WHEN: WEDNESDAY, JULY 15TH
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Jonathan Gray, Blackstone Global Head of Real Estate, live from the CNBC Institutional Investor Delivering Alpha conference in New York City on Wednesday, July 15th.
Mandatory credit: CNBC Institutional Investor Delivering Alpha conference.
DAVID FABER: Thank you. Well, thank you for being here. Of course, you heard Tyler. Sorry that Barry is not here to join us and also being flexible on time, too.
JONATHAN GRAY: I do what I can.
DAVID FABER: And we appreciate you doing all that you can for us, Jon. Tyler mentioned it. Earlier we did this Best Ideas Activists panel. And it was interesting for any number of reasons, but including that the two ideas, two of the three -- one was real estate related, but the other two were equities where real estate is a huge component of perceived value.
And I couldn't help but thinking, you know, is this a sign that it's all a bubble? That this focus on real estate value at Macy's, for example, or at Ethan Allen is simply a reflection of the fact that this has gone a little too far.
JONATHAN GRAY: I don't know if I would go that far.
DAVID FABER: I didn't think you would.
JONATHAN GRAY: I would say I think it's more a reflection of how much activism has grown. And because of that, investors are looking for hidden value. Where is there a company where they have and operating business, let's say, that's valued at 8 to 10 times cash flow, but they happen to own a lot of real estate that's worth 20 times cash flow? And is there a way to separate those and extract incremental value?
I don't know if it's so simple in every case to say yes, they should do it. There are tax issues. There are operating issues. But I think it's more reflective of the activist environment than, say, a really heated real estate environment.
DAVID FABER: Although the fact is -- and Keith Meister summed this up well. The values have risen dramatically for a Macy's, for example. And that impacts perhaps the way they should be thinking about things like capital allocation. That does seem to be the case when you're talking about a 10 or 15-year time frame.
JONATHAN GRAY: Yes. There's no question as real estate values have recovered and those multiples are very strong, that motivates people to, say, look at different things to create value with your real estate. It's happened in the past with some companies. I expect it'll happen in the future.
DAVID FABER: And we should mention, of course, you are the single largest real estate investor extant, I believe. Is that correct?
JONATHAN GRAY: We own -- we manage $93 billion of capital today. And if you include the debt on the properties, it's about 140 billion around the world. So probably up there.
DAVID FABER: The Chinese have been making their presence known in our market in a pretty high-profile way. In fact, one of the highest profile deals is one you did or were involved with, which is the sale of the Waldorf. Of course, Hilton owned it. You own a lot of Hilton.
Can we expect more of that? Is that going to continue at what seems to be a pretty robust pace?
JONATHAN GRAY: Yes, I think we are in the early innings of this wave of capital from China and a number of emerging countries, but China in particular. And the reason why is they have had 20 years of incredible growth. A lot of companies have big reserves today. Their regulators are now saying to their pension funds or to their insurance companies, it's okay for you to investor outside of the home country. So they are starting.
And it's really not that much different than what European companies did in the past or U.S. companies. I think it's logical for these companies and for financial institutions to diversify. And the natural first port of call would be the United States because of the liquidity and scale of the market.
So I think what you saw with the Waldorf and other assets, I would expect that to continue.
DAVID FABER: Yeah. I mean Barry, if he had been here, we would have talked about the Baccarat Hotel which wasn't even built when they paid a so-called per key, per room price that was quite high.
JONATHAN GRAY: Yeah.
DAVID FABER: Why are they willing? Do you think they have an appreciation and/or understanding of risk?
JONATHAN GRAY: Yes. You know, I think it's always easy to say, oh, foreigners are showing up, therefore, it's the top of the market. It's the Japanese with Rockefeller Center, that kind of thing. I don't think that's always the case. When you look at the Waldorf sale that Hilton did, the buyer got a full city block in New York City on Park Avenue between 49th and 50th. They paid about $1300 a square foot which is a significant discount to replacement cost. I think that's really hard to replicate what they bought.
And when you look five, 10, 15 years from now, it'll look like a smart investment. And I think there's a lot of things to do with that asset to create value. So I think it's easy sometimes to dismiss, you know, when the headlines the foreign buyers bought something, therefore, it doesn't make a lot of sense. I don't think that's really the case.
DAVID FABER: As you say, it does put people in mind of the Japanese boom when it seemed that so many -- whether Rock Center or Pebble Beach at the time. But why is it different now?
