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Europe’s REIT Comeback? Juicy Yields + Big Sector Shifts (WOLF EU)
Recorded: March 12, 2026 Duration: 0:54:21Space Recording
Full Transcription
Thank you. Thank you. Good afternoon everyone, welcome back to the Wolf EU show.
I have a few people trickling a little bit later this morning as well, about five minutes
later this morning as well about five minutes or so just waiting for a few guests to arrive
or so, just waiting for a few guests to arrive.
i'm your host eva evatronic and with my lovely co-host alex alex tutik i still can't get over
your username it's hilarious good morning i had a lot of comments regarding that but uh
you know i hope you get around to it eventually
awesome yeah so i brought um a whole host of lovely guests with me today this morning we
are covering REITs today europe usa wherever you are in the world i hear your crisis there's a lot
of people who cannot afford housing uh from all sectors whether that's commercial to you know
your personal real estate in your homes um so we are going to talk about all of that today
but first up I do have to read a very quick disclaimer I'm afraid so nothing on here in
this space is professional financial advice this is purely for educational purposes and to help
you learn as a listener and do your own research an investor should always carefully consider a
fund's investment objectives risk charges and expenses before investing a funds prospectus
and summary prospectus contains all this information and other info for you at income
shares etps from leverage shares or whichever fund you choose and to obtain a funds prospectus
and key information document please visit the website at income shares.com and a funds prospectus
and key information document should always be read carefully
before investing. And I would like to welcome back on the show Sandeep here from Leverage
Shares. Welcome. Good morning. Good afternoon. Good evening.
Hello, Ivar. Yes, Europe's sector is looking pretty good right now. It's basically
the market consensus
that has already reached valuation bottom,
so the only way is up.
And there are some strong support
for REIT demand based on data centers and healthcare.
Ooh, interesting.
Never thought of, yeah, didn't think about that one.
I want to welcome back on the show, Mads.
It's always a pleasure having you on.
Hi, thank you. Asana's a pleasure having you on. Hi.
The sound is working today.
Great to be here.
Crystal clear.
Awesome.
We'd like to welcome some friends at Wolf, the fam here.
Will, good morning to you.
Good morning.
How are you guys?
Or good afternoon to some of you, I'm sure it is.
It's morning for me in Chicago.
Awesome.
Yeah, Will's options trader here. Always love your perspectives on the market.
Fantastic knowledge that you always have. Yeah, love to have you on. And good morning, Nat Nat.
Very good morning.
Good morning. Good morning, Eva. Thank you so much for having me today.
Of course. Absolutely. So so yeah i want to kick
the show off alex do you want to give us like a sort of backdrop here
sure so i haven't speculated much into REITs before i looked into it that much to be honest
but for those listeners who might be a little bit confused about what it is,
it's essentially a real estate company that owns and operates
or finance incoming producing properties.
And you can then invest in that vehicle to take part of those investments.
And generally, they compete a little bit with bonds, yields, even cash when situations, when the environment is a little bit more unsure.
And there's many different ways you can focus your investments.
You can focus your investments, for example, for data centers.
You can focus for retail.
So think shopping malls or residential.
I think regarding the residential housing deficit in Germany is probably a topic that we'll cover
a little bit later today, so it's a little broad introduction.
Awesome, love that. Yeah, some great information. We definitely definitely so just to give you a little
download europe reits returned nearly 20 in 2025 that's four times what the u.s reits returned in
the same year which is really interesting we did mention it on a couple of shows as well that the
european markets did overall outperform the US. So that was quite an eye
opener for us over here at WolfEU. So we're seeing definitely the biggest outperformance
in the European listed real estate versus America in sort of the last decade, I'd say. And most of
the audience noticed that as well. Yeah, so today, we'd love for you to sort of kick things off.
Are you seeing anything interesting on the European markets, Mads?
Yeah, so I've never invested much in REITs.
I run a tech fund.
I think two things I would mention.
Trump is making changes in the United States.
And maybe that could be one of the things that is changing things for Reeds.
He's stopping the ability for professional investors to build portfolios of family homes.
There was a tax advantage on that.
And he's stopping that in order to make sure
that prices are not increasing there.
Yeah.
Then I think the states,
they're getting a new Fed,
head of Fed, and he will create some differences. He'll reduce the balance sheet of the Fed and will try to push the liquidity out via the banks.
