European Real Estate: Light at the End of the Tunnel?

Greg Campion: Investors in Europe's commercial real estate markets have grappled with two years of falling property prices and anemic transaction levels, but could there be a light at the end of the tunnel?

Rory Allan: So as we look across the European landscape, we think the current vintage is going to be extremely interesting. Pricing has come off significantly, but the structural fundamentals are still in place. So although there was still risk out there in the market undoubtedly, we think that it's a very, very interesting time to be investing into European real estate.

Greg Campion: That was Rory Allan, portfolio manager in Barings European real estate team, and this is Streaming Income, a podcast from Barings. I'm your host, Greg Campion. Coming up on today's show, European Real Estate: Is There Light at the End of the Tunnel? Before we get into the conversation, if you're not already following us and you're interested in hearing our latest thoughts on asset classes like high yield, private credit, real estate and more, just search Streaming Income on Apple Podcasts, Spotify, YouTube, or wherever you get your podcasts. With that, here's my conversation with Rory Allan. All right, Rory Allan, welcome to the podcast.

Rory Allan: Nice to see you, Greg.

Greg Campion: Likewise, likewise. Thank you.

Rory Allan: Good to have you in London. Yeah.

Greg Campion: Yeah, yeah. It's exciting to be here. It's a little cloudy and misty today, so very much on brand for London.

Rory Allan: Yep, absolutely.

Greg Campion: I would expect nothing less. We are talking about European real estate markets today. And the asset class, commercial real estate broadly has been fairly trying place to be for investors in recent years. I've had some conversations with some of your colleagues in the US and we've discussed some of the dynamics in that market. So today we want to dive into what's going on in Europe. So before we get into the markets that are attractive, the sectors that are attractive, all that kind of stuff, let's start high level. So can you just kind of set the scene for me in terms of the macro landscape that you're looking at, things like interest rates and inflation, and how that kind of is a setting up today?

Rory Allan: Sure. So I guess going back a little bit, I suppose the context is that we've had 18 to 24 months of market volatility, dislocation very much driven by interest rates. So inflation in Europe got to low double digits. That obviously drove a reaction from central banks in early to mid'22, which took interest rates in Europe to 4. 5, UK, a little bit higher than that, sort of 5. 25 we stand today. So that's had a lot of impact on real estate markets as you would expect. So prime values have come off 20 to 25%, liquidity down. We're down about 60% in terms of trading volume. So as we stand today, we've seen a lot of volatility going back the last year and a half or so. I think as we look at it today, we're a lot more confident about what the future holds. There's a load of indicators that we'll probably come onto which point us in that direction, but we feel like we've probably seen the worst of the market. So we feel like we've kind of had the trough and we're at an interesting point in the market between kind of trough and recovery. We're not quite there yet, but we kind of feel we're at that inflection point, which makes it a really interesting time in the market to be starting to deploy capital. I think there's a few things that we should point to that are maybe different from last time around. So last downturn, post- GFC. So I think the supply- demand dynamics are very different this time around, so we haven't seen the oversupply of the last downturn in the GFC. So that's been positive. We've still seen rental growth, so that's maybe slightly surprising to non- real estate players. So in some of the core sectors in which we're in, so logistics, living in particular, but also in some of the other sectors as well, office for example, which would be a bit of a surprise, we're still seeing some rental growth in certain areas of the market, and that's really because supply has been constrained and there is still demand. Now of course, as interest rates have increased very quickly, we've seen a lot of pain. So economic growth has stalled. We're pretty stagnant. There's always country by country variance in Europe, but across the whole we're pretty stagnant. So that is starting to bite. We're starting to see the impact of that in terms of tenant demand. But we feel that we're probably through the worst of it. There's still pain, there's still risk, but that brings opportunity.

