Blue Owl Capital Inc. (OWL) Earnings Call Transcript & Summary

This is Craig Siegenthaler from Bank of America, and it's my pleasure to introduce Doug Ostrover. So Doug is Co-Founder and CEO of Blue Owl, and prior to founding Owl Rock in 2016, Doug also cofounded GSO in 2005, which he eventually sold to Blackstone. Before GSO, Doug ran Credit Suisse's leveraging and finance group and held senior roles in DLJ before CS acquired it. In my view, Doug probably has one of the strongest backgrounds in credit across multiple platforms, and this gives us confidence in their credit portfolio. Doug, thank you for joining us today.

Thanks for having me. It's an interesting day, right? I thought we were going to have an up day and stocks are getting killed. And I think it actually is a good segue at some point into -- I saw [ Mike Arougheti ] here, they're in private credit, but just a little discussion about where rates are going because it's certainly cause for concern, the numbers that are coming up.

Great. So just a quick little intro here. Blue Owl is an alternative asset management with a $140 billion of AUM and focuses on private credit general partner solutions and real estate. It also is one of the largest individual investor efforts in the industry.

So Doug, let's just start with growth. How do you contrast your growth opportunities between the individual investor business and the institutional business?

Well, let me -- first of all, thanks for having me, and thanks, everybody, for coming out. We'll hopefully try to make this interesting and fun. So just as I think about growth, let me just talk about growth more broadly for a moment. We just came out with our numbers. We have pretty good numbers, 40% growth in revenues, FRE, [indiscernible] and I think it's important as we think about growth and we get into institutional and the high net worth channel to remember -- our asset base is different than our peers. 94% of our revenue last year came from permanent capital. So unlike our peers where funds fade away over time, and then they have to replace it, hopefully, with a bigger fund, our capital stays in perpetuity. I see Alan in the audience, and he's phrased it as a layer cake. We have a layer, we had another layer, another layer, but the assets don't leave. So we had great growth. It's highly predictable, really stable. For 2023, taking our numbers, our growth rate down a little from mid-40s to mid-30s -- still, I think, pretty impressive for an alternative manager. Certainly, and I think I heard Mike mention this and [ hit ] when he was just speaking -- we've got a large amount of capital, 10% to 12% of growth next year, which just comes from deploying the capital we've already raised. That will lead into your question, the high net worth space gets a lot of press and I'm sure we'll talk in greater detail about it, but let me start with the institutional side. Because if you were to take our business and you're going to look at our credit LPs, our real estate LPs, our GP solution LPs -- it is a world-class blue-chip roster of clients. But unlike many of our peers -- and I can't remember who it was, I listened to one of the earnings call, they talked about their top 50 or 100 LPs being in 2 and oftentimes 3 of their products. We have just 4% overlap. So as I think about our business and these businesses coming together, 96% of these very large LPs are in just one product. So the cross-sell opportunity for us is very significant. We're building out the teams. We're building out Asia, the Middle East, Europe, I think we're pretty well built out in the United States, and I think over the next few years, we're going to have a lot of success there. On the high net worth space, we decided early on when we launched that this was the wave of the future. So we built our business from day 1 to be a major player in that market. This is not like-- we saw Blackstone and they were successful, let's go build it -- we were ahead of Blackstone. Now, we haven't raised quite as much money, but as a percentage of our assets, it's a big percentage and growing. So look, I am really excited still about the wealth channel. I don't think anything's changed. We never thought it was going to be a straight line up to the right. Of course, when markets are choppy and volatile, both on the institutional side and on the high net worth side, people pull back their allocations. Now, I don't know exactly where it's going to go, but I do feel like I have my finger on the pulse of this market because the one thing I like to do is get out and meet with great advisers, some who are in the room today, and have lunches, dinner -- in fact, last I hosted a dinner for 50 advisers at a competing firm. But I like to get a sense of where they see their clients allocating capital. I can tell you, everyone I talked to believes today, their clients have a very small allocation and it's going to grow a lot. If you apply that to the broader market, that wealth channel, it's tens of trillions of dollars that will migrate from wealth into the alternative space. So I look at that, I think we're well positioned, we continue to add resources. I can tell you one positive thing about the pullback in the market over the last year. It's given us a chance to come in and talk to the leaders of all the distributors and try to get a sense -- what's working, what's not, what can we be doing better. I feel really confident over the next 12 to 18 months, you'll see 2 things happen. One, you will see us bring more products. But what we're focused on now is differentiated products. We want to have products in the channel where we have very little competition or where we have no competition. The second thing I think you'll see this year is that for our existing products, you'll see our syndicates grow quite a bit. So I'm still very excited about it. Can't tell you exactly what that line up to the right looks like, it will be up and down. But net-net, it's going to move sharply up to the right.