And that will make some changes. They have the picture of having the
horse in front of the wagon or the wagon in front of the horse. Now, the horse in front of the wagon
is that the money flows via the banks and the banks will lend out money to businesses doing
something. And what they want is to try to channel the money
into investments in data centers,
energy infrastructure, and advanced production.
Whilst in Europe, we are doing the opposite,
what they call having the wagon in front of the horse.
And that is where you let your central bank sort of loosen and put out a lot
of cash in the system. And that is good for everything, every asset that you might have,
whether it be stocks or it be housing or whatever. So prices go up in that environment for people that has assets,
and that should be good for REITs. So I think probably that as long as we don't see a change in
the European Central Bank in the policy towards what WASH is trying to induce in the States,
uh in the policy towards what is what uh wash is trying to induce in the states that
that reach should probably just continue being a good thing uh whether uh this is being priced
in in the states is and that's the reason for the weakness i i i don't know interesting insights
there yeah thank you for sharing that will what are your thoughts on this i know you have a lot to
you for sharing that will what are your thoughts on this i know you have a lot to yeah there's i
think the the the big uh picture you know when we look at the eu in general when you look at rates
and i was just looking at the 10-year guilt yields and it's we've gone from four you know
four and a quarter or so all the way up back to 473 in a short period of time. So this oil shock that we're seeing right now has influenced bond yields around the world.
And when you look at the U.S. yields overnight and the long bonds rose to basically back to the 26 highs here or pretty close.
And as yields continue to rise, even though the REIT space has done well this year,
significantly outperformed in Europe last year, and the U.S. has been a little bit lagging behind
until really the first quarter. You've seen some of these REITs start to move off the floor and
are actually up nicely in the first couple months here. But as yields continue to go higher,
and if all of a sudden we see U.S. yields breaking
above 5% on the long end of the four-year close to, or the 10-year close to four and a half,
we might get a little retracement of some of that REIT move so far. But I do think that is
a buying opportunity because long-term oil prices, unless this is sustained longer term, where we see the back end of the curve continue to go up in oil.
If this is just a short shock in oil prices and then later this year oil prices are down, I would expect yields probably globally to fall.
And I think that really sets up the REIT space
to be a great buying opportunity. I think you need to buy quality. I would stay away from
higher yielding REITs that look attractive, but potentially have maybe some tougher tenants or
credit or whatever it is, because the other thing that is going on and continues to seem day after day is a point of contention is the private equity space. We're seeing redemptions,
I think, of one of Morgan Stanley's private credit funds that they limited today, along with
Blackstone and Blue Owl and a handful of others that continue to get punished in the
private equity space. So I think if you're in the REIT space, you want to look for quality,
look for quality names that are, you know, either undervalued. I wouldn't chase the crazy high yield
stuff right now because I think there's just a lot of uncertainty. But again, if oil prices do
start to retreat and we see the back end of the curve start
to fall, where this is something that's going to be longer term priced in, I do think both
in Europe and in the US, the re-space could outperform for quite a while as long as yields
stop pressing higher.
And if we do get that oil retracement, I would expect yields globally to probably fall with that.
Because the other part of that is the oil shock can create a demand issue for that on the longer end.
So it can create some decreases in economic growth because you have high oil prices that can potentially hurt the
consumer and you have gasoline fee. It's also a sentiment indicator as well. You start getting
consumers that are looking at high fuel prices. And we know in Europe, fuel prices are already
high, but more towards the US. I think it creates a little bit of negative sentiment. So that can inhibit growth in the labor market. Obviously, the U.S.
has continued to dwindle a little bit with a big negative non-farm payrolls last month. So I think
when you kind of put a lot together, I think that the quality REIT space will be a good place to be
invested as long as yields keep a lid on it kind of where we're at right now.
Yeah, some very interesting thoughts on that. Oil has definitely been a very sensitive mover
for us globally. It's trading here about $93 a barrel or so here in pre-market. I think with
rate cuts, that's going to be another sensitive matter as well. And obviously that can also look very different for the European side.
Nat Nat, what are your thoughts on this?
What do you think?
What are your perspectives on what we all have said?
Yeah, I actually agree with his take.
I was actually looking at a few re-tickers over the last few weeks.
to read tickers over the last few weeks.
And what's very interesting is that there is one,
I believe it's ORC, right?
This one has a yield of almost 20%, right?
