WEBVTT - Atalanta's Solomon on Real Estate Markets: Very Robust (Audio)

0:00:04.040 --> 0:00:08.360
<v Speaker 1>Broadcasting live to New York, Bloomberg eleventh, Rio to Washington,

0:00:08.440 --> 0:00:14.120
<v Speaker 1>d C, Bloomberg to Boston, Bloomberg to San Francisco, Bloomberg

0:00:14.200 --> 0:00:19.360
<v Speaker 1>nine to the Countries Channel and around the globe the

0:00:19.360 --> 0:00:22.960
<v Speaker 1>Bloomberg Radio plus DAB and Bloomberg Got Gone. This is

0:00:23.040 --> 0:00:26.360
<v Speaker 1>taking Stock. I'm Kathleen Hayes along with Pim Fox. We're

0:00:26.360 --> 0:00:28.800
<v Speaker 1>gonna take a look at the commercial real estate market.

0:00:28.840 --> 0:00:31.080
<v Speaker 1>A lot of people are weary of stocks and kind

0:00:31.080 --> 0:00:34.360
<v Speaker 1>of wondering about bonds, and they're looking for places to

0:00:34.400 --> 0:00:37.880
<v Speaker 1>invest him that are liquid and alternative for many people.

0:00:37.920 --> 0:00:39.360
<v Speaker 1>This is a good one. Yeah. We're also going to

0:00:39.440 --> 0:00:43.159
<v Speaker 1>talk about the office, the office space, business retail of

0:00:43.280 --> 0:00:45.120
<v Speaker 1>We'll take a look at malls as well as ground

0:00:45.240 --> 0:00:47.920
<v Speaker 1>up construction. Also look at the condo market. Right now,

0:00:48.000 --> 0:00:49.920
<v Speaker 1>let's take a look at business news. We've got Charlie

0:00:49.920 --> 0:00:52.360
<v Speaker 1>Pellett at Bloomberg News from and thank you Pim, Thank

0:00:52.400 --> 0:00:55.480
<v Speaker 1>you Kathleen. Let us begin with crude oil stocks are fluctuating,

0:00:55.480 --> 0:00:59.600
<v Speaker 1>but crude now trading at fort Arrel. Talking about West

0:00:59.600 --> 0:01:02.520
<v Speaker 1>Texas Intermediate down ten cents there a drop of two

0:01:02.600 --> 0:01:04.840
<v Speaker 1>tents of one percent. We did see Brie of Brent

0:01:05.000 --> 0:01:09.080
<v Speaker 1>crude briefly breach fifty of barrel right now forty nine

0:01:09.319 --> 0:01:12.240
<v Speaker 1>seventy nine a barrel on brand up five cents again

0:01:12.280 --> 0:01:15.160
<v Speaker 1>there of point one percent. Stocks are coming off of

0:01:15.160 --> 0:01:18.440
<v Speaker 1>their strongest rally in almost three months, Mixed data offering

0:01:18.520 --> 0:01:21.880
<v Speaker 1>little clarity on whether the economy is strengthening enough to

0:01:21.920 --> 0:01:25.200
<v Speaker 1>withstand higher interest rates as early as next month. Diane

0:01:25.200 --> 0:01:28.440
<v Speaker 1>Swonk is the founder of d S Economics. Clearly the

0:01:28.480 --> 0:01:31.560
<v Speaker 1>Fed is attempting to make this smooth, although let's let

0:01:31.640 --> 0:01:34.120
<v Speaker 1>let's face it, what's happened since December. The moved in

0:01:34.160 --> 0:01:36.080
<v Speaker 1>December kind of a non issue, and then all of

0:01:36.120 --> 0:01:39.360
<v Speaker 1>a sudden, we're dealing in this geopolitical and economic environment

0:01:39.560 --> 0:01:41.960
<v Speaker 1>that's globally still fragile. And I think it's interesting that

0:01:42.040 --> 0:01:44.600
<v Speaker 1>although we didn't hear a lot of economics from President

