1
00:00:03,200 --> 00:00:06,640
Speaker 1: Global business news twenty four hours a day. It's Bloomberg

2
00:00:06,680 --> 00:00:09,760
Speaker 1: dot com, the Radio plus Mobile Act and on your radio.

3
00:00:10,000 --> 00:00:14,120
Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters.

4
00:00:14,240 --> 00:00:17,840
Speaker 1: I'm Charlie Pellett, the DAL, the SMP, neztack Hall declining in.

5
00:00:17,880 --> 00:00:21,960
Speaker 1: This update is brought to you by the American Arbitration Association.

6
00:00:22,440 --> 00:00:27,000
Speaker 1: International Trade or Business Dispute Resolved Faster with the International

7
00:00:27,040 --> 00:00:31,400
Speaker 1: Center for Dispute Resolution, the leader in alternative dispute resolution

8
00:00:31,480 --> 00:00:35,440
Speaker 1: around the world. I see d R dot org. Well.

9
00:00:35,479 --> 00:00:38,720
Speaker 1: Representatives for Twitter and the Walt Disney Company not immediately

10
00:00:38,760 --> 00:00:41,920
Speaker 1: responding to request for comment, but people familiar with the

11
00:00:42,000 --> 00:00:45,400
Speaker 1: situation say Disney is working with a financial advisor to

12
00:00:45,560 --> 00:00:50,240
Speaker 1: evaluate a possible bid for Twitter. Salesforce dot Com also

13
00:00:50,400 --> 00:00:53,840
Speaker 1: considering a bid, working with Bank of America on the process.

14
00:00:53,880 --> 00:00:56,600
Speaker 1: According to other people, right now we have got shares

15
00:00:56,600 --> 00:00:59,720
Speaker 1: of the Walt Disney Company down one point seven five percent.

16
00:01:00,000 --> 00:01:02,720
Speaker 1: Winter is now up by one percent, as some p

17
00:01:02,880 --> 00:01:05,240
Speaker 1: down sixteen a drop of eight tens of one percent.

18
00:01:05,360 --> 00:01:08,240
Speaker 1: Now also down eight tenths of one percent, as stack

19
00:01:08,360 --> 00:01:11,080
Speaker 1: also down eight tenths of one percent. Gold up a

20
00:01:11,160 --> 00:01:14,600
Speaker 1: dollar of an ounce eight, a gain of point one percent.

21
00:01:15,000 --> 00:01:21,039
Speaker 1: I'm Charlie Pellock. That's a Bloomberg Business flash. This is

22
00:01:21,080 --> 00:01:26,840
Speaker 1: Taking Stock with Pim Box and Kathleen Hayes on Bloombird Radio.

23
00:01:27,440 --> 00:01:31,600
Speaker 1: Taking Stock Today, we're broadcasting live from the midtown Manhattan

24
00:01:31,640 --> 00:01:33,760
Speaker 1: offices the Eisner Amper. They're getting ready to their and

25
00:01:33,840 --> 00:01:37,800
Speaker 1: a real estate private equity summit this Wednesday. The peers

26
00:01:37,920 --> 00:01:41,120
Speaker 1: sixty down at Chelsea Piers. But we're not waiting to

27
00:01:41,240 --> 00:01:43,800
Speaker 1: start this conversation because it's so big and important. We've

28
00:01:43,880 --> 00:01:45,640
Speaker 1: got to start today, and that's why we're happy to

29
00:01:45,680 --> 00:01:48,520
Speaker 1: welcome to the show Darren Horneck. He's managing partner at

30
00:01:48,600 --> 00:01:51,120
Speaker 1: Horneck Capital here in New York City, to talk in

31
00:01:51,200 --> 00:01:54,440
Speaker 1: particular about the New York commercial real estate market and

32
00:01:54,520 --> 00:01:57,480
Speaker 1: more broadly about what he sees as the factors driving it. Now,

33
00:01:57,560 --> 00:02:00,040
Speaker 1: welcome Darren. Thank you. You've been in real estate it

34
00:02:00,200 --> 00:02:02,280
Speaker 1: for twenty five years. I just have to ask you

35
00:02:02,360 --> 00:02:05,280
Speaker 1: what you've got got into the business. Well, got me

