2026 Outlook: Global Real Estate (Live from Barings 360)

David: Thanks Greg, for the introduction and thanks everyone again for your attendance. I'm really excited. We have a 45- minute market outlook panel with a great group of folks here to walk us through thoughts on what's happening in the market. As Greg said, signals from the noise is sort of the theme of this panel that we want to talk about and really think about, in the opening remarks for those that were over in the general session, what's happened in 2025, we're heading into the end of the year and what's the outlook for 2026 and beyond. I think that was pretty interesting. I think when you have panels which aren't scripted, like the one to have two different panelists say that something like AI, which is I think something shaping real estate, one person saying it's going to be transformative and one person catastrophic. So want to definitely hang out with Kevin at dinner a bit and hear what his thoughts are on the world. So hopefully we'll have similar discourse up here. So with that, I'll first ask each panelist to introduce themselves and we'll start with Mike at the end and work your way back to me.

Michael: Sure. Thanks, David. Good morning everyone. My name is Michael Flynn. I've been investing in real estate in Asia- Pacific for 20 years. The last 12 years I've been a fund manager on a series of value- add funds in Japan, and at Barings, I'm responsible part of a team that is building out the real estate capability beyond Australia into the rest of Asia- Pacific.

Alex: And I'm Alex Gobert, I'm the co- CEO of Artemis, a Barings Company. Thrilled to be here. And I've spent almost my whole career investing just in the US in Core Plus, in value- add and healthcare real estate.

Nick: I'm Nick Pink, I lead the European real estate equity team at Barings. I've been in the business in its various iterations, I guess you can trace my career back for about 21 years. So some serious longevity in the business. I've been a real estate investor for my entire career through equity. A little bit of dabbling in the debt space with Nazir in the early days before we brought specialists on board. But everything from core through to opportunistic and we're active in 10 jurisdictions through eight offices and a team of 50 specialists in Europe.

Nazir: And I'm Nazir Alamgir. I head up our US and European real estate debt business. I've been in the real estate industry for over 25 years. I think Rick was very bold to say he's been in it for 30. So five years from now you'll still hear me say over 25 years when I talk about my length of experience in the space. But I've been with Barings for nearly 10 years now and I'm based in New York.

David: Great. I think that's funny, the longest serving employee I ever worked with, he stopped himself at 40. He said, wait... It was in our pitch book it was 40 plus. He's like, " Don't put over 40, 40 plus. That's the number." But again, the advantage of that longevity I think is having perspective about cycles and how things can change and change quickly in the market. So we'll start with asking each person and sort of start with Nazir and work our way back down the line here. Again, I think we've got equity represented globally. Nazir can certainly speak to debt globally, but just talk a bit about the fundamental backdrop as you see it in your markets and really in my mind, when I say that, thinking about how much, I think real estate has gotten so much attention, really post- COVID with all the dynamics that have happened in office. Globally, I think residential is an issue like affordability of housing, how e- commerce has shaped... So there's so many different, I think macro things happening in the broader economy that are really very then directly impacting real estate and where there are risks and opportunities. So just ask each panelist to start with a couple minutes on how you see the fundamentals in your market from a risk perspective and then from a return or opportunity perspective.

