Michael Levy:

Our  alumni network, our relationship set, the people that have trusted us over the years, when we have done what we said we're going to do…

We truly get the first call, the last look, and the benefit of the doubt. And in this business, if you can get those three things, you have a competitive edge.

 

Nancy Lashine:

 

Hello, and thanks for tuning in to Real Estate Capital.

 

I'm your host, Nancy Lashine of Park Madison Partners. Capital is a lifeblood of the real estate industry, but the decisions on where and how it's allocated are driven by people and personalities. Who are they? What motivates them? What can we learn from their experiences? On this show we introduce you to some of the real estate industry's most influential thought leaders and decision makers.

 

And we talk about what is important to them, how they make critical decisions, who has influenced them and a lot more.  Our guest on this episode is Michael Levy, CEO of Crow Holdings, the iconic firm founded by Trammell Crow.  Michael joined Crow Holdings in 2016 and is the first person outside of the Crow family to lead the organization in its 75 year history.

 

A native New Yorker, Michael spent most of his career at Morgan Stanley, where he held various leadership positions in the Global Investment Management Division, real estate investment management, and banking. Today, Michael is responsible for Crow's business units, including real estate investment management, real estate development, renewable and traditional energy exploration, and securities management.

 

Listening to his passion for the organization, it becomes obvious why he was tapped to lead Crow. Michael has seen a few market cycles over the last 30 years. We discuss his lessons learned, where the firm sees opportunities today, the housing affordability crisis, and much more.

 

As I was thinking about this podcast, Michael, I was thinking, I wonder if there's some secret history here, because my last name is Lashine, your last name is Levy. My grandparents came from Russia and Poland in the early 1900s hundreds, Ellis Island. It was some unpronounceable version of Lashinsky that became Lashine. Then I have spent the last 30 years in Port Washington where I raised my, yeah, I've raised my family and we still live. So, yeah. So, tell us your story, Michael. I do know your background.

Michael Levy:

Yeah. But connecting those dots. My grandmother and grandfather came from Russia in 1917 through Ellis Island as kids, so we have that. This is my father's parents. I grew up in Fort Washington, and in fact, I'm going to my 40th high school reunion in two weeks.

Nancy Lashine:

No way.

Michael Levy:

And I'm so excited.

Nancy Lashine:

Oh, wow. Well, you should come stay at our house. We've got lots of extra bedrooms if you need a spot. I'm not joking.

Michael Levy:

Yeah, I believe you.

Nancy Lashine:

Actually, it's quite funny because we live in a house that people seem to know from having grown up there. And there's a family named the Bonds that lived in the house and they had a lot of wild parties. So, sometimes people come by and they're delivering the mail but they really want to see if the pool table is still in the basement kind of thing.

Michael Levy:

I grew up over in Flower Hill by St. Francis Hospital, so that was my part of town.

Nancy Lashine:

Oh, that's fun. So, you went to Schreiber High School.

Michael Levy:

I went to Schreiber High School, and then I went to college at NYU and it was the best school I got into. Actually, my first year I went to Drexel University. I was a design major, I was artistic, and that was-

Nancy Lashine:

Really? Was past tense or you're still artistic?

Michael Levy:

I have the innate skills, but they haven't been exercised in a very long time.

Nancy Lashine:

Oh, isn't that interesting? Do you ever think about taking up painting or any design?

Michael Levy:

Less so. I played music when I was a kid as well, so it's going back to music more than art. In terms of the creative side of me. I have a daughter who's incredibly talented as an artist and she does that as a hobby. But in my first year of college at Drexel, which was great and I loved it and Philly was so cool running up those steps like Rocky, it was really great. I didn't want to be broke. I was-

Nancy Lashine:

Okay, Michael, the similarities are continuing because I have a Bachelor of Fine Arts in Dance and Theater. I didn't want to be broke and I ended up going to business school.

Michael Levy:

Okay. As a freshman in my first year, I switched majors to business and then I said, okay, I want to get into the best business school that I can get into. And I applied to NYU and they took me and I finished. I spent the next three years at NYU and it was a great academic experience. It wasn't a great college experience in terms of there's no community, there's no Greek life, there's no sports, there's no sense of campus but you got exposed to some great people and great professors and great industry people. So, I learned a lot.

Nancy Lashine:

I first learned who you were, I don't even know if we had met at that point because I knew people who worked for you when you were at Morgan Stanley and you really had a great trajectory at Morgan Stanley and you went from the real estate sector, and at one point you ran all of capital markets. Tell us a little bit about that.

Michael Levy:

Early in my career, I was in investment banking and real estate. I joined them. It was 1998, and at that point in time, all three real estate businesses, lending, investing, and banking were one business unit, one P&L and as a young person, you would work on deals across. It was so cool. I stayed in that, but I moved into investment banking full time. That's really where I focused. In the financial crisis, the firm got in a lot of trouble, as you know, and I had been advising, as an investment banker in 2007 and early 2008, I had been working with pension funds on restructuring and bankruptcies in the real estate space. When the firm got in trouble at that point in time, I changed hats and started working for the firm on restructuring the business. That moved me into the investment management side. It wasn't the investment banking side that got in trouble. It was the investment management side. And then I spent a few years in that business working with new leadership and taking it out of the ashes.

Nancy Lashine:

That was 2008, or?

Michael Levy:

I started spending all of my time on that in January of 2009. Major changes that took place at the end of 2008. You remember that period well.

Nancy Lashine:

We were scared. I remember just being scared that the banking system was going to collapse. I haven't felt that way in any other crisis, even COVID, but the financial system collapsed at a level that none of us anticipated. And all the things that we learned at business school, the risk-free rate, it's the treasury bond. All those things were called into question. And I just remember not knowing what was safe and what wasn't safe anymore from an investment standpoint.

Michael Levy:

If Paulson didn't launch TARP, Morgan Stanley was probably two days away from bankruptcy. Goldman Sachs was probably three days away from bankruptcy. The stock went down to $6.

Nancy Lashine:

I had been at Lehman in 1998, '99, 2000, the heyday when the stock hit 80, and then it kept going and everybody was so excited. It was a really traumatic, I think the most traumatic period for me in my career, much more so than either COVID or this rate drop, which is predictable.

Michael Levy:

Undoubtedly, and I learned the most as well. The flip side is you had the shock and awe as it was beginning to happen but then you move forward and you learn during a period of time like you never learned during normal, stable, or good times.

Nancy Lashine:

And nobody knows anything, so you get to do stuff.

Michael Levy:

And decisions are made very quickly out of experience, out of intuition, out of instinct and you learn from people. It was an amazing period of time. So, I switched into real estate, to answer your question, and then there were changes at the firm occurring for, I won't go through the details everybody knows them. And then I was asked to take some responsibilities across all illiquid alternatives, venture capital, private equity, private credit, infrastructure, real estate. I did that for a while. And then I got asked in 2014 to lead what they call traditional asset management, so long only equities and long only fixed income and some other products, the liquid side of the business. And I did that for a period of time. And then the firm made more changes and effectively merged the liquid and illiquid sides of the house because the illiquid side, the alternative side, came out of investment banking originally. It grew up there and the liquid side came out of the investment management division. So, putting them together was a big deal.

Nancy Lashine:

But this was all still under asset management.