0:01:44.640 --> 0:01:48.360
<v Speaker 1>Obama this morning, the real issue is geopolitics and policy

0:01:48.720 --> 0:01:51.720
<v Speaker 1>are now economics. And I think that's very important as well,

0:01:51.720 --> 0:01:53.680
<v Speaker 1>because those can affect the economy quite a bit. In

0:01:53.800 --> 0:01:56.960
<v Speaker 1>equities struggling for direction today as investors step back to

0:01:57.040 --> 0:02:00.640
<v Speaker 1>Assessa two day events that added nearly three with sixty

0:02:00.680 --> 0:02:05.000
<v Speaker 1>points to the down. Jones Industrial average Costco wholesale shares

0:02:05.080 --> 0:02:09.000
<v Speaker 1>gaining the most in more than six years after earnings topped.

0:02:09.000 --> 0:02:12.240
<v Speaker 1>Analysts estimates assign the warehouse club is weathering a volatile

0:02:12.320 --> 0:02:15.560
<v Speaker 1>retail climate. Costco shares are up now by three point

0:02:15.680 --> 0:02:19.840
<v Speaker 1>nine percent. Sears Holdings considering options for its Ken, Moore,

0:02:20.000 --> 0:02:23.400
<v Speaker 1>Craftsman and die Hard brands as what was its Sears

0:02:23.440 --> 0:02:27.200
<v Speaker 1>Home Services repair business. Sears Holding shares up six point

0:02:27.240 --> 0:02:31.640
<v Speaker 1>one percent. Abercrombie and Fitch plunging after first quarter sales trailed.

0:02:31.639 --> 0:02:37.040
<v Speaker 1>Analysts estimates Abercrombie down sixteen point seven percent, Gold down

0:02:37.080 --> 0:02:39.040
<v Speaker 1>to eight to the ounce, a drop of two tenths

0:02:39.080 --> 0:02:41.720
<v Speaker 1>of one percent, to thirty two on Wall Street. Now

0:02:41.720 --> 0:02:45.320
<v Speaker 1>we'll look at other news from around the world. Thank you,

0:02:45.400 --> 0:02:49.040
<v Speaker 1>Charlie from the Bloomberg news room. I'm Alex Steel. Donald

0:02:49.040 --> 0:02:52.639
<v Speaker 1>Trump has hit the magic number. According to the Associated Press,

0:02:52.639 --> 0:02:55.200
<v Speaker 1>he now has a number of delegates needed to clinch

0:02:55.240 --> 0:02:58.960
<v Speaker 1>the Republican presidential nomination. The AP count has Trump with

0:02:59.000 --> 0:03:01.680
<v Speaker 1>one thousand, two hunder and thirty eight one more than

0:03:01.800 --> 0:03:04.960
<v Speaker 1>is needed. A review of Democratic presidential primary results in

0:03:05.040 --> 0:03:08.440
<v Speaker 1>Kentucky has found Hillary Clinton still ahead of Bernie Sanders.

0:03:08.680 --> 0:03:11.760
<v Speaker 1>That's According to The Career Journal, Bernie Sanders and Hillary

0:03:11.760 --> 0:03:14.600
<v Speaker 1>Clinton both picked up twenty seven delegates after the May

0:03:14.639 --> 0:03:18.040
<v Speaker 1>seventeenth Kentucky primary, but one delegate was yet to be

0:03:18.080 --> 0:03:22.280
<v Speaker 1>awarded from the sixth congressional district that goes to Secretary Clinton.

0:03:22.919 --> 0:03:25.400
<v Speaker 1>At a press conference in Japan today with leaders of

0:03:25.440 --> 0:03:29.600
<v Speaker 1>six other industrialized nations, President Obama commented on the Taliban's

0:03:29.639 --> 0:03:32.200
<v Speaker 1>appointment of a new leader following the death of Mullah

0:03:32.240 --> 0:03:35.320
<v Speaker 1>Mohammed Monsoor in a U S. Rohan strike last week.

