London Property - Home of Super Prime

The effects of inflation and interest on the housing market with CloudHQ CEO Hossein Fateh.

January 03, 2024 London Property - Home of Super Prime Season 10 Episode 5
The effects of inflation and interest on the housing market with CloudHQ CEO Hossein Fateh.
London Property - Home of Super Prime
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London Property - Home of Super Prime
The effects of inflation and interest on the housing market with CloudHQ CEO Hossein Fateh.
Jan 03, 2024 Season 10 Episode 5
London Property - Home of Super Prime

In this episode , Farnaz Fazaipour discusses the effects of interest rates and inflation on the real estate market with Hossein Fateh, CEO of Cloud HQ. Fateh explains the correlation between inflation, interest rates, and real estate valuations, particularly focusing on cap rates and the risk-free rate provided by government bonds. He emphasizes the impact of inflation on the cost of labour and materials in construction, influencing the overall cost of building projects.

The conversation delves into the potential challenges for property owners, especially those with variable-rate mortgages, in the face of rising interest rates. Fateh highlights the importance of timing in the market, advising investors to fix their interest rates in advance or be prepared to weather economic downturns by adjusting their strategies.

The discussion concludes with insights into how real estate investors can navigate high inflation, protect their investments, and potentially take advantage of distressed opportunities in the market. Fateh encourages strategic thinking, emphasizing the significance of creditworthiness and government interventions in shaping the real estate landscape during inflationary periods.

Overall, the podcast provides valuable perspectives on the complex interplay between inflation, interest rates, and the real estate market, offering practical insights for both investors and property owners.

Maximize your property wealth with London Property. Turn challenges into opportunities. With expert knowledge and reach, we tackle the complexities and inefficiencies of the property market with you.

Show Notes Transcript

In this episode , Farnaz Fazaipour discusses the effects of interest rates and inflation on the real estate market with Hossein Fateh, CEO of Cloud HQ. Fateh explains the correlation between inflation, interest rates, and real estate valuations, particularly focusing on cap rates and the risk-free rate provided by government bonds. He emphasizes the impact of inflation on the cost of labour and materials in construction, influencing the overall cost of building projects.

The conversation delves into the potential challenges for property owners, especially those with variable-rate mortgages, in the face of rising interest rates. Fateh highlights the importance of timing in the market, advising investors to fix their interest rates in advance or be prepared to weather economic downturns by adjusting their strategies.

The discussion concludes with insights into how real estate investors can navigate high inflation, protect their investments, and potentially take advantage of distressed opportunities in the market. Fateh encourages strategic thinking, emphasizing the significance of creditworthiness and government interventions in shaping the real estate landscape during inflationary periods.

Overall, the podcast provides valuable perspectives on the complex interplay between inflation, interest rates, and the real estate market, offering practical insights for both investors and property owners.

Maximize your property wealth with London Property. Turn challenges into opportunities. With expert knowledge and reach, we tackle the complexities and inefficiencies of the property market with you.

Outro:

Welcome to the London property podcast, your go to source for navigating the complex and ever changing London real estate market. Our digital marketplace provides informative and educational content from industry leaders. Through podcasts and videos. We cover various aspects of the real estate experience, including buying and selling finance, law, tax construction, design, and more. Join us as we delve into the latest trends and developments in the market and gain valuable insights from our panel of experts.

Farnaz Fazaipour:

Hello, and welcome to love them property, the home of super prime. I'm your host Farnaz Fazaipour. And today we're delighted to welcome back to the show Hussein Fatah, the CEO of cloud HQ. Welcome to the show.

Unknown:

Thank you for having us.

Farnaz Fazaipour:

So why don't you tell us a little bit about cloud HQ and what you do. To put things into context for us before we continue.

Unknown:

We have actually two companies, cloud HQ and cloud capital. Cloud HQ is a developer wholesale of data centres meaning we we build these massive buildings that house servers, primarily the clients are the five large tech companies, that's the target client list, Microsoft, Amazon, AWS, Google, most of it is Google Cloud, Oracle, cloud, and meta. Four of the companies there is their cloud product. So when we talk about Amazon is not Amazon selling books or shoes, it's the cloud services. That's our target lists. Those companies outsource data centres, and they also lease data centres. They have to product teams, we mean to be a vendor that when they do outsource, find the location, secure the power, secure the fibre optic routes, get planning, build a product according to their needs. And then we have a long term lease whether it's 10 1215 or 20 year leases. Okay,

Farnaz Fazaipour:

so that's your core business. And obviously today, we're talking to you about the effects of interest rates and inflation on the real estate market. And you're very well positioned to educate us on this subject.