Doug, what product are you most excited about in terms of growth right now?

You mean of our suite of products? That's an unfair question. You know what it reminds me of? It reminds me of when my kids were little, and I would sit around the dinner table, they would always say, "Dad, who do you love the most?" and I would have -- of course I would always say "I love you all the same." So let me -- just so I don't create any enemies in the firm, but I will tell you which one I like most in the set. We have 3 distinct strategies. We are the market leader in GP solutions. We just finished a fundraise there, $13 billion. We are the category killer in that space. For those of you who don't know that market, that is where we go and we take a minority stake in the largest alternative managers in the world. The team has done an excellent job. If you need $500 million, $800 million, $1 billion plus, you can come to us or you can go to a sovereign wealth fund. We've won over 90% of the deals that approach $1 billion. So we are the market leader. Most importantly, we made a bet that the big firms were going to continue to get a disproportionate amount of the assets, and that is what's happened. So the returns, depending on the vintage are 20% to 40%. But the current income -- because, think about it, you're sitting at the table with people like the founders of Vista and Silver Lake and Starwood and you're sharing in the fee and carry. The current income there has been well over 20%, and that goes on in perpetuity. Unique product, not in the market with it today, but something I'm excited and very proud of. The credit business, which is our biggest business, has done remarkably well. $70-odd billion of loans under 5 basis points of loss per annum. I'm sure -- maybe we'll get a question or we can talk about credit quality, but the portfolio is doing really well. Why am I so excited about that business today? I didn't listen to what [ Mike Arougheti ] said, but I'm sure he echoed these sentiments. I've been doing this 30 years. This is the single best environment to be a lender I have ever seen. The reason for that is there is a mismatch between the demand of capital from private equity firms and the supply of capital. So everyone is capital constrained. As I mentioned, it's been hard to raise money in the high net worth channel, institutional channel, and for us as a lender, what normally would happen -- we have a, let's call it, $75 billion, $80 billion loan. But when there was a lot of M&A and rates were coming down, we did have a quarter of our loan book get refinanced every year. So we would have $20 billion plus the money we raised, but we'd have to go redeploy it. Now, rates are up, there's virtually no M&A. So there is no churn in the portfolio. So we're only deploying new capital. Then, the other thing that's happened is -- everybody in this room knows well, is the banks have pulled back. If you went back 30 years when I was running Credit Suisse's leveraged finance business, the world hasn't changed that much, believe it or not, 25, 30 years. As a bank, I had $5 billion of capital, I'd make loans, but my goal was to turn around, make a loan and lay it off to fidelity [indiscernible] as quickly as possible. If I made 2 points on my $5 billion, that was $100 million -- not bad. I'd want to do it 10x, 20x, make $1 billion or $2 billion. The problem is when you have this much volatility in the markets like we're experiencing even just today, how do you price that risk? How do you make a commitment for 30 days or 6 months? So it makes sense that the banks are out of it. They will come back, but I don't think it's going to happen for a while. The best example I can give you of how difficult the environment is, is just look at the Twitter deal. That turned out to be a very long-dated commitment. He bid, the banks committed. Then he said, "I don't want to do it," and then he was forced to come back. By the time that happened, it was like 90, 120 days. $13 billion of risk. I don't know where everyone's marking it, but I'm hearing around $0.50. That was a $6.5 billion loss for the banks. So when you ask yourself how quickly are they going to come back, they're not going to come back very quickly. So great opportunity, and I should add -- a year ago, 18 months ago on the loan side, we make a good loan, say pretty good covenants but we'd be earning a 6.5%. Today, that same loan has lower loan to value. So it's higher up in the cap stack, better covenants and we're earning a 12%. That's before we use any leverage. So today, with some leverage, we can get a mid-teens return. I would tell you -- as I know this is being broadcast, but I'll say it anyways. Just as an aside, when we're sitting there and we're going through deals often, we say, who's getting the better side of the trade? Where would you rather be, in the PE or in the credit? When we were only making 6.5%, that was kind of a low rate. It was a good risk return because rates were at 0. We just thought PE was probably -- have the better side of the trade. But today, if I'm making a mid-teens and my loan to value is about 1/3 or 40%, I have 60%, 70% equity underneath. Clearly, the better side of the trade is being a creditor. So I'm very excited about that. But if you're going to force me -- and you know the answer to this -- so I see the smirk, because you know the answer...