36
00:02:05,320 --> 00:02:07,640
Speaker 1: into the business was my father sitting me down and

37
00:02:07,800 --> 00:02:10,360
Speaker 1: telling me how to sell something big. And he pointed

38
00:02:10,400 --> 00:02:12,639
Speaker 1: to the sky and said, go sell air plans, Go

39
00:02:12,760 --> 00:02:15,160
Speaker 1: sell buildings, and I thought New York City was the

40
00:02:15,240 --> 00:02:18,160
Speaker 1: right place to start selling buildings, so I quickly jumped

41
00:02:18,160 --> 00:02:21,040
Speaker 1: into the brokerage business and got my start that way.

42
00:02:22,160 --> 00:02:25,359
Speaker 1: Let's talk about some buildings and trying to get the

43
00:02:25,480 --> 00:02:27,840
Speaker 1: right tenants for the right buildings, because I was noting

44
00:02:27,880 --> 00:02:30,359
Speaker 1: that you do a lot of work in Queens for

45
00:02:30,520 --> 00:02:32,760
Speaker 1: example of Borough of Queens in New York, and a

46
00:02:32,840 --> 00:02:35,040
Speaker 1: lot of these follow a kind of a program where

47
00:02:35,080 --> 00:02:38,079
Speaker 1: you've got big loft spaces or old warehouses and then

48
00:02:38,120 --> 00:02:40,880
Speaker 1: you've got that whole transition period. Speak about that process

49
00:02:41,040 --> 00:02:43,760
Speaker 1: and maybe give a couple examples about how you know

50
00:02:43,880 --> 00:02:47,079
Speaker 1: a tenant might want to move in, but the developers saying, yeah,

51
00:02:47,120 --> 00:02:50,320
Speaker 1: you don't necessarily fit the criteria. You're not going to

52
00:02:50,360 --> 00:02:53,640
Speaker 1: be someone I want watching looking at a crushed bus

53
00:02:54,240 --> 00:02:56,359
Speaker 1: sculpture in the in the lobby when you come to

54
00:02:56,440 --> 00:03:00,400
Speaker 1: work every day. R. So the market is definitely an

55
00:03:00,480 --> 00:03:03,880
Speaker 1: interesting and dynamic market these days. UM, A lot of

56
00:03:03,919 --> 00:03:07,080
Speaker 1: the trend is following where the tenants want to go. UM,

57
00:03:07,200 --> 00:03:09,239
Speaker 1: that's something I'm very keen on. I used to have

58
00:03:09,280 --> 00:03:12,880
Speaker 1: a big technology business years back, and I had over

59
00:03:12,919 --> 00:03:16,040
Speaker 1: two hundred feet around the country, so when I looked

60
00:03:16,080 --> 00:03:18,880
Speaker 1: at space, I looked at it from the consumer standpoint,

61
00:03:19,440 --> 00:03:21,480
Speaker 1: and I have that ability now that when I go

62
00:03:21,680 --> 00:03:24,760
Speaker 1: look at office buildings, you know, mostly around the region.

63
00:03:25,320 --> 00:03:28,360
Speaker 1: I tried to think of myself as that tenant and consumer.

64
00:03:29,520 --> 00:03:33,400
Speaker 1: What they want is nothing new. They want the old school,

65
00:03:33,480 --> 00:03:36,640
Speaker 1: they want the cool stuff. They want my ceilings, wood floors,

66
00:03:37,160 --> 00:03:39,280
Speaker 1: They like a lot of concrete, you know, a lot

67
00:03:39,320 --> 00:03:42,000
Speaker 1: of the retro feel is what people are looking for.

68
00:03:42,720 --> 00:03:45,120
Speaker 1: And I've been lucky enough to buy three buildings in

69
00:03:45,160 --> 00:03:47,920
Speaker 1: the last two years and they really fit that match.

70
00:03:48,400 --> 00:03:53,040
Speaker 1: We bought Evergreen, which is the old Schlitz brewery UM

71
00:03:53,160 --> 00:03:55,960
Speaker 1: in the middle of Bushwick, UH. It's the biggest building

72
00:03:56,000 --> 00:03:58,640
Speaker 1: in the neighborhood, about a hundred seventy thousand square feet.