Unknown:

Well, thank you, maybe that's too much of a compliment. But look, inflation and interest rates that are totally related also affect long term debt. Meaning an you know, in the States, it's the US 10 year treasury. Here's the 10 year gilt. Real estate prices are directly real estate valuations are directly correlated with the 10 year bond, the government bonds. So when the government bonds were close to zero. Cap rates were, you know, in the lower the between three to 4%, here in England and America, also high threes to mid fours. Now on commercial properties, now those cap rates are incrementally higher. So means that multiples change. To put it in perspective, the cap rate is where you take the income of the property, and you divide by the interest rate, for example, it's a 5 million pound income divided by a 5% cap, which means 5 million over 0.05 is 100 million of valuation, which is a 20 Multiple. Right, right. So that's really kind of the value, how you look at commercial properties is what's the multiple and the way you look at the multiple is you divide by the cap rate,

Farnaz Fazaipour:

and the cap rate is the cost of money?

Unknown:

No, the cap rate is the premium on the cost of the long term treasury. So the risk free rate is the long term 10 year bond, or here the 10 year gilt that is the risk free rate. I looked it up today, here in England today. It's a 3.68% so that

Farnaz Fazaipour:

your money can earn with no risk whatsoever. If you get a government bond. Yeah,

Unknown:

the risk is Is the government of England going bankrupt and EU which has very low risk at that risk? You have, you can get make 3.68% on your money. Now to own real estate, which is a higher risk than the government risk, what type of premium do you need? Right. So, when the before COVID, when the, at some time when the risk free rate in England was at 1%. At 1%, the cap rates were somewhere between three and a half to 4%. So, the difference there is 250 basis points in real estate risk above the risk free rate. So, if the same logic prevails today, the risk free rate is at six storey 3.68. If you add 250 basis points on 3.68 means the cap rate needs to be 6.18. So, real estate risk if you keep it the same above the risk free rate of the government bond is 6.18. So, that's where Cap rates need to be pursued. Now, of course, certain sectors of real estate, retail which is doing badly would trade higher suburban office, which is a disaster with trade higher, certain asset classes in prime real estate, say residential in central London rental residential should trade lower. But everything is based off of what is the risk free rate and you adjust from there, but the risk free rate is up 250, at least in some cases, 300 basis points. And it used to be a little bit higher. And that is a disaster for certain property types. Because certain people won't be able to pay their debt or the debt, typically, even if they don't have debt covenants, debt covenants or certain mortgages is if appraisals change or if the valuations change, the lender could accelerate that mortgage or their mortgages when they come up, then the borrower will not be able to refinance. So

Farnaz Fazaipour:

I'm going to try and absorb everything you've said. But now the question I have is, what is the relationship between inflation and interest rates?

Unknown:

Well, it's when inflation goes up. The What does inflation really do inflation, people with assets are okay, or in some cases, better off. And people with no assets are poor. So for the majority of the population that have no lot of assets, what inflation does makes the poor poorer. In some cases, it helps certain rich people. But in most cases, it hurts it. And when the government has high inflation, the majority of the voters don't have a lot of assets. So they will vote that government out of office, because they're poor. And so it the gap, but the government's main tool in its toolbox is to raise interest rates to slow down the economy to lower the inflation. And inflation is really the cost of goods and services. A lot of that may be oil related. The other part of it is labour. Luckily, Today, China is going through its own recession. So the commodities which generally would be eaten up by China, is there's not a massive demand as at otherwise would have been, so that the commodities are somewhat in check. Oil is somewhat in check. Now, what is not in check, typically is labour in disinflation. And partly because both America and the UK have a very strict immigration policy. And what that does is it does and depending on which camp you're in, whether you're pro immigration or not, the facts are facts. Next, when labour is tight, then there is the cost of labour goes up. And a significant part of the inflation is the cost of labour. And that because of immigration being restricted is not coming down. So both in the US and in the UK, it's more difficult to battle inflation, because labour is tight. Right?

Farnaz Fazaipour:

And how does so obviously, if inflation is high, then they raise interest rates to control it. So that's an obvious way that the buying power of people in real estate is affected, is there anything else that affects the buyers purchasing power? When inflation is high?