You'll save me a question later [indiscernible].

All right. But my favorite place in the market right now is net lease trust, triple net lease. For those who don't follow it, and I'll save it for a later question -- is where we go, we buy a mission-critical asset from usually an investment grade counterparty. Not only do we buy the real estate, but that investment grade counterparty is leasing it back from us for 20 years. We can talk in more detail on that, but we're able to earn a very high current return on it, twice what you're seeing in the broader market today because this is a very specialized niche and we've been able to generate meaningful capital gains. So that's what I'm most excited about.

So we'll get back to trusts in a little bit. So last year was an interesting year. Fair market and public equities, higher inflation, didn't really derail your fundraising effort. So why was that?

Well, I think, one, we talked about -- we're in private wealth, institutional channel but I think we had the right products for this type of market. If you look across all those products I described, the characteristics are high current income, for the most part, inflation protected. We'll talk about that with Oak Trust, but in the credit market, we're all floating rate. Let me just -- I'm glad you brought that up because I want to mention this. If you look right now in the markets, institutions are increasing their allocations to private credit. So yes, last year, we raised $25 billion. We were happy with that number. If the markets had been a little less choppy, a little less volatile, I think we could have raised materially more. We're out -- that we're going to raise $25 billion this year. We feel pretty good about that. I think we'll have a lot of success in private credit. The thing to keep in mind with private credit -- what I described, better covenants, lower loan to value, and 12%, 15% returns is that it's floating rate. If you were to ask me right now, what is the biggest risk in the market, it's the Fed. If you looked at sentiment before today, everybody's view was maybe a couple more rate increases, stop, and then it starts to come back down. Now, I've been out talking to a lot of CIOs. Not saying this is going to happen, but as we look at our companies, and we're out talking, we still see inflation as a real threat. The point I make to everyone is, what if we're back in this room next year and we're still talking about we about inflation? What if the Fed is forced to raise rates for longer? What do you think that will do to the public equity market? It will be bad because no one is factoring that in right now. But if you're in private credit and rates stripped higher, our returns go up. So a great example is last year, the high-yield market was down 10%. The loan market was down, depending on the fund, 1% or 2%. We were up almost 10% in our credit fund. Public REITs were down 20%. Our REIT product, our triple net lease product, was up 20%. Not on marks, primarily realized, in that environment where cap rates had moved up. So to answer your question, I think high current income, principal protected, inflation mitigation were all things that resonated last year, should continue to resonate this year. Coming into the market this year with the performance we had last year, I think we're well set up to hit our fundraising [indiscernible].

Doug, over the last few years Blue Owl's grown at well more than 20%. 30%, 40%, 50%, I don't know the number, very high number -- if you continue at that growth rate with even no multiple expansion, you're talking a very high total return for the stock. How do you think about the growth trajectory going forward? Can you maintain that high growth rate?

