WEBVTT - TAAT CEO on Marijuana Legalization & CBD Cigarettes 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.360 at Bloomberg dot com slash podcast. Let's get over right 0:00:21.360 --> 0:00:25.400 now to SETI Costarelity. He's the CEO of TAT Global Alternatives, 0:00:25.400 --> 0:00:30.160 and we're gonna talk about marijuana legalization, which is big 0:00:30.240 --> 0:00:34.240 here in the US. I don't think the Germans smoke pot. 0:00:34.800 --> 0:00:37.800 They basically it's just if you're a beer. If you 0:00:37.840 --> 0:00:40.560 smell someone smoking weed in Germany, it's usually a brit 0:00:40.600 --> 0:00:43.279 or An American living in East Berlin. But I just 0:00:43.320 --> 0:00:45.839 walked up Lexington Avenue and saw a store that was 0:00:45.880 --> 0:00:49.879 selling actual weed and gummies with THHC none of the 0:00:49.960 --> 0:00:54.520 cb D you know, fake fakeery going on. Um there said, 0:00:55.800 --> 0:00:58.240 is this going to sweep the nation? Is it going 0:00:58.280 --> 0:01:02.520 to sweep the globe and be come as normal as 0:01:03.040 --> 0:01:06.679 you know, drinking liquor. Well, first of all, thanks for 0:01:06.720 --> 0:01:09.520 having me on UM. I do think that it has 0:01:09.560 --> 0:01:14.720 the absolute potential to do that. Um, you know, it's 0:01:14.720 --> 0:01:17.479 obviously a burgeoning category. There's there's a number of countries 0:01:17.480 --> 0:01:20.680 that have started to legalize it now and I think 0:01:20.720 --> 0:01:24.040 in the US, once those laws start to pass, you'll 0:01:24.080 --> 0:01:29.360 likely see, um, obviously a lot more uptake in the market. 0:01:30.040 --> 0:01:32.720 All right, say so, the big issue for the development 0:01:32.760 --> 0:01:36.520 of the cannabis market in the US has been federal legalization. 0:01:36.560 --> 0:01:37.840 And we've had a lot of states, a lot of 0:01:37.840 --> 0:01:41.040 big states, including New York and New Jersey, legalize it. 0:01:41.200 --> 0:01:45.960 So where are we in terms of federal legislation. Well, 0:01:46.000 --> 0:01:48.200 think they they've tried to pass a number of these 0:01:48.280 --> 0:01:52.440 laws through the House. Ultimately, you know, when when you 0:01:52.480 --> 0:01:53.880 kind of take a look at this, it's always just 0:01:53.880 --> 0:01:56.800 this plug a war between fear and greed. And I think, 0:01:57.360 --> 0:01:59.480 you know, for for as much as cannabis has been 0:01:59.680 --> 0:02:02.600 elite goal federally in the US, you'd be hard pressed 0:02:02.600 --> 0:02:05.880 to find any American or very few Americans that haven't 0:02:05.920 --> 0:02:09.280 tried it up until this point. Now, I do think 0:02:09.280 --> 0:02:11.480 that society as a whole is becoming a lot more 0:02:11.480 --> 0:02:13.840 progressive and open to the idea. So I think it's 0:02:13.880 --> 0:02:16.840 just a matter of time before it does end up passing, 0:02:16.840 --> 0:02:19.799 but even though certain states have legalized it, in order 0:02:19.840 --> 0:02:22.120 for it to really take hold, you need that federal 0:02:22.200 --> 0:02:25.400 legalization so that banks can now start getting involved in 0:02:25.400 --> 0:02:29.560 providing financing and really allowing these companies to generate sort 0:02:29.560 --> 0:02:31.720 of the capital and access to capital markets in a 0:02:31.760 --> 0:02:35.520 way that they can become large organizations, which is really 0:02:35.520 --> 0:02:38.000 what's needed in the US if you want to see 0:02:38.000 --> 0:02:42.600 this market flourish. I mean, the banking issue is I 0:02:42.639 --> 0:02:46.200 would say, probably the biggest in terms of growth. Right, 0:02:46.919 --> 0:02:53.880 what kind of growth do you expect from from marijuana? Well, 0:02:53.919 --> 0:02:56.480 I think it's again it's still a burgeoning category. And 0:02:56.480 --> 0:02:59.520 when you kind of take a look at the product itself, 0:02:59.560 --> 0:03:01.280 I think in the getting a lot of people thought 0:03:01.320 --> 0:03:04.520 that cannabis was going to compete with tobacco um, but 0:03:04.560 --> 0:03:06.560 as a whole it really does. In cannabis competes more 0:03:06.680 --> 0:03:10.040 with alcohol given sort of the drugs that are involved. 