Michael Levy:

It was still under asset management but the roots, the history, the culture of the various alternatives, capabilities all grew up in investment banking, not in investment management. They were placed into investment management around the time of the global financial crisis but they still were two very different cultures, people, systems, processes.

Nancy Lashine:

What did you learn about melding cultures and managing people during that period?

Michael Levy:

It was very hard. There was not alignment amongst, I don't remember the exact number, but I'm going to say there were 25 different investment teams between all of those things, and there was no alignment between these teams in terms of their economic opportunity and they grew up-

Nancy Lashine:

Meaning some worked on commissions? Some were on salary benefits?

Michael Levy:

Or their products. This team was paid on its product. This team was paid on its product. This team was paid on this product. And they also grew up. People grew up in investment banking, people grew up in investment management, people grew up liquid, fixed income folks versus private equity folks, very different. The illiquid folks are very focused on relationships. The liquid folks are focused on the computer screen, very different personalities. So, trying to put that together was, I wouldn't say impossible, but there was just a tremendous amount of angst and unhappiness and hostility and all of those things when you're trying to force something-

Nancy Lashine:

What's the purpose of putting them together? Is it because you wanted to use the client relationships to cross sell?

Michael Levy:

Ultimately, you're trying, if you step back, and I think this is happening everywhere that firm at the time and many other firms, they were trying to build good investment management businesses with consistent processes and consistent controls and good margins and have investor relationships that cut across all of your capabilities. This is blocking and tackling in the investment management world. So, the firm was very focused on trying to get there, and so putting it together. And then you have various groups of people who support all those groups, whether they're the Salesforce or the IT or the HR, the whole operational infrastructure. If all the different teams aren't aligned and want what they want to do in a different way with their own resources, all of those folks in the middle are just torn in different directions. And because they're not on the revenue production side of the business, they don't really have the control that people do on the revenue side of the business. So, it's a very, very, very difficult thing to try and put it together. I think it's very different if you organically grow it.

Nancy Lashine:

What did you do in that role that was some of the most successful things that you were able to do that you've taken with you?

Michael Levy:

I don't think I was in that role long enough to say the successful things because when you're only there for... Again, I did that role and then they put the businesses together, and then I was COO and head of distribution for all of it, and I think I stayed in that role for about a year before I left the firm and went to Crow. So, just putting it together and trying to figure out people. It's not the technical side of it that's difficult. It's the people side of it and getting-

Nancy Lashine:

Although sometimes at a very big firm when you have different systems and technologies, the back office piece is just cumbersome.

Michael Levy:

Absolutely. And technology is always cumbersome. I think the most significant thing, if I had to say one thing more than anything, it's alignment where the teams, where they aligned with the business and what the business was trying to do, and can you figure out compensation models that actually give you both. Part of it is about what you do and your performance, and part of it is about, and it needs to be a meaningful part of it is about the mothership and what it's trying to do. And I think if you align those things, and that's different for every organization and it's never perfect, but I think if you can align those things, then you can have the best of both worlds.

Nancy Lashine:

Wow. Yes, you've seen the belly of the beast and you've seen it from 30,000 feet. So, you get this call from this company in Texas. Tell us a little bit about the history of Trammell Crow, how they got to where they are. And I'll give you my perspective is when I started in this business in the '80s, there was Trammell Crow, there was Lincoln, and there was Hines. And they were three Texas originated development firms that had gone national. And they were all trying to do lots of different things, and they all look so very different today. So, I'm really curious how you see the firm's history and how it's evolved to where it is today.

Michael Levy:

Oh, sure. Trammell was a poor kid from east Texas, went to the military, married a young woman whose parents died and left her a grain business. And in 1948, he had some clients who needed some storage space, and he built an industrial building in Texas on Cole Street. We own it today, which is really cool to own that building. He had half of it leased and half of it was unleased. And he built it on spec, which wasn't done at the point in time, and he had success. And from there, by the 1960s, he had built, I don't know if it was the largest real estate development company in the United States, but it was amongst the largest real estate development companies in the United States.

And he did that by partnering with people, young people all over the country, basically saying to them, I will give you my balance sheet effectively, my relationships with banks, my personal guarantee, I will provide the financial underpinning, you go and find the opportunities and build the buildings. And by the 1960s, I don't know how many dozens if not hundreds of partners around the country, building America's real estate and building wealth for themselves in a partnership model, not an employee model. And that worked.

Nancy Lashine:

It's sort of the original operating partner with a capital source model, except that it was a single capital source.

Michael Levy:

Yeah, absolutely. Again, if you go to alignment, everybody was focused on their deals but Trammell was an unbelievable human and a force of nature, and he was able to hold it all together because he built it. All of these people had such admiration and respect for him. I never met the man, so unfortunately, I hear the stories.

Nancy Lashine:

But he lives a bit through his son, Harlan.

Michael Levy:

Absolutely, no doubt. Harlan is an unbelievable human being. And that business grew in the '60s and it grew in the '70s, and it was very, very successful. But in those days, you would borrow a 100, 110 cents on the dollar for a building that you were going to build and Trammell and the family went recourse on every loan. Well, for 30 odd years or 40 odd years, America was up into the right. And then in the late '80s there was this thing called the, after Reagan was elected, the Reform Act, and then there was the S&L crisis, and it effectively took the company down. Five IPOs were completed, Wyndham Hotel Company, BRE, AMLI, Avalon.

Nancy Lashine:

They were all spin outs from Crow partnerships all.

Michael Levy:

They were all. And then Trammell Crow Company, which was the last one done, and it was at the time, a very small real estate services company. And that Harlan did. So, Harlan took over the business fully in the, I don't know if it was 1990 or around that time, and he and the team at the time restructured hundreds of partnerships, executed these IPOs and got to the other side. And the other side was by the late '90s, he had a portfolio of owned real estate and owned Trammell Crow Residential, the multifamily development company, which survived this period of time.

Nancy Lashine:

So, the owned real estate and the development company were still on balance sheet for the Crow family.

Michael Levy:

Correct. That's what came out of it after this massive sprawling enterprise.

Nancy Lashine:

I remember going to the ULI conference in those days and just everybody's so depressed and walking around and it was a mess. There was a lot of mess.

Michael Levy:

I wasn't there. I was in the business, but I didn't... Well, I started in the business in '94. But that happened and that changed everything. And Harlan, first of all, that he pulled that off is truly unbelievable. But ultimately, when he was completed with that, his view was never again. And what never again meant was I'll never again be fully invested in one asset class. I'll never again be-

Nancy Lashine:

Was it all-

Michael Levy:

It was all real estate.

Nancy Lashine:

All real estate. Okay.

Michael Levy:

The family owned nothing.

Nancy Lashine:

But it was office, industrial-

Michael Levy:

But they did everything.

Nancy Lashine:

[inaudible 00:15:44].

Michael Levy:

Over that history, there is not an asset class. There was not a sector that they were not active in from hospitals to industrial buildings to retail buildings to apartment buildings to office buildings. They covered the full gamut. It was, okay, let's reshape the company from a very different risk profile. That started in 1998. The first real estate private equity fund was raised. So, the company was a developer, only a developer up until that point in time. But the family had now an owned portfolio of real estate and they had talent around that, and they wanted to provide opportunity for that talent and they wanted to grow that business. To do so, the family raised the fund in 1998, I think it was roughly $275 million. And that was the first value add diversified fund and started the real estate investment management business, which today, is in the scheme of today's world, a mid-sized real estate investment management firm in the United States, headquartered in Dallas with 100 people in it and partners in the United States and all around the world.