Yes. Let me -- I'm going to circle back and maybe just talk for a minute about the value of the stock. I mean the market will value it where they think appropriate. But maybe I can spend a minute and talk about how we think about it at the firm. So one, we've got the permanent capital stream. So it's highly predictable, highly stable. 100% of our revenue from that revenue stream comes from management fees. Kerri stays down with the employees, shareholders share in the management fee. So long-dated stream of income, that's a very stable predictability and stability. I know when I look at the numbers from last year, what we generated in management fee, I'm going to generate those numbers for the next 20 years. So to your point, its annuity based [indiscernible] growth. Growth is the big variable, and we can all talk about what that growth rate will look like, but we've shown an ability to hit or exceed our numbers for the bulk of our careers. We're out this year with $1 billion of DE, but what I'm focused on is we've told the market we're going to earn $1 a share in 2025. Let's just assume that we can get to $1 of dividend per share in '25, roughly 2.5 years. Is the stock going to trade at 13% with long-dated pools of very stable capital? Are we going to trade in 8% or 9% dividend? I don't think so. I think, if we still have those characteristics in growth in front of us, we'll trade at probably at 3% or 4%. So I think, the stock -- we are setting ourselves up to pay a really nice dividend. If we hit that dollar or we exceed it or we're somewhere close to it, I think the stock could trade in the mid-20s. That's what we're planning for over the next 2.5 years. I look at that -- I can't do it in my head, but that's roughly a 30-plus percent IRR per annum.

Or a double.

Yes, and so I view that as really attractive because unlike a lot of firms that have a lot of carry, and where assets are leaving and they have to go replace the next fund, we have a built-in floor. You know our earnings can't drop off too much because we've got assets that go on for 20 years, and all our revenue and all our profit comes from management. So I view it as a very stable, safe place to invest, and in your words, the ability to get a double over the next 2.5 years. So I think it's one of the more compelling financials in the market.

So I wanted to hone back in on the individual investor opportunity. You guys have continued to grow throughout the year, a little bit of slowing in the fourth quarter. There was a little bit of pause in some of the liquid products out there. So I wanted your perspective on the -- and you said some numbers earlier, but on the long-term trajectory of individuals going into privates and [ offs ] and what do you think of this sort of pause we've seen? Is it just a symptom of a bear market?

Yes, I think it's just a symptom of not just a bear market, but a volatile market. Clearly, there have been some funds that have grown and had redemptions -- by the way, I think we're going to come out of this stronger. Blackstone, Starwood, I think, are doing a great job meeting those redemptions and doing exactly what they said they would do, and I think those are great portfolios. So I feel good. We're going to come out of this better. Going forward, can we modify the structures a little bit? We're certainly working with your teams to think about what can we do to enhance it. I am really bullish on the opportunity. As you think about this market, it's going to grow to be $200 trillion in the wealth channel, they're forecasting by 2025. If you go from 5% penetration to 25% penetration -- by the way, I heard [ Marc Rowan ] speak, I think he was saying it was going to go to 50%. I don't have a strong view where it's going to go. But if you can go from 5% to 25%, that's $40 trillion of growth. Let's just cut it in half. Let's say it's $20 trillion, let's say it's $10 trillion. These are massive amounts of dollars, and while competition has speeded up, there's really not that many players who are well positioned. I think when you look at our denominator and the assets we have, we're one of the firms that's well positioned to really -- if it does take off the way we're all hoping and expecting, we're one of the firms that can really benefit. So what are we going to do? We're going to continue to work with the leadership here at BofA and Merrill trying to think about what is it that will resonate, what is it that's not [indiscernible]. You know, there's a lot of powerful FAs here -- I'm looking at one, 40 under 40. So you want to come to your clients with things where you know they're not going to lose their money -- that is how you lose the client. But you want things that are differentiated, and that's what we're trying to do. Our software fund is a great example. We're the only one in the market with a software lending fund. It's put up great results, happy to spend some time talking about it. But can we continue to find things like that? Our new REIT is another great example. There are REITs out there, but there is no one out there who is focused on stability and predictability of a triple net lease product. So what else can we bring into the channel? Maybe we have one competitor -- we hope we have none. But I'm pretty confident, as I said earlier, you're going to see us bring, over the next 18 months, probably 3 new strategies that we think will hopefully resonate with everybody in this room and around the world because we have built out distribution around the world. It's not just a U.S. phenomenon. It's in Europe, it's in Asia. We're in the process of building out the Middle East. So we're seeing excitement from that wealth channel globally. Again, we feel cautiously optimistic we can get a minimum of our fair share and hopefully meaningfully more than that fair share.