0:03:10.600 --> 0:03:12.760 The CD is going to compete with alcohol. CBD, on 0:03:12.800 --> 0:03:15.600 the other hand, does have the ability to compete, uh 0:03:15.600 --> 0:03:18.560 with tobacco, which is what you know our company is 0:03:18.680 --> 0:03:21.680 primarily focused on because it helps you quit smoking tobacco 0:03:21.760 --> 0:03:25.560 or one well, exactly right, I think one of the 0:03:25.600 --> 0:03:28.280 things that we're really proud of is that we've been 0:03:28.320 --> 0:03:32.080 able to apply hemp, which is a derivative of cannabis 0:03:32.160 --> 0:03:34.640 that doesn't have any t HC but does contain CDD. 0:03:35.040 --> 0:03:37.080 We've been able to figure out that when you can 0:03:37.120 --> 0:03:41.120 apply CBD to a cigarette smoker, it does have a 0:03:41.200 --> 0:03:45.040 high likelihood of helping them eliminate that nicotine addiction because 0:03:45.040 --> 0:03:49.640 CBD in and of itself isn't addictive. It's also not psychoactive. Right, 0:03:49.720 --> 0:03:52.560 so when you think about the pool of smokers, which 0:03:52.600 --> 0:03:55.600 is immense, and a lot of people don't really understand 0:03:55.600 --> 0:03:57.640 how big the tobacco market is. It's it's like the 0:03:57.640 --> 0:04:01.760 Mount everest of markets. Um, you know, comparatively to water, 0:04:02.520 --> 0:04:05.040 the bottled water market is about two fifty billion dollars 0:04:05.040 --> 0:04:07.640 a year globally, Tobacco is approaching a trillion dollars a year. 0:04:08.040 --> 0:04:11.120 The CBD is not addictive, it's not psychoactive, and it 0:04:11.160 --> 0:04:14.280 doesn't cause lung cancer. And you know, people behind you 0:04:14.320 --> 0:04:16.120 on the street don't hate you for it. I mean, 0:04:16.120 --> 0:04:18.920 there's so many, uh, you know, there's so many arguments 0:04:18.920 --> 0:04:22.120 for it. My question is on the th HC side, 0:04:22.279 --> 0:04:25.800 and and maybe this isn't you know your wheelhouse, But 0:04:25.880 --> 0:04:28.880 I just wonder, are we going to find out that 0:04:28.920 --> 0:04:30.880 a kid who smoked a ton of weed in high 0:04:30.920 --> 0:04:33.080 school and college. I know a lot of kids like 0:04:33.160 --> 0:04:39.039 that very very well, um ends up having some kind 0:04:39.080 --> 0:04:42.479 of mental health issues later in life because I know 0:04:42.520 --> 0:04:45.560 a lot of kids like that too. Well. Look, I 0:04:45.560 --> 0:04:47.840 think you one of the things that they're going to 0:04:47.920 --> 0:04:50.599 have to figure out is the regulations around the substance 0:04:50.600 --> 0:04:53.400 now different than they have the regulations around alcohol. Right 0:04:53.440 --> 0:04:57.200 at a certain point when the cognitive factors of the 0:04:57.200 --> 0:05:00.240 brain that's sort of finished developing, you know, consider these 0:05:00.240 --> 0:05:02.520 substances won't have the same effect as when you consume 0:05:02.560 --> 0:05:06.839 them when you're in the developmental stage. So as they 0:05:07.080 --> 0:05:11.480 right as they kind of progress on on the regulatory side, 0:05:11.839 --> 0:05:13.120 those are the things that they're going to have to 0:05:13.160 --> 0:05:15.480 figure out. And it would probably make sense that they 0:05:15.520 --> 0:05:18.320 regulate the substance similar to how they would regulate alcohol 0:05:18.400 --> 0:05:22.200 and put um certain age limits on when someone would 0:05:22.200 --> 0:05:23.520 be able to legally go in and buy it, Like 0:05:23.560 --> 0:05:25.520 we wouldn't expect the three year old or ten year 0:05:25.520 --> 0:05:27.640 old to want to go in and buy cannabis legally. 