Nazir: I guess to start off with, I'm going to make my comments cater to the region. So I think there are comments that apply to the US and then there are comments that apply to Europe. And Europe is complicated because each country and jurisdiction has different rules and regulations and laws. So it does make it a little bit complicated to create broad themes across the whole geography. But one of the common themes across the pond is what's happening in the banking sector and their willingness to lend in the commercial mortgage lending space. And one of the data points that we've been analyzing really for the past, I'm going to say since late'22 was the amount of commercial mortgage loan exposure on bank balance sheets. And the reason why we focus on banks so much is when I look at the US commercial mortgage lending market, we have roughly$ 6 trillion or over$ 6 trillion of commercial mortgage loans outstanding. And banks make up over half of that, somewhere close to 3. 2 trillion. And then in Europe, while the market's much smaller, banks make up nearly 80% of that lending market in the commercial mortgage loan space. What we've seen and what we started to see in late 2022 was the pullback from banks in the commercial mortgage lending market, which meant that there was a need for third- party capital to step into that space. It could come from insurance companies, it could come from securitization markets, it certainly came from private sources like our funds here at Barings. The biggest change that we've seen is the amount of loans that are being kicked from one year to the next since 2022. So we have a chart that we've shared with our investors at our fund presentation yesterday, which basically shows the wall of maturities. And in 2025 we originally expected somewhere around 570 billion of loans to mature, but you had 400 billion of loans, nearly 400 billion of loans roll from'24 into'25. Now when I go back to'22, what you see is that trend started off with 150 billion, move to 270 billion and is now 400 billion. So you have close to a trillion dollars worth of loans maturing this year. And needless to say, if you think of that trend going forward, it isn't going away. And the biggest part of that bar chart that we have is bank exposure to commercial mortgage loans continues to increase. That wall of maturity for them continues to increase, and it's simply because the problem loans that are on their books aren't rolling off. What's rolling off for the loans that are easy to refinance or can be sold and acquired by somebody else or paid off. So that challenged asset that exists on books will continue to exist for a lengthy period of time because what banks are doing is slowly taking that pain incrementally. So we've had eight consecutive quarters of write- downs on bank balance sheets, but it's going to take another two to four years to get through that, which means it's a really interesting market opportunity for us from a credit perspective. In Europe because the loans are nearly all floating rate, you don't necessarily have longer dated loans, that reset in base rates meant that banks had to face those problems a lot sooner, and they worked through most of those problems a lot sooner. But the credit box that they're executing on is much smaller today, which again is the reason for private capital having a moment in the sun to put money to work. Now again, the complexity is every country slightly has different banking prosperity to it, and those dynamics are changing based on the growth of those individual countries, even just by the common currency. I would say the other thing that we're seeing across the industry, and sorry for pontificating for so long, but I'm covering two regions in a big market, is that what we're seeing today is there aren't the themes that were lifting real estate in the past. So I'm stealing a little bit of Nick's thunder. He and I have spent some time on the road and I loved his tagline, " Our market today is no longer a market of a rising tide lifts boats, whether it was industrial or multifamily or data centers. The market today is a stock picker's market." You have to find the individual investments, and Greg was talking about sort of the micro market analysis as we go through our discussion today and throughout the day, what you're going to hear is how we are focusing on the analytics and the data that are breaking it down to individual micro markets, not just sub- markets but true micro markets block by block. Because what you want to answer, the question that you should ask first and foremost is why does this building need to exist? And if you can't answer that question, then you probably don't want to make that investment.

David: Thanks, Nick?

Nick: Well I can be a bit quicker because Nazir, you have stolen a few of the things I was going to say. So-

David: Advantages of going first.

Nick: I'll make some time up, but very high level what I would say, talking to peers in the industry, 12 months ago, I'm not sure why this came out, but apart from the fact that it rhymed, but the mantra had been survive until'25. I don't know if you are using the United States as well. I don't know what we all thought would be different, but we did think something would be different and would be getting back to normal and doing lots more. And we haven't, and we haven't because obviously macroeconomic situation, geopolitics, Trump, Liberation Day, all of the stuff we know, we just haven't been as active. The recovery has started in European equity markets for sure and that will show up in the data as and when it comes out next year. But it's been a tepid recovery and obviously the economic situation in Europe isn't helping because that is pretty woeful. There are a few bright points in some unexpected places, but generally when you aggregate the data, Europe is looking fairly sick economically and it also had its own political issues to deal with. Nonetheless, when I talk to peers in the industry, I would say it's probably a healthier place now than it was 12 months ago because cautious optimism and I think I used that term last year, has been replaced by pragmatism and realism. So I think people have been waiting for something that probably was never going to come and they've broken up to the fact that they need to get on and do what they need to do. So that's generating activity whether you are a seller, whether you are a buyer, and I think that's healthy for the market. And underpinning all of this, I think the fundamentals in real estate are strong. We've said it in the past, and nothing has changed, Nazir is right, the structural drivers, they're still there in the background, but I think more importantly the fundamentals, particularly the supply side in Europe, is supporting real rental value growth. And in Europe at least, it isn't just in beds and sheds, it's everywhere, if you look at the data. Even in retail, even in office, real rental value growth, we'll talk about dispersion in a minute, that's really interesting and that's developing at different speeds in Europe and the states as well. But I think that's what you need to focus on. The cycle's going to play out, it's going to be extended, but there's real rental value growth to get your hands on if you buy the right product and that's the key focus for us all of course. So maybe I'll leave it there and pass across and we can jump into some other regions, but I'd say it's not too late, don't wait too long, but this is a cyclical, I'll use another buzzword, generational opportunity, that you need to capture, and capital is coming back for sure.