But the actual ticker has just been down.
For the last five years, it's been down 74%. For one year years it's been down 74 for one year it's been down eight percent
but it has a high yield however one that's actually the one that does not have a high yield
um is a hr that's american health care re they have a yield of just above 1%, but the actual
stock has been doing phenomenal.
It is up within the past year, it is up over 83% within the past year, which is quite good
for a, it's actually not bad at all, given the current circumstances surrounding REITs, right? It actually hit a 52 week high not too long ago.
And for those that don't know this one, they actually,
they own and operate in the clinical space.
They own real estate across the U S the UK,
Isle of Man as well. This one seems to be a hot one.
Even though the yield is on the smaller
end, the actual stock is outperforming. So I thought that was very interesting. Kind of lines
up a little bit with what Will is saying, right? When we have a lot of economic uncertainty, when
we're seeing a lot of geopolitical tension, and now with oil, always tending to the the assets with strong fundamentals versus chasing the higher yields
those are actually better rewards and it's safe for long term as well yeah absolutely i can see
and understand why you're going for these sort of higher quality and what would define that right
and we always have healthcare is always here to stay. That's always one thing that people need, regardless of what economic changes there are and geopolitical
tensions. Yeah, I just pulled up the chart, actually. It looks insane, this chart. This
has not been on my radar at all. I didn't even think about healthcare. Yeah, HR, the growth is
a US healthcare. They came into public around 2024.
Very clean up, very good balance sheets.
So it's only about 3.4x net EBITDA.
Delivered 20% FFO growth last year.
And last year with same store and NOI up to 14%,
overall more than 25% in senior housing.
So that's something to think about as well.
We always have elders as well we need to look after,
where we probably have to send them to healthcare homes and whatnot.
So it definitely fits the ageing demographic.
I like that too, and the constraining of the senior housing supply as well,
I would imagine.
So, yeah, I think that's definitely something over here in europe we're facing as well
yeah and with the with ahr as well ever since its inception it has been up over 310 percent
that charge is literally just straight it is straight up girl it is like a rocket ship yeah
so great one so that's american Healthcare AHR great name on the board
there thank you for sharing Sandeep we love your thoughts on this I am very interested in this whole
data center thing as well oh I just chopped off one second let me just invite him back up on stage
if for whatever reason we have technical issues um i'll just restart the space
but usually you can just drop off and come back up and it should just work and it's been a bit
glitchy lately i hope he's with us
sent an invite um while we wait will did you have some names that you wanted to share?
Yeah, I think going back to the quality reads, I mean, one that I've been in and that I've been buying in the last probably three to five months is Realty Income, which is the
letter O.
I think the yield is a little over 5% right now.
I think the yield is a little over 5% right now.
They do have some exposure in Europe.
They got some exposure to pharmacy and healthcare and a little bit of retail.
I mean, they're kind of, I would say, one of the most stable players in the space.
I think the other one in the U.S. is ADC is another one, which is Agree agree reality corp uh that one has performed well actually just
hit i believe new 52 week highs last week uh broke out and kind of retraced the move over 80
so that's another one adc is the ticker um then there's i mean there's even some closed end funds
you could look at like rqi which is co which is Cohen and Steers Quality Income Realty Fund. That's another one in the space that I think has a nice yield and has more quality assets inside of that portfolio.
industrial space. You got like Prologis is one that you could be involved in. And then I think
when you look at like, you know, you have the healthcare space, just be careful on, you know,
there's some healthcare REITs out there that are, have a lot of high yield, but haven't performed
really well. So you got to go for the quality names. I would say on the data center side,
you have like Equinox is in there. Digital Realty Trust is another one, DLR. I would just
say that if you're going to be in the data center space, you're obviously subject to the news and
the headlines around AI. So I would say those are a little bit higher risk sentiment that you need
to be involved in. If they're going to be in your portfolio on the REIT side, I would say probably
the data center space I would be a little bit smaller in for the time being. Now, long-term, if AI continues to grow,
which we all expect it will, you're just going to have to be risk-sensitive to the choppy waters
that may come with being in the data center space because you could get headlines at any moment that
could short-term disable the AI space,
and those names trade lower. The data center reads probably trade with it. I know there was
a headline, I think it was last week on Wednesday or Thursday, that I think it was, which one?