Greg Campion: Okay, okay. That's a great overview. Let's talk about where we are in the cycle. So we're kind of tentatively titling this episode Light at the End of the Tunnel. Now, I'm hoping it's not a train that's coming the other way through the tunnel. But let's talk about, I'm curious if you and the team are looking at it and trying to say, " Okay, are we at the trough of this cycle?" What are some of the signals that you would be looking for to either confirm that or maybe give you evidence that that's not the case?

Rory Allan: Sure. And we spend a lot of time talking about this. This is kind of the main subject, topic of conversation as you would expect. Our research team, which is we have a research team based in London which taps into the global team as well, and a lot of their work is around where are we in the cycle, what are the indicators. And there's probably too many to talk to, but we split these out generally into indicators which affect the capital markets and then ones which affect the rental or the occupational markets. So I mean, the main one at the moment that we're looking at of course is inflation, what that impact is on interest rates. So we think that we kind of passed the main peak of interest rate anxiety mid of last year. Inflation got very high, of course. It was a lot stickier than the market was anticipating, but we've seen a steady decline in inflation. So we're tracking very closely monthly data. And I think the market is now pretty confident, as we are, that we've probably peaked from an interest rate perspective. Inflation is not over and I think we need to be careful with that, but we are trending down. The latest inflation data in the Eurozone in January was down to 2. 8%, so down from 2. 9 in December. UK is quite a bit above that, but focusing on the Eurozone, we are trending the right direction and have been for a while now. So that's positive. The market is anticipating that that will translate into interest rates cuts probably in the second half of this year. We're not entirely sure when that will start or how many cuts will be, but probably anticipating two to three. So that's obviously supportive of real estate pricing. We look at trading volumes as I mentioned. We're sort of down to 60% in terms of transaction volumes. That's equivalent to what we saw in the GFC. We don't think that will continue. We're also looking at the rate of decline. So by trough we mean the point at which capital values were declining at the highest point. We saw that mid of last year. So we're still declining in terms of value, so yields are still falling but they're falling at a much slower rate. So that's a rate of decline is slowing, which is quite important. We look at the REIT market, so the listed market as well, which is normally a very strong forward indicator of what the private markets are doing. So the REIT market has been sort of bouncing around a little bit, but from its latest low in October, we've now seen steady growth. It kind of increased around about 30% in values. It's fallen back a little bit since then, but we've got a strong indication that the listed market is starting that recovery journey. On the occupational side, we obviously look at GDP. As I mentioned, we're kind of bouncing, not bouncing, trundling along the bottom at the moment, different countries doing different things. But again, we think we're probably through the worst of it. Certain countries are having more problems than others, but we're looking at GDP very closely. We look at supply- demand, we look at development completions. If you look at previous downturns in the property market, there's normally a pretty strong correlation between development completion. So we saw developments completing in last year, 2023. The last peak was 2009. So there's a combination of factors that we look to. Not all of those are completely supportive right now. We mentioned what GDP is doing. But I think generally they're pointing to the worst being behind us and we don't expect this to be a sort of quick V- shaped recovery now. We think we're going to sort of trundle along a little bit. It's not going to be as simple as that and there still is significant risk out there. But there's a load of indicators which again we've worked through with our research team, which would point to the fact that we are coming out the other side albeit slowly and there is some light at the end of the tunnel.

Greg Campion: Yeah. Okay. So very kind of multifaceted, a lot of angles to consider. Very interesting to hear all these different indicators that you and the team are looking at. And I would guide our listeners to the quarterly research pieces that Paul Stewart and his team put out on the European research side because I think they're regularly checking in in terms of providing the latest data in terms of what all these indicators are showing. But that's encouraging to hear that maybe it's not a completely uniform picture, that this is the bottom and things are ready to turn up. But it sounds like there are enough kind of indicators that are giving you and the team kind of reasons for optimism. Now I want to just dig into the transaction activity point for a minute. I think the stat you quoted was down 60%. Curious what time period was that over?

Rory Allan: So that's kind of from the peak.

Greg Campion: Okay.

Rory Allan: Yeah.

