Coordinator: Welcome to the Center for Investment Excellence, a production of JPMorgan Asset Management. The Center for Investment Excellence is an audio podcast that provides educational insights across asset classes and investment themes.

Michael Steingo: Good afternoon to everyone. Thank you for taking the time to be with us today. My name is Michael Steingo, I’m a client advisor on the North American Institutional Team here at JPMorgan.

I’m pleased to have my colleagues from Security Capital, Ken Statz and Bob Culver here with me today to discuss the REIT market. Ken is a co-founder of Security Capital, head of Strategies and a member of the Portfolio Management Team. Bob is head of New Strategies and Client Service.

Now this is a particularly interesting time to be talking about the REIT marketing. We were hearing a lot of questions from our clients on REITs. For a little context, REITs were up 6.2% heading into March and then were down approximately 40% year-to-date on March 23rd. Since then, the REIT index has rebounded but there’s a widespread performance dispersion among property types in companies. To some extent, REITs (unintelligible) into the impact of social distancing on different parts of the economy, office, hotels and retail on one hand versus data centers and residential on the other. There’re also plenty of questions about what the industry may look like in the future. And we have the right folks on the phone to answer these questions.

So, Bob, before diving into discussion of the REIT market, I think it would be helpful for the callers to understand a little bit about who Security Capital is, how long the team has been investing in the REIT market and how your unique multi-tranche approach give you a different lens when analyzing the (market).

Bob Culver: Thanks, Mike, and welcome to everybody. Thanks for joining us today.

I want to make these comments on Security Capital brief so we can leave plenty of time to talk about the market, the risks and opportunities today.

But one overarching observation first. (Unintelligible) a time for asset management backed by experience.

Security Capital is a team of 23 professionals who are all based in Chicago and we’re all working remotely now, successfully trading, doing our research, all of the normal things that we do prior to the pandemic. We’re conducting business as it’s been our history since 1995.

We’ve got a very long tenured team, not only in the industry, starting with experience coming out of the 70s, but also as a team together since 1995. That experience is meaningful and important in times of crisis like this. We’ve managed as a team through 9/11, through the GFC. Pre-GFC, we returned $1 billion to our investors, not because we saw that crisis coming but because our fundamental research focused on cash flow, understanding balance sheets and understanding the businesses of REIT suggested that they were expensive.

Similarly but for different reasons, we came into COVID with over 40% cash, no hotels, no retail and no healthcare. Again, not because we saw the pandemic but because we didn’t like the businesses, the cash flows and the pricing of those spaces. We’ve owned by JPMorgan for the last 17 years. We have about $3-1/2 billion under management. And as Mike said, we have a multi-tranche approach, investing in REIT common equity, REIT preferreds and REIT debt. That allows us to combine those securities in different ways to accomplish different goals for our partners. But it also helps inform our decision to say on the opportunistic side. Understanding the balance sheets and cash flows needed to pay back debts and pay the coupons and preferreds makes us better equity investors for our partners.

We’ve been seeing a lot of interest in that common equity side, returns (unintelligible) seeing common equity investments through custom separate account as well as our Go Everywhere Fund. I would say in general, our partners are biased towards looking for opportunities in this environment.

Those are highlights of Security Capital. But I think the team that you’re talking to is built on deep research, understanding cash flows from properties, property by property, address by address, rolling all of that up, understanding the balance sheets and the risks of the companies, the environment that we invest in.

And so with that, let me turn it back to you, Mike.

Michael Steingo: Thanks, Bob. That’s very helpful background.

Ken, can you talk about the state of the REIT market heading into this COVID-19 crisis and how it reacts to shutting down the economy? In addition, you know, there’s been wide dispersion among the REITs in a subsequent recovery. Can you touch on that also please?

Ken Statz: Yes, of course. Thank you. And good afternoon everyone. I’m going to sort of set the stage for REITs pre-COVID and talk about how we looked at valuation, fundamental trends and balance sheet structure basically as of February 21, 2020. Why that date? Well, that was the peak in pricing for the real estate market in public format, this cycle, and as we all know is a very long cycle with a luxury of ongoing employment growth and good occupancies and excellent rent pattern.

As we sat in 2/21, we looked at real estate valuations in the public market three different ways. And I’m just going to briefly touch on just to set some stage sort of what those three different valuation systems were telling us. And roughly, we’re looking at REITs as real estate in our first valuation bucket, then we look at them as stock because there’s a lot of investors that own them as part of their stock portfolio. And then third, we look at them as income alternatives, bond substitutes.