Oracle, or there was a data center that was getting leased in texas that they were
no longer going to pursue and meta was going to pick it up i forget forget who uh which of the uh
hyperscalers was was in that contract but and then the you know all the ai names traded down
and some of the data center names as well so uh i think you just need to be nibbling in in some of
the higher growth spaces but um i think those are kind of some of the names
that I'm looking at. Again, I think quality will be where you want to be. There's another one in
there on the industrial side, which is Rexford Industrial Realty. That's a little bit more
higher risk. But if rates do come in and we do see some rate follow through to the downside,
and we do see some rate follow through to the downside.
I think REXR, which is Rexford Industrial Realty,
they have a lot of warehousing in Southern California
on the industrial side.
And I think that's another one that could run
on the stock price itself due to the higher risk
and yield sensitivity.
If yields do come in,
I think that could be a nice trade to the upside. If we get a sustained lower yields kind of globally, I think that will
help that name as well. So those are kind of some of the names I'm looking at. But the big thing,
back to what we're talking about, is geopolitical risk and how elevated do yields stay and for how
long. I think that's a big component of what happens in the reed space
this year and probably one thing i didn't have on my radar was you know oil going to 120
wti or brent continuing to go higher and uh if that happens where we start seeing oil
you know globally north of you know 100 and it's more sustained, I think that kind of may reset the REIT space maybe into 27
if yields stay elevated all year. So just keep that on your radars. Watch these yields,
see what's happening. But I do think that if yields start to top out and this is kind of
peak fear in the oil trade, then probably lower yields are ahead of us.
And I think that bodes well for the REIT space globally.
Awesome insights there. Yeah, I think with REITs, it's definitely more sensitive,
as we will just learn now. And absolutely great insights there. Sandeep, are you with us?
Yes. Can you guys hear me now?
Awesome. Yeah. Do give all of our listeners here a follow. And of course, if you guys
listening in the audience have any questions whatsoever, do drop them down below in the
little chat bubble and I'm more than happy to answer for you guys. Yeah, Sandeep, we'd love
for you to, let's explore a little bit of the data center stuff and what you're looking at as well
on the real estate market.
Sure.
Basically, the sector outlook for data centers
is ultra bullish.
2026 pre-leasing levels,
at least right now,
is basically at 75% across major hubs.
This is primarily being built.
One real factor for this
is this uh driving
requirement of sovereign ai or data native data protection which basically means that european
data needs to stay within europe so uh that is why we are seeing data centers explode and i suspect
that iran's recent actions on data center projects across the Middle East might prove to be
a beneficial uh factor for more flows into building out additional capacity within Europe and India
as this will be a high-risk region but basically what uh many of these AI companies were doing was
that they were leveraging cheap
electricity and cheap land leases available in the middle east who are all these countries were
basically very desirous of building secondary pillars of their economy since they're effectively
single pillar economies based on energy so there's plenty of money to spend and they were offering it
up they were basically offering everything up uh that is needed to build out a data center but again as we see in the course of action
this may not be a very wise decision so if you are talking if you are saying that AI will become
central to all productivity initiatives especially in work then it's going to be then the sector has gone from bullish to ultra bullish so one I think
some I think the previous speaker just mentioned it so data centers in the flap D markets the flap
D if you guys don't know is Frankfurt London Amsterdam Paris and Dublin are going to look
very very good this is where uh most of uh tech companies are most uh financial services companies
are all of them are data intensive and
they're looking for means to sort of co-locate their algorithms next to servers and computing
infrastructure to be a little bit faster so again i think equinix was the one that the previous
speaker mentioned eqix that's an interesting one digital realty DLR is a very good one so that's those
are two big uh uh things to look at uh another thing that you probably most people miss out is
that logistics is picking up uh e-commerce is here to stay and Europe has been building up in
e-commerce way more than uh Americaica has been because america is basically saturated market
dominated essentially by two companies uh shopify and amazon so logistics is looking very very strong
vacancy rates are at record lows in poor hubs less than five percent and the rents are usually fixed
are usually sort of uh tacked to cpi levels so rents are forecasted to grow 2.2% per annum
throughout through 2026 and into 2027. So that is an interesting play to make. So the what is known
as the Blue Banana Corridor from the Benelieu to Northern Italy and the UK Golden Triangle are the
ones that most investors are looking looking at and here is a name
that one we should be very careful of it says segro s-e-g-r-o uh don't uh you know don't mess
around with the don't mess around with the first letter there but it is a big leader in big box
it is a huge european leader in big box and logistics there's also a tri-tax big box which is a uk
specific company bbox which is pretty interesting to look at take a look at their numbers they are
quite promising and of course uh there's a u.s listed company prologus it has a huge european
footprint which is going to be very interesting to uh look at because you get uh
exposure to both sectors uh both the European market and the American market uh next one to
look at is probably healthcare uh aging demographics all over Europe guys uh healthcare becomes more
and more important but it is stable and and it's a growth market so there is going there is immense potential for high yield
leases that provide inflation protection so if you're taking a look at healthcare i i can't
remember if there's anything in healthcare that i can think of but that is another place to look at
if you are not looking at the health a specific healthcare read i think vonovia might be an
interesting one because there is Europe's largest regional landlord.
