Blackstone Inc. (BX) Earnings Call Transcript & Summary

Now we can get started. I'm Craig Siegenthaler from Bank of America, and it's my pleasure to introduce a man that probably hasn't needed an introduction in 30 years, Steve Schwarzman. As pretty much all of you already know, Steve is the Co-Founder, Chairman and CEO of Blackstone and a legend within the financial services community. After running Lehman Brothers Investment Bank at age 36, Steve left and started Blackstone in 1985. Steve wasn't just instrumental in building Blackstone into the firm it is today, he was involved in every phase of the firm's growth and development from the very beginning. This includes the firm's first-mover evolution from a buyout and advisory shop into a global alternative asset manager with strong businesses across all asset classes and all distribution channels: Institutional, insurance and individual. Outside of Blackstone, Steve has dedicated much of his wealth and resources to giving back. In 2020, he signed the Giving Pledge, committing to give the majority of his wealth to philanthropic causes. Some of his largest recent donations have been with the educational vertical, including a $350 million gift to MIT and a GBP 150 million donation to the University of Oxford. He also founded the Schwarzman Scholars Program in 2013 at Tsinghua University in Beijing, which is modeled to be the Chinese version of the Rhodes Scholars program. Steve, on behalf of all of us at Bank of America and Merrill, thank you so much for joining us.

Thanks. Thanks, Greg, and thanks for having a great conference. I read all the stuff, a lot of people here.

Okay. So just I'll provide a real quick intro on Blackstone. AUM is about $1 trillion. It's the largest alts manager in the world. It also has the largest individual investor business, which had started much earlier and dedicated significantly more resources than its peers. Last year, Blackstone generated about $7 billion of free cash flow, and the firm has grown at AUM by about 14x since its 2007 IPO. Despite this growth and track record, the stock is still offering a 5% dividend yield today versus about 2% for the average S&P 500 name. And the firm is highly diverse with leading and scaled businesses across real estate, private equity, credit and hedge funds.

Let's start with the macroeconomic backdrop. Some thought we were never going to see high inflation and interest rates again, but here we are. Steve, how do you think interest rates and the economy will trend over the next year?

Well, I think it's tough to kill inflation when you have a full employment economy. And you saw that in the last day or 2 with the announcement of what the inflation numbers on CPI were, it's around 6%. So you can't get to 2% from 6% just by having a stock market rally. It doesn't work like that. And so you're going to need higher interest rates. Usually, it takes at least 6 to 9 months to have higher interest rates play through an economy to really get the results that somebody is looking for. It's not an instantaneous type of thing. So I'm not a liquid securities person. I don't know exactly what's going to happen. But the bias will be to move interest rates up to a point where the Fed thinks kind of really going to be able to slow things down. And I guess the market is looking for 225 basis points increase. I would think that would be a minimum. The economy is slowing. In the first quarter earnings announcements, I think were viewed as being somewhat disappointing. That should be no surprise. When you have interest rates up, you should grow slower. And if inflation stays up, your business will have a margin squeeze, which is what's happening. So I look for, I guess, an interactive thing. You have to keep seeing how much inflation is going down. It's clear it's down. It was 9%, now it's 6%. But it's relatively easy to take something down to 4%. With interest rates getting from 4% to 2%, that's pretty painful. And I watched the 1980s, maybe when Volcker basically really had to crush the U.S. economy to get inflation down. There was a lot more inflation than there is now, so we're on a good path. But this doesn't get an instantaneous resolution.

So Steve, given this view of higher rates and uncertainty, how does this impact your industry? And how does it impact Blackstone specifically?