Alex: Yeah, I'm going to spin around the US very quickly, but I agree with what Greg said a little bit. Real estate is a local business, so you got to get the macro right, but you got to get the local. And so from an industrial perspective where we're spending our time, we're still overweight that sector. I think logistics demand is pretty steady, despite tariff and sort of economic uncertainty, but the vacancy rate is like 7.5% and that means you got to do the work. You might be, Southern California is really tough and Atlanta and Houston are doing pretty well. So you really have to go to the local asset and figure it out. If you look at Prologis, which in the US is sort of the definition I think of the market. Last quarter rent was down 1% and year to date it's down 4%. And so you really got to be focused on the right strategy. Our strategy is to buy relatively well- leased assets that have marked a market of 10 to 30%. We're getting positive leverage, so that really works and we can ride through whatever uncertainty might occur. We actually developed 30 million square feet over the past five years in the logistics space and we have one asset that's finishing construction. So we're not really doing any development because you can buy cheaper than you can build. We've also been active in cold storage. From a residential perspective, I would tell you that until recently we were overweight residential. Now we're kind of underweight residential. The good news for residential is that home sales are at a 30- year low and there's a hundred thousand apartments were absorbed in the last quarter and every quarter prior to that for the last year. That's a record. The bad news is, if you're a developer here or not here, but if you're financing a developer, developers develop and the numbers, even though new starts are down like 27%, there's too much supply coming, and I think all of us as owners and investors are looking for occupancy. So we are filling up our buildings and we're giving one to two months concessions. So if you're a young person and living in an apartment, get two months of concessions. And the difference between the buyers and the sellers in residential is, if you believe that those two month concessions go away in a year to two years, you buy the property and if you believe it's going to take three to four years, you don't buy the property because the math doesn't work. So we've sort of moved to underweight residential until we see more distress. We're looking for recapitalizations of people who bought in'21 and'22 and try to put that money to work because if they're not deep pockets, they can't really carry the property as they come out in a five- year maturity from a debt perspective. On the office side, I mean the office side, and I started my career in office, it's the tale of two cities. The trophy is great, but we really have limited exposure. So if you've got trophy office in your portfolio, you're loving life, and if you don't, your values are down somewhere between 30 and 70%. And so that creates tremendous amount of opportunity. Having said that, for me and for our team, I started as a leasing broker and when you look at TI's leasing commissions, free rent based building capital, these office buildings that are not trophy, it takes seven years of a 10- year lease to get your money back. So the CapEx is just so significant. So I think for us, we're looking for opportunity. We haven't really found it in the office sector, but that doesn't mean there aren't great opportunities there on a micro perspective.

David: Mike?

Michael: Thanks, Alex. Wow, things are a little bit different in Asia I guess in terms of some of the fundamentals, but maybe I'll cover off three just general observations first. And core investors are back in Asia, but they've been changed by the last few years, scarred if you will. There's a definite risk premium that's been added irrespective of the spread between cap rates and the cost of debt. And that could be political risk, who knows? But it's making it harder to get core deals done even though the investors are enthusiastic. I think that asymmetric risk problem that they had is retreating slightly. And what I mean by that is, for the last few years, if you did a core investment, if it went really well, you got core returns. But if it went a little bit wrong, you got opportunistic style losses and it was very, very hard to do anything in that case. And the last observation is really across Asia- Pacific, there aren't any cranes, no one's building anything. I went on to tour of Tokyo to see some assets last week. I saw three cranes in the center of Tokyo on very large sites, but three, and that's a market with 550 million square feet of grade A office space, grade A and B office space, 37 million people. So it's an incredible situation with a lack of supply and I think that should make us quite confident about the dynamic of the market going forward. And that lets us turn to how we're investing and trying to drive alpha, as opposed to the beta, if you like, of what the market will provide. Well, we do like Tokyo office, but just to show you how different Tokyo office is to perhaps some of the markets here. In that huge market I just described, the vacancy rate across all classes of office is 3%. And if you're talking A minus, B plus and better, it's probably one and a half to 2% across that entire marketplace. Rents are growing at six to 8% a year. It's not uncommon to have micro locations with less than 1% vacancy, and our cost of debt is one and a half percent all in, including arrangement costs. So it's a really compelling market in terms of fundamentals, and that would give you the market beta if you just bought those and sold them in the ordinary course of business. But what we try to do is add alpha because we're a value- add investor. And one of the characteristics of Japan is that 80% of the real estate is not owned by institutions, it's owned by corporates. And corporates in Japan are under huge amount of pressure from various sources. Their banks, usually they have one banking relationship, that bank sits on their board and it guides them through their lending and borrowing, and those banks want to see all that real estate or a good portion of it come off the balance sheets. The second is the government who is saying, especially Takaichi, the new prime minister is saying, " Look, the world is changing. We can't rely on our historic partners, we need to get match fit. All the corporates need to really focus on being global powerhouses, so you shouldn't be owning all this weird real estate and these other assets and these cross- ownerships." And activist investors from overseas are also attacking Japanese companies and saying, " Look, you need to sell us these assets and you need to restructure." But against that backdrop in Japan, there's a real face issue where it's really important if you're a Japanese corporate that everyone is assured of your financial stability because that makes you a suitable counterparty in all of your business dealings, and it's really, really important reputation. So no one wants to publicly sell buildings. So that's where we come in. We provide a markets clearing service, if you like, for a fee, where we act reliably, quickly, very confidentially and process assets from willing sellers usually on the end of their quarters, usually priced against their book value rather than market value. And then we have a tacit agreement not to sell it too quickly afterwards, and in return for providing those services, that's crystallized in an entry price, which is different to if we hadn't provided that service. So we're able to provide essentially to our underlying investors and our parent company who invests with us, thank you very much, out- sized returns for essentially what is core risk in a really well- functioning core market.