Nancy Lashine:

So, you are CEO of all the lines of business. Explain the different lines of business that you're head of.

Michael Levy:

So, Crow Holdings, the parent company. Yes, I am the CEO of it. The way I look at it, there are five business lines. One is we are like an endowment or foundation. We invest in stocks and bonds and private equity. We're an LP or a beneficial interest owner in those things. And we have a large portfolio that we manage for ourselves. And that provides stability and it provides liquidity and it provides diversification. Given what went through, never again will never happen. And that is a very large portion of our overall balance sheet, for lack of a better word.

Nancy Lashine:

Effectively a balance sheet.

Michael Levy:

But that's a business and it is managed, and it's really interesting.

Nancy Lashine:

How many people are in that business?

Michael Levy:

Well, around that business we built, it was announced yesterday in a press release. In 2010, the small team of people that were managing that for the Crow family or Crow Holdings at the time, they wanted to begin to do that work for other families. And over the past 13 or 14 years, built a multifamily office or a wealth management firm that grew up, and so that's 41 or 40 people. And today it was announced that business merged with a larger RIA, I guess you call it, a little larger firm. And so, it's part of another organization as of today. And those people manage our wealth and lots of other people's wealth.

Nancy Lashine:

So, you sold the business to this other entity.

Michael Levy:

Correct. Your listeners can look it up and Google it. And that team is going to continue to manage our wealth, and we're investors in this company and we're partners with it. I don't want to spend all day talking about it but that's one part of our business. The second part is we still own assets, properties that Trammell or Harlan has built over the years that are very large and very significant, and each one of them is its own business. And there's not a big team at Crow Holdings that manages but there's teams at each property, and I'm responsible for that.

The third business is an energy business that we've started in the past several years. It's obvious from my perspective, America's need for energy is growing and we can talk about all the reasons why and it's going to be provided by multiple sources. We started a solar development company because it's a lot like real estate development, and it's very clear the megatrends are there. So, we have a team of people that is developing solar in four or five states as we speak, and battery storage. That's a business we're growing. And then we also, in the traditional energy space, and we are headquartered in Dallas, Texas, and we have pretty unique access to people and insights, we have a traditional energy business today in Texas and New Mexico where we're-

Nancy Lashine:

Which is oil and gas.

Michael Levy:

Oil and gas business. Those are two teams in two businesses within the energy business. That's the third business line, energy. The fourth business line is the real estate investment management business, which is the one I just shared with you, started in '98. The guy who runs that, Bob McLean had been with us 35 years. He was a retail leasing agent, started out as for us.

Nancy Lashine:

The best training.

Michael Levy:

Unbelievable. That's a terrific group of people. That's an industry I come from specifically. So, I understand it well and spend a lot of my time in it because it's an area I'm comfortable in, as you can imagine. And then we have the real estate development business, which today we're one of the largest developers of apartment buildings in the United States and one of the largest builders of industrial real estate in the United States. And then I would say we have a boutique, for lack of a better word, office development business that we actually started right at the beginning of COVID.

Nancy Lashine:

We should talk about that.

Michael Levy:

Yeah, no, I have lots of views on that business. So, those are the five things that we're doing today.

Nancy Lashine:

You're the CEO, and is there a board that runs that you report to or what's the management composition?

Michael Levy:

Yeah, we do. It's on our website as well. We do have, I think technically it's an advisory board, but it's a board of incredible individuals, folks in our industry. People like Bill Walton is on our board and Mark Gibson is on our board and Don McNamara's on our board. I'm just talking about real estate people. Great insights and wisdom and advice and help. I'm so grateful to have them on my side helping me.

Nancy Lashine:

Well, you have a very full plate. One of the really interesting things is there are very, very few privately held real estate investment management firms left after 30 years of development in this business, right, of growth in the business. You're really one of the very few, which is one of the many reasons I wanted to have this conversation, but it's hard to do it with just your own balance sheet and both in terms of just the amount of capital that's needed to be successful at it, but also, succession planning and making sure you keep a motivated team and are able to keep growing internally. Tell us, is there a secret sauce? How is Crow making this work?

Michael Levy:

I think there are other forces at work too, if you look at it from the investor side of things. They're looking to consolidate amongst fewer managers. They're looking to have relationships that cut across alternatives. The industry consolidation is well underway. You saw Ares picked up GLP the other day for $3.7 billion.

Nancy Lashine:

They certainly did.

Michael Levy:

Every week I'm reading about some other merger, someone else going public. It's clear this industry is consolidating. Early in my career, I watched that happen in the long only equity and fixed income mutual fund business. You watch that take place. So, there're not only the forces that you indicated, I think it's more the investor forces that's driving it in terms of what they want.

Look where we sit. I think at one level, I speak to lots of young people who want to start the next real estate fund or the next real estate private equity firm. And I can say, look, the last thing the world needs is another real estate fund manager and another real estate private equity firm because ultimately in this business, you have to be differentiated. You must have a track record. But I see lots of people that are successful in growing their businesses whose track records are eh. So, it's not just track record, it's differentiated capabilities and it's marketing and distribution. Those are the things in the business today.

Nancy Lashine:

That's music to my ears.

Michael Levy:

You see it every day. We can look-

Nancy Lashine:

That's our business, of course.

Michael Levy:

We can look at all the market participants and look at who the biggest players are in the space. And that doesn't necessarily mean they have the best track records.

Nancy Lashine:

No, it's really about trust and communication at the end of the day.

Michael Levy:

What works for us, I think first of all, ownership matters a lot. And I think the Crow family is just truly unbelievable in the way that they approach the business. If we're sitting here with the Crow family talking about the business, it is not their business. It is a partnership with the people that work there. It is evidenced in every way that we behave and how we treat people. It is a cultural dynamic at the firm. That was how Trammell was successful. Trammell's success wasn't about Trammell creating wealth for Trammell. Trammell's success was about creating wealth and opportunity for the people that worked with him. And that culture is pervasive across everything that we do.

You asked what makes it work. I think that is the most important thing. Secondly, Bob is an unbelievable investor. He has learned, he is methodical and disciplined and strategic in what he does. And his track record, and I say his and the team because he has trained an entire generation of people, that track record is terrific. We have a terrific track record and we've been doing it for 25 years, and that matters in this business. And then third in differentiation, you talked about Trammell Crow. In America, our alumni network, our relationship set, the people that have trusted us over the years, when we have done what we said we're going to do, we truly get the first call, the last look and the benefit of the doubt. And in this business, if you can get those three things, you have a competitive edge. So, it's all of those things.

Nancy Lashine:

You talked about what it was like at Morgan Stanley when you had to bring these disparate groups together with different incentives. Between the five, now four different verticals. Are you managing four different groups or is there some cross-fertilization?

Michael Levy:

Each business area is managed separately with a different alignment. We're not trying to tie it all together at the Crow Holdings level. And it's not necessary because again, if you look at our business model, we are not Berkshire Hathaway, think about that model where Berkshire Hathaway I think has 25 people and they're one of the largest... And they own all these companies and under different brands and different names. That's a business model. And then, I don't know, Blackstone where it's all integrated and-

Nancy Lashine:

Everybody goes to the Monday morning meeting.