0:03:35.480 --> 0:03:40.280
<v Speaker 1>What they need to enter into serious that are led

0:03:40.280 --> 0:03:43.600
<v Speaker 1>by Afghans. On Friday, President Obama becomes the first sitting

0:03:43.640 --> 0:03:47.040
<v Speaker 1>president to visit Hiroshima. The battle over gay and transgender

0:03:47.120 --> 0:03:49.880
<v Speaker 1>rights is spilling over into other issues in Congress. A

0:03:49.960 --> 0:03:52.680
<v Speaker 1>thirty seven billion dollar measure to fund the Energy Department

0:03:52.680 --> 0:03:55.360
<v Speaker 1>and water projects has been killed in the House. It

0:03:55.440 --> 0:03:58.440
<v Speaker 1>was opposed by many Republicans because of a provision designed

0:03:58.440 --> 0:04:02.640
<v Speaker 1>to bar discrimination against AIDS and transgenders by federal contractors.

0:04:02.760 --> 0:04:04.880
<v Speaker 1>The head of New Jersey States Senate wants to move

0:04:04.960 --> 0:04:07.600
<v Speaker 1>quickly on drumming up support for two new casinos near

0:04:07.640 --> 0:04:10.720
<v Speaker 1>New York. Steve Sweeney says extra time is needed to

0:04:10.720 --> 0:04:14.800
<v Speaker 1>get voter approval in a November referendum. Governor Christie says

0:04:14.840 --> 0:04:17.320
<v Speaker 1>plans for the casinos are on life support because of

0:04:17.320 --> 0:04:21.640
<v Speaker 1>financial turmoil. In Atlantic City Global News twenty four hours

0:04:21.640 --> 0:04:24.679
<v Speaker 1>a day, power by journalists in more than a hundred

0:04:24.680 --> 0:04:27.479
<v Speaker 1>and fifty news bureaus around the world. From the Bloomberg

0:04:27.480 --> 0:04:31.640
<v Speaker 1>News Room, I'm Alex Steele, Charlie, and we thank you

0:04:31.680 --> 0:04:34.200
<v Speaker 1>and again recaving a mixed picture for stocks. The Dow

0:04:34.520 --> 0:04:37.479
<v Speaker 1>is lower by point one percent. The SMP five hundred

0:04:37.520 --> 0:04:40.440
<v Speaker 1>index little change that is up by less than point

0:04:40.480 --> 0:04:43.880
<v Speaker 1>one percent. I'm Charlie Pellett and that's a Bloomberg Business

0:04:43.920 --> 0:04:48.080
<v Speaker 1>flash this he is taking stock with Kathleen Hayes and

0:04:48.120 --> 0:04:52.480
<v Speaker 1>Pim Fox on Bloomberg Radio. Stocks are fully valued. That's

0:04:52.480 --> 0:04:55.080
<v Speaker 1>what many guests are saying. Bond yields are low, the

0:04:55.120 --> 0:04:58.719
<v Speaker 1>prices are high. If you want to get a positive return,

0:04:58.880 --> 0:05:01.599
<v Speaker 1>if you want to find yield on an investment that

0:05:01.640 --> 0:05:04.400
<v Speaker 1>you think is solid, where do you go. More and

0:05:04.440 --> 0:05:08.279
<v Speaker 1>more people are turning to commercial real estate. Speaking now

0:05:08.360 --> 0:05:11.320
<v Speaker 1>to an expert in the field, Rachel Gilbert Solomon, co

0:05:11.480 --> 0:05:15.839
<v Speaker 1>founder managing partner at Atlanta Advisors based here, in New York,

0:05:15.880 --> 0:05:18.479
<v Speaker 1>recently opening a West Coast office and joining us in

0:05:18.560 --> 0:05:21.599
<v Speaker 1>our New York studio. So, Rachel, welcome, Thank you for

0:05:21.680 --> 0:05:26.040
<v Speaker 1>having me. So, uh, what would you say right now?

0:05:26.240 --> 0:05:28.760
<v Speaker 1>Is hottest in the commercial real estate market? Where are

0:05:28.800 --> 0:05:31.200
<v Speaker 1>you seeing the most demand? Was it? Is it multi family?