David: Thanks. All right, great opening. We'll turn now to the topic of dispersion. I mean the term stock pickers market was used. I think Alex, you mentioned, I think real estate always is sort of a local market, but the range of outcomes can be different depending on what's happening. I was thinking about as we were talking here, when you think about dispersion,, during the recent government shutdown, I was listening to some interview and they asked the commentator on this program, if they're cutting 10% of the flights for the average traveler, what impact do you think that will have? And he very rightly said, " Well, if it's your flight that's canceled, it's a hundred percent impact." And so I think about the averages and the macro things are nice to talk about, but you really get down I think to the fundamentals. So just curious, maybe start with you, Nazir, talk about, you talk about stock pickers market in terms of the approach to research and how you sort of implement that in the investment process and maybe bring that to life for people.

Nazir: Sure. I think dispersion is very, very real and that's why we have to pick stocks today as opposed to take thematic approaches. We've talked about office a lot and I think you see the dispersion in office just from a global perspective, right? Office performance in Tokyo versus office performance in the United States. But what we noticed at the back half of last year is office started to turn a corner. You had positive absorption, you had 190 million square feet of leasing done in the second half of last year. It's the first time in almost two, no more like four or five years that you'd had positive leasing absorption. First half of this year was another 220 million square feet of positive leasing, so nearly as much as pre- pandemic levels. And one of the things that we had our research team do take that top down approach is, well, where is that leasing activity actually taking place? And we took the top 20 sub- markets and then broke it down into 300 micro markets. So again, not sub- markets. And what we noticed is 80% of that leasing activity was happening in 20% of those micro markets. And so when you do that analysis, you can actually find the buildings and it's not just all actually grade A, right? It's actually the location that matters, being close to a transportation hub, having high work lift play characteristics to it. So New York, we've used New York as an example in some of our case studies simply because within New York you have five micro markets that perform in the top 10, not just top 10% of those 300, but you also have half a dozen micro markets that are in the bottom 10. And that's the difference between being in Midtown Manhattan or being in the financial district of Manhattan. And you have massive dispersion in rents as well. And so that performance allows you again to pick the micro market and then to pick the actual asset that has a reason to exist and to outperform. But that same dispersion exists also in the residential space. That same dispersion exists in industrial. Alex touched on it a little bit already. You go to port markets like LA, which needless to say import a lot of goods from China, those vacancy rates went from low single digits to mid- teens. But if I'm in Dallas, those vacancy rates have moved half as much and that leasing and take up is taking place. And so if you're putting money to work, you're finding those micro markets that have a delta and have a distinction to them. On the residential side, it's simply about migration patterns. What did the pandemic do? It allowed us to work remotely and allowed us to be more flexible. And what do people care about? Taxes, politics, more migration, and where are those markets where we're seeing that migration? Atlanta had I think nearly 20 years of positive migration and just this year had negative migration for the first time. Does that mean we shouldn't invest in multifamily in Atlanta or what's the change in that migration? The net migration might be people that can't afford Atlanta anymore because rents have continued to go up significantly, but maybe the positive migration that's coming in are people that can afford those rents. So again, the data isn't just about positive migration, net migration, but it's about the type of migration that's taking place. And that dispersion exists in a very real way across all asset classes across the country.