Michael Levy:

Correct.

Nancy Lashine:

Or listens in.

Michael Levy:

We're somewhere in between, is what I'd say.

Nancy Lashine:

Yeah. Do your investors ever ask you about the potential conflict between being investors and developers, and will your development arm work on projects that you're investing in?

Michael Levy:

No. If you look at Hines is doing this today and Tishman is doing this today, but if you look at the history of the firm, we've had this development business and the development capability going for 75 years. And we started the real estate investment management business. And in that business, it just grew up that it was going to be an LP, it was going to provide capital to the competitors of our business. Today, we probably partner with 2025 industrial developers in the United States as their capital partner. I don't remember the exact number, but I'd imagine we probably partner in the multifamily side with a similar number of developers who are competitors with our development company. But if you look at the business on the development side of the business, our folks across the country are sourcing dirt. They're sourcing land, they're competing in auctions for land.

In the real estate investment management side, we're not fueling that competition. Those developers have won the land. The competition is over by the time we get the phone call from the developer to provide the capital to them. And I've been there eight years and I have not seen a single train wreck in eight years of watching these two businesses participate in the same sandbox. It's a huge market. It's highly fragmented, and there's no doubt that there are plenty of times when our guys and gals were pursuing a piece of dirt and lost it and it was won by a competitor who ultimately, because we had a relationship with, came to them and we provided capital to them and vice versa.

That happens, but it's not during the hunting for the land. And then separately, we don't commingle don't raise investment management funds or ventures that are doing different things in the market and might do some development deals with us. We don't do that. Our real estate development company does have investment vehicles and ventures with investors who might do business with us on the real estate investment management side, but those are opportunities that are isolated to our real estate development company.

Nancy Lashine:

Got it.

Michael Levy:

We don't cross these things.

Nancy Lashine:

As you've had the privilege of running these different businesses, you think about development companies by definition are very cyclical because development is cyclical.

Michael Levy:

Very.

Nancy Lashine:

Investment management-

Michael Levy:

Less so.

Nancy Lashine:

Less so. Despite the vagaries of being easier or harder to raise capital. Once you have a built-in asset management base, you have recurring income. What do you want to share or what do you think about those different business models? Do they go well under one global umbrella or-

Michael Levy:

I think they're very different cultures. As a business owner, whether or the cash flow volatility of those businesses or profile of those businesses work for you, I think depends upon what else you have at your disposal in terms of capital. For example, in a public company, the development business doesn't really work okay. It's way too volatile. We've watched in our careers, plenty of development companies go public and ultimately, go private. It just doesn't work in the public market. I think the real estate development business being that cyclical, you need to have a cultural perspective on it. You need to understand that. You need to be willing to accept that. And your leadership and your people in that business need to understand that too.

When times are good, they can be very good. And when times are bad, they can be very bad. And that level of personal volatility in your career is something that you as a young professional need to look in the mirror and ask yourself, are you prepared to spend a lifetime of that level of volatility? That is a very different person than the person in real estate investment management. I would also say the person in real estate development, from my perspective, think about the multiplicity of skills that they need to have to be successful. In the real estate investment management side, you have financial professionals who've been trained at great business schools and have great analytical skills and great quantitative skills, but most of the people in the business are younger or older versions of the same profile because the skill set is narrower. It's not broad, it's deep, but it's narrow.

In the real estate development business, if you think about what someone has to do, they've got to really understand the details of their local market and the submarket to really understand the market. Two, they have to convince people to sell them the land, everything from farmers to the work involved. And then they have to become politicians because today the value add is in the entitlement process. And you have to be willing to deal with community groups who are upset with you and politicians and all of the political dynamic that's involved in being in real estate. And then you have to have the creative vision from an architecture and design perspective to build something that's attractive. And then you've actually got to build it and handle the construction side of the business. We self-perform in most of what we do. And then you have to lease it and ultimately stabilize it and sell it.

Nancy Lashine:

And finance it.

Michael Levy:

And finance it. Think about that skillset.

Nancy Lashine:

That sounds like a renaissance person.

Michael Levy:

I say this all the time. And I'm not sure that a lot of young people who come and talk to me about, I want to be in the real estate business. And then you try and explain these two business lines, they're very, very different businesses and different skill sets that are needed to be successful.

Nancy Lashine:

There's so many different directions we could go in.

Michael Levy:

I'm sorry.

Nancy Lashine:

No, no, it's great. You, I think, are a self-proclaimed, prior to coming to Crow a capital markets guy, what is it that you have been able to bring from a capital markets perspective to this panoply of businesses?

Michael Levy:

Success in the real estate business remains two sides of a coin. It is the real estate but it is also the financing capital markets. It's a capital-intensive industry. Look, I never built a building. I never leased a building. I never managed the building. I cannot help the firm do those things. I learn so much from the people there. So, you move to things that maybe you know something about. Because of my career and the things I've done, I think global in terms of the capital markets. I can say, I don't know, we're looking at opportunities. Well, what about a Singapore Riet listing? And those are things that don't come out of Dallas, Texas in the ground because it's not the center of finance when it come-

Nancy Lashine:

Have you done a Singapore Riet listing?

Michael Levy:

No, I haven't.

Nancy Lashine:

Okay, just curious.

Michael Levy:

At one time we were looking at something and I explored it for something as well as we have materially expanded our investment partnerships throughout the world. Today we are not a global investor but our partners come from all over the world today. The United States, of course, and remains but a good portion of our investment partners are from outside the United States today.

Nancy Lashine:

And how did you do that?

Michael Levy:

We ultimately built the team of people led by a 25 plus year Crow veteran who's done everything for the firm. Terrific guy named [inaudible 00:33:38]. And this started before I joined. He was asked to lead investor coverage less than a decade ago. And then we just built out that team. There's a big team now, investor coverage, investor relations, all the RFPs and the DDQs and all of the information.

Nancy Lashine:

How many people are on your team?

Michael Levy:

I think when you add all of that directly, we have about 25 people at Crow for the totality of the client engagement side, give or take. And then of course, fund administration, we have folks at an outside firm that provide that. We have people in India who do analytical scrubbing and work there. It's a major commitment. Go back to Morgan Stanley, it was clear to me that to be successful in this business, you needed three things to work really well. You needed to be good investors, you needed to have strong operations, and then you needed really good client engagement. You need all three things. It's like three legs to a stool. If one of those things isn't strong, the stool is going to tip over. So, we really invested in the client engagement. That's the word I use for all of those things. The analytical support, the technology, the people up and down the continuum going from the relationship manager. So, we built that out. That's most significant.

Nancy Lashine:

Well, it certainly shows, I was very taken just looking at statistics when the first quarter fundraising stats came out and you were one of the top 10 funds. You think you'd raised over 3 billion for your diversified closed end value add fund. You can say the exact number, I don't mind.

Michael Levy:

Yeah, that's fine.

Nancy Lashine:

But you were only one of two privately held firms and only one of two diversified funds because that's not what's popular in the market today. That's a huge testament. Anything else you want to share about what was that like, going out and trying to pitch that in a terrible market like this?

Michael Levy:

Hard.

Nancy Lashine:

Okay.

Michael Levy:

I'm going to go back to-

Nancy Lashine:

That's honest.

