defer to Nick here in terms of their process, the idea is that you can have a high conviction REIT portfolio that can, since inception, has typically generated strong relative performance.

And so the way we do that is we run a concentrated portfolio. As I said, our top 10 names tend to be 60% of the portfolio and we have 25 to 30 names typically. And it's fundamental bottom up. And I think the reason why active management works in the REIT area is because it's this hybrid of real estate and securities.

And so if you understand both sides of that and the interplay of what drives stock prices, you could add value and you can deliver access returns. And as I like to say, it's particularly helpful if it's in the same brain because we've had real estate companies try and add securities people and put them together and it doesn't work as well, quite frankly.

But to the extent there are individuals like me and others that have this mindset and background, and I've got 30 plus years of experience doing this, there's a way to look at this and a way to value them. And it's pretty typically bottom-up fundamentally. You understand the real estate side, you integrate the security side, and you find pockets of mispricing and relative value.

Paul, if you're thinking about or looking at flows into and probably out of REITs, what does it look like? Are people starting to, I would guess that there was a rush for the exits as the rate hiking cycle started coinciding with these names getting creamed.

Are we starting to see inflows or is it investor apathy? Did the outflow stop? What's going on with dollars being allocated to this market? Yeah, it's kind of been some head fakes, frankly, Michael, over the course of the past couple of years where you've seen some strong momentum and flows into products like XLRE or VNQ. Again, the passive dominant market.

products in the space. SCHH is another one that people use to get their real estate exposure. I wouldn't say that there's been a durable trend in either direction. I would say, to your point, when you started to get to the beginning of the hiking cycle and inflation started to really accelerate, you did see meaningful outflows out of the category. But we've started to see a little bit of a drip. I mean, even REIT, which is a fairly small product relative to the ones I mentioned,

saw its assets double in a year in which REITs were effectively flat in 2024. And so a lot of that is net new money coming into the space. We've sort of gotten to a three-year track record. You know, due diligence platforms have restrictions around track record, live or otherwise, as well as minimum AUM levels. And so as you inch closer to $50 million in AUM and then $100 million, assuming we continue to grow, then you open up the doors to a wider range of advisor types

who are moving off of those passive products. So I wouldn't say there's a trend in either direction. It's been a lot of ebbs and flows, as it were. So Nick, Paul mentioned that the Spieber report shows that for equity managers, it's very hard. And over the past 5, 10, 15 years, it's like 90, 95% of those managers underperform.

and I pulled up the real estate ones and it's right. So over five years, it's basically like 50, 50 over 10 years. It's a much lower number of active funds that underperform in the real estate industry. And Michael and I have talked in the past about the bond side of things. And one of the reasons that it's not easy to outperform in fixed income, but it's easier by taking more credit risk or whatever it is. So what is that story in REITs that makes it so there are not as many active funds underperforming like it is in like a large cap stock universe?

So I think there's a couple of issues. One is the one I just mentioned, which is this business sort of started in the 80s. And for those of us that were around in the beginning, we've kind of learned through multiple cycles and we figured out how to manage money to create excess returns, to deliver excess returns.

And so that's one piece of it. I think the other side of it is probably some survivorship bias. After 20, 30 years, people that are bad at this business, they're no longer around. And so I think the managers that are left are pretty talented. And so we have a group that can certainly outperform the indexes.

and have shown an ability to do it over long periods of time. Well, it's interesting you mentioned that REITs really only date back to the 1980s. I guess if you want to be nitpicky, you could say that a lot of the managers have probably never really seen an environment like we saw in the 2020s of rapidly rising rates, right? There's been counter-cyclical rallies in rates over the years, but nothing like we saw in the 2020s. So do you think that

A lot of the real estate investors this time around were caught off guard and didn't really have the playbook for how to manage this cycle? Probably. Probably. I think it's more acute on the private side. Again, those of us that have been around a long time on the public side, there's some counterintuitive things. First of all, it's not a momentum thing.

It's a value and a reversion to the mean universe. So that's backwards from the way a lot of people think. And lower leverage companies outperform higher leverage companies. It's also counterintuitive. Wait, talk more about that. That is counterintuitive. Okay. Because so the reason is...

So people get real estate people in particular, especially private folks, get excited. Right. And they say, oh, if I can get cheap debt, I can lever it up a lot. And then what happens is it works until it doesn't. Right. But when it doesn't, you really get creamed. And so when you have high leverage into the end of a cycle, you're potentially going to go bankrupt and you can't make that up.

And so it might work for a short period of time, but over a full cycle, it doesn't work because nobody knows when that inflection point is. And these inflection points are severe both directions. So when you get near the top, you get a really sharp downdraft as we've had in, you know, in 08, obviously we had one, we had one in COVID and then in the interest rate tightening, you know, back to back kind of.

