Dec 1, 2025 · 1h 0m · capital-allocators
John Khoury – Asymmetry and Opportunity in Public Real Estate at Long Pond (EP.474)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators, Long Pond Capital founder John Khoury discusses his career journey, his firm's multi-year fundamental framework for exploiting public real estate valuation asymmetries, granular subsector outlooks, and the launch of their actively managed ETF, LPRE.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 18.3% of the talking time here. How this is scored →
Ted as informed peer 4.7 Guest teaching 4.6 Guest disagreement 1.5 Ted pushing back 1.0
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 13:30 Clarifying that pod shops aren't making mistakes
John pushes back against Ted's characterization of other players making mistakes, distinguishing that pods play hockey while value-oriented fundamental managers play basketball.
Hardest push from Ted ▶ 25:20 Ted challenging raw quantitative outputs vs real portfolio constructionTed presses John on why a purely quantitative ranking cannot simply be bought directly without active discretion and factor adjustments.
Biggest teaching moment ▶ 35:30 Explaining the three-year lag in real estate supply deliveriesJohn provides a masterclass on development cycle mechanics, showing how free money in 2020-2022 caused oversupply that peaked in 2024-2025 just as starts fell 60-70%.
Ted holds their own ▶ 26:43 Ted identifying key factor risk sensitivities in REITsTed demonstrates keen familiarity with systematic portfolio management by immediately pinpointing factor drivers and asking how momentum and value tilt the book.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Early Life and First Lessons in Real Estate Banking | 4 | 3 | 1 | 1 | Ted guides the biographical narrative through John's early real estate exposure and career shifts from Lazard to DLJ to hedge funds. John provides an engaging, collaborative origin story. | |
| Evolution and Expansion of the Public REIT Universe | 5 | 5 | 2 | 1 | Ted asks foundational questions about historical public REIT market size and changing dynamics. John educates on the emergence of secular risk, diversification beyond the four classic food groups, and the rise of pod shops. | |
| Exploiting Asymmetry and Disconnects from Intrinsic Value | 5 | 5 | 3 | 1 | Ted probes whether passive and pod shop strategies make market mistakes. John gently reframes, clarifying that they play a different game with hyper-short horizons, which naturally leaves longer-horizon asymmetry for value-oriented specialists. | |
| Founding Long Pond Capital and Defining Its Vision | 5 | 4 | 1 | 1 | Ted explores the founding thesis of Long Pond and its broader investable universe beyond traditional REITs. John breaks down asset-light models in homebuilders and hotel management companies. | |
| Long Pond's Investment Process and the Asymmetry Ranker | 5 | 5 | 1 | 1 | Ted asks how Long Pond analyzes disparate business models in a unified portfolio. John describes the proprietary Asymmetry Ranker, qualitative governance overlays, and calculating warranted value. | |
| Portfolio Decision Making and Allocation Speed | 4 | 4 | 1 | 1 | Ted inquires about the speed of execution and portfolio turnover. John explains that while diligence enables rapid allocation during volatility, positions are structured around a multi-year duration paradigm. | |
| Quantitative Ranking Versus Factor Risk Management | 6 | 5 | 2 | 2 | Ted asks how qualitative judgment and factor constraints deviate from purely algorithmic rankings. John recounts painful historical lessons around factor exposure and details his approach to pair trades and catalyst-driven shorting. | |
| Position Sizing and Research Coverage Structure | 5 | 4 | 1 | 1 | Ted asks about portfolio construction, position sizing, and team research structure. John articulates running concentrated long books with up to 12% positions in high-conviction dislocations while capping shorts around 3%. | |
| Sponsor Message: Ridgeline Investment Management Platform | 2 | 0 | 0 | 0 | Ted reads a sponsor advertisement for Ridgeline and introduces the subsector discussion. | |
| Sunbelt Apartments, Industrial, and Self-Storage Outlook | 5 | 6 | 2 | 1 | Ted asks about data centers, prompting John to explain why private markets capture better development economics before shifting to deep value in Sunbelt apartments, industrial, and self-storage due to the 2022–2026 supply lag. | |
| Navigating Trends and AI Risks in Office Real Estate | 5 | 5 | 2 | 1 | Ted asks about office real estate headwinds post-COVID. John contrasts prime Class A assets with capital-intensive lower-tier buildings and warns that long-term AI labor efficiency may decimate office tenant demand. | |
| Residential Dynamics: Single-Family Housing vs. Apartments | 5 | 6 | 1 | 1 | Ted asks about structural shifts in residential subsectors. John explains how frozen mortgage markets drive homebuilder rate buy-downs and how dropping Sunbelt rent-to-income ratios sets up significant apartment rental growth. | |