Michael Levy:

... what I said earlier. Why do investors support us? I think it's our culture. We're great partners. Truly, we shake your hand. We don't take an institutional mindset. We might have an institutional infrastructure but we don't take an institutional mindset. We're not transaction related. And people see that and they build trust. Just this morning I met with an investor. It's all about trust. Our culture and who we are matters. Our track record is great, and they see that. And then what we do as a matter of strategy, in the United States, we have not invested in the office sector in a decade. We have not invested in hotels in a decade. We don't invest in senior living. What do we focus on? We focus on industrial space. We focus on the broader residential rental space, and we focus on the specialty asset classes like manufactured housing, self-storage, small retail, convenience and gas.

As a matter of strategy, we've been doing this a long time. And when you look at what's worked, if you really look at what's worked and you look at what investors want in America today, whether they're foreign investors or domestic markers, we are in the places that they want to invest in. And also, marketwise, America is moving to the southeast and southwest. The data's clear and whatever the arguments are, we're here in New York on a beautiful day. The city is awesome. It is great out. It is vibrant, it is alive but the rate of growth in the northeast, there is no growth in the northeast. Do you know where it is? It's all in the southeast and southwest. That's where the corporations are moving to.

We just had a hurricane go through, and I know we have the discussions all the time. Well, this storm or this climate change or access to water or heat, I've been listening to my whole career that Phoenix is out of water for 30 years. I've been told that Phoenix can't grow anymore. It's out of water. What's happened in Phoenix in 30 years? It is obvious where America is moving to. Where we headquartered? In the heart of it all, in Dallas, Texas, the fastest growing nominal population in the country. We are not only in terms of the sector's experts with deep benches and deep relationships and deep expertise, geographically, we're in exactly the right places in America. And I think those are the reasons in totality. But it's-

Nancy Lashine:

There's been a lot of conversation about... Sorry. [inaudible 00:38:17].

Michael Levy:

These large investment management firms have armies of people in marketing and distribution. They have, literally hundreds of people engaged in covering every investor, talking to them about every alternative. They do know, capturing mindshare, delivering intellectual content. That dynamic is not slowing down. While we're a private firm, we are financially able to invest in the company to be competitive with this evolving marketplace of large, dominant global players.

Nancy Lashine:

That's really where I was going to go. Do you sometimes feel like you're swimming, like you are duck, duck goose? You're the goose because you see this phenomenon in the real estate industry today where you've got the very, very large players, they tend to be buying the operating platforms so that they have access to transaction volume. And then you see some small niche players coming in, but eventually they tend to get gobbled up. But that's the other dynamic. There's not that many groups that have continued to grow as successfully as you have that fit in the middle. When I say in the middle, I mean raising a few billion dollars.

Michael Levy:

I understand. Back in the day, we would've been considered a large firm today we're a mid-sized firm.

Nancy Lashine:

You're mid-sized, yeah.

Michael Levy:

I would say at one level, growth for growth's sake isn't important to us or the Crow family at all, in the slightest. We don't have an earnings target. We don't have an AUM target. It doesn't matter. What matters is that on a relative basis that the people that work for our company have opportunity. What matters is that the people who do elect to partner with us have a positive experience and we make money together. And at the end of the day, whether we're this big or whether we're that big, doesn't matter. If we were a public company, it would matter. If we were owned by a private equity firm, it would matter, but we're not and we're not going to.

Nancy Lashine:

Right, because not looking at earnings growth or bottom line or EBITDA-

Michael Levy:

It doesn't matter.

Nancy Lashine:

... any of that. When you think about transaction volume and just getting access to deal flow, is that just through the growth of your local partner network? How are you making sure that you can really get the deals you want?

Michael Levy:

We have 100 people in Dallas, Texas fully engaged in the real estate investment management business, first of all. We have 75 years of relationships in the United States, and we do have lots of operating partners across the country. Do we have enough? Do we need more? If the business grows from here, then that will happen. If it doesn't grow from here, then the level that we're at is fine. So, I think we've got the country really well covered. Now, we also have relationships out of this real estate development business. There's no public securities, there's no Chinese wall in the traditional sense. We have offices in Raleigh and Charlotte on the real estate development side, run by terrific developers, great people. Folks on the real estate investment management side, if they're trying to figure something out in that marketplace, they're talking to those folks and getting relationships through those folks and help for those folks. We have 20 some odd offices across the country that are extensions of the relationships. If people have done business with us on the development side and had a positive experience-

Nancy Lashine:

Right. There you go.

Michael Levy:

... we have that relationship. So, we are able to leverage that relationship across the firm. We're bigger as a real estate investment manager in terms of our footprint than the 100-person team would indicate. And I think that's a huge competitive edge for us. I don't think even the big, New York City based investment managers who might have four offices have the reach or access or network that we do.

Nancy Lashine:

No, because real estate is local.

Michael Levy:

Hyper local. Like one block makes all the difference in the world.

Nancy Lashine:

I believe you have some strong views about how we can solve our housing crisis in this country.

Michael Levy:

You heard me the other night.

Nancy Lashine:

And I would love to just have you share some of those thoughts with our audience here.

Michael Levy:

Sure. It is clear that the issue will be solved through supply. And the supply is not at the level of what we're seeing outside us. It's whatever word, attainable workforce, pick a word. That's what we need in America. All that you generally hear, certainly in the media and in the political class, for lack of a better word, is those greedy developers. Let's put rent control. Let's do everything we can to keep rents low. And I understand how that can be appealing to the listener. I do understand how that can be appealing to the listener but that doesn't solve the problem. I think in New York City, I'm probably wrong on this number, but I believe I saw a statistic that said last year, something like 16,000 unit building permits were pulled for a city of 10 million people. The question is how do you create more supply and what are the obstacles to supply?

The obstacles to supply are at the hyper local municipal level. If you go across America into communities and you want to do a development project, first of all, the communities, the single family homeowners around you and or the urban residents are not going to want you to build density. They just don't want density. There's no single family community I know that wants an apartment building built in the middle of it or adjacent to it. Those people, us, you, me, others, we obviously elect the legislatures at our local level and at our state level. And if we don't want something, they're not going to support it. And what happens is the entitlement process to get approvals that used to take a year, now take four years. And then when you want to build it, you've got impact fees that you've got to pay. You might have to build a park. You've got requirements on the building that aren't about safety, they're about aesthetics or they're about the environment.

I'll give you an example. Two diametrically opposed markets, Houston, Texas and Los Angeles. What's the market that has a housing crisis? Los Angeles, not Houston. In Houston, which has the easiest zoning and entitlement process in the country, I'm making numbers up, but order of magnitude, to build an apartment building for a workforce, let's just say it costs $150,000 a unit. If I want to build that same building in southern California, it's $500,000.

Nancy Lashine:

That big a difference.

Michael Levy:

Half of it is land and labor, half of it is local regulations on the building requirements as well as the fees that you need to pay. Why do you think there's a housing crisis in California and why do you think there's not a housing crisis in Houston? It has to do with what's going on at the local level in terms of the requirements that are being put on the real estate development industry because the investors demand a certain return on capital. And those investors are pension funds and foundations and endowments, and their cost of capital for real estate development is high teens at a minimum. If that math doesn't work, so when you in a municipality, instead of it taking one year, it takes four years. There's costs every single year. My duration goes out, which reduces, not good for IRR, not good for returns, my costs go up. And then the impact fees and the regulatory requirements. If those same communities relaxed those things, you would have more housing built in America.