Greg Campion: And so obviously that's quite a slow- down in transaction activity. I'm curious for you and the team on the ground in different countries in the UK and around Europe, does it feel like that? Does it feel really slow in terms of transaction activity? I mean, that headline number would make you think so, but I'm curious what it actually feels like day to day for the team.

Rory Allan: I mean, you can't get away from the fact that the market is doing what the market's doing. So we're down 60%. The team in Barings is actually incredibly busy. So we see this as an opportunity. From sort mid of last year, as I mentioned, we kind of felt we're pretty close to the bottom here. It may not be quite there, but we're getting pretty close. So we've been actively acquiring through this period of the market over the last six months, because fundamentally we do see some opportunities and this is the best time to be deploying capital. The window's not about to shut, but we're at that sort of point before the market really has priced in the fact that we're in the recovery stage, which we're pretty close to. So this is a great time to be deploying capital. So we've been looking to make disciplined but selective acquisitions during this time. So the team is incredibly busy and they have been throughout. We're always looking in the market. We spent a lot of time in 2022 looking at deals, but we didn't find the opportunities. We didn't think the pricing reflected the risk that was out there. So we held off. But really we're super busy at the moment. So last year, the second half of last year we did 10 deals north of 600 million euros in 2023. Already this year we've got north of 200 million euros, six acquisitions under exclusivity and legals at the moment. So we're not just talking about it, we're actively pursuing opportunities and putting capital into the market. No, I mean we're obviously very aware of what the market is doing, and a lot of people are sitting on their hands. A lot of core capital is pretty much exited the market, so there's a lot of value- add or is pretty much value- add capital which is out there. So of course we're aware of what's going on in the market, but the actual team itself is super busy.

Greg Campion: Interesting. Okay, well let's dive into where you and the team are seeing some of these opportunities today. So a lot of what you read about in headlines recently is talking about distressed assets. And obviously there's different players in the market that may have bought into different assets at different times and some are in better positions than others. Perhaps you have some weak hands in the market or owners of assets that need to sell them for whatever reason. So let's talk a little bit about that because I want to sort of bridge the headline with the reality, if that makes sense. So I'm curious what you and team are seeing kind of on a day- to- day basis. Are you seeing kind of attractive assets in the" distressed" category coming across your desk?

Rory Allan: Yeah. I mean, I would say that right now distress is not as widespread as you would probably assume based on the headlines. So there's been a few high- profile failures. And it's good to talk about distress. Everyone wants to talk about distress. It's not there to the same extent as it was post- GFC yet. That's not to mean it won't come, but right now it's more selective than widespread I would say. I think there is a lot of pressure that is still to come. So when we talk about light at the end of the tunnel, that's right, but that doesn't mean there's not still pain to come in various different places. We look at the debt funding gap, so the refi bridge that's coming up over the next three years. A lot of financings that happen, precorrection, five- year loans taken in at 60% LTV, values have dropped 20, 30%. Borrowing costs have doubled in that time. There's a lot of stress that is coming. So we estimate there's probably around about 90 billion euros over the next three years of refi gap. So where sponsors won't be able to top up or where there will be a situation where there is a gap between value and where it needs to get to to refi. So that is quite a lot of payment. Put that into perspective, that's still sub 1% of the overall investment market. So 90 billion is not a small number, but it's a small number and small percentage of the overall market. So that will take time to come through. Real estate, there's always sort of a rolling refi event coming. So it doesn't all hit in one instance. You don't take the pain in one go. So there will be more instances of distress, but it's not super widespread at the moment. It will also be probably targeted in certain areas. So office probably will account for around about 50% by our estimates of that sort of refi gap. So that's going to be an interesting area of opportunity. It's also a sector which is not flavor of the month obviously at the moment. So lenders are probably more likely to extend on resi, on logistics than they will do on office. It's also concentrated in certain jurisdictions more than others. So Sweden, Germany, for example, probably have accounts around about half of that refi gap as well. So it's not going to be super widespread, but it will be relatively targeted and it's not completely there yet. It's not just lending- focused either. We are seeing opportunities or distressed opportunities coming from fund structures. So we've seen that in the UK where open- ended funds have had to sell. So we're seeing some opportunities there.