Well, it depends what part of our business you look at. So this is like a golden moment for credit. And we have one a product called BCRED, which is 100% floating rate senior secured loans. And in today's value, the investor's getting a 10% return. So if you look at 10% in terms of risk, it's really quite modest. I mean, if you think you're buying senior secured debt and that's a high-risk indenture, then you're not thinking right. So it's close to riskless, actually, and based on the historical look backs. And you get 10%. But we're actually earning 12%, and we're keeping 2% back to basically make sure we have adequate loan loss reserves and things like that. But if we were to just let this go, it's like a 12%. So imagine, on a longer-term basis, doing that with senior secured debt. So this kind of cycle will really accelerate, I think, investors' interest in floating rate credit. And that's how we've positioned our firm. We're the leader in the world, actually, at making those types of loans in the alternative area. In real estate, it's going to have a very interesting effect. There are lots of different types of real estate, and they're not correlated in terms of how they behave. So it's going to make office even more difficult. It's not going to particularly help malls because consumers over time will spend less, and the mall business isn't so good. It won't particularly help business travel. So if you own hotels, that's not as good. But if you own resort hotels, they're booming. Everybody wants to like live their life after the pandemic. So that doesn't get in the way of that. Warehouse business is, frankly, fantastic. It's going up. Rents are still probably going up 12%. When we -- it's got 3% vacancy. And specifically to the question you asked, how does this affect you? What happens is those higher rates discourage new construction. So what occurs is already that construction of new warehouses is down 40%. So that's setting the base for a new cycle where the existing stuff, where we're the biggest private owner in the world, that's going to get another boost for rental increases over time. And the same thing is starting to happen in rental housing, with still growing around 5% to 8%, depending on what type you have. But the cancellations of new projects is very high. And so when you have inflation plus higher interest rates, people don't want to build new things. If you own old things, that's a good thing for you, right? As long as you're financed correctly, financed with longer-term debt because it's a long-term asset, you'll do very well with that. So I think I can keep going on asset class by asset class because we do. Like not everything, but most things, and tell you how it will affect. Other things will lead to lower prices over time for private equity deals. And so that's a somewhat cyclical business. You try and sell your stuff when the prices go up and you try and buy a lot of stuff when the prices are down. It's not a big brain business, right, finance. And so that's going to put pressure on pricing. Usually, it takes 1 year, 1.5 years before that happens. People tend not to like to sell assets at prices a lot lower than it used to be because they keep remembering the old price. In 1.5 years, they forget the old price and don't take a premium and think that was a good thing. That cycle has only happened every time I've been in, and I've been doing this for over 40 years. And so that will swing around. So we look at these things and there's a time to be a buyer, a time to be a seller. And our business as a whole, imagine this. With today's interest rates, our private equity companies last quarter grew their revenues 14%. They grew EBITDA 16%. So I know this is against what's supposed to be happening. I mean, I read media also. So what's happening to us couldn't be happening. It happened. So it's always interesting when you go into a cycle, but there are always ways to make money.

Steve, I have a background question for you. So at 36, you're a Senior Executive at Lehman Brothers at the time Lehman's one of the best investment banks, trading platforms on Wall Street. You decided to leave and you start a business that really hasn't been invented yet. What caused you to do that and take that risk?