Unknown:

Well, when inflation is high, then interest rates are high, when interest rates are high, people that want to borrow money on the real estate can need to borrow less, so they need less leverage. And the cost of borrowing money is high. So that it may, rents may start going up. But do rents go up at the same level as as inflation, sometimes yes, sometimes more. But if your cost of borrowing is not fixed, you're affected. Also, the even if your cost of debt is fixed, we have a property in America that the cost of that is fixed for 35 years. Nice, which is super nice. Right? Yeah. And it's under 3%. Right, and you would think we're doing better. Then, prior to inflation rate, actually, we're doing if I was going to sell it, we're gonna do maybe as well, maybe worse, even though the cost of debt is fixed, because the new buyer looks at their return profile. So the new buyer before COVID needed them total levered IRR of, say 7%. Now the new buyer needs a total levered IRR of eight and a half percent, and the entry cap rate is higher today. Also, the new buyer needs to lay out on a spreadsheet and to project their exit cap rate, their exit cap rate is also higher. So even though our cost of debt is fixed, when if we keep the property it is we'll probably do better, because rents go up rents, typically in market rate properties, about 50% of the units turn every year. So rents pretty much go up with inflation. But the valuation of the property has stayed the same. Or maybe it's gone down. Because the new prospective buyer will need a higher IRR buying a property because they will look at their risk free rates where they were versus where where they are now versus the risk free rate. It's an adjustment to the risk free rate. But also

Farnaz Fazaipour:

rents going up is going to also be linked to affordability because yes, you might need more rent because of whatever conditions you're dealing with. But then the tenants have to actually be able to afford to pay that Yes.

Unknown:

And that is related to the labour market. So if labour market is very tight, maybe people are still employed. If they raise interest rates too fast, then people start losing their jobs, then the late then you go into hard landing versus a soft landing. And so probably I was listening to podcasts the other day, more often than not coming in a hot, high inflationary market. The government's cannot manoeuvre into a soft landing. They have a hard landing, and we go into a recession. And that's the risk we're at right now. So

Farnaz Fazaipour:

what would be an obvious way for investors to protect their real estate investments in a situation of high inflation? Well,

Unknown:

ideally, then it's too late now. They would have fixed their interest rate long term, three years ago,

Farnaz Fazaipour:

and they should not be sellers. Well, or,

Unknown:

I mean, this is actually the point of thinking about there is you either protect Did yourself correctly three years ago, or you didn't, or you have a mixed bag like I have, because something is that's under construction. Anyway, construction loans are typically short term anyway. So even if you were smart enough to fix it the streets, then okay, my hat off to you. If you weren't, well, now you are potentially in trouble depending on the asset class. But really the best way is, hopefully you've saved some money, wait for the bottom of the trough, and be able to buy correctly. A good offence a lot of times, is the best defence, because then you can grow yourself and make money on the new acquisitions. But you have to time it correctly. Many times people are to trigger happy as soon as they hear, we're going down, they go and buy something. They could be a year and a half too early. And they could have bought it cheaper later now, that timing is never perfect. But to try and hit the right deal, at the bottom parts of the market, maybe not trying to hit it all the way at the bottom is the best way to protect yourself is to buy correctly. And I

Farnaz Fazaipour:

heard all these indicators that you've already addressed. You know, what's going on with the government what's going on with inflation in order to try and make a kind of educated decision on when is the right time and looking at the labour market and everything else

Unknown:

that, you know, get lucky. That always helps and try and find the right deal because the right deal at the right time is also not obvious. Sometimes what is a distressed situation and not be too greedy when a distressed situation comes up and make sure you offer a fair deal that look, buying right is more of a real estate art than selling right. So right now, the best way for a real estate investor is to time the market, which is never perfect, or time to correct acquisition. And work your way out of a difficult situation with your existing clients.

Farnaz Fazaipour:

But also being an established player in the real estate market, whichever asset class you're in, helps you buy, right because people know you will. Absolutely they will bring you the deals

Unknown:

absolutely also having the right balance sheet and having cash to act quickly. So, or having the ability to raise outside money. Because many real estate players right now say well, I don't have the cash. But the ability to raise money to be able to buy at the right price is one way to get out of trouble.

Farnaz Fazaipour:

And I mean, it's kind of an obvious answer, but I'm gonna ask it anyway. But how do changes in interest rates impact the rental market?