73
00:03:59,000 --> 00:04:01,360
Speaker 1: I bought it with my on our Savannah, who is

74
00:04:01,360 --> 00:04:04,760
Speaker 1: a large private equity firm, and we went in there

75
00:04:05,000 --> 00:04:07,480
Speaker 1: with the mindset of how can we make this a

76
00:04:07,600 --> 00:04:11,000
Speaker 1: cool building. UM and has fifteen foot floor to ceiling

77
00:04:11,560 --> 00:04:16,880
Speaker 1: um floors, windows throughout, and the coolest floors where they

78
00:04:16,960 --> 00:04:19,600
Speaker 1: did the beer production back in the day. They have

79
00:04:19,720 --> 00:04:23,279
Speaker 1: thirty foot high ceilings where the executives oversaw the vet

80
00:04:23,320 --> 00:04:26,360
Speaker 1: production of the beer. So we took that building and

81
00:04:26,440 --> 00:04:29,160
Speaker 1: we bought it for about thirty three million dollars, invested

82
00:04:29,160 --> 00:04:32,520
Speaker 1: in another thirty million, and we're catering towards the high

83
00:04:32,600 --> 00:04:35,520
Speaker 1: tech community. Who wants this cool vibe? Just have to

84
00:04:35,560 --> 00:04:37,720
Speaker 1: ask you dropped that one on the Little Bomb Show.

85
00:04:37,720 --> 00:04:40,680
Speaker 1: You had a technology company along the way. What was this? Um?

86
00:04:40,800 --> 00:04:43,360
Speaker 1: It was cold onset access. We used to wire office

87
00:04:43,400 --> 00:04:47,320
Speaker 1: buildings with a fiber optic infrastructure and sell broadband communications

88
00:04:47,400 --> 00:04:50,200
Speaker 1: to the tenants. Okay, you're you're getting fingers a lot

89
00:04:50,240 --> 00:04:52,240
Speaker 1: of pies. So financing obviously very important to you. What

90
00:04:52,400 --> 00:04:54,240
Speaker 1: is what is the what is the environment right now?

91
00:04:54,320 --> 00:04:55,920
Speaker 1: What is it like? Is money? Is it money just

92
00:04:56,040 --> 00:04:58,920
Speaker 1: flowing out at you you're crazy not to do deals?

93
00:04:59,000 --> 00:05:01,479
Speaker 1: Or is it tightened up at all? It's definitely tightened up,

94
00:05:01,520 --> 00:05:04,360
Speaker 1: and the market has become a lot more challenged. Um,

95
00:05:04,880 --> 00:05:07,760
Speaker 1: there's a lot of equity out there. So there's tons

96
00:05:07,800 --> 00:05:11,159
Speaker 1: of private equity out there. Um, there's sovereign wealth funds,

97
00:05:11,720 --> 00:05:13,960
Speaker 1: there's money out there that wants to be put to work.

98
00:05:14,279 --> 00:05:17,200
Speaker 1: All right, All these private equity firms raise their money

99
00:05:17,400 --> 00:05:19,719
Speaker 1: and they need to put it to work. The challenges

100
00:05:19,880 --> 00:05:22,800
Speaker 1: finding deals that underwrite to the levels that you want

101
00:05:22,839 --> 00:05:25,360
Speaker 1: to invest in, so you know, rule of thumb, you

102
00:05:25,400 --> 00:05:27,480
Speaker 1: want to be somewhere in a fifteen to twenty I

103
00:05:27,760 --> 00:05:30,960
Speaker 1: R R range. Those deals are not easy to underwrite

104
00:05:31,000 --> 00:05:34,320
Speaker 1: today based on the pricing level out there, and debt

105
00:05:34,600 --> 00:05:38,560
Speaker 1: is becoming more and more challenging from a transitional standpoint

106
00:05:38,640 --> 00:05:41,800
Speaker 1: and from a ground up standpoint. So while the market

107
00:05:42,440 --> 00:05:45,960
Speaker 1: is hot still and pricing hasn't come and falling down,

108
00:05:46,440 --> 00:05:49,760
Speaker 1: it's still challenging to find transactions that you could underwrite