0:05:29.000 --> 0:05:30.960 I wouldn't expect a ten year old to walk into 0:05:30.960 --> 0:05:33.800 a store and buy a Cannabio said, he talked to 0:05:33.839 --> 0:05:36.760 us about the tat cigarettes. What are they, how do they? 0:05:36.760 --> 0:05:40.320 How do they work? So basically, what we've done is 0:05:40.360 --> 0:05:43.960 we've taken a hemp biomass and we've processed it in 0:05:44.000 --> 0:05:46.720 a way so that it tastes and behaves like tobacco, 0:05:47.200 --> 0:05:50.800 which is fundamentally different than what other let's call it 0:05:50.960 --> 0:05:52.880 hemp cigarettes in the market would have been able to 0:05:52.920 --> 0:05:55.840 do because one of the key things for smokers is 0:05:55.880 --> 0:05:59.599 that they want a taste profile that resembles a cigarette. Now, 0:06:00.040 --> 0:06:01.799 one thing I can tell you is that the number 0:06:01.839 --> 0:06:04.240 of smokers that exist, there's almost forty million smokers in 0:06:04.400 --> 0:06:09.040 the U s alone, about them have tried date. Yet 0:06:09.160 --> 0:06:10.880 if you take a look at the market of smokers, 0:06:10.920 --> 0:06:13.320 the number of smokers still weighs the number of vapors 0:06:13.320 --> 0:06:17.839 twenty one, which tells you what to prefer delivery mechanism is. However, 0:06:18.760 --> 0:06:20.200 you know, I used to work at Philip Morris and 0:06:20.240 --> 0:06:22.760 I understand this quite well. You'd be hard pressed to 0:06:22.800 --> 0:06:25.240 find the smoker that enjoys the factory because's a nicotine 0:06:26.320 --> 0:06:28.120 and when you take a look at a lot of 0:06:28.120 --> 0:06:29.880 the vape companies. They're trying to sell you on this 0:06:29.960 --> 0:06:33.320 reduced risk element. However, they're still overly reliant on the 0:06:33.320 --> 0:06:35.840 crutch of addiction in order to sell their wares, which 0:06:35.880 --> 0:06:40.520 I think is absurd reliant, that's the point. Yeah, But 0:06:40.720 --> 0:06:44.520 I mean, it's so easy to any other product. There 0:06:44.560 --> 0:06:46.240 isn't any other product on it. If you have to 0:06:46.240 --> 0:06:48.400 buy because you're addicted to it, you can buy it 0:06:48.440 --> 0:06:50.039 because you like it, and there's still a market to 0:06:50.040 --> 0:06:52.800 be had. So why can't we apply that similar mindset 0:06:52.839 --> 0:06:56.520 to tobacco and provide smokers with something that they can 0:06:56.560 --> 0:07:01.160 consume by choice, not by me. And that's exactly what 0:07:01.200 --> 0:07:04.120 we're doing. So we've eliminated the tobacco, we've eliminated the nicotine. 0:07:04.520 --> 0:07:07.480 We give you the same format as a cigarette, but 0:07:07.640 --> 0:07:11.520 deliver CBD instead, which will still satiate a smoker the 0:07:11.560 --> 0:07:14.880 same way nicotine will, but won't create an addiction. And 0:07:14.960 --> 0:07:17.280 that way we can give the freedom to choose to 0:07:17.320 --> 0:07:19.840 smokers and they can decide you want to smoke, smoke, 0:07:20.040 --> 0:07:22.080 you don't want to smoke, don't smoke any chance, you 0:07:22.160 --> 0:07:25.520 gotta chewing tobacco alternative can you can you help me 0:07:25.520 --> 0:07:28.680 get get rid of the Copenhagen you like? You like 0:07:28.760 --> 0:07:32.000 to dip? I mean yes. I don't know if I 0:07:32.000 --> 0:07:34.360 should say that publicly because it's kind of embarrassing, especially 0:07:34.400 --> 0:07:36.600 at my age, but yeah, especially if I'm at a 0:07:36.600 --> 0:07:38.600 baseball game or driving a pickup truck or listen to 0:07:38.600 --> 0:07:41.520 country music, I like to throw on a lip. It's 0:07:41.560 --> 0:07:45.560 a great it's a great alternative. Before you're looking at 0:07:45.600 --> 0:07:47.520 the markets here and Matt, we had that big sell 0:07:47.560 --> 0:07:50.800 off on Monday, concern about growth, concern about the delta 0:07:51.160 --> 0:07:53.400 variant and its impact on this economy. But boy, the 0:07:53.400 --> 0:07:56.760 market recovered, to say the least, over this past four days. 0:07:56.800 --> 0:07:59.120 And uh again, let's get a sense of where we 0:07:59.200 --> 0:08:01.320 go from here. Brenda O'Connor joins us. She's a senior 0:08:01.400 --> 0:08:05.640 vice president