JONATHAN GRAY: Well, if you look at the overall real estate landscape today -- and let's contrast it to where we were in 2006 or 2007. We have a lot less leverage in the system. Back then, people were 90-plus percent levered. We have a lot more building going on. And we were labeled in an economic cycle.
And we don't have those conditions today. And that would argue that real estate probably is going to do fairly well the next couple of years. Therefore, somebody buys real estate at the market price probably will do okay as well.
Obviously, timing makes a big difference. Even if you look at the Japanese buying Rock Center, if you had held onto that asset over a long period of time -- and Tishman Speyer has done great with it, their investors have -- it would have been fine.
So I think when you buy great real estate in great cities, if you can hold it for the long-term and you capitalize the right way, in the long run, it should be okay.
DAVID FABER: So it's your expectation that we're going to be seeing a wave of capital continuing from China. Does that make you more of a buyer than a seller when it comes to some of your properties in the U.S.?
JONATHAN GRAY: Well, I would say this. I wouldn't limit it just to China. So you're seeing sovereign wealth funds in Canada, in Norway, in the Middle East, in other countries in Asia. What you are seeing is a lot of folks looking to invest capital. There's a hunger for yield out there today.
And if you were given the choice and said, do you want to buy a 10-year German bond at sub 1 percent or U.S. Treasury at 2 1/4 percent or buy a piece of real estate that yields 4 or 5 percent and has a chance of capital appreciation and inflation hedge, you might say real estate doesn't look so bad either.
So I do think it's one thing that's supportive of value going forward.
DAVID FABER: You can correct me on this. But my understanding, that there is a law -- i think it goes under the acronym FIRPTA, which is an excise tax specifically on a foreign buyer of real estate that keeps them oftentimes below 50 percent. But it's been noted to me that the Chinese are not doing that. They are buying all of it.
The conclusion being they plan to keep their capital here in the U.S. for a long time. They are not looking for a trade. They are looking for it to be here. And if they sell it, it's going to stay here. Is that your belief?
JONATHAN GRAY: I think depending on the institution, some are trying to stay below 50 percent. Some are not. I do think, as I said, foreign capital being in the U.S. market is here to stay. The FIRPTA law is one that doesn't make a ton of sense. I think policy makers on both sides don't really understand why would real estate be adversely impacted versus stocks and bonds. It goes back to a different political dynamic 30 years ago when it was passed.
Needless to say, people want to own U.S. real estate. So a lot of investors are looking through that. If that law was changed, I think it would lead to, though, a lot more investment.
DAVID FABER: Right. Although there are plenty of laws we wish were changed that won't be.
JONATHAN GRAY: Yes.
DAVID FABER: Included carried interest, but we won't get into that. In terms of rates, the big overhanging question I suppose that impacts so much of what goes on, you know, as we move into the possibility of a rising rate environment, we have already seen the rates to a certain extent get hurt recently on any other sort of rate-sensitive kind of asset classes. What do you expect for real estate?
JONATHAN GRAY: Well, I think the thing to keep in mind is that real estate -- owning real estate is not owning a bond. A bond pays you fixed yield. And it returns your principal at the end. And that's all you're going to get. Therefore, interest rates the key determinant of your interim value.
With real estate, it's more like owning a stock. There is a yield component. But there are earnings as well that can grow.
And if you have favorable supply-demand fundamentals, then you can see real estate values and cash flows grow over time. So back to my earlier comments, you know, if you look in the U.S. today, the economy is growing around 2.5 percent. New supply of commercial real estate is around 1 percent. That's as wide a spread as we have seen since the early mid 90s.
And we would argue that occupancies, rents, cash flows will exceed most people's expectations. And that's why we are still positive on real estate.
As you move into a fed tightening cycle, cap rates on average yields are already pretty low. I don't think you can expect that to improve, but you can still see good earnings growth.
So when we sort of boil that down, what we'd say is the last three or four years you have seen multiple expansion and cash flow growth. Values in real estate went up very sharply. We're probably now in a period where the multiples aren't going to expand, but the cash flow will. So you will get good growth in value, but not as good as we saw the last three or four years.
DAVID FABER: Let's go through some of the markets. You mention, of course, the U.S. You do seem to be constructive on the U.S. market.
JONATHAN GRAY: Yes.