0:05:31.240 --> 0:05:33.200
<v Speaker 1>We know a lot of people are renting instead of buying.

0:05:33.400 --> 0:05:36.040
<v Speaker 1>Is it? Is it retail? Where do you see a

0:05:36.080 --> 0:05:40.320
<v Speaker 1>lot of demand right now? We see, uh, Well, multi

0:05:40.360 --> 0:05:44.600
<v Speaker 1>family has historically been the asset class that has performed

0:05:44.640 --> 0:05:47.080
<v Speaker 1>the best, and we see that continuing in this market,

0:05:47.400 --> 0:05:49.840
<v Speaker 1>although I will say in a lot of the Class

0:05:49.880 --> 0:05:53.240
<v Speaker 1>A prime markets there's been a tremendous amount of new

0:05:53.279 --> 0:05:56.000
<v Speaker 1>product that's come online, so for the first time we're

0:05:56.000 --> 0:05:59.560
<v Speaker 1>seeing a little push back in rent increases until that

0:05:59.640 --> 0:06:02.520
<v Speaker 1>new instruction gets absorbed. We see that continuing, But on

0:06:02.560 --> 0:06:05.200
<v Speaker 1>the whole, as an asset class, we think multi family

0:06:05.240 --> 0:06:06.799
<v Speaker 1>is still the best bet. Are you talking about markets

0:06:06.800 --> 0:06:09.240
<v Speaker 1>like San Francisco, New York those kinds of places, Yes,

0:06:09.440 --> 0:06:14.479
<v Speaker 1>San Francisco, New York, Chicago, Miami, um major gateway cities.

0:06:15.080 --> 0:06:17.960
<v Speaker 1>It seems as though the competition for properties means that

0:06:18.680 --> 0:06:23.279
<v Speaker 1>buyers or investors are maybe not bending the rules, but

0:06:23.320 --> 0:06:26.640
<v Speaker 1>at least expanding their horizons. Right. So, for example, I

0:06:26.720 --> 0:06:28.920
<v Speaker 1>know that you've been looking at things like what reats

0:06:28.960 --> 0:06:33.760
<v Speaker 1>do and they necessarily say, all right, a certain vintage

0:06:33.760 --> 0:06:36.400
<v Speaker 1>of apartment house or a certain vintage of building they're

0:06:36.440 --> 0:06:39.360
<v Speaker 1>not going to touch. That's changed, hasn't it, Yes, Pen

0:06:39.560 --> 0:06:44.440
<v Speaker 1>that the boundaries and where institutional investors, reats and and

0:06:44.480 --> 0:06:48.400
<v Speaker 1>even private investors are moving very quickly. Used to be

0:06:48.440 --> 0:06:51.359
<v Speaker 1>there was a line in the sand where investors, for

0:06:51.360 --> 0:06:53.960
<v Speaker 1>for example, wouldn't invest in something that was built before

0:06:54.520 --> 0:06:57.960
<v Speaker 1>nineteen nine because prior to that you had eight foot

0:06:58.000 --> 0:07:01.120
<v Speaker 1>ceilings and that is not a desirable for a renter.

0:07:01.440 --> 0:07:04.000
<v Speaker 1>But because it's been so challenging to find deals, we

0:07:04.080 --> 0:07:07.560
<v Speaker 1>find that across the board, investors are pushing their boundaries.

0:07:07.560 --> 0:07:11.400
<v Speaker 1>They're willing to go to uh earlier vintages. They're willing

0:07:11.440 --> 0:07:14.200
<v Speaker 1>to look at things that require a little more work

0:07:14.240 --> 0:07:18.080
<v Speaker 1>to get that return. Rachel. How important is cheap credit? Now?

0:07:18.080 --> 0:07:19.960
<v Speaker 1>The Feds may be going to raise rates a couple

0:07:19.960 --> 0:07:23.040
<v Speaker 1>of times. Is here we've and and that is pushing

0:07:23.080 --> 0:07:25.320
<v Speaker 1>up the short end a little bit. But in terms

0:07:25.400 --> 0:07:28.640
<v Speaker 1>of longer term financing costs, you still have very low yields.