So in general, when we were sitting in February 21st when Bob mentioned we had lots of cash, we weren’t very skewed against certain property types. Bottom line what we’re looking at was REITs were trading at about 7% premium to their real estate value that we could determine with our large analyst team. This was very different then, even a prior 18 months before when REITs were selling at 12% to 15% discounts to real estate value.

So as a real estate player sitting in February after a terrific run in 2019 and as Mike mentioned, an initial run in ’20, REITs were expensive real estate. Secondly, as stock, they were at an all-time high price-to-cash multiple, 23.4 times. That also as a stock player, one would say, “Gosh, boy, real estate in public format has gotten the ticket here.” The ticket is great employment growth, tight occupancies and as Bob mentioned, a very accommodative debt market. So equity, which is part of our multi-tranche system, was very expensive.

The only part is income substitute as we were sitting then in February which kept us in the REIT market, as debt they looked pretty interesting and, you know, they had a 6.1% unlevered rate of return, which given the 1-1/2% interest rate environment right there was a very substantial yields for us.

So one out of three valuation systems we’re looking pretty good as we went into March.

I think the second thing though as we set the table is although overall REIT pricing was interesting, there had already been significant underlying trends creating huge return dispersion in the overall REIT market. Specifically, if you were talking about retail, hotels, very, very weak touch to the economy. We all know about online buying, et cetera, really taking a lot of market share away from traditional brick-and-mortar retailers. We also noted that the transient use of hotels was way down and causing very, very poor results in hotels.

And so what we had noticed was many of the areas with the REIT market was suffering from long-term multiple erosion. Over the last five years, the multiple of Simon Property, for example, had declined on average 9% a year. So we went into this with a lot of property types, more traditional core really suffering from a pricing basis. On the flip side, we had new entrants like data, industrial, which has been around for a while, all showing extraordinary growth in multiples and leading the way in terms of total rate of return.

So the bottom line is we went in generally full. We went in generally happy with great balance sheet, in fact the best balance sheet structure we’ve seen in a generation but with underlying this overall good outlook for REITs, significant underlying differentials in trends.

So let’s go into March. And shelter-in-place and the drastic need to shut down the economy and the shut down any places people would congregate to try to get ahead of the spread of the virus, has an incredibly disparate effect on commercial real estate.

We’ll go into these a little deeper but clearly, there’s a real interrelationship between REIT holding and shelter in place because for example, data, the need to be at home, work at home, shop from home, et cetera, all the trends on the infrastructure of data transmission obviously has had little, in fact probably a positive effective on the part of the REIT industry that’s within data transmission. Likewise, industrial, very good trend going in. Great business; arguably, a better business coming out in terms of what people have learned, how they can shop at home, et cetera.

But there’s a really interesting sort of interrelationship between office and residential. Obviously residential people had to shelter at home. But interestingly, with the advance in technology, people could also work at home. If you’re in a white-collar business -- I think most of the people on the phone here are probably working from home -- your business model of your employer continue to function. You can continue to pay rent. Equity residential, the average income of a rent payor in their multi-family portfolio is $160,000 of income a year. Because people could actually work at home, shop from home, residential has a very different reaction than retail. Likewise office, office has long-term leases. That’s terrific.

But office, because the business model of the people who had rented the space, they’re actually in business, they’re actually making money. They’re actually able to pay rent.

So that whole group had very high rent recovery ratios in the month of March into April, into May, anywhere from 95% up to potentially 100%. So near term, you have a vastly different kind of rent collection than you do on the other side where, let’s say, retail and hotels, there the underlying folks can’t operate. They had to shut their hotels. They had to shut their retail. And in that process, the underlying tenant stopped paying rent.

Obviously hotel’s rent collection went to almost nothing. In retail, 40% to 60% recoveries even though they were the same kind of quality leases office had, even though they had credit tenants. In fact, credit tenants in general didn’t pay any rent. And so you have just a whole different reaction to this collapse in demand where parts of the REIT market have sailed through this very, very well so far. It’ll be very good long-term implication, we can talk about future demand, but other parts of the REIT market are suffering in a highly unique way with no cash flow or little cash flow.

So all of that really set the stage for how REITs really responded in March, coming out in April and May.

Michael Steingo: Thanks, Ken. And we’ll come back to diving into a little bit more on the property type. But one quick question in the meantime as you talked about the COVID crisis. Your team managed through the global financial crisis also and can you talk about from a REIT perspective how this crisis has been different?