DAVID FABER: Now, of course, people will see Blackstone selling and they are done. But you're also doing plenty of buying. I mean I assume you're just opportunistic.
JONATHAN GRAY: Well, the nature of our business, we run these closed end funds. So people are always trying to read the tea leaves and say, oh, Blackstone is selling stock in XYZ company and they are selling this office building, therefore, I should sell, it's the top of the market.
But we get this money for a finite period of time. And we have this very simple buy at 6 and sell at model. And therefore, when we complete the mission, we sell. That's what we do.
And so oftentimes we could sell 1095 Sixth Avenue in New York for a couple of billion dollars and then go out and buy the Willis Tower in Chicago for a billion 3. That's an asset where we think there there's a lot of upside in retail and the observatory. We think we can lease it up from the 80 percent occupancy.
So I would say today we're in a market that's clearly past the deep distress phase that we saw coming out of the crisis. But we're not in an '06, '07 phase. So it's a market today where we can get good prices for our stabilized assets, but we're still finding opportunity to buy things.
DAVID FABER: Well, Jon, you and I have had many conversations through the years and I rarely hear you be anything less than more or less positive. And by the way, that's why the most successful asset class conceivably at Blackstone. But that said, what would be a warning sign?
JONATHAN GRAY: Well, I think the big warning signs in real estate are capital and cranes. So when you see lending that is quite excessive -- and that tends to be a telltale sign in real estate. That's when you know you are starting to face real issues. If you went back again to '06, '07, people were lending, borrowing 99 percent.
We sold our New York City office building and the buyer was 98 percent levered. Our extended stay hotels, the buyer was 98, 99 percent levered. We don't see that kind of excess today.
Cranes, when you see lots of building -- and there are places like Houston or Calgary, lots of building. Places like D.C. and the apartment markets, New York City hotels. You become more cautious when you see a lot of building going on. And then the last piece, of course, is if you sense an economic slowdown, that's obviously not good for demand on the real estate side.
And when we lay those three out, we see today not a ton of building going on. Leverage of the system is reasonable. And we still think this economic cycle has a bit of a ways to go. That's why we're optimistic.
As I said before, not as bullish as we were back three or four years ago when there was a lot of distress, when the prices were really cheap.
DAVID FABER: Right. Where are we then, in your opinion, in the lending cycle? I mean there's certainly a great deal of availability right now and extraordinarily reasonable rates, so to speak.
JONATHAN GRAY: Look, there's a lot of capital today relative to where we were in 2009, obviously. But relative to '07 again, it's still not back. If you use the commercial mortgage backed securities market at the peak, it was $230 billion. Today it's $100 billion. So it's come back a lot, but a long way from where it was.
Spreads for triple B CNBS were 85 over. Today they are 375 over. They are rational. If you looked at them in a long-term perspective, I would say we are at healthy equilibrium in terms of debt market.
Now, base rates are very low and those are likely to go higher. The fed will tighten. I think economic growth in the U.S. will be pretty good. We're going to see some wage inflation out there which I think will force rates to go up.
But in terms of markets and financial institutions taking on excess risk in real estate today, we don't see a ton of that.
DAVID FABER: And has the CNBS -- has that been taken up by direct lending or by Chinese lenders and/or others who are willing to take the debt component of the deal as opposed to just the equity component?
JONATHAN GRAY: Well, it's been a mix. During the crisis, we got into the debt business. So we started buying CNBS, started doing draw-down funds that were focused on mezzanine. And we created a public market rate called Blackstone Mortgage Trust that today is a $2.7 billion market cap.
And those funds were instrumental ironically in us doing the GE transaction because they had both equity owned real estate to sell as well as debt.
So what we see is for transitional assets, banks today don't want to take on undue risk. They want things where they can distribute the risk. So if it's a turnaround hotel or an office building that needs to be leased up, those are the sort of assets that somebody like our mortgage trust can lend on. And I think the spreads we're getting paid are appropriate for the risk today. We don't see excess in that.
DAVID FABER: You mentioned the GE Capital transaction. That happened pretty quickly. There are quite a few people that say Blackstone perhaps is one of the only buyers that could have moved that quickly on something so large.
Give me a sense here as to how that actually went down when you first got the call and what your thoughts were. It was a broad portfolio of assets that you were bidding on.