financial advisor UBS International, based in Miami. I believe, 0:08:05.640 --> 0:08:07.600 if my notes are correct, we can talk about what's 0:08:07.600 --> 0:08:10.360 going on down there in southern Florida, all the exodus 0:08:10.480 --> 0:08:12.720 from Wall Street. But Brenda, give us a sense of 0:08:12.720 --> 0:08:15.880 how you because some of the conversations you had with 0:08:15.960 --> 0:08:18.640 your clients this week after that big sell off on 0:08:18.680 --> 0:08:21.400 Monday and the subsequent rebound for the remainder of the week. 0:08:21.440 --> 0:08:24.560 What are some of the conversations you were having. Yeah, 0:08:24.600 --> 0:08:26.840 I mean, it was a pretty wild start of the week, 0:08:26.920 --> 0:08:29.520 and you know, when the markets traded off around two percent, 0:08:29.920 --> 0:08:32.520 you know, it looked pretty familiar to how and what 0:08:32.640 --> 0:08:34.720 we saw at the beginning of the pandemic. You know, 0:08:34.920 --> 0:08:37.400 we saw the relly of the US dollar, a drop 0:08:37.440 --> 0:08:40.079 in equities, a drop in oil, and an increase in 0:08:40.120 --> 0:08:41.960 bond meals. And as you said, you know, this was 0:08:42.040 --> 0:08:45.640 quickly reversed on Tuesday, and we've seen markets grind fire 0:08:46.080 --> 0:08:48.280 throughout the weekend. Here we are on Friday. The SMP 0:08:48.480 --> 0:08:50.800 is up over sixteen percent year to date, and so, 0:08:51.040 --> 0:08:53.880 you know, while some investors are concerned about the strength 0:08:53.960 --> 0:08:56.840 of the recovery, whether that's because of the delta variant 0:08:57.120 --> 0:09:00.440 or inflation, you know, for the most part are clients 0:09:00.559 --> 0:09:03.640 are big proponents that this recovery will stay intact. And 0:09:03.679 --> 0:09:06.360 we're so positive on christ As. What do you do 0:09:06.400 --> 0:09:09.000 though with clients. I had dinner with a bunch of 0:09:09.120 --> 0:09:13.200 traders last night who have just made so much money 0:09:13.200 --> 0:09:16.400 that they want to get some of it into cash 0:09:16.760 --> 0:09:19.000 before this turns around. Not like it's going to turn 0:09:19.040 --> 0:09:21.559 aroundy time soon. But you don't need to ride out 0:09:21.600 --> 0:09:24.240 the last hundred points of the S and P five hundred. 0:09:24.320 --> 0:09:27.800 Do you start moving them out? No, So we're not 0:09:27.880 --> 0:09:30.720 big proponents of moving to cash. I think the tactical 0:09:30.800 --> 0:09:33.199 things that we've been speaking to clients this week about 0:09:33.240 --> 0:09:36.680 are taking profit in sectors like US tech for example. 0:09:36.720 --> 0:09:39.199 I mean, the Nasdaq was up thirty eight percent last year, 0:09:39.240 --> 0:09:42.839 it's up another fourteenth this year, and so this is 0:09:42.880 --> 0:09:46.040 an opportunity given where valuations are, where we're happy to 0:09:46.080 --> 0:09:48.880 take a little profit off the table and allocated to 0:09:49.120 --> 0:09:53.120 sectors that we do like. So, Bret, I think talk 0:09:53.160 --> 0:09:55.120 to us about how you're talking to your clients about 0:09:55.480 --> 0:09:58.120 international exposure. I know that in Miami that you get 0:09:58.240 --> 0:10:01.480 tends to be a nice international community, a global community 0:10:01.520 --> 0:10:03.520 down there, and I'm guessing that's reflected a little bit 0:10:03.520 --> 0:10:06.160 in your book. How are you and your clients thinking 0:10:06.160 --> 0:10:10.720 about international investment opportunities? Al Right, So we're still positive 0:10:10.760 --> 0:10:13.080 on equities on a whole, and you know, they're still 0:10:13.120 --> 0:10:15.440 spectors of the U S market that we like, although 0:10:15.559 --> 0:10:18.880 you know, we do like certain parts of Asia, and 0:10:18.920 --> 0:10:21.280 a lot of my families aren't even looking at equities, 0:10:21.280 --> 0:10:25.480 they're turning to things like an alternative investment. So, you know, 0:10:25.640 --> 0:10:28.440 these are our clients tend to have