Benefits from a stable German rate environment.
There's Gassina, GFC.
Vonovia is V&A, German ticker.
And Gassina, which is a French ticker.
GFC, which has exposure to high quality Parisian residential and office infrastructure.
So those are some very interesting ones to look at.
Yeah, definitely a lot of names there mentioned.
Thank you for covering that.
I see Will's turned up there.
Yeah.
Yeah.
So I think that on the data center space, with everything that's going on with the private equity redemptions being limited.
Do we see a future where maybe some of this data center activity could slow down or could have some issues with funding?
Pretty good question, actually.
Pretty good question, actually.
Yes, private equity has in the past been quite, what I'm reading,
has in the past been slightly more speculative than needed.
But one good thing about the big AI companies is that they come with their own cohort of people.
And there is some guaranteed capacity basically built into these kinds of data center buildouts.
basically built into these kinds of data center build outs and this guaranteed capacity is a
definite uh you know a definite kind of support uh for the build out of course it's not they
don't guarantee 100 utilization of the data center in question but again if you get 40
that's better than what you would get in most other uh that's a better guarantee than zero
percent when you see look at private equity companies uh sort of outbidding each other and
making very unrealistic projections this kind of industry-led expansion is probably uh
better and a safer investment avenue than uh say the private equity model. I'm not fully convinced why private equity plays
with high tech industries such as data centers,
because precisely because it is so consolidated.
AI is such a consolidated sector is ridiculous
and it's often state aligned.
So what role does private equity have here
against a highly consolidated state supported sector that is AI?
It's definitely food for thought if you were to say that maybe private equity place should not be here.
Yeah, interesting.
Matt, go for us. And Matt, go for it. Yeah, so on the question on whether these data centers will be good investments for lenders,
I think you need to look for what the guys with most knowledge do, what the big lenders do.
They seem to be very eager to lend out their money to AI data centers build out.
We had a lot of talk about Oracle and how their loans didn't seem very well.
And when they made a large sell of bonds, it was oversubscribed immediately.
And they came out with a good quarter just yesterday or the day before yesterday talking about how once they deploy,
the data centers, they are profitable from day one.
Because there is the state where AI is right now.
It's generating real value in businesses that apply it and buy the tokens.
So I think, yeah, I think, but I find that discussion really difficult to wrap my head around because I think there are some really,
really good and skillful people talking about the credit risk right now and they see a credit risk.
But when I as a tech investor listen to their beer theses, it seems like they don't understand AI sort of completely.
And that sort of makes me suspicious about both ways.
So I'm very unsettled on whether there could be problems or there couldn't.
I think one should definitely look into it.
I think one thing that I'm sitting here thinking about is that I think every investor, no matter what you invest in today, should think about what does geopolitics mean?
And we talked about that, but mainly in the effect it might have on the interest rates.
And I think that you also need to think about sort of what does this increase in productivity mean for the sectors you are investing in?
Like these e-commerce centers that the REIT might own, will that still be a viable business model in five years?
model in five years. And so I think you need to think a lot about geopolitics and a lot about AI,
what that will do to the world. We had the Citrini report, which was a short seller report that
talked about a dystopic scenario a few years out. I totally disagree, but I agree that there might be some things that move
faster and that are harder to predict.
And I think the REIT market is sort of, it's been very stable and going up for a very long
time.
So I just think one should be cautious a little bit.
What are your thoughts on this, Will?
I know you know a lot about rates.
Yeah, I think that's a good point.