Ken Statz: Yes. I think at least in three ways. First and foremost as I mentioned, the nature of the collapse. Remember the GFC which we obviously managed through was a very long extended collapse from credit. And there’d been unsecured debt players being highly invested eventually in the convertible debenture market. The GFC was first and foremost all about seizure of the financial market, seizure of the ability to get credit and the credit, important area likely, is a long process. It really hit all the property types for an extended period of time.

Now we think it’s really interesting to look at the GFC on a day by day basis because when we overlay it with what’s happened in this crisis, which as I mentioned is a different crisis, this is a crisis of demand and demand very differently affected by different property types. So what we’ve done is we’ve been monitoring the REIT markets from day one of the peak, 2/21/20, and comparing to the performance and attributes of the GFC which peaked at 9/19/2008.

Over the period of time, peak to now, so day by day at trading days, you would see that the REIT market is only off about 18% through yesterday when during the GFC same number of days, the REIT market was off 50%. So a very, very different kind of play-through. And what’s fascinating to us is the first 21 days of the decline, trading days, you could overlay what was happening in today’s REIT market identically on -- just a very eerie graph -- to what was happening during the GFC, i.e. in the first 21 days, there was a 40% decline in both markets - in both market periods. And in both market periods, everything was taken down to varying degrees.

Starting in day 22, there was a dramatic recovery so far from 40%. Twenty percent so far this quarter today, off another 5. It’s very volatile. But why is there such a differential? And the reason is number one, again, there’s the important parts of the REIT market that quite frankly are in experiencing anything dire right now. There’ll be some issues here or there but they’re chugging along on their cash flow just fine. Other parts are devastated.

So if we kind of look at property types, you would find that industrial, peak to now, this cycle is only off 1% as we speak. Regional mall dropped 42%, much like they were during the GFC. So regional malls, shopping centers, hotels are off, more in line with the GFC experience even year-to-date or peak-to-date. And it’s really interesting to us in the middle, office and residential, which we’ll get into, they’re off about half as much as they were during the GFC. They’re not emerging on (unintelligible) even though their rent collections are really quite good. There’s real concern in the office and residential space that is causing 20%, 25% declines in value since peak.

So bottom line, there’s a disparate action in rent collection and in the GFC across the board is all about financial structure, balance sheet. Everybody was (unintelligible) at once. This is a very specific time of decline. Now that’s very important because the composition of the REIT market is dramatically different today than it was during the GFC. The areas like data, single-family homes, storage, what we’d call emerging core specialty now dominate the REIT business.

And that’s a very important point that we have to make. You cannot make conclusions from REIT’s overall performance today versus a traditional core real estate account. The traditional areas that we’ll be talking about today really are less than half of the overall REIT market in composition. So the composition of the REIT market is very different versus the GFC.

And then finally, the government action has been widely different. I remember during the early days of the GFC, listening to Hank Paulson who’s my old boss when I was at Goldman Sachs and he was then the Secretary of the Treasury and in the early days, there was anger, that there were villains. There were people that were wrong that they had overleveraged homes, they were flipping homes and the government wasn’t going to get involved. They were just going to let them take their loans. This collapse was sudden and I guess, if I can say this way, there’s no villains. I mean, everybody is being affected by healthcare and the horrific tragedy of death, et cetera.

So I think the government quickly changed and quickly got their act together (unintelligible) this market with liquidity. And the moment we started to get the Fed pumping in liquidities in March, REIT values started turning in varying degrees. As I mentioned, in essence through yesterday, the better part of the REIT market that had good secular trends going into this are on states. I mean, they’re off a little. There’s not much going on there and they’re 30% of the overall REIT market. On the flip is all the places that rely on theaters and restaurants and shopping, they’re looking a lot like the GFC in terms of how they’re performing.

Michael Steingo: Got it. Thank you. I know we’ve touched on this already but diving in a little deeper, can you give us the sector breakdown of the five most prevalent core property type, retail, multi-family, office, hotels and industrial by how they react to the crisis, which you already touched upon a little bit, but then your outlook for each one.

Ken Statz: Sure. Let’s start with retail. It can only get better. Going into the crisis as I mentioned, obviously retail which let’s just roughly divide it into two areas, shopping centers and regional malls. Certainly all retail but very different risks, very different rewards.