Actually, it was an ethical decision. There was -- the reason Lehman got sold in 1984, I was the person that actually sold it to American Express. It was because some of the people at the business took a restricted subsidiary that had a specific guidance as to -- you can only own 30-, 60-, 90-day commercial paper. They took it out to 5 years, which was against the charter, and they got caught and inverted the yield curve and basically it crushed the equity of the firm. So the firm had to either have a major capital injection or sell itself before people found out that the firm had no net worth. Because borrowing repo, once people understand you have no net worth, for a moment just almost instantly collapsed. So during that drama, there was, in my view at least, the need to change the senior management. And the other partners of the firm were scared to do that, and they just watched it all happen. And that wouldn't have been my way of handling that issue, and I decided I didn't want to be with those people anymore. And so that's why I left. It's sort of an odd thing. I mean, the company was like 150 years old, and this should have been able to be solved some other way. You could have brought in capital and dealt with it. But so I left because I didn't want to be with the people. And we started our business with the former -- went into to business with the former Chairman and CEO of Lehman who I had worked with. We were sort of like a buddy movie. He knew everybody in the world and I was the young guy who did the deals. And we sort of almost didn't need to talk. Because he didn't like doing deals, he never did deals. And I didn't know all those people because I was in my early 30s. So where would I meet all these people? So that was like the partnership. And we took that on the road basically, started a new business. I wanted to name it Schwarzman Peterson or Peterson Schwarzman. He didn't want his name on something because he started another business that fizzled with his name and somebody else's on it, so he wanted an impersonal name so certainly when a third person joined, we didn't have to make it like a law firm, right? You just keep adding these names. And so what we did is we took the German of my last name, Schwarzman. in German is black. And his is Greek. And his father, before they changed the name to Peterson, it was at Petropolis. So Petros means rock or stone. And so we just took that. So I had the delusion that my name was on the door, but the only people who knew it was the 2 of us. And we started out with a business plan that said we're going to do M&A advisory work because I ran the M&A department at Lehman so I know how to do that. It's a great business because you don't need any capital. So we talk to people and they give you millions of dollars. Yes. I talk to people today, I'm not going to get anything it, right? And I'm used to talking to people and getting nothing. But in that business, they give you millions of dollars. It's good talking. And so we went into that business. And at the same time, our strategic plan secondly was to go into private equity, which is really just starting as an industry. I used to advise the relatively few people who were in that business. So I was at the same table. I saw what was going on. They were basically my age, 3, 4 years older. Why couldn't we do this? I mean, it wasn't splitting the atom, right? So I wanted to do that. And the third thing we wanted to do was start other businesses that we, at that point, called affiliates, which would be owned 50-50, to go into areas that we thought were going to boom in finance. And we didn't know which they would be, but we knew that finance is cyclical. Things fall out of fashion. Nobody wants to own them. That's when you go into them. And the criteria we needed was catching that wave coming up, and going into business with somebody who was a 10 on a scale of 10, who really knew that business. And together, we would grow it as long as we controlled it. Because I want to control to stop people from doing things, in a bad time, that might not be good for customers because sometimes people in finance don't always do the right thing. We know what the right thing is. Sometimes, it's painful to do it, but you have to always do the right thing. So that was our strategic plan. And we had no assets. We had never done an investment, and now we're almost at $1 trillion. We raised $226 billion last year. I used to be begging for 5s and 10s. I still remember that. And now somebody will give us a few hundred billion -- million dollars for a commitment is not abnormal for us. We had commitments as big as $20 billion. So I've watched this industry grow from when we started. It was 3% alternatives in the institutional world, it's 25% now. And if you look at retail, which we're highly interested in and involved with, it started 12 years ago, I mean, that's an $80 trillion bunch of money, and there's almost no alternatives that are owned by this group. And our performance is so good. That's why institutions went from almost nothing into a quarter. And why should individuals not have the same opportunities as institutions? I mean, a real estate business has over 30 years, something like that, has averaged 700 basis points better than the stock market. Why should people at retail not have the opportunity to have that kind of investment? And we lose almost nothing, so -- over that period of time. So we've taken this little idea of the business, and not through acquisitions. We're not a roll-up like someone managed it who'd gotten big. This is all internal growth. It's going back to people and saying, "Here's our performance, here's our style of doing business and here are our values. And sort of come on this journey with us. We're having a good time. You should join us and have a good time, too. Why not?" And they do. And so we've become, by far, the biggest in the world. We were like 3x the market cap. The next 3 people you get, next 3 competitors, we're bigger than those 3 together. And the way you do this is by continuing innovative, coming up with new products that don't have downsides, that just have upsides. That's our philosophy: Don't lose people's money. They don't like you when you lose their money. Forget you've outperformed somebody else who's lost even more. That relative approach, I've always felt, is ridiculous. People just don't like losing money. I don't like losing money. I started with no money. Why would I want to lose what I have? Nobody does. So that's sort of our baseline when we go to invest things. And then we got to have a really good upside. And then we go forward. It's tough to get us to go forward because there aren't that many things around like that, but we always find them. And in finance, you can scale up. But we now have 60 different strategies. We started with 1 private equity fund. And now we do 60 different things. And at the end of the third quarter, and also in the fourth quarter the last year, when markets were down, finished the year down 18%, the S&P; I think NASDAQ was down like [ 20.75% ], something like that. We were flat. Can you imagine, like not losing people's money? I know at Merrill, that never happened, that any client ever lost money. But in fact, almost every client lost money last year unless you were doing sort of business with us. So our philosophy, it's like a good thing. And we have a whole trained group of people who believe what I just said. In other words, I'm not out here as an evangelist, this is actually what we believe. Believing in what we do and how we're set up with our investment committees. And we keep coming up with new things that we find, and people get used to buying things from us because they work. And so as long as we keep being an innovation sort of machine, if you will, we just don't let that stuff happen. To introduce a new product at the firm, you basically have to come before the senior people at the firm and prove that this is a good thing. It doesn't -- we don't have like good luck down there kind of management, right? That's not what we do. Everything rolls up. And we work cooperatively, but we always bring -- on critical things, we bring the entire senior management of the firm. Because every time we do something, we're betting our reputation. And what you can't lose is your reputation, and you sort of zealously guard that. So it's been a really interesting adventure over the last 37 years, and we're actually accelerating now. We're not like well going out. So it's actually fun. If you have a chance to work at Blackstone, you should do that. It's really -- we have a good time and people laugh a lot. We get Best Place To Work awards because people are very positive, and we also only hire nice people. I learned at Lehman Brothers. My first day at work, I had my new suit. I think it's the days when you had a brief case because it works paper, right? So you put stuff in it. Proudly walked into the office. Our building elevator opens and somebody gets out who was working. I found later he was a partner. He looked at me and said, "First day, isn't it?" I said, "Yes, this is my first day." And he said, "You're really going to love it here at Lehman Brothers." I said, "Why is that?" Knowing I was going to love it, I decided to work there. He said, "Because if you work at Lehman Brothers, nobody will ever stab you in the back. We'll just walk right up to you and stab you in the front." That was my first interaction, my first day at work in finance. So they actually made good on that promise. It was a tough place. So when I started Blackstone, I said, "One thing we're not going to do is a lot of these bad behaviors." And so we only hire nice people. And when people come to work, we recruit them from other people. I like to talk to people who make that change after a few months, right? "So what's the biggest difference?" They say, "Everybody here is so nice and they want me to be successful." I said, "Of course they do." They said, "But that's so different." I said, "Different from what?" He said, "Different from where I came from." I said, "Well, it shouldn't be because people are precious. And if you've gone to the effort to hire them, of course, you want them to be successful. You want them to be happy. You want them to be productive. Why wouldn't we want that?" They said, "Well, I'm just telling you, it's different from where I came from." So anyhow, we have a good sort of philosophy, and we have amazing people at the firm, which is really what creates the success.