All right, Doug, it's time for Oak Trust. Let's...

This has been quite the buildup for Oak Trust.

So I like the credit quality component of it versus its competitors. There's a tax efficiency component of it. Is there any scalability issues, like how big could this fund potentially get? [indiscernible]

Yes, so let me just take a step back, I started explaining earlier, triple net lease, we're the leader -- one of the leaders in triple net lease. Again, it's where we go to usually an investment grade or a very creditworthy counterparty. We buy what we believe is a mission-critical asset. Then, that investment-grade counterparty leases it back usually for up to 20 years. So I view it as a little bit like a belt and suspenders. We're buying the real estate, and we hope to make money on that, and we've got this 20-year lease stream, to your point. So there's a credit element to it tied to real estate. Cap rates have moved out. Today, we're earning on lots of new deals close to 8%. As you mentioned, that 8% is tax advantage. About 90% of it, you pay no tax on. So think about earning a [ 7% ] and change net on something where you own real estate, you have investment grade counterparty paying you interest. We've never had a default. We've never had anything going to arrears over 15 years. The reason I get so excited about the product is what we have done is we have become a solutions provider, and this will get into your TAM and the size of the market. We go to these large companies-- and today, the credit markets are a mess. So they're looking for alternative sources of funding. More and more companies are saying, "I can get a higher return on my capital than owning real estate." So we've done deals for Amazon and Starbucks and Walgreens and CVS and Cracker Barrel -- and they've all been [indiscernible], great companies, but they've always had one thing in common. They hit a certain amount of real estate and they say, "This is a bad use of capital, I can deploy it in other things and get a higher rate of return." What we're able to do -- and as far as I can tell, we are the only firm that does this -- is we can go in and buy wholesale, and we get a premium for that. So you think about -- in credit, in real estate, what's the best thing you can own? You want something that has a very high contractual rate of return. As I mentioned, today, it's moving towards an 8%, not quite there -- that is tax advantage. But we also have what I call unconstrained right tail miss. Meaning we can make a lot of money, big capital gains on this. These funds -- and I know many of you are going to find this hard to believe -- have generated an excess of 20% returns for 15 years. So how do we do it? How do we generate a 20% return last year, almost all from realized assets? Because we know rates were moving in the wrong direction, how does that happen? Well, I'm not going to say which company, but we bought a bunch of stores 18 months ago from an investment grade counterparty. We bought them at a [ 7 ] cap rate. If we were to go do that same trade today, we'd probably buy them at a [ 7.50 ], but we bought them at a [ 7 ]. We turned around and we sold those assets into the 1031 market at slightly above [ 5 ]. So we made almost 2x our money and close to a 40% IRR in 18 months. I think many of you are familiar with the 1031 market -- if you have a client who sells an asset, they have a certain number of days to redeploy that capital into another real estate asset and not pay tax. So now we control Walgreens, CVSs, Cracker Barrel, Starbucks, Amazon warehouses. People call us and say, "I live in Maryland, and I'd like to -- I've got $35 million I need to deploy or $135 million. What can you offer?" Now if we're buying them at [ 7 ] or [ 7.50 ], that market is around a [ 5 ] still. So we -- and it's a gigantic market. We have been able to generate these really big cap gains. So this is how I view the product. You come in and you make a base case of an [ 8 ], but you have the optionality that we continue to sell markets, sell assets into that 1031 market. You also have the optionality, the opposite of floating rate debt. These are 20-year leases. A year, 2, 3 years from now, rates start to come down -- you have incredible convexity. You make a fortune if those cap rates do compress. So we are -- this is a great opportunity. To answer your question, we have live, in-house today, well in excess of $10 billion of executable trades. Our issue is we don't have enough capital. If you were to talk to Marc Zahr, who runs that business for us, he thinks that if he went out, he could get close to $20 billion. That's how much demand there is from a marketplace. Remember, the credit markets are dislocating. So a lot of people are saying, "I've got these assets, why not just monetize it and have a little bit more lease expense." Big opportunity, uniquely positioned, high current income, tax advantage with the ability for big cap gains. That, to me, is unique, differentiated. As you think about our growth, that will be one of the areas I think we're going to really scale.