Greg Campion: Okay.

Rory Allan: We've also seen some closed- ended funds where maturities are coming up and people haven't been maybe as disciplined as they could have been during the good times in terms of selling. So there are now opportunities that are coming out from that as well. So there's a few different avenues where we're seeing deal flow and really interesting distressed deal flow, albeit not super widespread at the moment.

Greg Campion: All right, so you mentioned earlier that there's some opportunities to put value- add capital to work today. So let's zoom out a little bit from the more specific distressed opportunity and just tell me a little bit about as you look across that broader risk spectrum, where do you think some of the more attractive places to put money to work are today?

Rory Allan: Yeah, I think there are opportunities everywhere, frankly, across the risk spectrum. So when the market has come off minimum 20 to 25%, but the structural fundamentals of sectors, for example, logistics, living, are still very much there, the drivers behind those, whether it be demographics or technology or ESG are still there, I think there's opportunities across the board from core to opportunistic. I mean, our particular focus at the moment is, and mine in particular is value- add. And we're seeing, again, great opportunities both kind of structural and cyclical. So again, we're looking at logistics, for example, where pricing in certain countries has come off 30, 40%, living has come off maybe a little bit less. But sort of almost counterintuitively some of those more structurally sound sectors have fallen value the most because they were trading down into very low- cap rates. So living, logistics was getting into the low to mid- three percents, and they've probably popped back up to late fours into the fives, just by the nature of the downturn, this is an interest rate- driven downturn. So we're seeing some very interesting opportunities in those kind of core sectors, but we're also seeing opportunities in those more sort of tactical opportunities. So mentioned a little bit about office being probably a focus of where some of the distress will come, so we're seeing some interesting opportunities there as well. I mean, generally when we look at value- add, we're looking at various different strategies, so build to core, repositioning, so active asset management. But we're increasingly seeing mispriced income as well. So where that market dislocation comes, we're starting to see opportunities for mispriced cash flow, which is a difference to what we've seen in the past in previous vintages. So that's really interesting for us that we're able to make our value- add returns very strong, risk- adjusted returns through cash flow as well. So that's an increasing part of the value- add environment.

Greg Campion: You started to talk about sectors there, so I like the way you put it, distinguishing between structural and tactical. Interesting to hear a little bit more about that. Personally, I feel like sometimes it's helpful to hear an example to bring it to life. Is there anything that you and the team have done recently in any of these sectors that you would want to highlight because I think that could be interesting, especially if there's more recent transactions to give people a feel of what the market's like today?