I always debate if it's better to be stabbed in the front or the back. The front might be better.

Well, it's bad both ways.

So let's just hit on innovation. One thing Blackstone has always done very well is product innovation. You've moved into areas faster than peers, new and innovative products that didn't exist before. I mean, this is very important for your long-term growth trajectory. So maybe you could talk about your approach to innovation and also business building.

Well, one of the things I observed very early in my career is that there are no patents in finance. So anything you invent as a new product, if it's really good, your competitors will come in and imitate, and as the capital just keeps pouring in, crush the margins. So most products have limited lives when they can really perform well. I was involved in one of the first interest rate swaps. We've got a 1% fee for doing that. I thought I died and gone to heaven. We could make a fortune just given all this stuff. Now they're doing interest rate swaps for 1 basis point or something. So it's turned into a nothingburger business. And that's like the prime example of why innovation and creation of new products isn't a theory. It's not an option. So we know from the first day we opened that we had to keep coming up with new things to take advantage of new market conditions and also to protect the business from the possibility that other people would be doing the same thing, and their capital could make a difference in a negative way as they came in and squeezed. So we just have always done this. Now each of our big verticals, whether it's real estate or private equity or credit or hedge fund business and some of our other ones, every year, we -- I used to do this stuff myself when we were small. Then I realized, "Oh my goodness, I'm not that clever, and there's so much to do." So what we do with each of our business lines is we have a strategic planning thing once a year. And they have to come with up to 3 new ideas for things that they could be doing. And in each one, like what's the return for the investor? How big can we make it? How expensive is it for us to build it in terms of hiring people and the space and all that kind of stuff? And how fast can we get to breakeven? The idea that it takes years, I've seen a lot of these white space things that people talk about. Really? If you can't be profitable in a year in finance with a new product, you should give it up because the world keeps changing so much that, whatever you started, by the time they hired the people, it may not be that good anymore. So you've got to hit it right away. So whenever I see these reports that somebody says, "It's going to take me 5 years to break even, and I'm going to" -- that's usually an unsuccessful approach with people who don't understand how to grow a business. So we look at how fast can we get to profitability. And then we look at our own business line and say, "Do we have the people to do this without hurting the original business?" So even if it looks like there are 3 good ones, that may be too much to launch. So we'll knock out the least good, maybe the second, and only do one. We'll keep that other ideas and see if it still works. So you have to control your own business, make sure you don't do any harm to what you're already doing. But this is like a way of life that in the place. And from really just when we started 37 years ago, then everybody else in my industry pretty much did the one thing that worked for them -- and they decided after we went public in 2007. And so we were doing this, and people said, "I want to be one of those." Because we had a $30 billion market cap and they had none. So they started to try and replicate that. It's very hard to replicate that, as people are finding.

Steve, I wanted to talk about your private wealth business. You started at maybe 11 or 12 years go, much earlier than your competition. And this is a business that addresses many different channels, IBD, RIA, but also the wirehouses at Merrill. So what really caused you to start this business early in the years and put a lot of resources behind in, building a big distribution platform?