Unknown:

Well, the there are, obviously, rental market right now because inflation goes up is going up. The question is, is the cost of borrowing going up faster or slower? One typically lags the other. And depending on and then the other side of it is interest rates go up too fast, then we're going to have the shrinking of the economy, people losing their jobs or people having to sell their homes. I mean today when you look at it, the if you were a banker in London and your salary was 400,000 pounds, your mortgage could have been as much as 100,000 pounds, that is 25% Probably the banks would have cut you down to say 80,000 pounds. Now that was if your interest rate was floating which banks in England give a lot of floating rate rate, floating rate debt. That mortgage could today be 202 150,000 pounds. The guy huge that guy if his loan comes up, whereas mortgages reset. Either we have to sell his home buy something else, the bank may foreclose. Mortgage default rates are definitely on their way up They're not quite at the levels of 3%. But they could be hitting higher than 2%. And, or they have to find some other sorts of funds to get out their savings and pay the mortgage down. But there are definitely a higher likelihood that certain people will default and lose their homes. And then obviously, the government at some instances would need to step in and start bailing people out. That's what happened in the States. And it could happen here. Luckily, in the States, right now, more of the mortgages are long term. Here in England, the risk is a lot of the mortgages are short term. And that, you know, certain people will manage to whether it's calling their parents or borrowing money or using their savings to bail themselves out, but certain families won't be able to do it. And, yes, the tough reality of where we're at. And

Farnaz Fazaipour:

can you give us an example of where inflation interest rates affected the real estate market in the past?

Unknown:

Oh, yeah, I mean, in 2008, look, we've had crisis every 10 or 15 years, and we've been through it a lot. If you're a real estate player, every 10 or 15 years, you've had a very tough time. I mean, for me, personally, I worked for someone else in the early 90s, my boss was in bankruptcy. I learned a lot about us bankruptcy law than myself in 2001. During the.com crash, we had many tenants going out of business, there were because our tenants were internet related. And look, no one will forget 2008 remain in 2008. I remember calling my wife and friends and saying capitalism has failed. That we are where we are. And this was in November of 2008, when Lehman Brothers and who was went bankrupt, and one after the other US banks were going bankrupt, and the government had to come in and bail out some of the biggest banks in America. And then again, right now we are hitting the same kind of issues. COVID came along, after COVID didn't really affect things as bad. In the real estate market. However, the government pumped too much money into the economy, all around the world. And this has caused inflation. And now the government's have to severely restrict lending by raising interest rates. And we're going to be lucky to have a soft landing, but more likely, it will be a hard landing. And we'll go into a recession more often than not, when governments raise interest rates. We have gone into a hard London.

Farnaz Fazaipour:

So I remember personally asking you what the heck do I do now? And you said stop going to Harrods stop into Harvey Nichols. Stop going on holiday, tighten your belt sit and wait. But have you got any other strategies that homebuyers can use to navigate high interest rates? I mean, you did say luring down your your debt. Yeah,

Unknown:

I mean, the real answer is, look, you've either were smart enough or lucky enough to fix your debt. If you have not, you'll either have to sell your house, go move to a smaller place. borrow money from a family or a friend or use your savings to pay down your debt. And that's and tighten your belt and stop spending so much. You eat inside during the cheaper why? You wait, try to write out to live to fight another day. You need to write this out to live to fight another day. Another day will come but you need to be able to last through the process until interest rates come down and which is out of your control.

Farnaz Fazaipour:

Right. And how would How does inflation affect the cost of construction?

Unknown:

Oh That's a good question, but the look it obviously cost of construction is totally correlated with inflation, because at least in my industry 50% of cost of building a data centre as labour 50% of the equipment and materials. So, labour market is extremely tight, and that cost goes up with market, the materials cost and equipment, it goes up with inflation. So, what we try and do is we try and raise rents to protect our yield and sometimes you manage to do it, sometimes we are living in an environment where we are making less money per transaction and living with a lower yield also parts of construction in the commercial sense is capitalised interest, meaning when you have your total capital stack is kind of like soft cost, hard cost. And part of the soft cost is, you know, architects and permitting and engineers and site supervision is also a interest rate bucket. That is the interest rate, that the amount of interest that you need to reserve. So, during construction, when the property has no income, it pays the back, that bucket needs to be much larger now than it was before. Because that capitalised interest during construction is much higher. So you're typically our return unleveraged returns are lower than before, unless we've managed to dramatically raise rents, which in my industry is harder to do.