very long term 0:10:28.480 --> 0:10:34.480 time horizons. They're great correlation benefits to alternative asset classes. Um. 0:10:34.520 --> 0:10:37.680 You know, investors are often rewarded for a little with 0:10:37.760 --> 0:10:41.000 a liquidity premium. So we've been looking at things like 0:10:41.120 --> 0:10:44.760 private private real estate and private equities, specifically in the 0:10:44.800 --> 0:10:48.240 secondary space. Well, luckily, some private equity firms are raising 0:10:48.280 --> 0:10:52.319 some big funds right now. Carlisle raising twenties seven billion 0:10:52.360 --> 0:10:55.920 dollar fund right, Blackstone just wrapped up last year at 0:10:56.120 --> 0:10:59.760 twenty six billion dollar fund. Um. I think five d 0:11:00.200 --> 0:11:05.200 twenty billion dollars came into private equity in the first half. 0:11:05.240 --> 0:11:09.480 There's a lot of cash washing around, isn't there. Yeah, there, 0:11:09.559 --> 0:11:11.720 there definitely is. And so there are certain parts of 0:11:11.720 --> 0:11:14.120 the private equity market that we maybe stay away from. 0:11:14.160 --> 0:11:18.280 But again, um there are subsets like um um secondaries 0:11:18.320 --> 0:11:20.600 that we're really big fans of, and we still think 0:11:20.640 --> 0:11:23.200 that you can get kind of mid teen high team 0:11:23.240 --> 0:11:26.080 net returns on these asset classes. And if we look 0:11:26.160 --> 0:11:28.760 forward um to the next five years and we look 0:11:28.760 --> 0:11:32.280 at ubs as capital market assumptions, I mean those returns 0:11:32.360 --> 0:11:34.600 kind of beat what we think equities may do over 0:11:34.640 --> 0:11:37.840 the next three to five years or the market cycle. Brenda, 0:11:37.960 --> 0:11:40.280 you know, get it. Love to get a sense of 0:11:40.320 --> 0:11:41.920 how you're viewing US equities. What are some of the 0:11:41.960 --> 0:11:43.439 sectors you like, because there is a little bit of 0:11:43.440 --> 0:11:45.000 a push and pool out there between some of the 0:11:45.000 --> 0:11:47.360 folks that are saying, boy, I'm sticking with those growth names, 0:11:47.400 --> 0:11:49.800 the the Amazons, the apples of the world that have 0:11:50.040 --> 0:11:52.040 done so well for me for such a long time. 0:11:52.440 --> 0:11:54.120 And then there's obviously people that are you know, kind 0:11:54.120 --> 0:11:56.280 of rotated into the more cyclical side of the market 0:11:56.280 --> 0:11:58.880 and may be benefited from the some of this reopening trade. 0:11:58.880 --> 0:12:00.280 If you will, let me get a sense kind of 0:12:00.280 --> 0:12:02.920 where you are putting your client's assets right here in 0:12:02.920 --> 0:12:07.040 the US. Yeah. So I'll talk about two sectors that 0:12:07.080 --> 0:12:10.839 we like right now, and that's consumer discretionary and financials. 0:12:11.080 --> 0:12:13.360 I mean with financials, yes, you know, the sector is 0:12:13.440 --> 0:12:16.199 up twenty year to date, but we still think there's 0:12:16.320 --> 0:12:19.720 upside here and that's really based on two reasons. Um. 0:12:19.800 --> 0:12:23.160 The first is, you know, in an interest rate increasing environment, 0:12:23.320 --> 0:12:27.280 this um this this subset will will tend to outperform. 0:12:27.600 --> 0:12:30.000 And then a lot of the banks that raise these 0:12:30.040 --> 0:12:33.240 big provisions for loan losses are now starting to release 0:12:33.280 --> 0:12:35.320 some of this capital, and we think that's gonna benefit 0:12:35.720 --> 0:12:38.600 bank and financial names. The other area we're looking into 0:12:39.040 --> 0:12:42.360 is consumer discretionary, and this is really on the notion 0:12:42.480 --> 0:12:45.000 that there is just a ton of cash sitting on 0:12:45.559 --> 0:12:48.480 corporate and household balance sheets. If we look at household 0:12:48.480 --> 0:12:51.719 balance sheets as an example, I mean US savings as 0:12:51.720 --> 0:12:55.839 a percentage of disposable income is around twelve orcent. Listen, 0:12:55.880 --> 0:12:57.439 it's