So mall business going into this as I mentioned with Simon Property’s ongoing multiple decline over several years was a tough business. Why is this such a tough business? Well, their switch to online shopping has been especially hard for malls -- heavy in apparel, heavy in department storage, required to bring in business. And as a mall owner, you don’t own a lot of your department store space. It was a really, really though situation n terms of how do you refit malls to be relevant, how do you get new tenants without spending just enormous amount of capital.

So it’s a tough business. Coming out of this, it’s a really tough business. And that’s why I think why you see not only Simon, the best, biggest sort of grew in the business off 45%, 50% but essentially like what happened in the GFC when General Growth went bankrupt -- the only bankruptcy that happened. Most of the smaller mall players have evaporated their (pin) stocks.

So that part of the business is really tough. And I think Security Capital is such a detailed real estate investor in public format. We have to just have some humility as we talk about opportunities in mall space. Most of the questions we need to fill out are highly detailed by their modeling. There are no answers for how much bankruptcy is going to happen. As our Head of Research Kevin Bedell recently said, “We’ve gone from who’s on the watch list for malls to who’s not on the watch list for malls.”

And so there’s very low conviction on cash flow. There’s no visibility right now on rent collection. I mentioned 40% to 60% for shopping centers. Simon is silent. We do know there’s still in gap for 50 million bucks. That’s an unpaid rent. But it’s just silent right now. And so for high-conviction investor like us, it is a really drastic area that eventually we’ll probably have some dislocated interest in. But right now, that’s something we can’t touch.

Shopping centers are a better story. They actually have tenants working in the business models, ROCK, Burlington, TJ Maxx. It’s arguable they would come out of this stronger than they were. However, we were highly retailed going into this mess and we’re even more highly retailed coming out of it. So even though good quality shopping centers and think of like Regency, a great grocery-anchored. They own 400 centers out of 40,000. (Unintelligible). They’re a good choice for retailers over the long term. They’ve got grocers doing good business, drug store doing good business. But they make their bread and butter on mom-and-pop in inland space and it’s just a tough situation right now. Lots of deferrals, lots of discussions going on both with tenant and with their bankers.

And so shopping center is certainly an area that we would find future interest in. But we’re threading that area very lightly right now because again, the companies don’t know how to explain 2020. And the companies don’t know how to explain 2021. Little more clarity in 2022.

So let’s just put in terms of a traditional retail area, which by the way is only 7% of the REIT market right now, somewhat a shocking number. It’s 25% five years ago. Retail, if you’re looking at REIT performance in general, it’s only 7%. I mean, it’s less than half data, which is 16%.

So REIT market is not saying a lot right now because there’s not a lot to talk but it’s not a big part of what we do.

Now let’s sort of move up the food chain here and let’s talk about office. Office has been in a tough position for a while. It’s historically been a very capital-intensive business that the REIT market has not really embraced terribly well. Clearly, Western Californian kind of real estate markets for office, San Francisco, et cetera, have had real rent growth over this cycle. But the big story in office has been what’s going on with New York.

So coming into this, we saw multiple erosion in Boston Properties for example, that over the last five years, the multiples had eroded 6% a year. Again, that’s a crosscurrent, a trend that we think the decline is even accelerating in terms of what’s happening. Now you won’t see it in the office right away because of these long-term leases. We think what will happen as people try to hear on who wants to continue to work at home, oh by the way, if you’re coming in to work and you have to take the subway, how the heck do (unintelligible) gateway, high-rise office? That’s all to come and figure out. But in the meantime, their tenant is okay. Their rent collection is very good and we assume that over time they’ll probably get a lot of short-term renewals as corporations kind of figure out what their path will be.

Now the market’s taken notice of this. So unlike retail where it’s a big question mark, once we look at a Boston Property, we note the following: in February, we paid $847 in square foot per Boston Properties. Replacement cost, probably 1000 bucks. That’s sort of normal equilibrium pricing. Today, we’d be paying $630 of square foot in just two months later.

Is that the right amount? Well it’s a 7% cap rate, for those of you who are familiar with cap rates in the commercial real estate market. Staying at Boston Property office with all the problems (in the future), you know, how much space will be needed to pull out? Will people want to be in the city? Will they want to go to Nashville or will they want to go to Tampa? All of the relevant questions that we’ll all be watching but at the meantime, the public market’s taken 200 bucks of square foot off of Boston Properties. And that starts to get interesting, I think, as we’re looking through the lens of office. Not compelling. But is a 7% cap rate interesting to a real estate player? Well, prior to March, it would be unheard of for this portfolio to be trading there with their investment-grade balance sheet.