Farnaz Fazaipour:

Right. And we talked about the impact of interest rates, obviously on mortgage payments, the obvious is that they're going to be more. But is there a way that mortgage products can adapt in markets like this, to support the higher interest rates, so that the general public can have some light at the end of the tunnel? Typically,

Unknown:

that only happens with government intervention, because the banks also make their money off of the risk free rate. So the banks by themselves will not going to take a loss. Because what the banks do, they typically, at least in the States, here, banks, keep their mortgages in the States, they package the loans and sell the mortgages. Now, in the States, we have quasi government entities, given certain qualifications by these mortgages, from the backs. I'm afraid to say England may need to do the same type of structuring, if the banks end up with a lot of mortgages that are on their books, then the government may have to step in and be the willing to buy those mortgages, from the banks to open up the bank's balance sheets. And if they don't, then the bigger risk of this thing continues, is that you'll have bank failures. That's happened before, like in the SNL crisis. And then in 2008 in the states, if enough people default on their mortgages, then the banks will start defaulting. And then we have an even bigger problem. So it's a timing thing is does the government thinks there is enough risk and the sector to start buying the mortgages, so it doesn't have bank failures in the crisis, when Lehman Brothers and all these banks failed, is because it wasn't necessarily because of commercial properties. There was because there were too much mortgages in default being held on the bank's balance sheets. And the banks have to mark these mortgages to market and when the bank's mark these mortgages to market, the banks don't have the required reserves. And then the banks are failing.

Farnaz Fazaipour:

At love and property. We do news bulletins every Every week, so I read a lot of the news wires. And what I had been reading recently is some mortgage products that were actually lower than the current rates of Bank of England. So the one in question was a buy to let mortgage that somebody was offering at four and a half percent when Bank of England rate was a 5.25. So what does that all mean?

Unknown:

Look, the I don't know the specific mortgage you're talking about. Sometimes it could be seller financing, meaning the guy that is owns the place is willing to lend you money to buy it, then that guy may want to achieve a certain price. And him he, the seller in that point, is taking some risk. And he obviously doesn't have a mortgage, and he can give you whatever bonds. That's not a mortgage that is typical. And in fact, that seller will have some risk of default, and the seller will carry that risk. In other cases, I remember in 2008, in the States, there were these mortgages that were offered. I think they call them grandma mortgages, or granny mortgages, where the banks were selling things to the consumer that the consumer didn't really know what they were buying. They had short term, very low rates. But in three years, the mortgage rates jumped. The common friend of ours, Mother bought them. And I remember her going into default in two years, because she said that, why did my raise rates, mortgage rates go up? Because she bought something that was artificially low in the beginning. And then it was embedded in the mortgage, that it doubled or went up significantly higher, after a couple of years, and then she would go into default. So those were actually some of them. The federal government came hard after the banks who were doing that they were selling mortgages to people that didn't really the consumers didn't really understand what they

Farnaz Fazaipour:

were buying. So if it's too good to be true, then it probably is, yeah, who

Unknown:

doesn't? It doesn't really work.

Farnaz Fazaipour:

And how would you say a real estate investor can take advantage of inflation?

Unknown:

Well, I think the best way on the commercial side, if they can find the property that the current tenants in it, or paying under market rates, and that you're able to buy the property at the correct price. And then when the rents roll, renegotiate those rates to market rates. So that would be a classical goodbye in this type of market. Because they'll rates and now it has to be the right property type. It has to be under market rates, you need to look at when those terms come. And then also the options on those tenants to those tenants have the option of renewing with the fixed escalator or do the tenants have the option of renewing? At a at the market rate. Right. And if the

Farnaz Fazaipour:

type of tenants that actually will have the ability to pay more rent?

Unknown:

Well, yeah, obviously you want good credit? Yeah. Because also very much so and that's a very good point. Credit also really matters in this type of market. Luckily, in our sector, we only dealing with a very big tech companies. We don't have that issue, but in certain property types. Retail many office buildings when the tenants cannot pay, raising rents is you're absolutely right. Farmers irrelevant because they can't pay it. Yeah.

Farnaz Fazaipour:

So if you did have a crystal ball, how would you predict the prime central London property markets going to react in the coming months years quarters, residential or office? Let's start with residential?