Rory Allan: Sure. So I mean, from a structural perspective, again, we talk about a couple of main categories. So logistics and living, and those are both quite broad. There's a number of different subsets of logistics and similar living, whether it's resi, whether it's student housing, whether it's senior. We've been busy across the board. So from a logistics perspective, we're currently closing in on a UK deal. I talked about how certain countries are seeing things in a different way. UK has come off probably the hardest, the quickest. And we're doing a deal. Currently, I can't give too many details because it's in legals at the moment. But the price has come off 60%. That's not necessarily because it's distressed. The market has probably come off 40% and we've got to call it a motivated seller on that front. So we're doing a deal at a 60% correction from peak pricing. So that's pretty interesting. Again, I can't go into too many details at the moment, but that's a very interesting potential deal. We're spending a lot of time on the student housing front as well. And student housing is very interesting particularly in an economic downturn because students tend to go back to university. So student numbers tend to pick up during an economic downturn. So we've been focused for a number of years on student housing. We've done a number of investments in slightly more mature markets like the UK. We completed a recent deal just before Christmas in a slightly less mature market. So in Rome, Italy. And we're spending a lot of time looking at southern European countries on the student front. Now, Rome is incredibly interesting for a student market because it's so undersupplied. So it's one of the largest student markets. It's got over 200, 000 students, a number of which are from overseas or non- Rome residents. It's got one of the largest universities, La Sapienza in the center of Rome, but it's only got around about 8,000 to 10, 000 beds. So we look at that mismatch between supply- demand, talk about the provision rate of a city. And in Rome you've got 45 students to every one student bed. We get excited by London where there's maybe five or six students to every one bed. And Rome is 45 students to every bed. So the difficulty in somewhere like Rome is actually finding the site. And we don't take zoning risks. That can be a very convoluted, time- restrictive process, particularly in somewhere like Rome. So the difficulty is more finding the site. So we were able to find a site. It was a complicated deal. It was actually a site which was initially acquired by a bank for a new headquarters, for their new office headquarters of a bank. Post- COVID and post everything that's been going on in the office sector, they decided they weren't actually going to build that office out, so they were able to get a building permit for student accommodation. We were able to acquire that plot of land which we're going to build out and manage as a student housing. So we still see a lot of strong structural tailwinds behind student. There's an emerging, very fast- growing middle class in places like China, India in particular. A lot of students are coming from that part of the world. And fundamentally a complete lack of supply in certain markets. So we're seeing strong rental growth and we see an opportunity to bring some of the product that we've developed in the UK and examples from the US part of the business as well and bring that to cities like Rome, to Milan, to Madrid, to Barcelona. These slightly less mature, they're still established, but they're slightly less mature than some other markets. So that's where we're seeing some good opportunity and really excited about that Rome deal in particular.

Greg Campion: That's really interesting too to hear that interplay between two different kind of sectors with a pullback in office from a bank, then opens up an opportunity in I guess what you're describing is more of a structural long- term sector in the living side. So it's kind of just interesting and obviously it just goes to show that having expertise across all of these different sectors, they're not discrete opportunities. It's very much interrelated and you have to understand the dynamics that are driving one sector because they very much may impact another sector. I think those are two great examples on the structural side. Anything that you would describe as more tactical that's been an interesting transaction recently?

Rory Allan: I mean, I think we're looking primarily at, I would say tactically in the office sector, so a few other subsets as well, but we're looking at some office deals. We haven't closed a deal in the last six months in the office sector, but I think it's really noticeable that in the existing portfolio that we have we're seeing some really good pickup occupation in the office sector. So for example, you can almost see it from this room actually. We have an office building that we're close to finishing the development of, a building called TIDE Bankside. So on the south side of the river, River Thames, which completes later this year. So that's going to be one of the first net- zero carbon buildings. I'm sure we've talked about this previously in London. And it's noticeable even in the last couple of months the pickup in demand. So you would kind of assume, again, office market is on its knees, UK economy is struggling, inflation is still sticky, but on the ground, and again you need to put this into context of what type of asset we're talking about, the quality of the type of asset, on the ground we're actually seeing some really interesting pre- lathing activity in that building. But that, again, is because that asset is 100%. So we always used to just talk about location. So location is key in real estate, which of course it still is. But we're now looking at so many other factors as well. The quality of the asset is absolutely imperative. And this is the same for residential, for student, for logistics, but it's particularly the case in office. You have to play in that top 5 or 10% of the office sector because the rest of the market is structurally challenged.

Greg Campion: Yeah.

Rory Allan: But if you're in that top 5 to 10%, we're still seeing some really interesting rental growths from north of 5% rental growth in London last year. So again, it's all about location. It's all about the specification. And the specification is fundamentally, it's about ESG as well. So it's not just about the fixtures and fittings, the floor to ceiling height, it's how energy efficient is that building, what's it constructed of, what's the amenity like, what's the tenant well- being going to be like, what's the open space like. That building on the South Bank has roof terraces on every floor. It's got a couple of really big wraparound terraces at the top. And a decade ago that wasn't really a thing in London. I mean, talk about the weather here. We don't spend all our time outdoors. But that's now fundamental to employee well- being. So in certain areas of the market, I wouldn't be saying, " Look, just buy office," because there are issues. I think it's important to differentiate between offices in Europe, between offices in the US. And sometimes we speak to investors, it's like, " Every office market is like San Francisco or Manhattan." That's not the case.