109
00:05:49,760 --> 00:05:52,440
Speaker 1: and really make sense of. You said, what three buildings

110
00:05:52,520 --> 00:05:55,520
Speaker 1: in two years, so that you've been able to acquire,

111
00:05:56,120 --> 00:05:58,360
Speaker 1: But we we did ten deals in the last three

112
00:05:58,440 --> 00:06:01,000
Speaker 1: years since I started the company on my own, but

113
00:06:01,200 --> 00:06:04,320
Speaker 1: particularly to the point of office. We've got three office buildings,

114
00:06:05,000 --> 00:06:09,080
Speaker 1: one in Bushwick Um, one we just bought recently with Brickman,

115
00:06:09,360 --> 00:06:12,320
Speaker 1: not a private equity firm, in a Ridgewood Um, and

116
00:06:12,560 --> 00:06:16,520
Speaker 1: another one in the South Bronx in mont Haven Third Avenue.

117
00:06:17,440 --> 00:06:19,880
Speaker 1: I was gonna say, if if a private equity investor

118
00:06:20,040 --> 00:06:23,160
Speaker 1: is thinking about getting into real estate and to do

119
00:06:23,240 --> 00:06:25,880
Speaker 1: these kinds of deals with you, what do you recommend

120
00:06:25,920 --> 00:06:28,320
Speaker 1: they do to prepare themselves so that they understand the

121
00:06:28,360 --> 00:06:32,799
Speaker 1: important parts of a deal. Um. The private equity firms

122
00:06:32,839 --> 00:06:36,000
Speaker 1: that I mostly work with our real estate specific private

123
00:06:36,040 --> 00:06:40,119
Speaker 1: equity firms, so they're very smart, very capable, professional people.

124
00:06:40,640 --> 00:06:43,560
Speaker 1: They understand the macro side of the real estate investment

125
00:06:44,240 --> 00:06:46,320
Speaker 1: and they look to me in a lot of cases

126
00:06:46,720 --> 00:06:50,799
Speaker 1: for my general expertise. So I'm an operating partner general

127
00:06:50,880 --> 00:06:54,120
Speaker 1: partner in most capacities, and I'll bring them up the

128
00:06:54,160 --> 00:06:56,400
Speaker 1: speed and discuss the business plan. Is the person of

129
00:06:56,440 --> 00:06:58,720
Speaker 1: real estate market cooling? Often can the FED stop worrying

130
00:06:58,720 --> 00:07:03,239
Speaker 1: about bubbles? Um. I don't like the word bubbles because

131
00:07:03,400 --> 00:07:05,720
Speaker 1: when you say bubbles that you just assume it's gonna

132
00:07:05,720 --> 00:07:08,440
Speaker 1: burst at some point in time. Um. What we're seeing

133
00:07:08,520 --> 00:07:11,560
Speaker 1: now is just a very very long cycle. UM. And

134
00:07:11,680 --> 00:07:15,960
Speaker 1: things are definitely cooling down based on the rate of transactions.

135
00:07:16,440 --> 00:07:21,120
Speaker 1: So two thousand fourteen two thousft were unbelievable years. Two

136
00:07:21,160 --> 00:07:25,000
Speaker 1: thousand sixteen is gonna probably be off by about Thank

137
00:07:25,040 --> 00:07:29,840
Speaker 1: you very much. Darren Hornick, he is managing partner Hornig Capital,

138
00:07:30,280 --> 00:07:33,480
Speaker 1: joining us here at Eisner Amper. They are put in

139
00:07:33,760 --> 00:07:36,800
Speaker 1: their fourth annual real Estate Private Equity Summit to take

140
00:07:36,880 --> 00:07:46,800
Speaker 1: place at Pier sixty on Wednesday. This is Bloomberg coming

141
00:07:46,920 --> 00:07:50,800
Speaker 1: up Bloomberg Politics with our own Mark Niquette. We're going

142
00:07:50,840 --> 00:07:54,160
Speaker 1: to preview the debates tonight, Donald Trump facing off against

143
00:07:54,240 --> 00:07:56,880
Speaker 1: Hillery Clinton. Markets already on the move ahead of that.

144
00:07:57,080 --> 00:07:58,679
Speaker 1: This is taking stock of Bloomberg Radio.