Doug, let's shift into credit quality. We watched a lot of asset managers get bigger in the private credit space. Have you seen competition intensify? How can you maintain high credit quality in your portfolios if there's more firms fighting over the same loans?

It's a great question. It's obviously something I get often. So first of all, I want to -- I described earlier that this is one of the best environments to be a lender, that we're actually capital constrained despite the growth that you've seen in the marketplace. So where was it really hard for us to maintain credit quality? It was the prior 6 years. That's when money was flowing, rates were low. The competition was crazy. People were waiving covenants, rates were low. It was really hard to maintain your discipline. I think we did about 4% of the deals that came in. You can imagine our deal teams, they were frustrated because we were saying no most of the time, and the deals we're getting done away. I'm not saying they were bad deals, but they didn't fit what we were looking for. So now, fast forward to credit quality, we haven't really added any names to the watch list. We're not seeing our credits get worse despite what you read in the press. In fact, year-over-year -- now, this is going to distort things a little to the upside, but I just want to give you a sense -- I think revenue across our portfolio on average was at 13%, EBITDA was up about 10%. Now, that's not apples-to-apples, because some companies made acquisitions along the way. But the trend has remained positive. In fact, I saw Pepsi results -- not that I follow Pepsi, but I thought it was interesting. Their volumes were down, but their revenue was up. Why? They increased prices is 15%. Unilever, Ben and Jerry's, Dove body soap and things like that -- volumes down, raised prices 11%, sales were up. So we're still seeing the consumer willing to absorb those higher costs. By the way, as I talk about that risk of rates staying higher longer or maybe the Fed having to raise it longer, these are the trends I see. So as I look across the portfolio, I am not seeing problems. But there is one problem that people aren't talking about, and that is interest coverage. Because, I mentioned, rates have moved from 6% to 12% effectively. Even if you had an outstanding loan, LIBOR has moved from 0% to 4%. So interest expense has gone up exponentially for a lot of companies. If I were to show you our stats, we started above 3 turns of interest expense. We're now to slightly above 2. But if rates went up another 250 basis points from here, we could quickly be trending towards 1. So we could see an increase in defaults. Now, if rates go up another 250 or 300, I think we would all agree, stocks would get really hurt. But what I care the most about, we've been very disciplined about our loan to value. So if it turns out, I have a good company, let's say, I lent to it and it was doing $100 million of EBITDA. It's still doing $100 million, but it has a bad balance sheet -- meaning interest is too high. I'm going to get all my money back plus some. What I worry about is what you asked in the beginning -- seeing cash flow start to decline, if we went in to a recession. We're not experiencing that. So right now, I feel really good about the portfolio, like how we're positioned. I want to make this clear, everybody in the marketplace is capital constrained. It is so much easier to make a loan today than it was 2, 3, 4 or 5 years ago.

I think this is an important point, that there will be some restructurings over the next year, but a default or restructuring necessarily isn't a bad thing because you could walk away with more value coming out of that.