David: I imagine as a lender, Nazir, that you just have to get a lot sharper on the underwrite given... I mean there's maybe a period of time where the average person might think, "Well that's loan to values X, even if it doesn't go well, you sort of risk a loss," but when you have these sort of massive divergence in what the potential outcome can be-

Nazir: It creates greater swings in value. So as much as we think values have reset, they can reset more when you have these massive swings in dispersion.

David: And maybe Nick, I'll turn to you and maybe focus a bit on office. And I know some of the things you guys have done in London, and again, I think the sort of macro themes around office are what they are, but I think when you get into different markets it can be very different based on the quality of the asset. And maybe just talk a bit about how you see that and the investment opportunity set when you look at it.

Nick: Yeah, maybe we've had the benefit, well, we have the benefit of operating in lots of different markets that are all moving at different speeds. I think the trends that Nazir has outlined, we've seen them in our top tier markets, certainly in the office space. I think there's more clarity around the impact of dispersion, bifurcation, polarization, whatever you want to call it. I think in those sectors where you see greater, whether it's location or technical functional obsolescence. So I think we've seen it most in office certainly, and we've seen it in retail as well. I think it's less clear in residential and in industrial, but it's definitely there. Part of the problem we have obviously is a lack of timely and quality data in Europe, in a lot of the markets where we're active. So I think we have to rely a lot on the local teams on the grounds to try and get real- time evidence of where tenant demand is moving and tenant demand is sort of moving and changing dynamically at a really rapid pace and it's really important that you understand how that is evolving. London, yep, we do a lot in London office and I think we've got a really strong handle on how that whole dispersion picture can evolve perhaps more quickly even than we had expected. So we've done some development in the London, in the sort of the core city office markets and in some of the more fringe markets over the last three or four years, and the underwrite hypothesis we had has been proven out. We picked markets that had the right amenity, the right transport links, but most importantly we were providing the right quality of space. And as we were coming out of the pandemic, it was very clear to us that, for big corporates they needed to tick the obvious boxes in terms of getting people to the office physically, but you needed to provide the right space that was going to encourage people to come back in ultimately. So we've created the space and sustainability in Europe is still a key piece of all of this. We've created the space and guess what? We filled it up ahead of underwriting, and although cap rates have blown out from a rental perspective, those will all perform incredibly well. I think what I have been surprised about in London as an example, but I think we see it in some other markets as well, Paris is perhaps another good example, is how an acute lack of grade A space can begin to loosen some of those criteria that you thought was the new law, if you like, in sort of a hybrid working world. And probably the most startling way I've seen that come home is in the Docklands area in London, I'm not sure how many of you all know it, but Canary Wharf, I mean even as recently as 12 months ago, people were predicting the end of that as a decentralized office location. You saw a lot of the big occupiers coming out, moving back to the city core, to the west end, to the fringe of those markets, and we've been the beneficiary of that. But because there is no space, occupiers that need a space solution, and frankly a lot of occupiers themselves have been caught out by the return to office and how many people want to come back in, a lot of big corporates are looking around markets like London and saying, " Well, okay, well we need the quality, because that's the most important factor, we can't find it in the core. Where can we find it?" So now, guess what? Canary Wharf, which 24 months ago had probably approaching 25, 30% of vacancy, has had its strongest lease up year in a decade and is back down to vacancy that is supportive of above- trend rental value growth. Now I didn't think that would happen, but I think it's a great example of how this dynamic demand situation can change very quickly even in the market as big as London.

David: I'll turn to you, Alex, I mean any quick thoughts on dispersion but also maybe pivot the conversation to demographics. I think in Greg's opening comments, he talked about the aging population, I don't remember the exact numbers, but in some period of time there'll be more people 65 or older than younger than a certain age. Certainly, I mean personally I've had to deal with aging parents in the last four or five years, and the number of medical appointments and senior housing and that experience certainly, from the Barings perspective started to get to know Artemis a bit in your healthcare strategy, not to make this a product plug, but when you sort of experience that in your own life and you think about it as sort of a demographic trend shaping an investment opportunity, would love to get your thoughts on that.