| Retail Sector Recovery and Omni-Channel Evolution | 5 | 5 | 2 | 1 | Ted prompts on retail and hospitality. John argues the retail death thesis is over and uses Hilton versus Park Hotels to illustrate the immense power of asset-light conversions. | |
| Manufactured Housing and Dislocated Cold Storage Assets | 5 | 6 | 1 | 1 | Ted asks for overlooked niche subsectors. John highlights manufactured housing ground leases and the severe market dislocation in cold storage operators like Lineage. | |
| Leveraging Artificial Intelligence in Investment Diligence | 5 | 5 | 2 | 1 | Ted asks about AI in research diligence and why Long Pond hasn't entered private real estate. John explains why private equity requires a different skill set and details the launch of Long Pond's actively managed ETF (LPRE). | |
| Forward Outlook: S&P Divergence and Upcoming Inflection | 4 | 5 | 2 | 1 | Ted asks about operational ETF launch challenges and medium-term outlook. John highlights the historic 60% performance gap between REITs and the S&P 500 since 2022 and anticipates a powerful inflection point. |
Statements from this episode (38)
Khoury: In 1999 REITs Traded at 20–25% Discounts to Private Value
“REITs were the antithesis of what anybody wanted to own. So the most impactful thing that I learned at Lazard, having been the grunt guy, running all the models in advance of the CEOs coming in to complain to my managing director why their stocks all traded at…”
Khoury: Four core subsectors previously comprised over two-thirds of REIT index
“They used to call it the four major food groups, office, industrial, retail, and residential, and those companies accounted for over two-thirds of the entire REIT index.”
Khoury: Buying Distressed Real Estate and Waiting for Recovery Is Dead
“If real estate went down, you could buy it and just wait, and generally it would come back over time, and that's certainly not true anymore.”
Khoury: Niche REIT subsectors have decreased correlation across real estate
“The second thing that's happened is, as the public market has proven to be an efficient place to own and hold assets, more and more sub-sectors have come to the public markets. Data centers, towers, cold storage REITs, single family for rent REITs, gaming REIT…”
Khoury: 90% of US Real Estate Is Privately Owned
“90% of real estate in this country is owned outside of the public market. So you've got 10% of the market that trades publicly.”
Khoury: 80% of Pod Hedge Fund Returns Arrive Around Quarterly Earnings
“80% of the returns of these pods are generated on quarterly earnings or the day after quarterly earnings, which means they are looking out for one quarter.”
Khoury: Long Pond Evaluates Investments on Two-Year IRR Paradigm
“We look at everything through a two-year IRR paradigm.”
Khoury: REIT Price Movements Are Now Double Long Pond's Early Years
“When we launched the fund, the first three years of the fund's existence versus the last three years of the fund's existence, the average move in the REIT space is literally two X today than it was then.”
Khoury: Pod shops have grown 4x since Long Pond's founding
“And the pods have grown four X since Long Pond has existed.”
Khoury: Hotel REITs are poor businesses because they are price takers
“There are hotel REITs, which in our opinion are not great businesses. They're generally price takers.”
Khoury: Hotel Franchises Grow Earnings 15% Annually While Hotel REITs Stagnate
“These business models, you've got RevPar, you've got net unit growth, then with a little bit of operating and financial leverage and share repurchase, you're growing earnings, 15% a year, compared to the hotel REITs basically growing, not at all, or in some ca…”
Khoury: REITs total under $1.5T; Long Pond tracks 325 companies
“REITs are just under a trillion and a half, and the non-REIT side is actually larger than that. The companies are generally much bigger. In aggregate, we cover about 325 companies in our coverage model.”
Khoury: Cash-Generative Share Cannibals Become Cheaper If Their Stock Stays Flat
“In the best instances, these are companies that are generating material amounts of free cash flow and shrinking the float so that as time passes, if the stock's flat, it's getting better and it's getting cheaper.”
Khoury: Market Panics Indiscriminately Depress Good and Bad Cyclical Stocks
“Cyclical securities got hammered across the board, good and bad ones. Our experience is often, they all go down at a similar level in those periods of time, so you get a chance to buy the really good ones at great prices.”
Khoury: Long Pond Rotated Into Hard-Hit Compounders Like Hyatt
“In the case of Liberation Day, A lot of what we did was sell stocks that were down a little to buy stocks that were down a lot that had these compounding characteristics like Hyatt.”