The yields everywhere right now continue to, I would say,
defy gravity.
And it seems like as we've gotten a little bit of relief
every time that we get something, we have something that flares up.
And here it's on the geopolitical front as well.
I mean, you just had, obviously, in the U.S., 10-year yields below 4%.
And now we've ratcheted all the way back up 20-so basis points, 25 back in the 420s.
So I think that yields globally uh where where are we going
from here we've had obviously yields that have been elevated across the globe for for quite some
time in the last you know couple years historically they're still relatively low but uh with the
amount of debt that's out there, especially when you look at housing,
which is one thing we haven't hit on yet, housing in the US, housing in the UK, in Europe,
housing still here is at 40-year lows in the US where transactions are extremely low and sales
continue to crawl along the bottom with mortgage rates north of 6% on the 30-year here. So I think
that that's another space is what happens with housing, what happens with the aging demographics
in Europe and in the US with the boomer generation continuing to get older and downsize. I think
that's another big component. Back to the AI conversation is
about, like you're saying, what happens more medium term on the job front? And the question
I've been asking myself, and I'm curious what everyone else's thoughts are, if we start to have
job losses where we start to see a structural move in unemployment, what happens to yields then?
Do yields just start to go down because now there's going to be a scramble to high unemployment?
And even though you have increased productivity, is it a bunch of people that are out of work
and looking for jobs? Now the conversation becomes,
are we looking at some type of UBI that may come down the road? I mean, those are the questions
that I ask myself. Will the general public, if job losses start to mount, people are looking for
jobs, AI might sound great, but maybe the counter argument is, does the general public reject it
if job losses start to become more widespread due to the adoption of AI?
And you're seeing, it seems like every day and every few weeks you've got more layoffs coming and big companies cutting jobs due to the adoption of AI.
And not only that, the robotic side and what does that play on the longer term jobs front?
So I'm starting to wonder, is long term are rates, is there just a negative bias in rates
that rates should move lower due to AI, due to productivity?
Even though it could be good in the short term, I'm really concerned on the jobs front
of what it does to the jobs market.
And maybe that's overshadowed because everybody said that 30 years ago when the internet first came out that it was going to take all these jobs and all it did was increase productivity
and make everybody better and look where we are today is much higher. So those are the questions
that I'm asking more in a medium term. Get your guys thoughts on that. I would love your thoughts on this, Mads.
Yeah, I totally agree.
And I think the Citrini report that came out was where he exactly talked about how everybody would be unemployed because of AI.
And that would result in people not being able to pay the mortgages of their houses.
And then you would have a financial crisis.
So when you listen to Scott Besant and when he talks about running the economy hot,
so he wants lower rates and higher growth.
And that can materialize if you increase productivity a lot, efficiency a lot.
And you do that by investing in businesses, in factories, in productivity.
So that way you can grow and sort of save society from the Citrini report is this increased productivity.
So people will lose their jobs or might have to find other jobs, but goods and services will decrease in price due to an increase in productivity. And then the question is, where does that leave REITs?
Because there you buy into a value of an asset
that people some way have to pay for.
And that's sort of built on the economy as we know it today.
So yeah, like Will, I also just have questions
about the future and that was kind of my point
on what will geopolitics and what will AI mean
for the economy and that maybe we should think more
and yeah, it's just down more paths, different paths.
Yeah.
Yeah, some great questions there.
Nat, Nat, do you have any thoughts on this?
Or are you seeing anything on that end?
Yeah, in terms of AI and jobs,
very interestingly enough, a few months ago,
we were on an AI-specific space with WolfBitcoin
and another AI company.
And we kind of went into the weeds a little bit.
We kind of did doping into the topic of job creation and job loss. And what we found was
quite interesting, right? So in the interim, there's definitely going to be some disruption,
as we're seeing now, right? And that's like with everything. So job losses are expected.
And that's like with everything. So job losses are expected. However, what we realized and what we found based on, you know, all of the research that we did on that space, that in the long term, AI is actually projected to create jobs and create opportunities, right? very interesting to see how it's going to play out um i believe it was will that actually mentioned
the the dot com right what happened when the internet first came out right a lot of people
were scared and i think it's the same thing now with ai i think in the long term we're going to
be okay though i think so too i think it's i call it the industrial shift 2.0 right um when we saw
obviously the internet and they were like oh my god it's gonna take all the old school jobs away
and everyone's gonna lose you know I think we just become the operators of the AI instead you know
um so something to think about when you are learning AI. And obviously job losses are no fun,
so have to upgrade with the times and, of course, with no spend,
and that means no people affording housing at all.