Nancy Lashine:

You would. And I guess on the margin, we all hope that technology will help bail out a little bit because of cheaper construction costs and maybe more efficient process. But how do you fix people? That's a hard something to fix.

Michael Levy:

It's a political... You can choose carrots or sticks. You've heard the administration, national rent control has come up as a topic, I'm just saying. Or you can use carrots, which is you can create, I'm making it up, a construction financing program with a reduced cost of capital for developers that'll reduce their costs.

Nancy Lashine:

But you need the political will to do it.

Michael Levy:

You need the political will. I'll give you an example when, this is my memory banks, and I could be wrong in a couple of details here. But when Governor Newsom was elected in California, there was a lot of press around, he was bringing together 48 municipalities. And unless they came forward with housing plans, he was going to sue these municipalities.

Nancy Lashine:

He hasn't sued one.

Michael Levy:

He hasn't sued one. I'm not saying he should or he shouldn't but I'm just saying if the state is unwilling to step in, the communities, I don't think, will step in. I don't think the communities, the thousands of municipalities across the country and the ones that are resisting it, I don't think they'll wake up and say, we're going to do the right thing for America and we're going to build density and apartment buildings for working class people in the middle of the single-family neighborhood. I don't think that's going to happen. And unless the state... But the state is also elected by people. So, this is a topic that it seems to me as a matter of logical thinking. The answer is obvious. But the political will, it's not obvious to me. I would say in terms of big megatrends, housing in America as a political topic is moving in both parties. Housing as a public good. It's the concept of housing. And so, it is possible at a federal level and/or state level that in the coming years that they rethink this and perhaps come more my way.

Nancy Lashine:

Yeah, no, I think that's true. I think in the same way that medical care when cost became so out of whack and it became a federal issue that housing will rise to the level of a federal issue, whether ultimately that results in better decisions, TBD.

Michael Levy:

I don't know but I'm just watching it. So, in our apartment development company, most of what we develop now is what we call attainable apartments. As one market participant, five years ago, we were building class A apartments across the country and we were determined to figure out a way to do this at a lower cost. We couldn't get a cheaper cost of capital because even when we met with impact investors who stated they had a lower cost of capital, their assumptions were so conservative that it was the same cost of capital as the marketplace.

Nancy Lashine:

Oh, interesting. Okay.

Michael Levy:

So, we couldn't source less expensive capital. We couldn't do anything about the entitlements, the cost of entitlements and regulatory but we could work on construction. So, we really rejiggered our business to be able to build cheaper than we were building by standardizing things and technology to some extent. I think there's a lot of hype about technology and construction, and maybe one day it will really work but to date, that's a very, very limited [inaudible 00:49:26].

Nancy Lashine:

But you feel like it should be, we should be able to, in the same way that we can build an iPhone for so cheap, we should be able to modularly build.

Michael Levy:

I have people from Silicon Valley coming in all the time, starting companies. We spent a lot of time with that company, Katara. You remember Katara?

Nancy Lashine:

Please, let's not talk about Katara.

Michael Levy:

But this is-

Nancy Lashine:

It's a painful memory.

Michael Levy:

But this is the issue. Then you go and beta test and you spec it and it fails on you, and the cost of it are astronomical. So, we speak to a lot of technology firms run by technology, people that might have some real estate people on their board and be Affiliated with them that are here to tell us how to build buildings. I would love to meet a successful firm that it's successful in two ways, they're building buildings cheaper and they're a profitable company because there's lots of people like a terror who threw billions of dollars at it, failed and then tormented, ultimately, the people who entered into relationships with them because they failed. You're building a building and the costs of failure is astronomical when you have to step in and rebuild it.

Nancy Lashine:

We hear about this all the time. Greystar now has a modular development factory that they've just... It has been successful in Europe. They're trying to do it in the U.S. There's a bunch of test sites everywhere.

Michael Levy:

I think it's great. I think it's terrific. I can't wait for this to really make a difference in the industry. It will be great and everybody will have access to it and it will just make it less expensive.

Nancy Lashine:

We should probably have government financing programs that we don't have today. That would be tax-exempt financing for attainable housing, not just capital A affordable section eight type housing, but other housing.

Michael Levy:

For workforce, for cops, firefighters, teachers.

Nancy Lashine:

People who just live.

Michael Levy:

Yeah. Sorry.

Nancy Lashine:

I want to talk about data centers for a minute. Are you active in that space? Everyone's talking about it's the new hot thing. Tell us what you think.

Michael Levy:

There's no doubt that the electrification of America is escalating, whether it's electric vehicles or data centers. The demand for electricity is growing and the demand for AI and all the processing. You've heard the statistics at ChatGPT searches know X times the amount of bits and bytes that a Google searches. There's no doubt that the demand curve is up and to the right. And at the moment in time, there's a bit of a feeding frenzy going on in America by both the hyperscalers who want these data centers built for them and for power to provide the hyperscales. In response to that, the capital markets have looked up and said, that's the next new new thing. That's the growth area.

I don't know what the number is, but there's probably over a trillion dollars of capital in the United States between private equity infrastructure firms, real estate firms at least chasing this opportunity. And what I worry about, because I've seen this multiple times, look at what happened with life science in the last craze. All this capital chasing what is at the end a finite opportunity. I think there's going to be some great opportunities and people are making a lot of money and people will make money.

Nancy Lashine:

Are you doing it?

Michael Levy:

I'll answer that in one second. I'm worried that this at some point, I don't know if that's three years from now or nine years from now, but at some point, there's just going to be a lot of unfulfilled promises that aren't met and a lot of capital. But during this phase, it's the go-go days in the marketplace. And because of what I think, I'm very careful on this topic. That being said, as a reminder, we have a large industrial development company. We have over the past four years acquired dirt that we were going to build warehouses on and found out almost after the acquisition, we get power all the time, but realized that, oh my goodness, we can get whatever numbers-

Nancy Lashine:

Lots of power.

Michael Levy:

Lots of power to this building, to this land. And therefore, we have not personally developed the data center but we have sold the land into a data center development project.

Nancy Lashine:

What I hear from people who've, whether they serendipitously fell upon that or have been out in that business that that's not a typical real estate two x or something. It's like a 10 X.

Michael Levy:

It can be. It all depends. It really does depend. But yes, it is multiples of what the land is worth for distribution or fulfillment. That sparked our attention. We happen to, ourselves, for 70 years own land that happens to be located adjacent to one of the most important data centers in the world. And that land is very valuable. So, we're working that land today, but the business today is all about access to power, and so we're very focused on that. We didn't chase that land. We didn't buy it. We're not in a craze for it, but we have it and we're in the process of securing the power. And knock on wood, if we do, we will be in that business in some very unique land in the United States.

Nancy Lashine:

Right. That's awesome. Good for you.

Michael Levy:

Yeah.

Nancy Lashine:

If you work hard enough, you get lucky.

Michael Levy:

There's enough unlucky things that happen in life. How about once in a while you get something lucky happening.

Nancy Lashine:

Touche. Everybody's asking the question and I had love to get your take on this. Have we turned the corner of this downturn? Obviously, 500 basis points in a rise in interest rates have caused a huge slowdown in the real estate volume of transactions. People are worried about the value of the things that they bought in the last few years. Have we turned the corner and do you transaction volume starting to pick up and what's going to happen to some of those assets that may have been purchased in the last few years? Will they recover?