0:07:28.960 --> 0:07:30.880
<v Speaker 1>Is that How much of a driver is that for

0:07:30.960 --> 0:07:33.440
<v Speaker 1>commercial real estate broadly? Is it going to be effective

0:07:33.440 --> 0:07:35.080
<v Speaker 1>if the Fed moves a couple more times this year?

0:07:35.920 --> 0:07:39.720
<v Speaker 1>The cheap credit is really instrumental in driving real estate,

0:07:39.880 --> 0:07:42.760
<v Speaker 1>and we don't see that changing anytime soon. I know

0:07:42.840 --> 0:07:45.000
<v Speaker 1>that there's been a lot of talk about the Fed

0:07:45.040 --> 0:07:49.280
<v Speaker 1>potentially raising rates in June. The credit markets have priced

0:07:49.280 --> 0:07:52.000
<v Speaker 1>that in a little bit, and we're still at historically

0:07:52.080 --> 0:07:55.360
<v Speaker 1>low interest rates. So as long as credit is as

0:07:55.400 --> 0:07:58.000
<v Speaker 1>plentiful as it has been, we don't see that affecting

0:07:58.040 --> 0:08:01.640
<v Speaker 1>the market. Rachel, that you've done what at the LANDA

0:08:01.720 --> 0:08:04.880
<v Speaker 1>Part Advisors, what six hundred million dollars worth of deals

0:08:05.080 --> 0:08:09.240
<v Speaker 1>markets like New York, San Francisco, Denver, Baltimore, Fort Flord

0:08:09.280 --> 0:08:11.480
<v Speaker 1>of the northern New Jersey. But you also say that

0:08:11.520 --> 0:08:13.520
<v Speaker 1>people are looking at I don't want to call him

0:08:13.600 --> 0:08:17.120
<v Speaker 1>second tier, but alternatives. For example, rather than go to

0:08:17.160 --> 0:08:19.400
<v Speaker 1>the east coast of Florida, you go to the west

0:08:19.400 --> 0:08:21.720
<v Speaker 1>coast of Florida. It's sort of like, rather than go

0:08:21.760 --> 0:08:23.920
<v Speaker 1>to Williamsburg, you kind of go to Bay Ridge. At

0:08:24.000 --> 0:08:27.280
<v Speaker 1>least for those who understand Brooklyn, what is that just

0:08:27.360 --> 0:08:30.200
<v Speaker 1>because it's just you know, the competition or what what

0:08:30.320 --> 0:08:35.400
<v Speaker 1>is causing this trend. Well, um, it's just very challenging

0:08:35.440 --> 0:08:39.319
<v Speaker 1>to be able to find a return and so um

0:08:39.360 --> 0:08:41.480
<v Speaker 1>again it's an experience. Is that because the seller is

0:08:41.480 --> 0:08:43.960
<v Speaker 1>the seller not realistic, the seller wants too much and

0:08:44.000 --> 0:08:45.760
<v Speaker 1>the and the buyer won't come through. I mean, is

0:08:45.760 --> 0:08:49.240
<v Speaker 1>the bid ask spread closing or what's happening. Yes, we're

0:08:49.280 --> 0:08:51.760
<v Speaker 1>seeing a change in the marketing process as well. Because

0:08:52.200 --> 0:08:55.960
<v Speaker 1>the market is so competitive, there is a tighter a

0:08:56.000 --> 0:08:58.120
<v Speaker 1>tighter span in the bid ask spread. We're seeing the

0:08:58.160 --> 0:09:02.600
<v Speaker 1>marketing process being condensed, less time for diligence, less time

0:09:02.600 --> 0:09:05.920
<v Speaker 1>to close. Um. And because sellers know that while the

0:09:06.000 --> 0:09:08.120
<v Speaker 1>market is like this, they have to kind of let's

0:09:08.120 --> 0:09:11.720
<v Speaker 1>say make hey. Um. But it's all signs of a

0:09:11.800 --> 0:09:15.160
<v Speaker 1>very strong market. Because deals are closing a contract price,

0:09:15.160 --> 0:09:18.680
<v Speaker 1>they're not being retraded, So that's a sign that there

0:09:18.720 --> 0:09:21.559
<v Speaker 1>is a market clearing price and and the market's very

0:09:21.640 --> 0:09:24.480
<v Speaker 1>robust malls. Rachel, We talked to Tom McGee this week.