And if you're leveraged into that, you can't make it through. So Nick, you've been in the space for a while. Back in the day, the way that investors got access to private REITs were often through these just garbage products, super high commission, a lot of leverage, obviously no liquidity, concentration, all the things that you want to avoid as an investor. These days, you can get a diversified basket from the Blackstones of the world,

Talk about the differences between a liquid strategy, like the one that you're employing, versus, and not Black Swan specifically, of course, but just generally like these monster refunds that are clearly a step above what used to exist, the way that retail investors used to access private real estate. That is correct, by the way. Your characterization, it's evolved. I would say...

The public market is a better place for what's called core to core plus real estate, if you knew that term. So that's income producing class A properties and not a ton of operational risk, just sort of exposure to a high quality asset class series of companies and series of properties. And if you compare that to what you could get in the private market, a fund like that,

The long-term data says public market outperforms by quite a lot, actually, which might also be counterintuitive. But I think the reason is twofold. One is fees. So the private market fees are much higher. And the second is liquidity. And the value of liquidity is not because people necessarily need to be liquid. The value of liquidity is you can maneuver a portfolio.

So when COVID started, as an example, like you said earlier, Michael, you could see the office market, right? What was going to happen? You could see the track record. You could visualize it. So I sold my office stocks in one day. You got a billion dollar, you got a big fund. You got a billion dollar office portfolio. You can't sell it, period. You're just going to watch it go down. You know, I'm embarrassed to say that hearing you say that, which is so effing obvious, but

I've been saying it for 30 years and people still, I can't, I'm not a good salesperson. Instead of going through all the workouts and all these things and negotiating with the banks. But yeah, that's so gosh damn obvious. Like, yeah, everyone knew immediately as soon as March 12th hit, you knew offices were never going to recover or were never going to be the same. And Nick, to your point, you could, okay, boom, get out of it.

If you own office buildings, it doesn't work that way. No, it doesn't work that way. Okay. And so what, and I grew up more in the institutional marketplace and what I would say is the way that sort of some of those larger investors that might have real estate groups and expertise in-house, so to speak, they meld private and public together and

What they use the public for is either exposure to a diversified pool of high-quality companies and assets, or maybe some tactical things. And on the private side, if I were in that seat, what I would use the private for would be targeting a property type or a location or some property.

some unique kind of niche or opportunity that I saw coming, build a portfolio and sell it. The other thing about the public market is it's perpetual life. If you have a private fund, you build it, it's in theory 7 to 10 to 12 to now 15 years, and then you want to sell it. In the public market, these companies can last forever. If you have an operational business like

storage, self-storage. You build a business and you build an operational skill that's better than anyone else, and you get that competitive advantage, public versus private. So there's pros and cons to both. But in short, if you're taking advantage of an opportunity, timing, property type, market dislocation, you could do that privately pretty effectively. If you want exposure to an asset class or...

you're an RIA or a family and you don't have property expertise, in our opinion, you're better off going public. The public equity guys are always probably a little jealous of the private equity guys. You have to be a little jealous of the fact that the private real estate managers aren't seeing their marks every single day. That has to be a little annoying that they don't like the equity stuff gets repriced immediately and follows the market if it falls, I guess. That part has to be kind of tough to deal with.

I'm curious if the cap rates of today, you said they've gone from whatever, 3% or 4% to 7%. Do you feel like it's fish in a barrel these days, or are there just selective opportunities that look a lot better than they did in the years past? No, I don't. When you're really cheap, it's also messy. You don't always know it, right? It's not so obvious. And so we were there, again, in hindsight. It's always obvious after the fact too, right? So that kind of was sort of October of 23 was kind of the bottom line.

And we bounced off of that bottom where it was distressed, things were cheap. But when they're cheap, you never know if they're getting cheaper or if they're bottoming, right? And so now we sort of know. And now in our view, we're early cycle. And so real estate early cycle is a good time to invest in real estate because the cycles are long.

And, you know, the fundamentals are in good shape, except for office and certain other maybe minor categories. But in general, you have good fundamentals, high occupancy, you have NOI growth, and now you actually have development going down. And I think there's a good chance demand will surprise to the upside. And so you'll get that tightening of the marketplace. And so the rents will go up.

in certain property types higher, quicker than people think. That's happening right now in the healthcare, senior housing arena. Stocks have done really well. Growth rates are really high. And so...

So that's sort of how the cycle works and where we are. So it's kind of a very interesting time. Guys, when I think about exposure to residential, I think about home builders. But there are residential REITs, are there not? And if so, what are they? What do they do? So there's a series of high-quality apartment REITs.

And then there's manufactured housing. And then there's single family rentals. Like American Homes for Rent? Correct. Exactly. So those are the three subcategories, if you will, of residential things publicly. And that sector we think is in decent shape.