Yes, it was actually somebody else's idea at the firm. And we'd been selling private equity funds through retail distribution systems, but this is a very episodic business. And someone came to see me and said, "We should really do this on a structural basis and build it out." And it was the first time in my career I ever knowingly lost money, because I said, "How much does this cost?" I think at the time, it was somewhere between $10 million and $12 million a year when we were like a small business. And with the objective of just being better at what we were doing episodically and sort of looked at the retail channel. And I really sort of hesitated doing it because I don't like losing money. And at the end of the day, I said, "Okay, well, let's make that investment." Build it out underneath one criteria, is that we have to have the same quality people in that part of the business, which is basically a service center, if you will, through the retail channel, same quality people as we do for the rest of the business. I said, "I don't want to run sort of different types of citizens at one firm." I mean, you've got to be really terrific people doing that work. And so we just started doing it, and we spent the money. And 6 years ago, interestingly, John Gray, who is in Asia today, he's a president in the firm, absolutely amazing, terrific, person. He came up with this idea of doing what's now called BREIt, which is bringing retail, into the high net worth channel, our institutional-quality real estate. And that became a very successful business with returns 3x higher than investing in public REITs. And so that's been a big success. Customers have done very well, sort of averaged somewhere between 12% and 12.5% returns over that 6-year period. So 4.5% roughly current income and 3%-ish shield from depreciation, so you're getting in the 7s and sort of averaged 12-plus. So this has been very good, and that scaled very well. And it's enabled us to do a second big product called BCRED, Blackstone Credit, and that one was the one I mentioned. That's yielding more than 10%. And if the Fed keeps going up, we'll keep going up. And that's done really well. And so we'll have a whole family of products ahead of everybody else. You just watch, "Oh, Blackstone did this again. Maybe I should do something." But you can't just do something. This takes years to build it sort of first-class capability. And so we always have new things, and this cycle may be a little difficult over the next few months because when interest rates going up, the stock market goes down, high net worth people wanting more liquidity. But that's a short-term thing. And we're already seeing that redemptions are down substantially in BREIT this month compared to last month so far. And I think the future of introducing products there is great. We're doing a lot of stuff in the insurance area, got like $150 billion, $160 billion now, but it's meant to be increased to $250 billion just by contract, if you will. And we've got some other things we're working on that will make us much larger over time. So to do this, you have to keep coming up with new products and new reasons to be relevant, but we're global and people like giving us money. I mean, $226 billion a year is unimaginable, except we did it. And we were in the 200s the year before. And we look like we found a zone that's really, really different than anybody else in the world. I find it a lot of fun because I actually don't have to do any of it anymore, right? Because the firm's got so many amazing people, that I used to be like a door-to-door salesman like many of you. And now I don't have to do that because other people sell the products. So if that's a sign of something, I'm not sure what. I guess they call it your business has been institutionalized, but that's a good thing. And institutions, 3 out of 4 are still staying the same or increasing. Their new money's going into alternatives. High net worth, there's a huge opportunity. With insurance, it's got $30 trillion of AUM. And we increase, we manage money for an insurance company and end up making so far like 140 basis points more than they were doing. So if we can do that and they can sell, the way that business works, if they're earning more, they could either price their products more aggressively because they can offer more to the person buying their products. With insurance companies, profits will go up as a result of that. And so we've become somewhat popular. No surprise. And so they have -- there's so many trillions of dollars there that we could handle over time. That's turning into a lot of fun also. So we have a terrific group of people with the firm doing that. So we're quite positive on our business. And we're lucky we found this niche that many years ago. And we don't wander enormously into other types of areas because it's harder to be successful in liquid securities. It's a really -- I did that with my first job. I couldn't figure out how could I win with all these other smart people with limited information you're allowed to have. And it's almost like they want everybody to have the same information. I always like an information advantage, that you can do that with private securities.

So Steve, you have so many businesses that are growing right now. When you talk to John, Michael Chang, some of the senior leaders at the firm, what 1 or 2 businesses are you the most excited about from a growth standpoint in the next 5-plus years?

I mentioned credit, so I won't do that, beat that drum again. But infrastructure is doing really well for us. Our infrastructure business last year was up 19%. So people should put their hands up. Who else was up 19%? Any hands? No hands. That's why I like this, right? And that's why customers like it. And so we see significant growth over time with that business because that business is basically U.S. business now, and that can be growing in Europe, where we've done 2 very large deals; and in Asia. So that's a real growth engine. We have -- between that and credit, as of today, those are sort of 2 areas that sort of look like they're doing particularly well.