I mean, hopefully Europe or even the US might give some incentives
for new house buyers or even people struggling, hopefully.
In Europe, I don't know about that because we have so much regulation.
Yeah, the other question I had was, so I think in the US from a demographics perspective,
when you start to look at all the housing, because I'm in my late 30s, and you start to look at
and you start to look at the boomer generation for the U.S. that owns majority of the homes
and the younger generation. I mean, last year in the United States, the average first-time home
buyer was 42 years old. The average home buyer of any homes was 54 years old. So my question is,
all this housing that's out there currently that's owned by the older
generation as they age and begin to die and downsize and everything else, call it 10 years,
15 years, 20 years from now, what happens with is population growth and birth rates are very low
in the US. What happens to that next generation, the younger generation,
when they get these homes from maybe their parents or whatever it is?
Who's going to be the buyer?
Or will there be an excess supply of housing in the next 10 years?
Because the big house, maybe the younger generation is more in cities
or they want to travel or whatever else they're downsizing.
And all this excess large inventory that's owned by the older generation, my thought is maybe those houses will get sold or the kids will want to sell those properties just to get assets and money.
But who's going to be the buyer?
So that's the question that I've been asking on a bigger scale is what happens to the older generation that owns majority of the houses?
Will they sell them to the younger generation and at what prices and when can they afford them?
Yeah, great question. I wonder who would be the bigger beneficiary for that kind of stuff, right?
Sandeep, you have any thoughts yeah isn't
this already happening in europe i just found this thing called renovita.net you guys can take a look
at it you can buy a house in italy for one euro the agreement yeah the agreement is that you have
to renovate it and you have to own it for a and own it and occupy it for a certain
period of time so there are parts of europe that are already seeing this happen uh primarily because
of urban migration or simply emigration also many italians go abroad especially young italians
decide to travel abroad uh within europe and live in places. And there's an aging population everywhere.
In fact, my Italian colleague was saying the same thing the other day.
He was like, oh, yeah, I see only grey-haired people everywhere here.
All the young people seem to be leaving.
So if you want to take a look at what might happen in the U.S.
If there's an aging population, I guess that's, you can already
see it in parts of Europe right now.
Can I buy a house in the US for $1?
That would be great.
No, no, no, no.
You can get a house for free in certain states if you just happen to walk in and say, I just
live here.
And it'll take the owner about two years to uh for example in california
if you squat in a house it takes a year or the owner about a year a year and a half to
evict you because you have rights as a as a as someone with a roof over your head or something
like that i don't understand the law but apparently that's how it goes in certain states oh yeah i
forget that the u.s has different state laws in every it's
like the little mini government in its own little country there's like especially in uh in the
chicagoland area and then he's right in california the the tenant laws uh for for the renter are
very strong and it's it's very hard to get people evicted uh especially in California. I mean, they could be in the houses
a year, you can't get them out. And it's very renter friendly. And there's loopholes and
there's people that try to target landlords and properties to try and get in them and then do
this exact thing to try to essentially live for free, which is crazy. But it does happen in some of the parts around the US.
I think we saw this definitely uptick during COVID,
obviously with the world shut down.
Then surely wouldn't that deter homebuyers then?
Natna, I would love your thoughts on this.
Yeah, so the squatting laws are very, very interesting.
Recently in Potomac, in Potomac, Maryland, there was this big case where this quote unquote influencer, she was in a mansion.
She was squatting in a mansion.
But on social media, it gave away, it seemed as she owned the home.
And her social media page is now shut down, right?
It was shut down.
But she was given this false facade that this is where she lived
and these are all the things that she had.
And what's interestingly enough,
recently the cops actually pulled up into her home
and they arrested her and kind of had to force her out of there because the house wasn't
hers she was squatting there for I think almost two years so that the whole squatting issue is
an issue across the board in in the U.S. That's very interesting Alex is there anything like
this in Europe where you are in Sweden? Oh, no audio.
Was it just me?
Oh, heard you then.
Hello.
Maybe not.
We'll have to come back.
Yeah, probably.
Try from your phone.