Alex: Yeah, I'll make it a product plug. I mean, look, in your career, you look for opportunities coming out of the RTC, coming out of 9/ 11, the financial crisis, the COVID environment, you look for these opportunities where the demographic or the tailwinds of investing make even the dummies look smart. And healthcare happens to be that situation right now, because healthcare is needs- based, like David said, you don't choose to go into senior housing facility, you don't choose to go to the doctor, you need to go to the doctor. So it doesn't even care about interest rates, it doesn't care about the war in Ukraine, it doesn't care about anything. So we really like it. We recently, on our third fund, we raised a fair amount of money and why we like it is because healthcare is 18% of the US GDP. Greg hit the numbers right, from 2025 to 2035, the age group of 65 and greater is going to grow at 20% per annum. And that is real demographics. I've been talking about these demographics in full disclosure for the last 10 years, if you heard me or you heard my partner, Deb or Anark, but they're here and they're now. So that's super exciting. Then when you layer on that the COVID environment, COVID destroyed NOI in this sector, it stopped new supply and it created a memory of those who were investing in it and didn't do it correctly that they're not going back anytime soon. And so we treat it as an operating business. We really feel like we understand it. And this statistic, I think is the best statistic going. If you look at Green Street from'25 to'29, which I think is kind of the religious bible for real estate investors, senior housing is slated to grow NOI at 12.4% and data centers are 5. 5%. So 12.4, 5.5, and then every other sector is slated to grow at like 4%. And so this is why every consultant is recommending this space. And so what you have to do if you're in the room, you got to figure out, there are maybe five, six players in the space. I always say in our value fund space, we compete with a thousand people, but there's five or six players, you got to pick the right one. Do they understand it's an operating business, because the demographics are sort of here and now. And so we'll see in five, six years, I'll be back here hopefully, and will it have been the right segment, but the demographics are indisputable.

David: Great. And now Mike, maybe turning to portfolio construction. I know in terms of Asia- Pac, we acquired the Altis business in Australia. We're starting to expand organically under your leadership in Japan and other markets there. I mean when you think about, we've talked a lot about the office dynamics in Japan. When you think about other regions, other countries in the region, any specific things you think about in terms of longer term portfolio construction, areas you like, areas you don't like or have more caution on?

Michael: Sure. Well, we like, in the alt space, the Opco Propco game, especially at this point in the cycle is one that we like a lot. We've invested a lot of money in Australia in self- storage businesses. And I'll tell you why, the drivers, the property level economics and the Opco economics all appeal to us in a big way. The drivers are urbanization, smaller apartments, which are driven by these high construction costs that we're seeing around the world at the moment. And it's way, way behind America in terms of penetration per million population, especially in urban locations. So we think that the growth is there, and on a financial basis, you can capture kind of market to market rents almost on a monthly basis if you have a good performing location. And we really like that. We like the development yields which are yield and cost is about 7% in Australia. Your exit costs, your exit values are four and a half to 6% depending on location. So on a property level you're capturing market rental increases. There's a really great development yield to be had, development profit to be had. And so we think fundamentally it's a great business. But then you have attached to it this really exciting Opco, which if you are implementing the new technologies like we are, where we have unmanned locations, so they operate typically at a 70% or better operating margin as a location. So that means that the Opco, the enterprise value that you're driving in the Opco, it's 18 to 20 times EBITDA, the listed comparables. So we love the playing real estate play and we don't necessarily need to own that forever, but everyone that we develop and get in and out of, and recycle capital from, we're building enterprise value in a scale easy to understand transparent Opco, which will cushion our returns through market uncertainty. Those are the ingredients, I think that we want to point significant amounts of capital at over the next cycle.

David: Okay. Maybe Alex, go to you again. We've talked a bit about healthcare and what's driving that. I think you mentioned in sort of a broader context, industrial was something that you still have a ton of interest in. Maybe resi pulling back a little. I mean you think about the major food groups and even some of the more niche things, where do you think over the next 12, 24 months you see the most opportunity?