Unknown:

Look, I think there is the high probability that there will be failures on consumers not being able to pay their mortgages. The probability will increase depending on how quickly the government starts lowering rates. If the government continues in these higher rates and rates that stay still and for duration for how long because every month, certain mortgages are coming up. And every month, certain people will say my mortgage has doubled or tripled, and I can afford to pay it or I need to sell my house. So there are, there will be distressed buyers. So scuze me your right sellers. And then buyers, distressed buyers will want to get that lower price, because they'll have more options. If they have more options, they're trying to find the bottom, they'll bid lower and lower and lower. So I think that the also with the current tax regime, is the days of people buy massive mansions in London, because they are avoiding federal tax or UK government taxes are over those days are over the non DOM data novel. billionaires that live here permanently, those days are over. So the massive properties will really meet those prices that are skyrocketing, the number of sales at 100 million or so you're going to have less and less of that, because those people will not permanently be able to live here. And so I think that those I think if the government does not lower rates, soon and fast, we'll have failures in my view in central London, especially on the young buyers that took the risk of properties where their mortgages were 20 25% of their income. Now that 20 25% has gone to 50% of their income. And they'll have a tough time making that they'll have to dig through their savings and call friends and family to borrow money to pay off the mortgage or worst case scenario is loser homes or be able to sell their homes at a fraction just to pay off their mortgage.

Farnaz Fazaipour:

Doesn't look peachy. But I mean, then when you think back to when we were getting on the property ladder, you know, 5% was a really low interest rate.

Unknown:

You're right. But the problem is, we were going in borrowing at five, the new buyers were using 20% of their income borrowing at one. Right when these buyers were using 20% of their income borrowing there. One, they were betting that interest rates were there. So it's too late for those guys. Yeah.

Farnaz Fazaipour:

And also we were going into longer term mortgages. So

Unknown:

we were borrowing or in the property market 20 years ago, or 15 years ago, you were using 5%. But the 5% paid for 20% of your income. Right, so then the 5% mortgage was 20% of your income or 25%. It really, really high if you're buying 25% of your income. Now, those guys were borrowing at 1%, still 20% of their income. And so if that really goes from one to four or five, some people could be in a situation where 100% of their income of their mortgages term is going towards their mortgage, and how are they going to live to pay for food?

Farnaz Fazaipour:

Well, I guess we're all in it together to a degree. So we've got that comfort, but it is it is a wait and see. And you know, it is my job as someone who's been a you know, a property consultant for all of my career to be positive and say, in a we do get surprised in London, and people come from out of nowhere and suddenly change the top end of the property market. So what would you say about commercial real estate?

Unknown:

Well, let me just address that. The opportunity now is figure out how in the next six months to for you as a property consultant to take advantage of the distressed situation that's going to come into the market. That's the opportunity. Yes,

Farnaz Fazaipour:

I've got very good idea if someone gave me 100 million pounds Exactly. Or exactly a really good idea. Yeah, and some

Unknown:

people in your world. Some people will be clever enough. Five years from now we're gonna say x, y, z, ABC. These people. Joe Schmo went and figured it out. out, went and raised the money raised the distress fund, bought that building at the bottom of market that building at the bottom of the market, there will always those guys, those guys will come again. And those guys are the guys that will look like superheroes five years from now. Yeah,

Farnaz Fazaipour:

well, let's hope those guys come and find me. And we put together portfolios of rental investments in prime areas, clustered together so that you can then sell it to an institution because everybody's leaving the rental market as well, because of all the taxations on individual landlords. So there is there is, you know, I always like to think that markets find a way. And you know, in certain asset classes, yes, in the real estate market, there are a lot of opportunities for the clever investor,

Unknown:

I think the government will also come around just like they raised taxes as the market was moving, they'll need to lower the sales tax on those taxes now to get to support the market, and I think, would rationally should happen. Yeah,

Farnaz Fazaipour:

well, I hope the government's ready for data centres and fully supporting your initiatives in the UK.

Unknown:

They are but like everything that slower than what we would like. The as far as data centres are concerned, we actually are. Most jurisdiction really want our asset class. Because we pay taxes, we support a huge amount of construction jobs, typically 800 employees, and these are high paid blue collar workers, potentially making like 50 pounds an hour. We don't put any pressure on traffic. And we don't put pressure on the schoolchildren meaning we don't create schools. So typically, jurisdictions really want our asset class and it's good for the general areas because they can afford to have better schools, better roads, and we pay taxes. So it's a good asset class. That's not going away.

Farnaz Fazaipour:

Definitely. You know, what, thank you very much for taking time out of your very busy schedule to talk to us and educating us on interest rates and inflation. It was really good having you on the show. Well,

Unknown:

thank you for having us. Appreciate it. Thank you.

Outro:

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