So the other, I got a question for everybody
because I think that this is going to play into
yields and reits across the pond and here is uh it's interesting i was just looking at the
dollar index and and the euro as well um where do we see currencies going um broadly i know i think
the eu was that they were saying last week that they could potentially see
rate hikes later this year. And you look at the dollar, obviously, in some turmoil with oil has
caught a bid off the 96 low. I've been looking at the dollar on a monthly chart long term,
looking at the dollar index that goes all the way back to um you know 2008 to 2011
really and there's a really strong um uptrend line that we've touched a couple times here around this
96 level and i'm just wondering do does the dollar continue to move higher and the euro moves lower
and the euros come off that that uh you know, upper 117, 118,
now we're trading back towards the 115 level.
I'm just curious on what everybody thinks on rates
and monetary policy kind of going forward,
because that will affect the REIT space on both sides.
The dollar and the Euro relationship is really driven by three factors, right?
One is interest rate
differentials. And we're already seeing a July rate hike being priced in by the ECB.
They actually have 1.5 hikes priced in since this Iran war was started for absolutely no reason.
And in the US, we have rate cuts that have gone from two to one. Okay, so what does that mean?
rate cuts that have gone from two to one. Okay, so what does that mean? It means if by the summer,
if oil stays high, and actually the US EIA is actually now forecasting oil prices to stay
around 80 for this quarter, 70 to 80 in the third quarter, and then down to 70 by the end of the
of the year, which is still over 20% higher than oil prices were at the beginning of the year,
year, which is still over 20% higher than oil prices were at the beginning of the year,
we will likely see Europe react more strongly than the US, which means rate differentials
will widen. And that provides a little bit of support for the euro. The reason why the dollar
was down 10% last year was because of actions around tariffs and the sanctions and embargoes that were put forth on Russia, okay, that's
resulted in capital flight, along with the fact that the second factor that
drives currencies and rates is deficits. And this essentially was due to the fact
that over the last three presidencies, our deficit has risen almost
consistently to the one and a half, two and a half trillion area. And we are likely going to
have 50 trillion of debt by the beginning of the next decade. So we are on track to do two and a
half trillion dollars of deficits this year, next year, and that is putting pressure on our currency along with the fact that with the tariffs, we are doing less trade globally and people are trying to move their assets into other asset classes like gold. trillion asset class, right? And that compares to equities, global equities at around 120 trillion
of which 70, 80 trillion is US alone, right? Which is crazy. Less than 5% of the world's population,
right? With 70% of the world's equity value. But because of this doubling of gold,
and then over the past year and the rally in the last two years prior to that, you know, gold
is being accumulated aggressively by central banks that are now diversifying away from
treasuries.
And so the biggest buyer of treasuries today is not China.
They're selling.
It's not Japan.
They can't afford to buy.
They have their own problems.
It's not Europe because of the tariff war.
It is actually Americans.
Americans are the only ones buying
treasuries on an incremental basis in size. And that's why they want to change banking regulations
to allow for better risk weightings so that banks can actually buy more treasuries. And
they need to do that so that yields don't blow out. If you look at the UK tenure today,
They need to do that so that yields don't blow out.
If you look at the UK tenure today, which is one of the reasons why Europe is having such a big issue.
UK is an example.
UK tenure blew up 50 bps since the February 28th war started.
And so, like I said, there are a number of drivers of currencies. If we see the war get worse, and oil prices go to over 100 sustainably
over a couple months, you will see the euro underperform the dollar because it will be risk
off. It will be risk off for EM currencies and EM stocks because EM is a lot more exposed.
Think about China, India, Malaysia, Cambodia, Vietnam, Indonesia, all importers of oil without
domestic production. Okay. So they, so the U S dollar will rally in that scenario and Europe
will underperform UK will underperform and Asia will underperform. Now in the other scenario where
this lasts for a couple of months and then peters out, the Euro will might stay a little bit weak
for two or three months. Then it will likely
start to rally going into the ECB meeting in the summer where the ECB hikes. And we have our new
Fed chair, Warsh, come into power. And he will likely try to convince the other 12 Fed Board
of Governors to be more dovish into the second half of the year. So then the market will refocus
on rate differentials and deficits with the US having a much bigger deficit than Europe,
which is funny. In 2012, we used to make fun of Europe for having these super high deficits.
And debts to GDP with Greece at over 120%. And we used to think that 60 70 percent