Alex: Yeah, so we could go in our value fund series from fund one to fund four, going to fund five. It's all about the increase in alternatives. So I think if I was an investor in the room, I would want to know, does the manager have a competitive advantage in that space? And we think we have a very good competitive advantage in manufactured housing and student housing and cold storage and self- storage. Barings has a excellent hotel group that gave a presentation. And so you got to have a competitive advantage, but alts are going to continue to increase. When I started it was just office and retail, and those sectors, those malls, so they're basically... The allocations just continue to go down. So if you're going to be an allocator, which is what we are, you've really got to challenge your internal team to become experts in the alternative space because that percentage is not 10% anymore, it's going to go to 20%, then 25%, and that's how you're going to outperform.

David: Maybe Nazir, pivot to you from a debt perspective, how are you thinking about sector- specific opportunities in portfolio construction?

Nazir: Sure, I'm going to do risk profile first and then I'll pick property type. So I actually think, over the last three years we've probably done 85% of our investing in the core plus risk profile. I actually do think going forward there's going to be more interesting opportunities in the value add space, simply because when you look at the cost to build versus the cost to buy, you're probably at one of the widest gaps that you've seen in a couple of decades. So I think that's really going to be an interesting opportunity for us to put money to work. And I think even equity dollars be put to work in terms of buying something instead of developing something. In terms of property types, I probably would've given another shameless plug to healthcare senior housing, but I'm going to pick office, which I actually picked last year too. But what I'm going to say about offices, despite all of this positive leasing momentum that we've had, you still have tremendous amounts of vacancy that need to be absorbed. And then everybody worries about AI displacing white collar workers that are going to take up office space. But I do think that, again, you are going to have that dispersion in performance and you can find the right opportunities that are going to have out- sized returns for the risk that you take.

David: And maybe Nick, any thoughts from you in the European landscape in terms of sectors sort of-

Nick: Yeah, look, I'm not going to be controversial. I'm going to say probably 70% of what we do will be in the bed and shed space, but it is a big space and we're playing across eight or well, eight to 11 jurisdictions at any given point in time. And in some of those jurisdictions there are niches within those big sort of sectoral definitions. So what could I pick out? Well, I would agree with Mike. Self- storage is really interesting. It's completely immature in the European context. I think the last data I saw put European space per head of population, about 3% of what you have here in the US, and even ours, which is somewhere in the middle, I think we're even the UK, which is the most developed, has about 10% of the provision that you guys have. So it is very immature, that brings risk, but I think there are some out- sized rewards there. We're looking at a couple of opportunities with established operators at the moment that bring good seed opportunity and to contrast with Australia, your returns were interesting, but from a development in your perspective, we're looking at nine to 11 with exits in the mid- five cap rates. The issue is the barrier to entry, is finding the right operator, of which there are very few with a track record. But then also their ability to access sites because there's so much competition for space and we're in a market that is heavily legislated. So bringing that space forward is incredibly difficult. So I'd say that's a focus for us. I guess office doesn't yet qualify as niche, does it? But that would definitely be a pick for me based on what I've said so far. And student housing, I mean that's another one that's mature in some markets like the UK, completely immature in others, and we're certainly looking to grow our weighting in the student space in markets like Italy, Milan, Rome, Spain, Madrid, Barcelona, those big dominant locations that have really high quality educational institutions that are now teaching degree courses in the English language, which I think is a real demand driver for international student flows. So where you have all of those facets, it's a really interesting opportunity.

Nazir: Okay, how did Nick get away with picking five different property types and everyone else had to only pick one?

Nick: Cover all the bases inaudible.

David: Well, if you're a stock picker, there's opportunity in every market, in every segment. So got just under five minutes left, maybe a toss up, something that we didn't really cover in the prep, but it's something I've been thinking about and working with different regions. I think housing affordability is such an important issue and you think about some of the macro things going on that are influencing that, tariffs just inaudible. I wonder when you think about development opportunities, maybe Nick, we should do some of that, and just when you're working with your operating partners, the cost to build, the outlook for that, how are people in the business thinking about that? I mean affordability is a huge issue, continues to be a huge issue. I think it's influenced some mayoral elections in the US certainly recently, I mean literally the number one thing. I've got a daughter about to graduate college in New York and she's sitting there looking at apartment prices, I mean, New York's maybe be a little bit of a specific example, but I think any city you go to if you're a young person trying to think about your first apartment, I looked in Charlotte, where I'm from, in the popular parts of town, what rent costs and what sort of average starting salaries are. But just curious, sort of toss up how people think about your interactions with developers and how they're thinking about that cost of construction and how that influences decisions to sort of go or not go forward on a project.