JONATHAN GRAY: So I would say about the transaction overall it was one of those rare sort of win-win-win where GE the seller, Wells Fargo who was our partner and ourselves all came out with where it made a lot of sense for folks strategically.
We got a call maybe three and a half weeks before the GE announcement that they were going to exit GE Capital, wind down most of it. We didn't know at the time that that was happening. They just called us and said: Would you be interested in looking at our overall real estate book?
I think the important thing was we had done a lot of business together as firms over time, in real estate specifically. We bought a lot of assets. So there was quite a bit of mutual trust and long-term relationships.
We sat down with them, with Keith Sherin who runs GE Capital, Alec Burger who ran real estate and other senior executives. And they laid out a simple plan. Here's what we want to do. We want to sell the whole thing, lock, stock and barrel. Can you do this?
What was complicated, if you compare it to, say, Equity Office which we bought for $39 billion back in '07, that was much easier. One asset class, one geography.
This was shopping centers in Bulgaria and industrial loans in Mexico. This was very complicated. What we did was we said, yes, we are very interested. We said we've got to call one party here. We are going to call Wells Fargo because some of these senior loans don't fit in our business. Plus we need a bit of financing. They said sure.
Called Tim Sloan at Wells Fargo. He said they are all in. And for the next three and a half weeks, the conference rooms didn't smell great, you know. It was one of those things. And we mobilized our team on a global basis.
The nice thing and the reason we could do it is we have a big European fund, we have a big U.S. fund. We have a couple of large debt pools of capital. And we had expertise in a lot of platforms.
So in French office buildings or Pan European logistics or Southern California office or southeast apartments, we had existing investments in these spaces. We knew a lot of these assets we could move very quickly.
And for GE, at the end of day, I think it made a lot of sense because when they made the big bang announcement, they tied it to a large transaction. The market reacted very positively. For us, it made a ton of sense because we were able to deploy a lot of capital in a short period of time.
DAVID FABER: In terms of the deployment of capital, of course, we focused here on the U.S. But you are operating around the globe. And I always love to sort of get your thoughts about other markets.
What market right now to you looks most attractive of those that you are investing in?
JONATHAN GRAY: I'd say a couple of things. I think southern Europe is still interesting. It's funny, you watch on the screens what's happening in Greece. And many investors are very cautious about what's going on.
We look at Europe and say for the last six years during the crisis, it's been a challenged environment politically, fiscally. And it'll probably be challenged for a while to come.
And your base case has to be I think pretty slow growth. But we do think Europe will hang together, find a way. I don't know if one or two countries won't. But the bulk of Europe will hang together.
And the question to us is: Can you buy assets at a price that reflects the kind of slow growth environment that's out there? And we think the answer to that is yes. And you've got a lot of financial institutions who own assets who have to sell. They are inadvertent owners.
So in places like Spain and Portugal and Italy today, we're very active on the commercial side. In Spain, on the residential side as well.
Again, our benchmark is: Can we buy hard assets at the discounts to the cost of building them? And the answer in Europe is yes. And there's not a lot of new construction.
So Europe for us, we think is pretty interesting. We recognize the challenges there. We have been there a while. We have been there. It's not like this is new. So we started -- we have been investing in Europe since the early 1990s.
During this cycle, we started in earnest in early '12. We bought 32 billion euros in real estate across Europe. What's interesting is we have been able to buy them at much higher cap rates on leverage yields and big discounts.
Even today, if you wanted to buy a warehouse in the United States, it's probably a 5, 6 percent yield. Comparable warehouse in Europe would be 6 to 7.5 percent depending on the country.
So we think as capital markets there recover, growth stabilizes, modest growth. By the way, what people underestimate in Europe is the devaluation of the euro, the decline in interest rates, the fall of energy prices, all those things have been helpful to the European economy. And we're seeing some green shoots in a lot of these economies.
So Greece is a problem. We're hopeful they will find a solution here. But we believe in Europe. Maybe not as a high growth place, but as a place that can be stable with modest growth. And therefore, if you can buy lots of assets, at reasonable prices, in our world it makes sense.
DAVID FABER: Have the banks rid themselves of a lot of their problems already when it comes to real estate and others? Because I know for a while you were taking advantage of those potential sales.