It's an interesting thing in this country because we are perennially under housed. So we form more households and we form fewer places for them to live. And so the market tightens and then rents go up and now interest rates are up. So we have this affordability problem, but there's not new development to backfill. So I don't know how this ends, but it's a dilemma for the marketplace. And

Honestly, it might be something at the lower end of apartments where the public sector has to get involved and somehow help to clear that part of the market. So I'm curious for your investment process, is any of this quantitative? Do you have any lines in the sand in terms of yields or cap rates that you absolutely have to work with or won't work with? Do you have any industry classifications you have to stick with? Any sort of rules around your process?

Yes. As any money manager does, we have the big, bright red line rules, and then we have the guidelines, if you will. I think the guidelines are more interesting. The way we tend to do it is we have guidelines around number of names, percentage of weight, an active weight in the portfolio, divergence from index sector weights, and

And so what we are trying to do is deliver a smoother ride, let's call it. And so we're like, to use a baseball analogy and apologize to anybody that's maybe not a sports fan, but we're a leadoff hitter. We hit a lot of singles. We get on base a lot. We don't strike out. We don't hit home runs. And just like baseball, moneyball, any of that theory works.

If you can consistently do that, you wind up better off in the long run. And so in money management parlance, if we're consistently second quartile, we're going to wake up in 10 years top decile. And that's kind of how we do it. And we just compound. We consistently, we strive to consistently compound faster than the market. And so that's kind of how we do it. So last question for me, we spoke about residential,

office, mall, data center, a little bit of multifamily, anything else that, or anything that you're excited about, anything that you are strategically underweight,

What's on your mind, Nick, as far as the state of the REIT market? There's four pockets of themes or opportunities the way we see the market right now. Some of these we've talked about. The first is secular growth sectors. Data centers is the obvious one. We're overweight data centers, but you could also put senior housing and industrial property in those categories.

The second would be attractively valued yield-oriented businesses and business models. So things like net lease or what we call gaming REITs, but they're structured as net lease businesses with operators. And we think these are kind of mispriced. Those sectors right now are yielding 7.5% to 8%, and they have growth in yield.

So just pause and think about that. That seems not right. It seems a little bit, it seems attractive to us, obviously. And then there are things that have been beaten up and may or may not recover. So office is one of those, obviously. A sector called cold storage, which is refrigerated warehouses, think of it that way. I thought you were talking about Bitcoin. No, no.

And then the third would be biotech. And we're keeping an eye on those for signs of a bottom and a recovery, but those have been in very difficult, had a very difficult time. Wait, what's a biotech REIT? A lab space. Okay. Paul, anything else on your mind?

Yeah. So when we think about positioning REIT, first of all, Nick's being extremely modest. This is a top decile performing strategy among both ETFs and mutual funds. I know that the topic is talk your books. I'd be remiss if I didn't mention how good the team is, Don. And I think we try and position REIT in a number of different veins. There is that secular...

that is the data center segment that's mapped to AI. I think everyone's trying to find adjacencies. We deal with, say, energy infrastructure and the pipeline companies that are providing the natural gas. I'm sure you saw energy transfer just had a big deal announced with a big data center project down in Texas. So trying to draft on bigger themes that might not seem like obvious

alignments with something like a REIT strategy. And then, of course, there's the active story. You had a sort of record year for active flows last year, doubling the previous record in a year in which we saw a trillion dollars flow into ETFs. We think the ETF wrapper unlocks a tremendous amount of value for investors, especially in an active REIT strategy. And then there's

there's another piece of this where I know on the compound and friends, you guys talk a lot about private markets, private credit, and how popular those strategies are becoming and might become in the wealth channel. Private real estate strategies have been very popular in that channel. And we think for the majority of investors and the majority of investors that advisor service, a public reach strategy is enough real estate exposure for most investors. And you've seen at times when you've been gated on some of these large

private real estate strategies, how that can undermine eventual client goals. The final piece of it, I think, is just what Ben laid out in terms of the opportunity set for an active manager in a high conviction strategy to generate strong relative performance. Yes, there is survivorship bias in those numbers and there's always nuance to Spiva reports, but the point is that

Unlike, say, a lot of those private strategies, there is a flexibility inherent to the ETF wrapper through the in-kind redemption and creation mechanism that allows for extremely efficient access to a market segment that Nick laid out, has a really nice setup on the near term, but also can play on some of these longer-term secular trends. Paul, for investors that are looking to learn more about your vehicle, where do we send them? Alpsfunds.com, all day, every day.

All right, gentlemen, appreciate the time. Thank you. Thank you. Okay, thank you to Paul and Nick. Remember, check out alpsfunds.com to learn more. Email us, animalspiritsatacompoundnews.com.