Podcast Summary: Capital Allocators EP.474

Guest: John Khoury, Founder & Managing Partner, Long Pond Capital
Host: Ted Seides
Date: December 1, 2025
Episode Title: Asymmetry and Opportunity in Public Real Estate at Long Pond

Episode Overview

This episode features a deep dive into the opportunities and evolving landscape of public real estate investing with John Khoury of Long Pond Capital. Ted and John discuss John’s background, the growth and nuances of the public real estate universe, the profound impact of passive flows and pod shops, Long Pond’s process of identifying asymmetric opportunities, insights on various real estate subsectors, and the firm’s new actively managed ETF. The conversation provides both strategic and tactical lenses on investing in public real estate, aiming to distinguish where value lies today and how to capitalize on it.

Key Discussion Points & Insights

1. John Khoury's Background and Path to Public Real Estate

• Family Roots: John grew up in a real estate family in New Brunswick, Canada. His father, a Lebanese immigrant, laid the entrepreneurial foundation (05:16).
• Career Launch: First job in real estate investment banking at Lazard, learned about valuation disparities:

  "You have $100 of apartments trading for 80 cents... it seems like an interesting way to exploit valuation differentials between the public and private." (06:10)

• Transition to Public Markets: Inspired by an encounter with early real estate hedge fund founder Art Ruble, John opted out of the expected private equity career track for the entrepreneurial, growing field of public real estate securities (08:09).

2. Evolution of the Public Real Estate Universe

• Market Growth: From $300 billion, concentrated in four main subsectors ('the four food groups'), to a trillion-and-a-half dollar, highly diversified sector including data centers, towers, cold storage, SFR, and gaming (09:14).
• Secular Risk: Once real estate was seen as cyclical but not secularly risky; now, differences in technology, work-from-home, and e-commerce have introduced enduring change—some sectors thrive, others decline (09:40).
• Increasing Dispersion: More investable ideas, less sector correlation, heightened opportunity for active managers.

3. Market Structure and Participant Behavior

• Who’s in the Game:
  • Passive Players: Now dominate, care only about tracking the index.
  • Pod Shops: Focus exclusively on short-term catalyst events, like earnings.
  • Actively Managed Firms: Few with a true fundamental, long-dated approach remain (11:05).
• Implication for Opportunity:

  "They're playing hockey, we're playing basketball... We have a view that our job is to identify and exploit asymmetry within publicly traded real estate securities." (13:08)

  • Volatility and short-term mispricings present more frequent asymmetric opportunities for Long Pond.

4. Long Pond’s Investment Process & Philosophy

• Focus on Asymmetry:

  "Our job is to identify and exploit asymmetry... defined as a disconnect between intrinsic value and stock price." (13:08)

• Two-Year IRR Paradigm: Not looking for immediate catalysts, but for events or trends likely to realign value and price within two years.
• Coverage Universe: Not restricted to REITs — includes hotel operators, homebuilders, service companies (16:53).
• The Asymmetry Ranker:
  • Proprietary tool ranking investments by disconnect between intrinsic value and price, factoring in business quality, management, and incentives (19:33).
  • Used for resource allocation, not automated trading.
• Qualitative Overlay: Management incentive alignment and capital allocation history are key.

5. Portfolio Construction & Risk Management

• Dynamic Response: Able to move rapidly in volatile environments, but always through a duration lens (22:24).
• Turnover: Episodic—can be high during reratings, but also periods of little activity (24:09).
• Factor Awareness:

  "The asymmetry ranker doesn't care about factors. We're not a factor-neutral fund, but we respect factors." (25:13)

  • Experiences during periods like 4Q18 have reinforced attention to sector and style risks.

6. Long and Short Positions

• Typical Book:
  • 30 longs by 30 shorts, long positions tend to be larger (28:25).
  • Longs can be as big as 12% in high-conviction, downside-protected opportunities.
  • Shorts used more tactically and in smaller sizes (max 3%), sometimes to offset long gross exposure (29:49).

7. Team Structure

• Analyst Coverage: Each analyst covers 40–50 stocks due to sector specialization; sector correlation is much lower (30:59).

8. Subsector Perspectives

a. Data Centers

• Public market opportunities less compelling than private, due to lack of development economics exposure; questions about long-term terminal value (31:45).

b. Apartments, Industrial & Self Storage

• “Secularly winning” sectors, currently cheap in public markets—e.g. Sunbelt apartment REITs at big discounts to NAV; an inflection is on the horizon as new supply halts and demand recovers (32:57).

  "We think you're not only buying incredibly cheap securities here... but you're at a point where the inflection's on the horizon." (35:38)

c. Office

• Doomsday post-COVID predictions overdone; top-tier assets in NYC and SF recovering, but the segment remains capital intensive with free cash flow challenges.