Steve, we can get a question out there, maybe from the financial advisers, whether they should buy the Blackstone stock or own Blackstone funds. How do you respond to that?

Well, I respond they're both good, right? And people obviously buy these funds. We were at almost at $1 trillion of that. Our stock over the last 10 years has compounded at 25%. So if you can do better than that, you really should. But 25% is not so bad. It's like double the S&P over that time. We've grown our earnings around the same kind of -- it's at 19% over that time period. And our multiple goes up and down like all stocks. So sometimes, it gets really frisky and you make a lot. And then sometimes, the multiple goes down, it's not as amusing. But the business itself has performed very well. We're the largest company in the country that isn't in the S&P. We're 74th or something like that on market cap, and we started with nothing, right? And we're going to some where for sure. And so I think that the stock over time, we pay a very high dividend. I think you thought you said it was like 5%? It's either 5% or 4.8% or something like that. So that's pretty high. That's like 3x higher than the average S&P stock. So you get like a high current income. You get this growing company which is much more robust than -- it's one of the fastest-growing stocks in the S&P, if you like comparing it with that. So I think the stock is an interesting investment. It's been -- always has been. Funds are great, too. So it depends how much money you have, right? Where you can put it. I do both. I own a lot of stock and I invest in all of our funds. So the firm is my family office.

So Steve, you own 20% of the stock today.

Yes.

But the firm is $1 trillion roughly. It's a big firm, might be tougher to put up high growth rates going forward. Maybe you can push back on that. But how do you feel about the firm today versus 5, 10, 20 years ago, with the product breadth you have, with the distribution scale you have?

Yes, the firm is pretty amazing. Because what happens in our business, we're really in the intellectual capital production and management business, right? We're trying to see what's happening in the world before other people do and act on it, identifying trends, that's how you really make money. You don't make money just sitting at your desk running numbers. You have to know where the world is going before it goes there. And with the scale that we're operating at now, it's so much fun because on Mondays, there are probably 5 of us, 6 of us, 7 of us who sit in a room. And each of our business groups come in and we talk about everything they're doing, every deal they're working on. And they'll tell us of something around the world wherein that industry is changing. Imagine having real-time feeds on the world and almost every type of company or real estate asset, or even our hedge fund area, what's going on, on the credit. So we can see changes in 1 country or 1 vertical, I'd call it. And as soon as we see that, we can figure out whether that's going to spread all over the world or what's going to happen as a result of that one piece of information. And that gives us -- like in real estate, for example, we're literally everywhere. We can -- if we know what is happening in a certain asset class, if warehouses are getting good in one place, that trend most likely will occur in others. So we could start buying when other people don't even know they should be buying. And so scale works for us. But to have it work, it has to be harvested directly, which means you need it all feeding into a central location. We do it every week. And they have to be completely open so that everybody is telling everybody else what's occurring. So this idea that scale doesn't work, I've only been asked that question since 1992. And people say, "Well, you can't be right. We know. You just have to be small to win." And I say, "No, you have to know more stuff. You could be small and win if you have amazing domain expertise. You don't have much money to invest, you do 2 deals, and they work. On the other hand, you can create this remarkable generator of intellectual capital and take that." So we started seeing that in the United States, it was like 2012, that home shopping was starting and people didn't quite know what it was, and you could just see this thing. So we needed home shopping, there's only a matter of time before it's spread all over the world. They'll spread at different rates, but they will all get that because it's got some advantages. So we sold out our malls and we basically concentrated in the warehouses that are used in that distribution system. And we did it all over the world. We're the largest owner -- private owner in the world. And the asset class just like exploded. While other people were buying office buildings which are basically collapsed. We were 50% office. We sold all of our office because we could see something that's going wrong with that. And that's the way we built an enduring company with great performance. And the advantage isn't like one person being a genius. I don't know that we have geniuses. We have a system that manufactures data, that's what they call it now. At the beginning, I wasn't the smart kid in class, so I always needed to see stuff, right? Once I saw it, I knew what it meant. But if I couldn't see it, I couldn't invent it. Some people could just sit in a room and sort of speculate at what's going on. I can't do that. I need news feeds. So now we've created this remarkable system, and that's why we're going to keep going and we're going to keep creating new things. And we're all on the same team doing it, just fine. I mean, I've been doing this a long time. It's actually more fun now because it's easier.

Right. Well, we will stop there, we are out of time. But Steve, on behalf of Bovis at Bank of America and Merrill Lynch, thank you very much.

Thanks, Craig.