Michael Levy:

Yes, we have certainly reached an inflection point in the market in terms of the capital markets undoubtedly. And then we should talk about operating fundamentals because the capital markets lead the operating fundamentals, but it's no doubt transaction activities picked up, sentiment has changed. People are investing. Like us, we were really on the sidelines for '22 and '23. This started January '22. It was clear as day. Interest rates moved in January '22, so we've been in this for two and a half years. In terms of sentiment and capital markets, sentiment, it turned this summer. It literally just turned, because remember last December, the tenure went to 3.9. There was this little bit, or November though there was a little bit of euphoria.

Nancy Lashine:

I think it went to 3.7 at one point.

Michael Levy:

It may have. And then it spiked back up. And this malaise that took place in the marketplace in January and February, it was-

Nancy Lashine:

So depressing.

Michael Levy:

People were like, enough. And remember-

Nancy Lashine:

Everybody was expecting a rate cut in the first or second quarter and it didn't happen.

Michael Levy:

Didn't happen. And I remember in May like, people need a break. I could just tell. I was like, this summer people should take... The market. The market needed the summer. But somehow during the summer, the capital market sentiment shifted and the grease is starting again in the business and the industry. Now, the underlying investors, the CIOs of the underlying investors, they're still looking at the negative performance in their portfolios and in terms of new allocations from them into the sector, that remains delayed but the people who have the commitments and/or the direct investor, they're active again and participating in the marketplace. And I would presume, assuming that we have positive performance, that the underlying investment capital will begin to be allocated positively in 2025. I think 2024 in terms of fundraising is like the worst year since 2012.

Nancy Lashine:

It is. That's true.

Michael Levy:

And the market was half as big in 2012.

Nancy Lashine:

The market was even less than half as big.

Michael Levy:

So, on a relative basis, it's-

Nancy Lashine:

The dry powder, the $300 billion of dry powder that we have today that's in the U.S. is bigger than the entire market was in 2012.

Michael Levy:

That just exacerbates how bad fundraising has been.

Nancy Lashine:

In terms of total dollars.

Michael Levy:

In terms of total dollars. But I think that will turn because I think it lags. Those fund flows lag what's actually taking place in the marketplace. In terms of challenges or problems that people have? Again, it completely depends upon what you own. If you bought a really good industrial building at the height of the market and you paid a three and a half or four cap for it, you just have a valuation issue. Hopefully you've absorbed it by now and you get to move on. If you were actually developing during that period of time, rents have run so fast, if you underwrote in 2021, yield on cost at a five cap, I'm just making it up but let's say that was the market, and you're leasing it today, you're probably leasing it at a six, six and a quarter, six and a half to a seven. And so, you've actually-

Nancy Lashine:

So, you're right in the money.

Michael Levy:

Even if you at the peak of the market did industrial development, you're making money. So, if you bought it, you've lost money. If you've developed it, you're likely making money or certainly breaking even. It's a very interesting dynamic when people talk about risk. The risk was to buy the stabilized asset. The risk was not to develop it.

Nancy Lashine:

What do you think the risk is today? Some people are saying that the best opportunities are in core because there's so little core money around.

Michael Levy:

Sure, but the problem is pricing. There is so much capital. If you go to buy core assets... We can talk about office buildings, which is its own microcosm, but let's just talk about what people really are focused on. They're focused on residential rental, they're focused on industrial, they're focused on these specialty sectors. If you want to go today, right now into the marketplace and buy a core multifamily asset in a good, solid, strong market, take Atlanta, your cap rate today is four and a half to five and a quarter.

Nancy Lashine:

Ouch.

Michael Levy:

If you want to buy-

Nancy Lashine:

And your mortgage rate is probably in the sixes.

Michael Levy:

It could be.

Nancy Lashine:

Or maybe high fives.

Michael Levy:

It could be.

Nancy Lashine:

Yeah.

Michael Levy:

That's just what the market is.

Nancy Lashine:

So, people think they're going to grow their way to positive leverage.

Michael Levy:

The underwriting is clearly that we're going through the supply wave right now of resi and industrial but the new starts have collapsed, so look a year out for industrial look, two years out for multifamily and the deliveries relative to absorption. So, you can underwrite real rent growth. The other point is, yes, that cap rate's low, but there's been a lot of supply and maybe income is down, maybe NOI is down 5% or 10%. You're just capping a lower number and you're looking at your basis and your basis might be below replacement cost. So, the headline yield is concerning, but the cost of building it is more expensive than buying it but that's the market. You say the core capitals out of the market. Well, somebody's buying these things and they're paying these prices for it. I don't disagree. I think it is a good time to buy these assets because I think you are able to buy some of them below replacement costs. And I do think rental growth will be there and I think these will be good investments because I think supply and deliveries will be drying up.

Nancy Lashine:

Where do you think the best opportunities are in real estate investment today?

Michael Levy:

Selfishly, in what we're doing. To be very fair to the industry, I think there are tremendous opportunities in data centers and there's no doubt. And there's so many capable people pursuing that right now, but I think the demand for industrial in the United States and the supply demand fundamentals, the setup is terrific and I think it's a great opportunity. I think this whole thing about residential rental of all types, the build to rent space, the single-family home for rent, given the unaffordability of buying homes, that is here to stay. And whether it's aggregated homes or purpose-built communities, people are going to rent these things and they're going to need them. There's Millennials in their ages, that's a great space. We're very active in manufactured housing. One out of every nine homes in America Built is a manufactured home. There are 43,000 of these communities, 4.3 million of these homes sit on manufactured home communities. It's the largest space of affordable housing in the United States.

When you acquire these communities, you're only buying the dirt and the community, I shouldn't say the dirt. You're acquiring the community. The people own their homes and it's such a mom-and-pop business. So, you're literally able to find a community that someone's owned for 35 years materially under invested in it. The roads look terrible. The clubhouse is a mess. The pool is brown and people are living there. It's their homes. This is their communities. So, you can go in there and truly add real value. People like to talk about value add. You can add real value and increase the value of their homes, make their lives better, and rents can move reasonably. It's a terrific investment return with very low volatility and very little CapEx needed over the course of an investment period.

Nancy Lashine:

It's such an important place to add value and to improve. And it's such a mom-and-pop business still because there's very few institutional owners of these assets that have been able to do a good job there.

Michael Levy:

We've been focused on this for six years. We've been one of the larger acquirers of these properties, and we've built an amazing portfolio and business and I think it's a terrific business, terrific opportunity. There are other things we do that not everybody does. They're harder to do in terms of where there's opportunity. The convenience and gas business for us, we've been very, very successful in over a long period of time. And that's driven by relationships with operators and it's an idiosyncratic business. The flow isn't constant. It sometimes has a-

Nancy Lashine:

Do you net lease those properties or how does that work?

Michael Levy:

We typically have an arrangement that they have a buyback option with respect to it.

Nancy Lashine:

Do they have a triple net lease, or?

Michael Levy:

Yes, to us. There's some structures in there. When private equity goes into buy a convenience and gas site, they basically buy the business. We finance the business and the owner can grow it, and then they have the right to buy it back from us. So, our structure is attractive to a lot of folks but it's such a unique marketplace and unique relationships that I'm not expecting everybody to have that capability.