JONATHAN GRAY: Yeah. I would say more so as you move sort of north to south. There's still room to go in the south. And that's where we are spending a lot of time. In Ireland, they have cleaned up a lot of their issues. They had some big challenges. The British banking system sold most of its troubled assets. So we're seeing this steady thing happen over time and it's creating opportunity. I will give you another country.
DAVID FABER: Please.
JONATHAN GRAY: Around the world. I think Brazil is an interesting place.
DAVID FABER: Really, Brazil?
JONATHAN GRAY: Yeah, brazil.
DAVID FABER: The currency is on its --
JONATHAN GRAY: The currency has gone down in half. But if you think again about from a hard asset perspective, you have seen the currency fall by half. Cap rates have gone up a couple of hundred basis points. So you're buying the same asset maybe down 60 or 65 percent in dollar terms.
Now, they have real political challenges, economic challenges. But it's generally hard to buy things on a compelling basis once the all-clear sign has gone up.
So if you think about it, we got very active in India on the real estate side three or four years ago when the same kind of sentiment existed. Now, we didn't know that we were going to get such a positive change in government and things were going to turn as quickly. But we just said, wow, we're buying things in India at very attractive prices.
And I think a similar dynamic exists in Brazil. The biggest challenge as a leverage investor is the cost of debt to buy real estate, for instance, in Brazil at 17, 18 percent. So you really have to do most things on an all-equity basis.
DAVID FABER: And what about China? Because we talked a lot about inbound. But you were doing investing there as well. And I wonder -- obviously, this is very recent. But the tumult in the stock market, concerns there at least of it hitting the pocketbooks of consumers. But you're buying malls there.
JONATHAN GRAY: Yeah. So China, we have seen slowing economic growth. I know yesterday's number was not bad. But they are transitioning from more of a fixed asset investment economy with a lot of credit growth to something more based on domestic consumption. They are also working hard to reduce corruption and the role of the state. And that transition is resulting in lower growth.
But long-term we're very bullish on China because of the infrastructure, the entrepreneurial spirit of the people, the pro-growth orientation of the government. And, you know, certain sectors we think in this transition will do well.
So we have been really focused on regional malls. We own 29 of them. In the first half of the year, despite all the negative stuff you read, we have seen 13 percent same-store sales growth. Much higher than we see in the U.S., Europe, Japan.
Now, we don't own high-end stuff. We own malls anchored by Walmart with H&M and Zara. But middle class Chinese customers are seeing their wages rise, there's more urbanization. And these malls are very hard to replicate.
China is not a case where you say buy everything. Certainly, the residential sector has see some overbuilding and offices, in some cases hotels. So I think you have to be selective.
But for us, things tied to consumption would be retail, some of the warehouses as well, we think they are interesting.
DAVID FABER: So far no impact that you have seen? I know it's very near-term.
JONATHAN GRAY: No impact. You know, for us, it's interesting. Markets moving up and down, volatility is generally a good thing. Because if you think about the capital we get, our investors give us the money for 10, 12 years. And we're not forced to move the money in the short-term. We're not forced to sell in the short-term.
And so if markets dislocate and somebody is forced to do something, that creates opportunity for us. And if we have to hold on to something a little longer, we do that.
So I'd say from our perspective, the volatility in China could very well create more opportunities.
DAVID FABER: I want to bring it back home, if I can, in the brief time we have left. Are you still the largest single owner of single-family homes in this country?
JONATHAN GRAY: I think so.
DAVID FABER: How many?
JONATHAN GRAY: 50,000.
DAVID FABER: 50,000. Are you done buying?
JONATHAN GRAY: No. We are still buying. We have sold a little bit. We're really sort of focusing the portfolio as we have gotten into the business more geographically focused. We like a little higher price point. We're still buying mostly in the southeast, mostly Florida. A little bit in California still.
What we like about the housing market is the fundamentals are great. If you look at single-family homes in the United States, traditionally we built a million 3. That's what they say you probably needed today. So far this year we're on pace for 675,000. And that shortage of single-family homes provides real support to value.
And the reason single-family home prices are up 6 plus percent is because we're not building homes at the kind of pace we should. I think that will continue to change over time. But I would expect that single-family housing construction values will continue to grow over the next few years.
In terms of our business, we are 97 percent occupied. We are seeing 4 plus percent rental growth. We think it's a real business. What's interesting is there were 12 million single-family homes that were rented prior to the crisis on a mom-and-pop basis. Us owning 50,000 sounds like a lot, but it's a drop in the bucket. But we think we can run a real professional business.