  "All office is left for dead today seems highly unlikely." (36:49)

  • Potential future risks from AI-driven vacancy remain (38:33).

d. Housing

• "As dicey as ever." Single-family affordability is a persistent problem; homebuilders using mortgage rate buydowns to drive sales, but consumer is stretched (39:24).
• For apartment REITs, constrained homebuying supports rental demand.

  "We're of the view that ... you're going to get this 19 to 22% catch up [in rent increases]." (41:35)

e. Retail

• E-commerce threat overhyped; the physical retail experience is proving necessary and the sector is much healthier, though not a current focus due to better alternatives (42:19).

f. Hotels

• Prefer management/franchise models (e.g., Hilton, Hyatt) over asset-heavy REITs; value in companies transitioning to asset-light models and demonstrating earnings compounding plus multiple expansion (43:05).

g. Manufactured Housing & Cold Storage

• Manufactured housing: “Incredibly safe,” stable cash flows, affordable living alternative (45:36).
• Cold storage: Recent IPOs (e.g., Lineage) offer value after oversupply and operational hiccups; now potentially available at 50 cents on the dollar (46:31).

9. Technology and AI

• AI is used for enhanced information processing but not as core differentiator; “table stakes” for staying competitive (48:14).

10. Public vs. Private Markets & The Actively Managed ETF

• John has not moved into private real estate, citing different skillsets and higher return on time in the public space (48:48).
• Long Pond’s Actively Managed ETF (Ticker: LPRE):
  • Offers daily liquidity, full transparency, flat 1% fee, and significant tax benefits (50:08).
  • Invests in the 20–25 cheapest high-quality real estate compounders, ~50% overlap with the hedge fund long book.
  • John believes “institutional investors will adopt actively managed ETFs.” (50:48)
  • Unique Value: Owns names not in broad indices (e.g., Hilton), excludes low-quality, low-growth REITs (53:28).

Notable Quotes & Memorable Moments

• On Passive and Pod Flows:

  "They're playing hockey, we're playing basketball." — John Khoury (13:08)

• On Asymmetry:

  "Our job is to identify and exploit asymmetry within publicly traded real estate securities." — John Khoury (13:08)

• Market Outlook:

  "What do I look forward to in the next two years? Not swimming against a current. I'm excited to stop talking about it and watching it happen." — John Khoury (00:00, 54:48)

• On Office Outlook:

  "All office is left for dead today seems highly unlikely." (36:49)

• On Apartments:

  "We're of the view that ... you're going to get this 19 to 22% catch up [in rent increases]." (41:35)

• On ETF Structure:

  "The power to compound that way is incredibly powerful.... It's a product that is for now, without competition." (50:48)

• Personal Leadership:

  "I wanted to create the best version of the firm I could create. Seeking to exploit asymmetry in publicly traded real estate securities." (16:13)

Key Segment Timestamps

| Time | Topic / Quote | |----------|--------------| | 05:16 | John’s family background and foundational training in real estate | | 06:10 | Lessons from banking and the first realization of public-private valuation gaps | | 09:14 | Description and growth of public real estate universe | | 13:08 | Market structure – "They're playing hockey, we're playing basketball." | | 16:13 | The founding vision for Long Pond | | 19:33 | The Asymmetry Ranker process explained | | 28:25 | Typical portfolio structure: “30 longs by 30 shorts” | | 31:45 | Data centers and sector-specific opportunities | | 35:38 | Apartment/industrial/self-storage value proposition | | 36:49 | Nuanced office outlook post-COVID | | 39:24 | Housing subsectors—the SFR/homebuilder/apartment dynamic | | 43:05 | Hotels: asset-light vs. asset-heavy models | | 45:36 | Manufactured housing and cold storage insights | | 50:08 | Rationale and structure of the Long Pond actively managed ETF | | 54:48 | John's outlook for the next two years: “Not swimming against a current.” |

Additional Personal Insights

• On Team Building:

  "We play basketball as a firm every Wednesday morning at 7am ... outside of my family, it's the most fun I have every week." (56:51)

• On First Paid Job:

  "My first job was delivering papers on [my brothers'] routes.... It taught me the benefits of operating leverage." (57:15)

• On Life’s Surprises:

  "I grew up in Fredericton, Canada. I now live in New York City. That wasn't on the bingo card.... Very little, I would say, went the way I expected when I was growing up." (57:47)

Conclusion

John Khoury delivers a rich, honest, and detailed account of the state and opportunity in public real estate. He outlines the edge in taking a long-term, fundamentally driven approach in a sector dominated by short-term and passive flows. The discussion is an essential listen for anyone seeking to understand real estate security investing, structural shifts in capital markets, and the innovations Long Pond is bringing via its active ETF structure.

For listeners: This episode blends practical investing frameworks, current sector context, and an insider’s perspective—providing a timely, comprehensive overview of public real estate’s risk/reward profile in 2025.