not as high as it was earlier in the 0:12:57.559 --> 0:13:00.439 pandemic at thirty five percent, but it's much higher than 0:13:00.480 --> 0:13:03.760 the five to seven that's the historical average. So our 0:13:03.880 --> 0:13:07.240 view is as this cash continues to work its way 0:13:07.240 --> 0:13:10.760 through the system, it will benefit sectors like consumer discretionary, 0:13:11.679 --> 0:13:14.080 anything you like in fixed income. I mean, I know, um, 0:13:14.120 --> 0:13:17.880 it's tough to chase returns there, find returns there even um, 0:13:17.920 --> 0:13:22.200 the further you've got the risk spectrum. Yeah, So you know, 0:13:22.360 --> 0:13:25.199 most of my clients view their portfolios as an overall 0:13:25.280 --> 0:13:28.160 asset allocation and a diverse by portfolio. So we still 0:13:28.240 --> 0:13:32.600 have strategic allocations to fix income, but we tend and 0:13:32.640 --> 0:13:35.360 are tending to UM stay away from that now, but 0:13:35.440 --> 0:13:38.440 we still have You know, I would argue ten to 0:13:39.160 --> 0:13:43.120 allocated to liquidity, cash and fixed income. Hey, Brenda, thanks 0:13:43.120 --> 0:13:45.480 so much for joining us. We really appreciate you taking 0:13:45.520 --> 0:13:48.760 the time. Brenda O'Connor, Senior vice president, Financial advisor for 0:13:48.840 --> 0:13:53.160 UBS International. Her clients take a look at private equity 0:13:53.240 --> 0:13:55.760 here and search for return. Since it was a suggesting 0:13:55.760 --> 0:13:57.480 boy in the fix income mark with a ten year one. 0:13:57.720 --> 0:14:00.520 Tough to find some yield out there. So some of 0:14:00.559 --> 0:14:04.319 the folks with longer term investment horizons putting some of 0:14:04.360 --> 0:14:05.920 the money to work in the private equity. And has 0:14:05.960 --> 0:14:08.559 mentioned some big, big money is being raised out there 0:14:08.600 --> 0:14:13.120 by some of these big funds. Now, let's talk real estate. 0:14:13.320 --> 0:14:17.280 Cushman and Wakefield's head of head Economists and head of 0:14:17.320 --> 0:14:21.040 retail research, Ken McCarthy joins us. And this is a 0:14:21.080 --> 0:14:25.680 hot topic, UM hot industry, and you know, pricing on 0:14:25.760 --> 0:14:28.480 at least on the retail side, the residential side, I 0:14:28.480 --> 0:14:31.360 should say, has been amazing. But I have to say, 0:14:31.640 --> 0:14:36.000 can as I walk through UM the valley of Manhattan 0:14:36.200 --> 0:14:41.160 and look left and right, everything looks closed, It looks empty. 0:14:41.240 --> 0:14:45.000 I mean here in our I guess Bornado building. Right, 0:14:45.120 --> 0:14:50.760 we have no more UM anchor tenants. Home depot is gone. UH, 0:14:51.040 --> 0:14:53.840 container store is gone. H and M is gone and 0:14:53.880 --> 0:14:57.880 no one's replaced them. So it looks really bad. How 0:14:57.960 --> 0:15:01.880 is it? So? Thanks very much. I don't think it's 0:15:01.920 --> 0:15:04.440 as bad as it looks, you know. I think retail 0:15:04.520 --> 0:15:06.920 has been challenged for a little while now because of 0:15:07.560 --> 0:15:11.000 e commerce penetration, and then when COVID hit, it was 0:15:11.040 --> 0:15:13.320 considered that this was going to be the end of retail, 0:15:13.400 --> 0:15:17.400 the apocalypse. Uh. And definitely there have been some store closings, 0:15:17.400 --> 0:15:22.000 there's been some movement around in where companies or retailers 0:15:22.560 --> 0:15:25.960 decides to locate, but overall, the amount that's being spent 0:15:26.000 --> 0:15:28.320 by consumers continues to grow. I think it's just a 0:15:28.320 --> 0:15:32.040 matter of location more than anything else. You know. Many cities, 0:15:32.320 --> 0:15:37.600 particularly cities like New York, which rely heavily on public transit, 0:15:37.720 --> 0:15:43.120 have seen much slower adoption of back to work UH. 0:15:43.160 --> 0:15:46.000 And that's particularly in a place like Midtown where most 0:15:46.040 --> 0:15:49.600 of the retail is in office buildings. That's creating some challenges. 