Nancy Lashine:

Do you have any perpetual life vehicles or is everything either closed in or direct accounts?

Michael Levy:

We have some very long-term ventures. Perpetual, we don't have perpetual. We don't have perpetual.

Nancy Lashine:

Have you thought about taking any of your closed end vehicles or separate accounts and creating open-end funds?

Michael Levy:

I've thought about everything. I think-

Nancy Lashine:

It's a trend that we're seeing in the market today.

Michael Levy:

My job is to think about all the options and to pay attention to the market and really what do investors want. And then figure out whether it makes sense for us or whether we can do it or can't do it. I would say, I'm sure you agree, starting these from scratch, starting open-end perpetual vehicles from scratch, is very difficult because if you're going to provide liquidity, how much equity do you need to have liquidity in an open-ended perpetual vehicle?

Nancy Lashine:

At least a billion dollars.

Michael Levy:

Sure. As this cycle has shown, you can have 70 billion and don't have liquidity. I lived that in the global financial crisis. I watched open-end funds, the whole German, open-end fund market. I don't know if you remember, that was a daily liquidity business. The entire industry was shattered. All the open-end funds in the U.S. gated right? Today, I'm not going to say all, but most of them are gated.

Nancy Lashine:

Well, no, the non-traded Riets are but the open-end funds are trying to clear their cues.

Michael Levy:

I know. I said most, but my point is-

Nancy Lashine:

Just defending our brethren.

Michael Levy:

I'm just talking about liquidity and do these open-end perpetual vehicles.... They have liquidity when times are good and they don't have liquidity when times are bad. That's when people want to get out. So, you got to be thoughtful about it, and you got to be honest and you got to speak the truth. I'm not saying they're bad and they're necessary and they're great. My last firm has at today, a terrific open-end fund but it was a very small fund back in the day.

Nancy Lashine:

All right. We could keep going at this all day, Michael. You have such incredible perspective and so much to add to so many conversations but we are going to wrap up. Let me ask you, Texas versus New York. When you think about retiring, tell us about where would you live?

Michael Levy:

I'm torn and I'm torn because I spent 50 years in New York and this is where my kids are. This is their lives. This is my best friends in the world. This is my family. These are the people that I love. I've built amazing relationships. I have great friendships in Texas and wonderful people that have gone from acquaintances to deep, deep friendship. But ultimately, I have three kids. If those three kids live in three different places in the world, one in Hong, Kong, one in New York, it'll be harder for me. But if those three kids wind up building their lives here, I'm going to be where my kids and my grandkids are. That's the life that I want to live when I get older.

Nancy Lashine:

Right. Where do you go to learn? What conferences do you go to or what industry groups have you gone to really get best ideas and continue to build those more senior relationships?

Michael Levy:

I think PREA is a particularly important and influential organization. I think elements of ULI are very valuable. Less so on the investor side, more so on the real estate side. I think The Real Estate Roundtable in Washington D.C. on these topics of federal legislation for our industry is an important organization. Clearly, PERE as a convener and as a distributor of intellectual content is part of the backbone of our industry. So, participating in those events, I think Jeff Dorman and the guys and gals at IREI, they produce incredible intellectual content, and when they convene, they get a really good group. This Columbia Business School real estate program is a great group of people. Down in Dallas at SMU, they have a terrific real estate school and a real estate program. So, those are some of the things that I'm engaged in at different levels.

Nancy Lashine:

What do you read every day to just get news?

Michael Levy:

I try very hard not to read the news because it's toxic. It's all toxic, right? I don't care what your channel is, it's bad for the soul. And you'll realize that if you don't go to news apps and you don't go to the news websites, you get what you need through emails that come to you just through life. I'm not in a public securities business. I don't need every minute to know what the [inaudible 01:08:54].

Nancy Lashine:

Do you subscribe to certain emails, to publications that send you an email?

Michael Levy:

It's happened over time. It just comes to me now over time. If there's one news source I'm going to go to, it's the Wall Street Journal. It is the Wall Street Journal. I choose to read. I read books. I read paper books, and I listen to podcasts. I get knowledge and information through podcasts.

Nancy Lashine:

What's one of your favorite podcasts?

Michael Levy:

Well, because I love him and he's so funny, Bill Maher is so funny.

Nancy Lashine:

Yeah, he's funny.

Michael Levy:

He just cracks me up and he's got these two podcasts. He's got Real Time and another one, I forget what he calls it. I think Sam Harris is an incredible thinker. He's a neuroscientist, the way he can articulate. Unbelievable, the way that he thinks. I have health podcasts, I have foreign affairs and political, and-

Nancy Lashine:

Any book recommendations?

Michael Levy:

I just think of the one I'm reading now. I'm reading a James Michener book called The Source, which is... I love Michener. He's great. He's reading that right now. There's a book called Chip War, fabulous book about the semiconductor, the chip.

Nancy Lashine:

[inaudible 01:10:03].

Michael Levy:

It's an amazing book. I like reading stuff that Yuval Noah Harari writes. He wrote Sapiens. I thought Sapiens was such a fabulous book.

Nancy Lashine:

It takes a lot of attention to read him though.

Michael Levy:

It does.

Nancy Lashine:

Yes.

Michael Levy:

It does.

Nancy Lashine:

Talk about needing to concentrate.

Michael Levy:

It does. The big one this summer, I think Peggy Noonan is an unbelievable journalist, and I love everything she writes, I read. The greatest book I ever read was Anna Karenina by Leo Tolstoy, without a doubt. I had never fallen into a book so much the way that he wrote. Peggy the summer, read War and Peace, and I've been intimidated by War and Peace but I now-

Nancy Lashine:

I have another friend who listened to that as an audible.

Michael Levy:

No, I'm going to read it.

Nancy Lashine:

Oh, a friend of mine listened to it as an audible this summer and was totally obsessed with it. I thought she was crazy. So, now you're the second person saying this, so that's interesting.

Michael Levy:

Well, I'm like, "I'm going to read that book." That's my next book is War and Peace, and I'm geared up. It's 1200 pages.

Nancy Lashine:

Yeah. I'm impressed. I guess you have, hopefully, some airplane time to do that.

Michael Levy:

That's where I read.

Nancy Lashine:

If you could have dinner with anyone dead or alive, Michael, who might it be?

Michael Levy:

Oh God, no pun intended.

Nancy Lashine:

I know it's a hard question.

Michael Levy:

I have so many interests in so many things. You know what? I would love to have dinner with any one of Socrates, Aristotle or Plato because it blows me away how they figured so much out. We live in a world today where all that will happen, you'll criticize the Greeks for all the bad things they did in today's social milieu, but if you really read what those people wrote and the way they thought and how they figured it out, they figured it out. The stuff that we know today, they figured out thousands of years ago.

Nancy Lashine:

Wow. Okay. That's deep.

Michael Levy:

Oh, sorry. I don't know. Just came to me.

Nancy Lashine:

No, that's great. It's such a pleasure, Michael, having you. Really, thank you so much. I love your enthusiasm and you've sat in so many interesting seats in the business. I can't wait to see what you guys do next.

Michael Levy:

Nancy, thank you for having me. It's great to talk to you. It's a lot of fun to talk to you. I'm glad that we built this relationship. Thank you.

Nancy Lashine:

Likewise.