Greg Campion: Yeah.

Rory Allan: In the same way London is very different to Milan, to Madrid. London's kind of lagging in some respects some of the other European markets. So you've got to be very careful when it comes to office. But in the right area of the office market, there are a lot of opportunities. And again, not many are looking at those opportunities because there's a bit of an attitude of office is bad and we don't want to touch it anymore. So we will still look at tactical opportunities in that sector and others indeed. But right now when the market is corrected by such an extent, our focus has still been on those structurally supported sectors of kind of sheds and beds.

Greg Campion: Yep. Yep. Yes, I mean there's no shortage of opinions on the future of office and we've discussed that a lot on this podcast. But I can say just having been here in London this week, I mean a few trends I notice is it seems very busy. Certainly in our office it seems like there are a tremendous amount of people commuting in every day. So I've been walking across from Blackfriars Bridge in the morning and just amazed by how many people are walking and cycling in every morning. And I don't know if the cameras pick this up, but as I look behind you, I see about six or seven cranes. There's obviously no shortage of development going on here as well. So very interesting space. I mean, point well noted around quality being absolutely crucial. I think that's been a theme that we've definitely seen probably accelerate coming out of the pandemic where everything that you mentioned in terms of the energy efficiency of buildings, et cetera, has become that much more important. And very interesting to see that you're seeing rent levels supportive and even rising in some of these very top- end assets. So that's a trend that I think we'll all continue to follow very closely, but appreciate getting your views on that. Okay, a couple more things I wanted to just cover with you before we finish up. You kind of alluded to this a little bit, but just high level, can you make a generalization or is this too tough to say which markets are looking particularly attractive from a geographic standpoint today and which maybe are less attractive?

Rory Allan: Sure. I mean, I think real estate is always asset by asset. And we look at this very much at the top down through our research team, but a big core strength advantage that we have at Barings is the platform. It's that bottom- up approach as well. Having the people on the ground, you've mentioned the platform, we've got nine offices, seven countries, 80- plus investment professionals. So that gives us a real advantage because we know what's happening in these various local markets as well as having that top- down approach from our research team. In some ways it's hard to generalize because you might look at certain markets and say, " From a top- down perspective, that country or that city is less attractive for whatever reason, but you can still find a great deal and make some great returns." I think from a sort of a value- add approach today, there are clearly certain markets which have come off, pricing has come off harder and faster. So I think I mentioned the UK where we're doing the deal, which is off 60%, which is a great opportunity. The UK is a bit of an outlier. We have higher, stickier inflation. The interest rate environment is that much higher. So we're at 5. 25 relative to 4. 5 on the continent. So looking at the UK, pricing has corrected much quicker for those reasons. So we're seeing some opportunities. There's maybe a little bit more distress. Maybe taking a few more calls in the UK about distress opportunities than elsewhere. And that's why we're looking at this logistics deal, for example. Structural fundamentals are still very, very compelling, but the value proposition is very much there. So we're looking at the UK, and for the same reason Sweden and Germany are interesting markets. So Sweden got a little bit more overlevered than most of the other countries. Sort of a symptom of this cycle post- GFC is that there isn't as much leverage in the system. So we're talking about distress, but it's not going to come to the same extent as it did post- GFC because the banking regulations have been put in place. So generally there's less leverage in the system. The Swedish REITs probably pushed a little bit more than some other countries. So we're starting to see some financial stress in Sweden, and Germany as well. If you look at that refi gap, there's a significant portion that will come from Germany. Again, markets that we like, markets that we have strong presence in, a market like Sweden, extremely innovative, Germany, a powerhouse of Europe not doing very well economically currently, but from a long- term perspective is an economic powerhouse. So from a cyclical looking at where pricing has come off the most, UK, Sweden, Germany standout. That's where we're seeing a lot of pretty interesting pricing coming through. But that's not to say that in markets which have corrected less or maybe doing slightly better economically, like Spain for example, aren't interesting. You can still find some great deals there. Give you an example. We completed our first deal in Portugal just prior to Christmas. Again, this is a logistics deal, a site which will become probably the dominant last- mile logistics scheme in the country. So a pretty significant site and something that we're very excited about buying that in at a very interesting price and we think there'll be a great scheme and great institutional capital which will acquire that office in due course. And we're also busy in Italy. Italy is a market, we have a great team in place in Milan and we've been busy throughout. So we acquired a deal recently, again logistics, which we're very excited about. And even we're looking at an interesting deal at the moment. I don't know whether we'll do it or not, but it's an interesting sort of example of where it's a portfolio of four assets. This is in the logistics sector. And we actually built and sold to the assets to the current owner at a sort of sub- 4 cap. That's now on the market and we can probably acquire that back in at somewhere close to a 6 to 6. 25 cap rate. So that's an interesting example of where you can play. Italy is still doing well occupationally. It's not come off to the same extent as I mentioned in UK, Germany, Sweden. But there's still some pretty interesting opportunities for one reason or another. So that's the beauty of real estate. Every asset's different. You can make a great investment in a city or a country that you maybe think from a top- down perspective is not as attractive as some. You can make a shocking investment in a market where you should be able to do better from a sort of a fundamentals perspective. So there's opportunity across the board. All of our team, as I mentioned, are very busy. So no, it's an interesting time to be investing.