0:15:49.680 --> 0:15:53.400 But overall, as we look at the retail sector in 0:15:53.480 --> 0:15:57.840 commercial real estate, it actually performed surprisingly well in the downturn, 0:15:59.120 --> 0:16:03.000 So I know it's interesting. I know for retail, the strategy, 0:16:03.120 --> 0:16:07.320 the buzzword for many years has been omni channel. You know. Uh, 0:16:07.360 --> 0:16:09.920 an example that would be, you know, buying something online 0:16:09.920 --> 0:16:13.160 but picking it up at the physical store, so that 0:16:13.240 --> 0:16:15.640 brings some life into a lot of the retailers in 0:16:15.720 --> 0:16:18.480 terms of the bricks and mortar. Is that a long 0:16:18.600 --> 0:16:22.920 term trend? Do you think? Well? Certainly, right now the 0:16:22.960 --> 0:16:26.360 consumer is king in the retail world. Whatever the consumer wants, 0:16:26.400 --> 0:16:29.040 retailers are trying to get it to them. Uh, it's 0:16:29.080 --> 0:16:30.720 it's going to be a combination. I think you're right. 0:16:30.760 --> 0:16:33.320 Omni channel is a good way of describing it, but 0:16:33.400 --> 0:16:38.480 it's also about um, it's about digitally native brands think 0:16:39.080 --> 0:16:42.720 Amazon as an example, are now going into bricks and mortar. 0:16:43.160 --> 0:16:45.880 So it's a fusion of both of those at the 0:16:45.920 --> 0:16:48.800 same time. Uh, that's gonna content that's gonna lead to 0:16:48.960 --> 0:16:51.280 higher demand for bricks and mortar as well. I think 0:16:51.600 --> 0:16:55.360 net net consumer spending is rising, It's probably going to 0:16:55.400 --> 0:16:58.280 continue to grow, and as it does, the pie is 0:16:58.280 --> 0:17:01.200 going to get bigger. But the question is, you know, 0:17:01.240 --> 0:17:02.880 how much of it is going to be e commerce? 0:17:02.880 --> 0:17:04.520 How much of it is gonna be bricks and mortar 0:17:04.720 --> 0:17:06.679 net net, most of it's going to be bricks and 0:17:06.720 --> 0:17:09.240 mortar in terms of overall as it is today again, 0:17:09.320 --> 0:17:13.200 as you're speaking, we're watching the SMPI extend gains to 0:17:13.320 --> 0:17:18.000 set yet another intra day record high. So you know, 0:17:18.000 --> 0:17:22.560 at least if you're invested, your wealth is rising. Companies 0:17:22.640 --> 0:17:25.639 have more power in the stock market. And although a 0:17:25.680 --> 0:17:27.640 lot of debt has been taken on as we were 0:17:27.840 --> 0:17:31.800 you know, just talking um, uh with our previous guests 0:17:31.840 --> 0:17:36.320 about financing costs are basically nothing. So, um, what does 0:17:36.359 --> 0:17:40.520 this mean for the market? Um? Is there is there 0:17:40.560 --> 0:17:43.359 opportunity to come in and get some deals here? Is 0:17:43.400 --> 0:17:47.080 there value out there? Or um, you know, is it 0:17:47.200 --> 0:17:51.960 fairly valued now? So? I think that's very location sensitive 0:17:52.040 --> 0:17:54.680 first of all. But second of all, I think there 0:17:54.880 --> 0:17:56.959 was value. I think a lot of that has already 0:17:57.000 --> 0:18:00.639 taken place. Uh that as we go forward, there the 0:18:00.680 --> 0:18:03.680 opportunities are starting to diminish a little bit. Uh. There 0:18:03.720 --> 0:18:06.320 There definitely if you're an occupier, there are places you 0:18:06.359 --> 0:18:10.679 can go and take advantage of softer markets. But overall, 0:18:11.200 --> 0:18:13.760 I think the market is probably pretty close to fairly 0:18:13.800 --> 0:18:16.080 priced right now. It's a good point to keep reminding us, 0:18:16.080 --> 0:18:19.880 by the way, that it's very location specific, and I'm 0:18:19.880 --> 0:18:22.040 sure can you probably have to remind people about this 0:18:22.200 --> 0:18:26.520 a lot because it is such a It's not um, 0:18:26.560 --> 0:18:31.400 you know, one solid America is very big. Um. Commercial 0:18:31.400 --> 0:18:34.800 real estate is global, I'm assuming you know. And so 0:18:35.880 --> 0:18:38.480 it's it's difficult for for the lay