0:09:24.480 --> 0:09:27.520
<v Speaker 1>He's CEO of the International Council of Shopping Centers. He

0:09:27.679 --> 0:09:30.560
<v Speaker 1>was at the recon convention on in Las Vegas. To me,

0:09:30.600 --> 0:09:34.000
<v Speaker 1>he was surprising the upbeat on on on retail, on

0:09:34.040 --> 0:09:36.040
<v Speaker 1>the demand for these mall spaces. I thought, you know,

0:09:36.120 --> 0:09:37.679
<v Speaker 1>brick and mortar was dying. What are you seeing in

0:09:37.720 --> 0:09:40.840
<v Speaker 1>the market. Well, there's been a transition in the way

0:09:40.880 --> 0:09:44.080
<v Speaker 1>people shop. Obviously a lot of shoppers move online, but

0:09:44.280 --> 0:09:48.320
<v Speaker 1>regional malls are still integral as social meeting centers, and

0:09:48.480 --> 0:09:51.640
<v Speaker 1>so what malls have used to be are very different

0:09:51.640 --> 0:09:54.000
<v Speaker 1>from what they are today, and they're transitioning to become

0:09:54.280 --> 0:09:58.280
<v Speaker 1>lifestyle centers. Maybe they're an indoor amusement park, maybe they're

0:09:58.320 --> 0:10:01.440
<v Speaker 1>they're an indoor golf center or a fitness center. So

0:10:01.520 --> 0:10:04.839
<v Speaker 1>they still are vital, but what they sell and how

0:10:04.880 --> 0:10:09.000
<v Speaker 1>they sell is definitely changing. Quick question, what's a transit village.

0:10:10.120 --> 0:10:15.160
<v Speaker 1>A transit village is um apartment complex or a lifestyle

0:10:15.240 --> 0:10:18.920
<v Speaker 1>center that is attached to maybe it's a commuter hub,

0:10:19.480 --> 0:10:24.439
<v Speaker 1>a main station. And that is significant because it follows

0:10:24.480 --> 0:10:29.600
<v Speaker 1>the trend that younger buyers and the next generation really

0:10:29.640 --> 0:10:31.959
<v Speaker 1>want to be closer to urban centers. So they don't

0:10:31.960 --> 0:10:33.640
<v Speaker 1>want to live in a suburban life. And if they

0:10:33.679 --> 0:10:35.800
<v Speaker 1>are living in the suburbs, they want to be someplace

0:10:35.840 --> 0:10:38.960
<v Speaker 1>that gets them very quick access into the urban Centers.

0:10:39.280 --> 0:10:42.079
<v Speaker 1>Thank you very much for joining us. Rachel Gilbert Solomon,

0:10:42.120 --> 0:10:44.880
<v Speaker 1>co founder, managing partner ahead of the New York office

0:10:45.160 --> 0:10:49.760
<v Speaker 1>of Atlanta Advisers, many thanks. You're listening to taking Stock.

0:10:49.800 --> 0:10:52.719
<v Speaker 1>I'm pim Fox my co host Kathleen Hayes, and you're

0:10:52.760 --> 0:11:01.640
<v Speaker 1>listening to Bloomberg Radio Bloomber. Taking Stock is brought to

0:11:01.679 --> 0:11:04.680
<v Speaker 1>you by CBOE Vixed Options in futures. Volatility can be

0:11:04.679 --> 0:11:07.920
<v Speaker 1>harnessed with c BOE VIX options and Futures C disclosures.

0:11:08.000 --> 0:11:11.559
<v Speaker 1>Learn more at cbo dot com. Slash Powerful Outcomes Fix