Greg Campion: Yeah, that's great. And to me, it's very interesting just to hear how the amount of activity that's going on and how varied it is because I think if you're not super close to it and you kind of just look at the headline numbers, like you were mentioning transaction levels down 60% since the peak, I think your initial reaction would be, " Okay, there's probably not a lot going on." But there is a lot going on.

Rory Allan: There is, yeah.

Greg Campion: Yeah.

Rory Allan: And it's digging out those opportunities. Everything takes longer in this sort of market. Some of the deals that we've closed recently, I've been working on for at least six months.

Greg Campion: Okay.

Rory Allan: And sometimes pricing has sort of changed, the deal changes during that time. That's real estate, particularly value- add. So everything takes longer. But I think looking at the market now, as we talked about earlier, it's not priced in, the recovery is not priced in. This is the time when, again, selectively we should be doing deals. I think we'll probably look back in two, three, four years time and say, " 2024, that was the time." There's still going to be opportunities coming through in'25, '26, et cetera, as the recovery becomes more established, but I think this is a time where you need to be a little bit braver and say, " Okay, we've seen this before. We've been around for multiple cycles. We've managed risk across multiple cycles." We don't think the recovery is going to happen tomorrow. It's not going to be that V- shaped recovery. But we think if we're deploying capital now, again we're not day traders here, this is real estate. So our whole periods from a value- add perspective are kind of generally three, four, five years. Core is longer, but you're generally not in and out in a very short period of time. So I think deploying capital today is a very sensible thing to do as long as you understand the risks that you're taking. That's obviously key to what we're doing, understanding those risks. We've seen it before and we think now is the time to be deploying.

Greg Campion: Yeah. All right, well I think that's a really great place to leave it. And this has been extremely informative for me. I feel like I've learned a lot. Hopefully our listeners have as well. For our listeners, I would point you to, as I mentioned, some of the quarterly research reports that come out. Rory and his team are often putting pen to paper as well, so go to barings. com and search under viewpoints for all of the latest thoughts. Rory, this has been awesome. Thanks so much for your time.

Rory Allan: Cheers, Greg. Thank you.

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