person to really 0:18:38.720 --> 0:18:41.320 get that through, or for me at least to get 0:18:41.320 --> 0:18:45.000 that through my thick skull. Sure, now I feel the 0:18:45.040 --> 0:18:47.240 same way when I walk the streets. I think this 0:18:47.359 --> 0:18:49.040 is the way it is everywhere, and you have to 0:18:49.600 --> 0:18:52.240 step back and say, no. You know, some cities, cities 0:18:52.280 --> 0:18:57.480 that don't have as heavier reliance on public transity, for example, 0:18:57.520 --> 0:18:59.840 a lot of people drive to work. They're seeing much 0:19:00.040 --> 0:19:03.840 higher occupancy rates than cities that do rely on transit, 0:19:03.920 --> 0:19:07.439 and that affects them, you know, effects where retailer is 0:19:07.440 --> 0:19:09.479 going to open, where they're going to go in the future, 0:19:09.640 --> 0:19:13.360 things like that. So, as they always say, in real estate, 0:19:13.400 --> 0:19:16.199 it's all about location, all right, Well, my location is 0:19:16.280 --> 0:19:20.520 midtown Manhattan. So here's my question, will Midtown man will 0:19:20.560 --> 0:19:24.199 Manhattan in general, what's the expectation within the commercial real 0:19:24.280 --> 0:19:27.879 estate community, what needs to happen for this to come back, 0:19:27.960 --> 0:19:31.440 because the vacancy rates, as Matt mentioned, are just stunning 0:19:31.480 --> 0:19:34.240 to to behold, and is it just simply a question 0:19:34.240 --> 0:19:38.840 of they got all over the rates. So I think 0:19:38.960 --> 0:19:42.119 it's going to be about economic growth. That's the fundamental driver. 0:19:42.240 --> 0:19:45.320 We need to see more people in in the city 0:19:45.400 --> 0:19:47.920 going to work in the office space. When that happens, 0:19:48.359 --> 0:19:52.280 then you'll see more retailers come back with them and 0:19:52.320 --> 0:19:55.480 start to reopen stores that may have been shut down. 0:19:55.840 --> 0:19:58.160 But the key thing is going to be getting more 0:19:58.160 --> 0:20:00.760 people on the streets a little long run. It's a 0:20:00.760 --> 0:20:03.800 good point. I went over to Chick phil A this 0:20:03.840 --> 0:20:07.320 morning at six am to try and, uh, get my 0:20:07.400 --> 0:20:10.360 first taste of that fast food chain. I've never been 0:20:10.400 --> 0:20:12.800 there before, and um, there was a sign on the 0:20:12.840 --> 0:20:16.000 window that said we're closed until later because there's no 0:20:16.040 --> 0:20:18.080 one here, and well then it's probably no one to 0:20:18.200 --> 0:20:21.240 staff it as well. It's also a probably big issue, yeah, 0:20:21.760 --> 0:20:25.760 I think, you know. And after that, I walk around 0:20:25.800 --> 0:20:27.919 and I noticed all of the deli's are just not 0:20:28.000 --> 0:20:29.720 open as early as they used to. And why would 0:20:29.760 --> 0:20:31.840 they be because I was the only person walking around 0:20:31.840 --> 0:20:35.560 the streets, especially on a Friday morning. Quite frankly, I'm 0:20:35.600 --> 0:20:38.680 in the office. But you know, it's it's a bit 0:20:38.720 --> 0:20:41.800 slow to to to pick up overall, and I think 0:20:41.840 --> 0:20:44.439 you're right, Um, it's going to take a while. So 0:20:44.440 --> 0:20:47.040 where where Where are the strong places for commercial real 0:20:47.119 --> 0:20:51.360 estate right now? Well, if you look at migration, that's 0:20:51.400 --> 0:20:54.800 a good indicator. A lot of it is in UH 0:20:54.920 --> 0:20:59.360 in the Sun Belt. So places like Texas and Florida 0:20:59.480 --> 0:21:02.360 which have UH, which recovered a little bit sooner, they're 0:21:02.400 --> 0:21:06.360 also seeing faster growth in demand for office space, more 0:21:06.400 --> 0:21:10.080 occupancy than we saw and driving that also is going 0:21:10.200 --> 0:21:13.800 you know, as we see more people moving migrating into 0:21:13.840 --> 0:21:15.760 the Sun Belt, which is in a long term trend. 0:21:15.800 --> 0:21:20.359 It's not a new trend. Um that's gonna drive demand. 0:21:20.520 --> 0:21:24.360