Nazir: Well I think we're seeing certainly the political landscape, you're right, but even in, I saw an article recently probably it was in the Wall Street Journal, about LA making the process of applying for an affordable housing permit to build it, shrinking that timeline. So it used to take a year for you to be able to get through all the permitting process. They're trying to cut that down to 60 days. So I think the political will will make it easier and you'll need the incentives because of the disconnect between the cost of existing inventory and the cost to build. You'll need that political and economic incentive to build it as well. And I think that'll come based on how people are voting polls today.

David: All right, any other thoughts on that before we-

Alex: It's a dangerous investment topic, and I'll give you a perfect example. There's a lot of people who invest in Texas multifamily, and Texas came out with this HFC structure where you could defer your property taxes in exchange for doing affordability. So that seemed pretty good. We actually signed up for it on one of our projects, and three, four months later, Fannie and Freddie said, " We're not willing to finance that," which means there's no liquidity. So this stuff is, I think it's very tricky. We want more affordability. Affordability is magic buzzword, but man, there's a lot of landmines out there.

David: Yeah. Okay, we've got just under two minutes left, so we'll close with the bold predictions, which is always exciting. We'll see how bold people are willing to get, I think, Kevin, at the catastrophic impact of AI. So we'll see what, if anyone wants to go bigger than that, but just go down the line, start with Nazir, work your way down again. What-

Nazir: Can I go last? Come on now.

Alex: He's going first all the time. That's where you get it inaudible.

David: We'll go to Mike then and work our way down.

Michael: Well, I would say that a lot or many of the data centers that have been announced in Asia will end up not being built because in the developed markets there's a moratorium on new development, either official or unofficial because of their concerns around the availability of power. And that's meant that most of these sites have migrated to emerging Southeast Asian nations who are very keen to be tech hubs quite rightly. But they don't have the infrastructure and they definitely don't have the power. I was talking to a government official from one Southeast Asian Singapore- adjacent country that said that the use of data centers of their electricity will rise from 5% this year to 40% in five years time, and they do not have 40% latency in their electricity production infrastructure. So something's got to give, and I think that will become clearer over the next couple of years.

David: Okay, Alex?

Alex: I mean, I'm a half full person, as you can probably tell, but 10% of the US population spends 50% of the consumer spending, and that's up from 35% like two decades ago. And so I just think the dispersion there is not good for real estate because real estate houses the economy. For us, 2026 is all about risk management because you can't have 10% spending 50% in real estate all over the joint. So I think 2026 could be a little bit more tricky than people think.

David: Nick?

Nick: Can I have two?

David: Yes. Two quick ones.

Nick: Didn't expect you to say that, I thought you'd say no. Okay, two. One market- related one. So I would say, I think it was Mike that said earlier, you're seeing core capital come back in Asia. We're seeing it come back in Europe probably a little bit sooner than we'd expected. What I would say is continuing the dispersion theme, I think there's going to be a real sort of set of winners and losers there. So I think we're going to see the next wave of consolidation in the fund industry starting now, look forward. That's my market one, if you like. Bit of light relief, sporting, you should know you're hosting the World Cup this year, next year, sorry, in the summer. And sport normally provides a degree of light relief, which I'm hopeful it will provide next year. And my prediction is actually soccer, I still struggle with that, but soccer is going to hit the mainstream in the US, finally. Why are you laughing?

David: Yeah. Well, isn't that the World Cup to make that a possibility.

Nick: Did you know the World Cup was here?

David: I did. And I think, don't we get in automatically as the host?

Nick: You do.

David: We'll be in the mix of... So let's hope we can show well. All right, Nazir, we'll close with you. No pressure.

Nazir: Forgoing sports, my bold prediction is the US wins the World Cup. All right. Probably as bold as the predictions comes, folks, but in all seriousness, I think I'll use New York as an example, but I think that the mayoral election there and in other cities, you're seeing, especially in the north, whether it's Pacific Northwest or Northeast, despite the left- leaning votes, I think the actual impact is going to be a lot less than people predict. So there's a lot of doom and gloom in New York because we have a socialist mayor. But I said this yesterday, if New York can survive in the time that I've been there, 9/ 11, the GFC, Sandy, a pandemic, you can survive a socialist mayor. It might have an impact for a year, maybe two, but it's not going to have a lasting impact.

David: All right, well, I'll take the other side of your prediction on the US winning the World Cup. So as much money as you want to put on that, I'm good. Yeah, thank the panelists for your time. Thank you for your attention and inaudible.