So as we move up the food chain, things get a lot more interesting.

When you go to residential, multi-family has been in the golden era, absolutely golden era. The prime demographic was in the ages of 25 to 30. Those are the people that typically rent apartments. We also had single professional women delay having children, kept them in apartments longer than expected. And so demand has been terrific and especially terrific in a multi-family suburban, gateway, high-rise apartment.

That was starting to wane a bit as we’re going into this as people were looking perhaps for lower-cost option than paying $4000 a month for a studio apartment. And that’s another question mark coming out of this. I think one of the reasons multi-family is off so significantly is not a question of near-term rent collection; it’s terrific.

But a question of whether there’s really a change geographically on where you want to own apartments. People may come out of this wanting more space. They may want a place they can work, at least part-time in their apartments. And this is (arguing) for southeast and southwest. And the market is noticing that. The market is paying more, a lower discount rate, higher multiple for multi-family located outside of the gateway cities.

And so that’s an area that’s also fascinating. And the market is making a bet that people will tend to want to sort of be in place, in apartments still, but they may not want to be in midtown Manhattan high-rise. They may not want to be in San Francisco high-rise. They might be spreading out.

So there’re lots of interesting opportunities that’s investible and residential.

And then finally industrial. I mean, industrial is of course, what a terrific business coming into the pandemic and it’s a terrific business going out. Just some caveat. It’s not cheap. There’s been very little net price movement in the price of industrial. Obviously people learning to shop at home, people learning to do all sorts of things many of us older folks never did. The logistics warehousing system in America, Prologis for example, estimates we need 400 million square feet of new industrials to sort of complete how America will probably work over the next five years. Terrific for the industrial area with one big caveat; you better not own the wrong industrial because that means there’s some obsolescence in the way the economy worked before.

So in the major food groups that we have, you know, a brief time to talk to today, it’s a very clear statement in our research that the pandemic is accelerating, has been a catalyst on the downside for areas that were already suffering. And we’re relying for example on retail on entertainment, in restaurants, in movie theaters to (have tenants) and have some excitement. It has accelerated bad trends in place and it’s one of the reasons, as Bob mentioned earlier, we are not invested, we’re not chasing those areas even though they’re highly dislocated as I mentioned versus sort of the same pattern from the GFC.

However, once you move up the food chain and to at least a neutral secular trend to excellent secular trend, there’s a lot to like and there’s a lot to do in that space in the commercial real estate market.

Michael Steingo: Great. How about the secular trends for the emerging core, self-storage, data centers, single family for rent? Can you touch on that?

Ken Statz: Sure. And of course, as we’re talking about all of this, as I mentioned, those trends were terrific going in, right? In many cases, the only problem was supply. Storage is a great business. The market’s really (warm) to it over the year. But there’s too much supply.

Storage is unique because there’re many levers storage operators can use to keep people in place in the storage business and gradually raise their rent because they kind of forget that they actually have a storage and these companies raise their rents every month and just sort of belatedly notify them. It’s been a terrific business but they also lease it all online now. Clearly, they still have some folks from the leasing office but it’s unique in a sense it has very good demand, very good test to the economy. Too much supply prior to this, which will slow down. But their business model, they actually lease (unintelligible) anybody and you actually put your stuff in without seeing anybody.

So that’s an interesting business that (unintelligible) with supply that perhaps this collapse in overall markets will certainly stop the ongoing starts of new supply in storage which long term will be positive.

In data we mentioned already. You know, Equinix just came out today to say -- one of the big data providers-- they’re looking at some problems with their customer base in terms of providing services to retail and other areas affected, like for example a 3% of their revenue stream. Overall, they’re still seeing 7% and 9% revenue growth this year. I mean, it’s just compelling. And data has gone from being a very small initial part of the REIT business to as I mentioned, 16% of the REIT space now with the data centers.

I have data and industrial. Thirty percent of the REIT market are those two categories, which explains why REITs trended off as much as maybe some people would think given the terrific condition in retail and hotel.

Single-family homes, terrific business. Our thesis is intact. If you could think of a business that came in strong, great revenue growth, new business to the public markets relatively but one with tremendous demand, very little supply in new housings, just some problems with operating data. You know, how do you actually manage an 85,000 single-family home portfolio?

The thesis is intact because what they’re providing is privacy or backyard, affordable cost. All of this as the golden era of multi-family is not over but it starts to wane is sort of a natural complement to where will folks go next. They might not buy a home but they do want a yard. They do want a school. They do want all of those things.