Khoury: Passive Capital Inflates REITs Paying Unsustainable Dividends
“If you've got a significant amount of passive capital, which the REIT market now does, and a passive capital doesn't really care about anything, oftentimes securities can trade at levels that are higher than they otherwise would be because they're paying divid…”
Khoury: Long Pond maintains 30 longs and 30 shorts portfolio structure
“30 longs by 30 shorts, with the longs almost always being larger.”
Khoury: Long Pond sizes top long positions up to 12%
“We run with 12% positions. We don't do it all the time. It's reserved for special situations.”
Khoury: A 3% position is a large short at Long Pond
“For us, a short being a three percent position is a big position for us.”
Khoury: REITs Trading at 125% of Net Asset Value Is Now Normal
“If a REIT traded at 125% of NAV, That was Wall Street Journal News. Today, it's the norm.”
Khoury: Better Data Center Investments Are Private, Not Public
“Data centers, they're one place in real estate where the better opportunities are in the private.”
Khoury: Jury Is Out on Terminal Value of Data Center Assets
“The jury is out on what terminal value of these assets will be.”
Khoury: Real estate deliveries reflect capital markets from three years ago
“Real estate deliveries are never reflective of current capital markets. They're reflective of capital markets from three years ago.”
Khoury: Sunbelt Apartment REITs Trade at 25% Discounts to Private Value
“And the Sunbelt apartment REITs, which in aggregate are the largest exposure of the fund today, we're buying these companies at six and a half to seven percent implied cap rates, while the private market is close to five, five and a quarter, in 25, 30% discoun…”
Khoury: New Supply Starts for Sunbelt Apartments Dropped 60% to 70%
“So the output of that is in these secularly winning real estate asset classes, Sunbelt departments, industrial, and self-storage, that supply starts are down, depending on market subsectors, 60, 70%.”
Khoury: Office buildings consume 25% to 30% of income in capex
“25, 30% of the income from an office building is going into repairs, maintenance, capital expenditures on a recurring basis.”
Khoury: AI Office Vacancies Will Eventually Dwarf AI Tenant Demand
“That space that AI tenants are taking will be dwarfed by the magnitude of vacancy that they create over time.”
Khoury: Long Pond holds no long exposure to office real estate
“We don't really have exposure today in the long side.”
Khoury: Sunbelt Apartments Due for Rent Surge as Ratios Hit 19%
“Rent to income in the Sunbelt Has been going lower and lower and lower every year. So once you get back to equilibrium, we're of the view that it's not going to be, oh, we're back at equilibrium. We're going to grow a little bit. You're back with equilibrium. …”
Khoury: Hilton Cash Flow Quadrupled While Park Hotels Declined Post-Spinoff
“Interestingly, both of those companies did two dollars and 19 cents in free cash flow in 2017. This year, Hilton is going to do over nine dollars in free cash flow. Park Hotels is going to do less than the two 19 they did in 2017. Over that time period, Hilton…”
Khoury: Hyatt Shifted from 70% Owned Real Estate to 80% Management Fees
“Hyatt, when they came public, they owned 70% real estate and generated 30% of their income from management franchise. Today, it's 80% management franchise and 20% owned and leased.”
Khoury: Equity LifeStyle grew earnings through every modern recession
“This is a business that's grown earnings in 99, 2002 1001, 2007, 2008. You name the year, it's grown earnings. And their business is simple, but incredibly safe. They own the land underneath manufactured homes. They don't actually own the homes. It's an incred…”
Khoury: Cold Storage REITs Trade at 50 Cents on the Dollar
“Today, the company trades at, we believe, around 12 times free cash flow. Its competitor, AmeriCold, we believe trades a couple turns lower than that. We think good longer term businesses that are probably trading at 50 cents in the dollar to replacement cost …”
Khoury: Institutional Investors Will Adopt Actively Managed ETFs
“Our view is that institutional investors will adopt actively managed ETFs.”
Long Pond's Active ETF Holds 20 to 25 Cheapest Among 80 Target Real Estate Firms
“What we've done is we've taken the data that we have over the last 15 years of analyzing these companies, and we've said, there are 80 high-quality real estate companies. These are secular winners, compounders like Hilton. That will be the investable universe …”
Long Pond's ETF Has About 50% Overlap with Hedge Fund Long Book
“It's about a 50% overlap at any given point in time.”
Khoury: Real Estate Is the Only S&P Sector Down Since 2022
“You're talking to somebody who's investing in the only GIC sector in the S&P that's still materially down since 22. The GIC and REITs is down almost 20%, while the S&P is up 40. We've now, since the beginning of 22, underperformed the S&P by 60%. I believe the…”