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WeWork (WE) Begins Trading Tomorrow After SPAC Deal - YouTube
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was nothing more exciting in
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the market, then the saga of we
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work in eth ouster of its
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leader, Adam Newman Now it's
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got a new CEO. It's also packed
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up and it's ready to roll
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tomorrow. Let's talk abtou
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what's going on with the
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business, joining us. Alex
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Snyder's Portfolio management
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Center Square investmten
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Management, Alex, Thanks for
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being here, so number one. Are
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you going to buy this thing
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when it's t?ou Oliver Great to
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be here. Thank you. dAn uh,
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we're looking hard at it. I
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think I think that the Matic
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for we work right now is
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fantastic. You know the big,
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flexible work environment that
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was kind of formed and really
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accelerated by the pandemi Is
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playing right into their hands,
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and they have a new leader. As
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you mentioned. It's not Adam
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Newman anymore. He was the
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perfect guy to get something
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like this started. Very
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entrepreneurial, very inspiring.
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He got Softbank to give them
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money, and he grew like a weed
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but Sandy familiarity, Mithra.
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He is a guy that we know very
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well here at Center sarque
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because he's been the public
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markets for a long time. He was
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the CEOf o GDP, which is a
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small company that got taken
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out a few years back, and he
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workedt a Tornado, which is a
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New York uh, real estate
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company. So he track record is
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fantastic, and instead of
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welfare success from her. Born
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a does a staple, a big real
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estate firm, and the business
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now is going to be largely
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centered on the rents paid by
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those in the time that they're
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spending in the offices. As we
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were going to own the
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properesti. What is the main
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revenue stream going to look
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like they operate as a
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traditional REIT? No no, they
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will not. They are still
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effectively subleasing space
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and partnering with landlords
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Okay, build out, basically then
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released to tennis, so they are
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not like a traditional office
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freed. At all. Um but one of
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the things that they're doing
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going forward that I think is
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absolutely fascinating is
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building out the real estate as
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a service model. So some of the
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big guns in the brokerage space
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like C B R E. Cushman
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Wakefield, which actually has
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$150 million investment, and we
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rkwo Are building out their
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real estate as a service model,
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and this is expected to be, uh,
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call it $2 trillion global
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market annually. That's only
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20% penetrated and what that
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means is tt. The real estate
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is a service a lot of this
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stuff. Real estate is done in
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house. So you have somebody
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that helps you find your real
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estate helps you build it out
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helpsel hps make it safe for
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workers to come back. And what
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real estate is a service means
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is that places like we work or
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C B Er will do that for you.
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Much like software as a service
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has really come into the common
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vernacular over the last 10
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years. And so we work grew up
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as a covert confirm that is
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still its main businses. But
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one of the things going forward
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is the software as a service
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business line that I think is
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really what really could turn
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on the afterburners for them.
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Alex There's a lot of companies
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that have been stacking in the
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market lately, and the path to
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the public market says,h U,
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excuse this way through this
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particular model, but. Andn o.
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A lot of people say the lot of
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packs are higher risk, but I
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can't really think of any that
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wereon the brink of bankruptcy
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at one point, uh, dan had to be,
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uh, you know, build out
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basically by different
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investors. Softbank, I mean,
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Are the pressure inpots that
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led to that blow up now, fully
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relieved. Was it as simple as
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leadership or is there? Uh,
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financing an In all of balance
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sheet or fundamental things
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that are are still risk points.
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So I'll start off by saying
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that when they were trying to
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go public in 2019, theer were
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$47 billion in valuation, and
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now you're getting that athe t
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20% of that cost. So any time
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you get something off a really
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good start when you're trying
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to get a second chance. Uh
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beyond the valuation. I think
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that two major things have
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changed both the world and the
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company itself have really
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morphed in the last two years
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because of the pandec.mi So
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first with the company you went
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from Adam Newman to send deep,
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who is a great operator and did
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a really nice job, right,
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sizing the business and
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focusing on their core
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competency of Coworking and
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then adding on that real estate
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is a sercevi. Uh, you know for
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future growth as well. And then
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the world itself changed
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throughout the pandemic, right?
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We learned that you know we
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could work from heom. And as we
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work from poem that became the
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common nomenclature, but we're
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now learning that it's not just
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o
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rk from home and its work
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from anywhere. You don't have
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to be just in the main
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headquarters. You can be in
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your home. You can be in a
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coffee shop. Youan c be in it.
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We work space somewhere in
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between. And in fact, there are
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a lot of major companies that
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are doing exactly that. So that
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say their employees in Long
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Island don't have to come all
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the way into Manhattan. They
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can go to what we workspace
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that's near their hoe.us And so
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both of those things that
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really put we workin a great
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position to sueeccd where it
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did not in 2019, and I will say
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that I even know some
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television networks that have
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we work Offices set up went
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blank. Okay So, Alexa, whats i
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then? The game plan first year
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out of the gate, like when
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we're wahitcng this company's
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earnings and we're hearing
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about the strategy. Is this
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about just partnering with
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different real tourism property
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owrsne to expand their
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footprint, Or is it about
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really eking out the gains and
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squeezing all the margin that
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they can from their existing
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proptieres? So first things
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first. They're not profitable
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yet, and they pretty much have
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never been put in their history.
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But things look pretty good for
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2220 even through the delta,
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Bury it coming through.he T we
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work office space got a
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disproportionate amount of
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leasing in places like
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Manhattan, London relative to
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traditional landlords. They are
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60% occupied relative to less
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than 30 and a bunch of gateway
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cities so people are using the
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space and what they need to do
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is continue with that
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trajectory and get their
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current spaces. Fuller more
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occupied from 60% to around 86
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to 90% portfolio wide and then
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they can really start turning
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on everything else and
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hopefullgry owing. In their
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softrewa or real estate as a
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service and growing their
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discount, and so we're
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expecting some decent top line
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growth from this business first
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year, man are they gonna be
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able to compete? With the
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market that's demanding, like
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double digit growth from
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anything that's unprofitable I
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do think that they're going to
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have a lot of growthUm. you
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know, next year is gonna there
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even does still going to be
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relatilyve small, But from
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there, it's going to go up
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multiples. You won't even
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measure it in, like teens.
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Percent You know what was it?
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You just said about red hat up
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17. It's cutting me.or It won't
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be measured that way. Ando s I
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have high hopes for what
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they're going to be showing us
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in 2023 2402. The trick is
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getting there, Alex. Great
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conversaonti to establish this
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company force and what to look
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for hope You'll continue with
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us. Absolutely Thank you,
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Oliver. Thank you. exAl Snyder,
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probably manager, Center Square
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Investment management
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