DAVID FABER: But what's the exit if there is one? I mean does it go on for quite sometime? Because the public vehicles that are out there with this same strategy have not gotten respect in the market. I mean I think most of them are trading below NAV.
JONATHAN GRAY: Yes. I think the challenge for a lot of the companies, some were sub scale. Others are trying to sort of build the bike and ride the bike at the same time which is hard.
So our focus is let's perfect the model. Let's get a world-class management team. Let's have really clean simple metrics that the market can understand.
And when we show up, we want a business model fully leased. We'll acquire, but it's a small percentage of the overall business. It will look more like a traditional multi-family read as opposed to some acquisition vehicle that's hard to follow.
So we think if we can execute on the business, we'll find a way to communicate that to the public market investors.
DAVID FABER: What does that mean?
JONATHAN GRAY: What that means is right now these companies are buying things. They are not sure what their turnover cost is. They don't know what their overhead cost is. It's very complicated to deliver.
If you can show them something that's pretty simple that says we are going to grow rents at 4 percent and earnings at 6 or 7 percent and we are going to pay you a 4 or 5 percent dividend, investors will say this is a good business.
DAVID FABER: You think the construct will be much more concrete if and when.
JONATHAN GRAY: That's what our plan is.
DAVID FABER: I wonder, rents are going up. The value of the underlying property has obviously gone up. Why not just sell en masse if you can? Or why not sell individually?
JONATHAN GRAY: Well, look. If the public market is not there, one of the nice things is we have the most liquid asset class in the world, single-family homes. We can turn around and sell them. Our fervent hope and desire is to build a real long-term company.
DAVID FABER: You think Blackstone will be in this business for a long time to come?
JONATHAN GRAY: Well, Invitation Homes, just like any portfolio company will be in it a long time.
DAVID FABER: Of course.
JONATHAN GRAY: Us, if we take the company public, we have to sell.
DAVID FABER: At some point.
JONATHAN GRAY: Right.
DAVID FABER: You could do that any number of ways including potentially I would think consolidating with some of the ones that are out there.
JONATHAN GRAY: You could merge. There are a bunch of options. We have done that with other assets. Sometimes we IPO. Sometimes we merge with existing platforms.
DAVID FABER: Finally, Jon, people in this audience -- I always like to ask, what about New York City? Here at home, for those of us who may own real estate here, I mean can it keep going? Or are there or should there be concerns?
JONATHAN GRAY: I think when you look at both New York and London, these two places are different almost than anywhere else because there's so much desire to live there, work there, travel to these places. There's so much positive momentum that's happening. So I would continue to be a long-term bull on New York City.
Now, as I said, not every asset class. We built a lot of hotels. It's tougher. We built a lot of high-end condos in Midtown. Maybe that market will be --
DAVID FABER: There have been a lot and a lot more going up.
JONATHAN GRAY: And a lot more going up. But rental housing in New York City, we just did a large investment in that area. There's a real shortage. Office buildings in New York City, in Manhattan, in Brooklyn. And I would expect this spreading effect which has happened in New York, it's happened in London, will continue.
We just bought a big shopping center in Queens, reflecting the fact of what's happening out there in terms of density and growth. I think New York City ha a lot of very positive things going for it and I think it will continue.
DAVID FABER: Actually I would be remiss. You have mentioned hotels a number of times. You still own a lot of Hilton, though you're below 50 percent. But you didn't sound that bullish on hotels.
JONATHAN GRAY: Well, no, no. I'm bullish on hotels nationally. New York City is the one market that's seen the most building relative to other markets. If you look nationally again, new supply is about 1 percent. Demand is growing 2.5, 3. The hotel business is still solid. We think it'll continue. We have been buying. And I would expect you'll see us buy some more stuff.
But at the same time, as you pointed out, we'll sell our shares. We used to own 75 percent of Hilton. Now we own 45 percent of Hilton. From a personal standpoint, if I could own the Hilton business forever, I would own it forever because it's an instant return on equity business.
People build these hotels, sign long-term contracts. The company's got 30 percent more rooms under construction than anybody else in the world. It's a really special business. But like all our stuff, we have to sell.
DAVID FABER: You've got to buy it and you've got to sell it.
JONATHAN GRAY: Yeah.
DAVID FABER: Jon, thank you as always.
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