And so that space was experiencing rapid multiple appreciation, earnings multiple appreciation over the last two years. It’s even more terrific right now longer term. Short term, they’ll have some rent collection issues. You can’t have millions and millions of people unemployed without having some rent collections here or there. But in general, they’re better than expected, you know, in that low 90% to 94% rent collection.

So that’s an area with terrific touch going in. Clearly some disruption from unemployment and ongoing unemployment in the meantime but longer term trend, that’s an area that we find compelling. It is a focus of what we have.

Finally, hotels, Holy Toledo, what do you do with hotels? There's nobody there, right? And even as hotels are opening and markets are opening, basically the kind of hotels owned in the public market REITs, those kind of hotels have certain leisure business in their portfolio. They have (drive-through) resorts but it's a minority. By and large, the public market for REITs in hotels have a lot of convention space. They have a lot of need for transient, i.e. business travel. They need people to go to conventions. These hotels don’t work otherwise.

And so the only thing hotel REITs are doing is opening up selectively hotels to, quote-unquote, "lower their burn rate." We just came out of (unintelligible), talked all the hotels for an extended period of time via Zoom and it's not a happy story, obviously. And when they do open a hotel as they said it's not because they're going to make money. They're going to lose less money. There's some specific anecdotes of great hotels in Florida having a packed Memorial Day weekend. Well, the moment Memorial Day was over, guess what? It was empty. And so it's almost they lose money simply by hiring folks to open them up.

So things have to change in hotel world. We need people not just to travel occasionally on a retail basis. We need all the people on the phone to start getting in the plane and moving and seeing clients, seeing companies before you'll get anything like the old days in what was still a weak pattern for hotels. Is that '22? Is that '23? All we know is that hotels right now are an interesting longer-term play. But probably like in the GFC, very few people really made money playing hotels. They made money in blind pools that were created to buy hotels because in the private and public market there will be a lot of over-leveraged hotels that either never opened or just gets sold at a very low price.

Unfortunately, the hotel REITs are not in a position to do anything. One of the things we learned was bankers have been "pleasant," quote-unquote, as pleasant as the banker can be. And all of this sort of in a kumbaya moment because it's no one's fault. However, as they're going through debt covenants, as they're going through all of the different ramifications, they're timing these hotel REIT stuff, can't pay dividends, can't buyback stocks can't be anywhere near offensive. They're just timing their burn rates right now. So that is not a Security Capital kind of format to buy dislocation.

So that in the emerging or non-traditional core, you've got the terrific pattern going in. You've got some disruption but ultimately this is an area we can see things accelerating and in our cash flow model, (unintelligible) five-year cash flow and some of these are higher than we expected going into the pandemic. That's rare but that is giving us in all of this turmoil some real investment raw material to work with.

Michael Steingo: Well, thank you for the overview of all those sectors. Many investors have been asking us about what the performance the REIT market might tell us about the private market, obviously a much larger market. Is there anything you think the REIT market is getting wrong right now?

Ken Statz: Well, I think as I’ve been highlighting, the overall REIT market probably can't be used to interpret much, because the overall REIT market is still with all sorts of different reactions to the pandemic, all different pricing results and all sorts of, quite simply, the risk-reward trade off very widely and a REIT portfolio balanced to current REIT indexes really has less and less to do with how a traditional core real estate portfolio would be held by institutions. Quite simply, there's very little overlaps, unless you're an institutional investor in commercial real estate and 30% of your portfolio is industrial and data and you have 7% retail. The overall movement of what's happening is probably not too indicative.

However, you can go property type by property type. And I think what the REIT market has been getting along certainly in the second quarter is there's all types of REIT investors. You know, there's Security Capital. We're in it to buy real estate. But there's momentum players. There's yield players. And I think the 20% rebound has been a struggle to us because where people are getting the conviction to buy up especially the dislocated part of the commercial real estate market in public format, we don’t know, the companies don’t know, the tenants don’t know. And our highly detailed models are blank right now in many cases.

So I think what the REIT markets perhaps had gotten wrong so far this year has been a rush to buy dislocation, a rush to buy, "Well it's down 50%, it must be of value." I don’t think so. And so I think that would be the primary thing the REIT market is getting wrong. But I don’t know if that gives much comfort to folks doing a lot of properties in those areas.

Michael Steingo: Thank you, Kenneth. Thank you everyone for joining us.

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