Yes, we took over a company during the crisis, that -- you know, cash flow went to 0. [ DeFirm ] didn't want to put in more money. We took it over, and it was doing -- when we made the loan -- this was an early loan, our deals are bigger today-- $30 million of EBITDA. It went down to almost 0, now it's doing $40 million. So we're going to turn around and sell it, and we're going to get well in excess of par. So to your point, when you hear default, don't think automatically like it's necessarily bad for the creditor. If the firm -- and I would put Ares in this category -- does a good job, disciplined, oftentimes it can be a small to a large positive for us.

So at this moment, I just want to check and see if there's any questions from the audience.

So you spoke about a triple net lease with 20-year-odd time frame. I mean, as an investor, I have another option available to me, which is a public [indiscernible] called Realty Income. They are in a similar market for some time. But it's interesting that when you mentioned that you're getting about 8% on those sale and leaseback deals for an IG counterparty, I haven't heard them talking about that 8% figure, probably they are somewhere around 6% points. So how is your triple-net lease different than this?

Yes, I may have missed the beginning. So you can help direct me along the way. Most of the loans we've made have been that 7% to 7.5%. Recently, I've seen it migrating up to the high 7s. We're not quite to 8%, but we're getting there. We're able to get that because we really are coming in and being a solutions provider. Great company, whether its Walgreens, CVS -- whoever it might be, they want to sell $500 million of real estate, they can get much tighter cap rates if they hire a bunch of brokers to go out, sell it 1 here, 2 here, 3 there, take a long time. This is like such a small amount of money to them in the scheme of a $10 billion, $20 billion, $30 billion business that -- I don't want to mislead you, it's a negotiation. But we come in, we say we can do size and they know that the next time they want to go sell a distribution plan, a factory, whatever it might be or more stores, we will be there. We've done it over and over and over. Some of these, we've gone from starting 10, 12, 15 years ago to owning 1 store of one of these big chains, today, we're their largest landlord by far. So there's a trust built up and we get paid a premium for solving that problem. But at the end of the day, what matters most is, one, credit quality, making sure they can pay that lease expense. Two, the underlying assets. We've had great experience of either selling into that 1031 market or monetizing the assets or renegotiating the leases. Look, I can just show you over time, 15-year period, high current income and as I said, greater than 20% total return. Let me just address the public market. The public markets, I'm not that close to that space. My partner Marc Zahr obviously knows all the assets. But I did spend a lot of time during COVID, especially in the office REITs going and talking to people about -- was there a lending opportunity? We ended up not doing anything, but that is a total different analysis. A lot of the public REITs are very long office space. I don't have a view -- I happen to be in a building, by the way, that's fully leased. We need more space, can't get it. But around the country, I would say that is not the case. You have to have a view of where that's going. Are rents really going to go up, can they fill those spaces? Not every REIT is created equally, they touch so many different asset classes. We decided when we launched our business to focus on a very narrow niche. I know we're out of time, so I'll leave you with this. One of the things we try to do at Blue Owl is we are a solutions provider to the private markets, primarily to think about PE venture firms. We want to be an indispensable partner to those firms. So think about what we've created. One, we're one of the largest lenders to their portfolio companies. We can write the largest checks up at the GP level to those firms, meaning at the partnership level. They need capital to do something? We are a great source of funding and by far, the biggest. Then, part of what we wanted to do in real estate is there is no one working on that with them on their companies that are really asset rich in real estate. There are 2 very small funds, no one who can come and really solve a problem for a very large company -- meaning, wanting to liquidate assets. Now, we have this third leg of the stool where we've amped up our discussions with the founders and CEOs of these companies, "Hey, this is what's happening in the investment grade space, you should take a look at it for your portfolios as well." So that was part of the rationale for getting involved as well.

Well, with that, we have to stop. But Doug, thank you so much on behalf of all of us here at Bank of America Merrill Lynch. Thank you.